According to Telegraph Goldman Sachs is braced for a $1bn (£690m) court battle this month, as the US investment bank faces dramatic claims that it took advantage of naïve leadership at Libya's sovereign wealth fund, the Libyan Investment Authority (LIA) to rip it off. The LIA claims that during the Gaddafi era its former management lost more than $1bn in a series of nine derivatives trades after bankers at Goldman Sachs took advantage of the fund's lack of financial knowledge. Goldman made hundreds of millions of dollars on the trades. Goldman Sachs denies the claims. The case is a highly unusual one, as major investment institutions such as sovereign wealth funds are typically seen as highly sophisticated investors with the financial resources to hire lawyers and advisors, and so are legally held responsible for their own decisions. In this case, however, the LIA claims its management at the time did not understand what they were doing, and trusted Goldman Sachs to give good advice, trust which, it claims, was used to exercise "undue influence" over the LIA. "From mid-2007, Goldman Sachs developed a relationship of trust and con-fidence with the LIA and, in the first four months of 2008, took unfair advantage of the relationship that had been established, and/or exploited the LIA's position of vulnerability," the wealth fund claims, arguing that it "lacked experience in the field of derivative instruments." As a result Goldman could "drive through a series of complex derivative investments which the LIA did not properly understand and which involved the LIA paying substantial premiums for the disputed trades which were both overpriced and inherently unsuitable for a sovereign wealth fund like the LIA," it said. The bank denies the claims. Goldman's defence documents said: "The LIA, with $65bn worth of assets to invest and access to numerous professional advisers was not dependent on the defendant, nor was it improperly encouraged or influenced by the defendant)." It said the LIA would have made "very substantial profits" if share prices had moved in a different direction. "The LIA was well aware of the risk/reward profile and received precisely the exposure to risk, and the prospect of return, that it desired," Goldman said. The fund also claims that Goldman Sachs behaved improperly by arranging an internship at the bank for the brother of the LIA's deputy executive director, and by offering "apparently lavish and exotic hospitality". Goldman Sachs also denies this, arguing that "the internship was viewed as part of the training programmes it offered to the LIA." The seven-week trial is scheduled to begin in London on 13 June. It is interesting. I will keep an eye on this trial. If LIA manages to win the case there will be a waterfall of claims to GS in London, I think. And GS can become bankrupt. Unfortunately, the probability of this event is not large. $GS, Goldman Sachs Group, Inc. (The) / 10080