Industry Updates

Hedge fund Basis Yield Alpha has 30 days to amend and refile suit against Goldman Sachs

Thursday, July 21, 2011

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Opalesque Industry Update – On Thursday, the US District Court in New York issued a decision that determined the Basis Yield Alpha Fund transaction with Goldman (over subprime securities Timberwolf) was not a domestic transaction, however, Judge Barbara Jones ruled that BYAFM could amend their complaint to reflect this decision, and gave the BYAFM team 30 days to refile their complaint.

The Australian hedge fund is suing Goldman Sachs for fraud, in selling $81m of Timberwolf – which the investment bank itself termed internally a “sh*tty deal”.

Judge Jones ruled that the Supreme Court Ruling in Morrison v National Australia Bank, precluded Goldman Sachs from being pursued for a fraud claim in the US for securities purchased on foreign exchanges. Eric Lewis of law firm Baach Robinson & Lewis, lead counsel for BYAFM, said in a statement that, “We are pleased that Judge Jones rejected Goldman’s plea to dismiss the case with finality. We are confident the sale of Timberwolf took place in New York. The U.S. securities law do in fact apply to Goldman Sachs, even when it is selling securities to investors outside of the United States. This is one step on the way to BYAFM being able to bring Goldman to account for its fraudulent sale of the infamous Timberwolf security.”

Commenting about how this turn of events bodes for the financial community, securities lawyer and Forbes Contributor Bill Singer “says the Morrison decision was a major victory for every financial services and institution that engages in securities transactions in the U.S. “It raises the bar of truth for claimants but it also makes it harder for them to even get in the courthouse door”. (Source).

The Timberwolf securities declined more than $50m within a single month during the summer of 2007.

Kirsten Bischoff

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