The Derivative Project

Why Didn’t the SEC and Congress Investigate the Goldman/Libya Trades?

Why Didn’t the SEC and Congress Investigate the Goldman/Libya Trades?

Why Didn’t the SEC and Congress Investigate the Goldman/Libya Trades?

 

Reuters reported today “Libya Sues Goldman Over Losing Trades“.   No surprises here, just regrets the SEC and Congress did not do more sooner.  A billion dollar investment, that loses almost 100%, and generates more income to the “investment advisor”, than the client, is worth investigating as a fundamental breach of fiduciary duty.  Put aside the issue it was a sovereign wealth fund on the losing side to a “prestige” American “investment adviser.

Reuters wrote:

“Libyan Investment Authority (LIA) files law suit in London
  •  Says paid more than $1 bln for trades that ended worthless
  •  Says Goldman exerted undue influence by encouraging trades
  • Goldman says claims without merit, to defend them strongly.”
The Derivative Project first urged the SEC and Congress to investigate this shocking breach of fiduciary duty by Goldman, that appears may be even tied into “Madoff Banks”.
For background, please read our Posts here:
We wrote in June, 2011, ” The recent public disclosure of the Libya Goldman call options says it all about the SEC.  The most “prestigious” Wall Street firm “losses” 98% of a SWF’s billion dollar investment and the SEC takes no action”.
“What the average 401K investor does not know is that Wall Street was well aware of the rot in the financial system and the potential collapse of the equity markets. Libya, not a major player in the OTC derivatives markets, was also not aware why these trades in the summer of 2008, were so ill-advised.  The investment advice you were given in your mutual funds in 2008 and 2009 is comparable to the investment advice Goldman gave Libya in 2008.  Worthless.
Goldman chose their greed over sound investment advice to Libya’s sovereign wealth fund. Wall Street made a conscious decision to choose their bottom line over your 401k earnings potential in 2008 and 2009.  Wall Street chose to keep near retirees in the equity markets, following a 40% decline in certain indices, because they made more money doing that, over moving your accounts to cash or putting on very easy hedges to protect your hard-earned savings, through easy, strategic shifts in your 401K mutual fund allocations.
The Libyan trade shows it is time every one question the self-serving “expert” advice, recognize what it is worth and take action for your future. The Libyan trade illustrates in a very straight-forward  manner the problems of Wall Street and why our economy is stalled, the subject of an upcoming post.
The genie is out of the bottle.  The trust is gone. Financial firms have a responsibility to act in the community’s best interest, or there are no capital markets. Thank you, Libya, for highlighting the real raison d’etre of Wall Street.  It is no longer capital formation, it is but a singular focus on enriching a Wall Street firm’s bottom line, nothing more, nothing less, at the expense of the community overall.
In closing, J.P. Morgan’s equity analyst upgraded Goldman Sachs stock, on Tuesday, May 31, the same day the Wall Street Journal disclosed the losing Libyan trade…”
Bloomberg reported this week:  “The U.S. Securities and Exchange Commission is probing Goldman Sachs’s dealings with the LIA for possible violations of American anti-corruption laws. The fund has said it is cooperating with the authority.”