• Derivatives sold to LIA plunged in 2008 financial crisis
  • Investment bank accused of lavishing gifts to gain influence

Goldman Sachs Group Inc. “crossed the line and established a close, trusting, personal relationship” with officials during Moammar Al Qaddafi’s regime, lawyers for Libya’s $60 billion wealth fund said in closing arguments during the final week of a London trial.

Youssef Kabbaj, a Goldman Sachs banker who spent time in Libya, engaged in the “deliberate blurring of professional and personal relationships” with the fund’s young investment team, Libyan Investment Authority lawyer Roger Masefield said. Kabbaj, who left Goldman Sachs after the bank’s trades with the LIA fell apart, has denied any wrongdoing.

The $1 billion trial between the LIA and Goldman Sachs has shed new light on the New York bank’s dealings with Libya under its former ruler. Goldman Sachs sold equity derivatives to the LIA that lost almost all their value when global markets froze in 2008. Qaddafi was ousted and killed in 2011, plunging the country into violent conflict and economic crisis.

Now entering its final phase, the trial has seen Libyans accuse Goldman Sachs bankers of overwhelming the fund’s unsophisticated executives in a bid to win deals, and providing gifts and lavish entertainment to influence officials. Goldman Sachs argues the LIA was sophisticated enough to understand the risks and is suffering from buyer’s remorse.

“The evidence at trial has confirmed the frailty of the LIA’s highly ambitious case,” said Goldman Sachs spokesman Sebastian Howell. “It is clear that they understood the disputed trades and entered into them of their own volition.”

The LIA “clearly, fundamentally misunderstood the true nature of the disputed trades,” Masefield said on Tuesday.

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