Goldman Says Supreme Court Bars Hedge Fund Lawsuit

Aug 5 2010 | 12:54pm ET

Goldman Sachs has asked a New York federal court to toss a collateralized debt obligation lawsuit against it, citing a recent U.S. Supreme Court decision.

The Wall Street giant argues that the $1 billion lawsuit, filed by collapsed Australian hedge fund Basis Capital, is barred by the court’s June ruling in Morrison v. National Australia Bank that forbids federal securities fraud lawsuits in the U.S. by foreign buyers of foreign securities traded abroad. According to Goldman, the transaction in question, which one Goldman executive called a “shitty deal” in an internal e-mail, took place in the United Kingdom.

“This litigation presents a contract dispute between two foreign entities, executed abroad and governed by English law,” Goldman said in a Monday filing.

Not so, according to Basis. A lawyer for the Basis Yield Alpha Fund, which filed for bankruptcy three years ago, told Bloomberg News that the CDO and its credit-default swaps were derivatives of U.S. securities, meaning that the actual location of the transaction was New York, with Goldman Sachs International merely acting as an agent of the U.S.-based parent company.

Basis filed suit against Goldman in June after settlement talks between the two sides failed to produce an agreement. The hedge fund argued that Goldman misled investors in the CDOs in an effort to “take the risk of toxic securities off its books with knowingly false sales pitches.” Basis said it lost US$56 million of its US$78 million investment.


In Depth

Star Fund Managers Battered By Rocky Ride In Yields, Currencies

May 28 2015 | 6:05am ET

Some of the biggest names in the investment world have been whipsawed by the recent...

Lifestyle

Yale Receives $150 Million Gift from Blackstone’s Schwarzman

May 12 2015 | 12:10am ET

Yale University announced it has received a $150 million gift from Blackstone Group...

Guest Contributor

The Road To Tax Alpha

May 28 2015 | 5:36am ET

Tax-related alerts are increasingly helping investment managers harvest tax alpha...

 

Sponsored Content

Editor's Note