Posted on 06/09/2010 1:16:34 PM PDT by NormsRevenge
NEW YORK (Reuters) – An Australian hedge fund is suing Goldman Sachs Group Inc (GS.N) over an investment in a subprime mortgage-linked security that hastened the fund's demise in 2007.
The lawsuit, being filed on Wednesday, accuses Goldman of misrepresenting the value of the notorious Timberwolf collateralized debt obligation, which garnered a lot of attention during a recent congressional hearing.
Basis Yield Alpha Fund is suing Goldman to recoup the $56 million it lost on the CDO, according to a lawyer for the fund, Eric Lewis. The suit also seeks $1 billion in punitive damages.
The litigation is the latest in a string of legal and public relations headaches for Goldman. In April, U.S. securities regulators charged the powerful Wall Street bank with civil fraud in connection with the structuring and sale of another CDO called Abacus 2007.
The hedge fund decided to file suit after months of settlement talks with Goldman broke down. .. The suit was being filed in U.S. District Court for the Southern District of New York.
...
The suit alleges that Goldman pitched the Timberwolf deal to Basis even as the bank's sales force and mortgage traders knew the market for CDOs could soon crumble. In June 2007, Basis paid $78 million for two pieces of the CDO with a face value of $100 million.
Basis, which financed the transaction with a loan from Goldman, said it lost more than $50 million when the bank began making margin calls on the product just weeks after selling the deal. Basis said the margin calls quickly forced it into insolvency.
"You can't say you are basically selling a strong performing high-yielding security that you know is going to tank," said Lewis, a partner with the law firm Baach Robinson & Lewis.
(Excerpt) Read more at news.yahoo.com ...
This is what will eventually kill Goldman: the number and scope of the civil lawsuits that will arise now that the lid is being peeled back and exposing the criminal enterprise that has operated within the world financial markets.
IMO, this lawsuit could not happen to a more deserving bunch than Goldman.
Goldman Sucks
Hey.
So what if the Goldmans took horse meat, road kill, and pig shit and sold it as as USDA prime gound sirloin.
Blankfein didn’t hold a gun to anyones head and make them buy it, did he?
It’s Wall Street capitalism Jake.
They could sell rotten stuff all day and I don’t care as long as it’s rated CCC/CC- ... it’s when they pay off the ratings agencies to mislabel the goods as AAA/AA+ and when they lie to the investors in these CDO’s and only allocate a portion (usually about 2/3rds) of the money to the loans included in the fund (undisclosed) ....
GS is rotten to the core ,, everyone in any management position there should be investigated.
Eventually this will lead to all securitized mortgages being ruled void... In practice the note and the deed were seperated to produce the securities... they’re unsecured.
Are you sugesting the Goldmans somehow managed to influence His Emminent Higness the Meat Inspector General?
LOL.
That could never be.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.