Goldman Sachs Asks for Arbitration in Basis Yield Hedge Fund Lawsuit

Goldman Sachs Group Inc. (GS) asked a New York state court judge to order arbitration in a lawsuit against the investment bank by Basis Yield Alpha Fund or dismiss the complaint.

Basis Yield Alpha Fund, a unit of Australian hedge fund Basis Capital Funds Management Ltd., sued Goldman Sachs in New York State Supreme Court in October, accusing the bank of making false and misleading statements and omissions in connection with the sale of securities known as Timberwolf and Point Pleasant.

Basis Yield agreed that any disputes connected to the investments would be subject to binding arbitration when it opened its trading account, New York-based Goldman Sachs said in court documents filed yesterday.

The case should be dismissed if arbitration isn’t ordered because it lacks a “substantial nexus” to New York, and because the losses from the investments were caused by the collapse of the mortgage market and not by misrepresentations, Goldman Sachs said in the filings.

“Not only are subjective opinions as to market direction inactionable, but defendants had no crystal ball as to market direction any more than did BYAFM or any other investor,” Goldman Sachs said in the court documents.

A June 2010 lawsuit by Basis Capital over the securities was dismissed last year by U.S. District Judge Barbara Jones in Manhattan, who ruled the Australian fund couldn’t use U.S. securities laws to pursue its claims against Goldman Sachs.

The case is Basis Yield Alpha Fund (Master) v. Goldman Sachs Group Inc., 652996/2011,

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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