Goldman Sachs is sued by hedge fund over subprime mortgage deal

AN Australian hedge fund is suing Goldman Sachs over an investment in a subprime mortgage-linked security that hastened the fund’s demise in 2007.

The lawsuit, filed yesterday, accuses Goldman of misrepresenting the value of the notorious Timberwolf collateralised debt obligation.

Basis Yield Alpha Fund is suing Goldman to recoup the $56m it lost on the CDO, according to a lawyer for the fund, Eric Lewis.

The 36-page complaint, seeking $1bn in punitive damages, repeats a Goldman
executive’s description of the Timberwolf CDO as “one shitty deal.”

Goldman called the suit “a misguided attempt by Basis ... to shift its investment losses to Goldman Sachs.”