A bitter rift has opened up between the world's most powerful bank and one of its most fearsome dictators after Goldman Sachs invested $1.3bn (£790m) of Colonel Gaddafi's money – and lost virtually all of it.
According to an investigation by the Wall Street Journal, Goldman offered to make Gaddafi one of its biggest investors as compensation for losing 98% of the money the Wall Street firm invested on behalf of the Libyan Investment Authority (LIA). This left the $53bn Gaddifi-controlled sovereign wealth fund, which elsewhere has stakes in companies such as Financial Times-owner Pearson and BP, with just $25.1m of the money it entrusted to Goldman.
The fund, which has soared in value in recent years on the back of Libya's growing oil wealth, was frozen by the EU and United Nations in February because of its close links with the Gaddafi family.
Under the terms of the proposed compensation deal, which was never consummated, LIA would have received $5bn worth of preferred Goldman shares, in return for a $3.7bn investment, allowing the fund to recoup its $1.3bn of losses. (AtW's comment: interesting approach to compensation for 98% loss - offering to spend even more cash on paper that can go up as well as down)
Goldman lost the money – which it invested between January and June of 2008 in a range of options to buy currencies and shares at a future date for a stipulated price – after the collapse of Lehman Brothers panicked the markets and caused the underlying securities to crash in value.
The investments, in a basket of currencies and the shares of six energy, utility and banking companies including Citigroup, amounted to a bet on a rise in the underlying value of the assets. However, since their values plummeted they became virtually worthless.
In one of the most extraordinary examples of the fallout from the financial crisis Mustafa Zarti, then LIA's deputy chairman, summoned Goldman's North African chief, Youssef Kabbaj and some colleagues, to a meeting in July 2008 to discuss the losses. It is understood that Zarti was so angry he behaved "like a raging bull", cursing and threatening the Goldman staff to such an extent there are rumours the bank arranged for security to protect its staff until they left Libya the next day. The LIA went on to demand restitution and issued vague threats of legal action, the Wall Street Journal reported.
More from the source: Goldman Sachs lost 98% of Gaddafi's $1.3bn investment | Business | The Guardian
AtW's comment: not all that Sachs is Goldman...
According to an investigation by the Wall Street Journal, Goldman offered to make Gaddafi one of its biggest investors as compensation for losing 98% of the money the Wall Street firm invested on behalf of the Libyan Investment Authority (LIA). This left the $53bn Gaddifi-controlled sovereign wealth fund, which elsewhere has stakes in companies such as Financial Times-owner Pearson and BP, with just $25.1m of the money it entrusted to Goldman.
The fund, which has soared in value in recent years on the back of Libya's growing oil wealth, was frozen by the EU and United Nations in February because of its close links with the Gaddafi family.
Under the terms of the proposed compensation deal, which was never consummated, LIA would have received $5bn worth of preferred Goldman shares, in return for a $3.7bn investment, allowing the fund to recoup its $1.3bn of losses. (AtW's comment: interesting approach to compensation for 98% loss - offering to spend even more cash on paper that can go up as well as down)
Goldman lost the money – which it invested between January and June of 2008 in a range of options to buy currencies and shares at a future date for a stipulated price – after the collapse of Lehman Brothers panicked the markets and caused the underlying securities to crash in value.
The investments, in a basket of currencies and the shares of six energy, utility and banking companies including Citigroup, amounted to a bet on a rise in the underlying value of the assets. However, since their values plummeted they became virtually worthless.
In one of the most extraordinary examples of the fallout from the financial crisis Mustafa Zarti, then LIA's deputy chairman, summoned Goldman's North African chief, Youssef Kabbaj and some colleagues, to a meeting in July 2008 to discuss the losses. It is understood that Zarti was so angry he behaved "like a raging bull", cursing and threatening the Goldman staff to such an extent there are rumours the bank arranged for security to protect its staff until they left Libya the next day. The LIA went on to demand restitution and issued vague threats of legal action, the Wall Street Journal reported.
More from the source: Goldman Sachs lost 98% of Gaddafi's $1.3bn investment | Business | The Guardian
AtW's comment: not all that Sachs is Goldman...
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