Goldman Advised Libya To Be a Major Holder: Report

Goldman Sachs (GS) invested over $1.3 billion from Libya’s sovereign-wealth fund in currency exchange bets along with other complicated trades in early 2008 and the investment lost more than 98% of its value, the WSJ reports, citing internal Goldman documents.

When the fund, controlled by Libya’s eccentric leader Muammar Gaddafi, recorded massive losses Goldman offered Tripoli the opportunity to become one of its largest shareholders, the Journal said, citing people familiar with the matter.

Negotiations between Goldman and the Libyan Investment Authority, which launched in June 2007 with about $40 billion in assets, stretched on for months during the summer of 2009. Eventually, the talks fell apart, and nothing more was done about the lost money.

According to the Journal, Libya was livid at Goldman over the virtual complete loss of the $1.3 billion it invested in nine equity trades and one currency transaction. A confrontation in Tripoli between a top fund executive and two Goldman representatives left the bankers so rattled and shook that Goldman arranged for a security guard to defend them before they left Tripoli the following day, people familiar with the matter told the Journal.

The Journal also says that Goldman offered Libya’s sovereign-wealth fund a way to invest $3.7 billion in the securities firm. Between May and July of 2009, Goldman executives made different recommendations, including one in which Libya would get $5 billion in preferred Goldman shares. Each proposal, guaranteed a steady stream of payments that would have gradually offset the losses, the Journal said.

Internal Goldman documents also reveal that Goldman CEO Lloyd Blankfein, its finance chief David Viniar and top executive Michael Sherwood were involved in discussions in this regard, the Journal reported.

Goldman, however, told CNBC there was never any proposal that would have led to Libya obtaining a stake in the investment firm.

For more on this story, please go to The WSJ.

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