Goldman Wins Dismissal Of Hedge Fund's CDO Lawsuit

Jul 22 2011 | 12:41pm ET

A U.S. judge has thrown out Australian hedge fund Basis Capital Management's lawsuit against Goldman Sachs, ruling that Basis didn't prove that the collateralized debt obligation transactions in question took place in the U.S.

Citing a U.S. Supreme Court decision last year barring the use of U.S. securities laws by foreign buyers of non-U.S. securities, U.S. District Judge Barbara Jones ruled that Basis failed "to provide sufficient facts that allow the court to draw the reasonable inference that the purchase or sale was made in the United States." Goldman claims that the CDOs were sold in the U.K.; Basis has called it a New York transaction.

Jones gave Basis 30 days to file a new complaint with evidence that the transaction took place in the U.S. The hedge fund's lawyer said it intends to do just that.

"We are confident the sale of Timberwolf took place in New York," Eric Lewis said.

Basis collapsed four years ago due to losses suffered on the Timberwolf CDO. The hedge fund was seeking more than $1 billion, accusing Goldman of misleading it about the quality of the assets in the CDO, and providing evidence that an executive at the bank had called the CDO, "one shitty deal."

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