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January 31, 2014

Libya Says Goldman Didn’t Explain Options

“In early 2008 — months before the financial crisis began — Goldman Sachs put $1.2 billion of Libyan money into leveraged bets that six stocks would rise over the next three years.”

“None of them did. Libya lost every dollar that was invested. In a lawsuit filed against Goldman in London, the Libyan Investment Authority said that Goldman made at least $350 million from putting the country’s sovereign wealth funds into investments that the investment banking firm did not explain and that Libya did not understand.”

“The suit provided, for the first time, details on the investments that were made.”

“Had the Libyans understood them, they would have known that the fund was effectively buying long-term call options on the six stocks. As with all options, they could expire worthless if the shares failed to gain over the period. On the other hand, if the stocks rose substantially, the Libyan fund could have profited.”

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Read full Deal Book article here.

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