I chuckled as I read a very long account of how Goldman Sachs lost 98% of the money invested by Libya’s sovereign wealth fund, at the very start of the financial collapse in in 2008. A story in the WSJ revealed how the firm tried to compensate Ghaddafi and his men by offering a big stake in the business, but their promised payback wasn’t good enough, so the deal fell apart.
It was the height of the boom. And the Libyans liked one thing about what Goldman had to offer–a man named Driss Ben-Brahim, who was an Arabic speaking wunderkind and head of Goldman’s emerging markets trading. “We were in awe of Driss,” one former Libyan Investment Authority executive recalls. “He was like a rock star…while we were making peanuts…we felt honored by his presence.”
So the Libyans ponied up. Big time. Their investments in options–the chance to buy stock at set prices–totaled $1.3 billion. Then the crisis hit, and the whole thing dwindled down to just $25 million. And the Arabs were pissed!
During a meeting after the fall, “Mr Zarti was like a raging bull, cursing and threatening Goldman staff.” The firm arranged for special security to protect the bankers who had lost all of the dough. Despite attempts by Goldman to offer stakes in the firm over long terms to compensate the Libyans, nothing worked out, and the losses stuck.
But don’t feel too bad for the Libyans. Their funds still stood at $53 billion last June and this year US officials froze $37B in their assets, including some funds still managed by Goldman. I guess the Colonel will have to invest with the Chinese next time to make a real payback with his billions.