Goldman Sach faces lawsuit for selling mortgage-linked securities
An Australian hedge fund manager will file a multi-million dollar lawsuit against Goldman Sachs for losing money in mortgage-linked securities sold by the investment bank.
Basis Capital, who owned the collapsed Yield Alpha Fund despite the mortgage crisis, has accused Goldman for selling $US78 million of its investment product called Timberlwolf.
A lawyer representing Basis said that Goldman pitched the Timberwolf CDO products in June 2007 despite the fact that it was known to be a failure.
Goldman was pressuring investors to take the risk of toxic securities off its books with knowingly false sales pitches," said Eric L. Lewis, an attorney from Baach Robinson & Lewis.
The lawsuit is seeking injuries and damages of not less than $US 56 million and $US 1 billion in punitive damages.
David Mapley, former Basis director, revealed to investigators that Timberwolf transactions were done in January 2008.
Emails from Goldman executives describing the investment product as “totally dead” and “one shitty deal” were uncovered and obtained during the government's investigations.
Goldman in response to lawsuit, said that Basis should have been careful enough to find out the risks behind with the securities.
"The lawsuit is a misguided attempt by Basis... to shift its investment losses to Goldman Sachs," spokesperson Michale DuVally said.
The $1 billion Timberwolf CDO and the aggressive tactics Goldman employed to sell the deal became the focus of an April hearing by the Senate Permanent Subcommittee on Investigations