NY Appellate Court Rebukes Goldman in Toxic Securities Case  NEW YORK (Jan. 30, 2014)



In a significant blow to Goldman Sachs, the Appellate Court for the state of New York said in one voice that the Wall Street powerhouse should stand trial for its role in the sale of so-called toxic securities, which played a major role in the 2008 financial crisis.

The 5-judge panel unanimously rejected Goldman’s attempt to have the case, brought by Basis Yield Alpha Fund, dismissed based on fine print disclaimers in the security offering. The case alleged that Goldman sold two collateralized debt securities (CDOs) to Basis in 2007, on the basis that they were well priced and sold at Goldman Sachs’ own internal marks.


Behind the scenes Goldman considered the securities to be subpar, and said in a cynical internal memo that the infamous Timberwolf security was “one shitty deal. “ Goldman had undisclosed internal valuations that showed Timberwolf was worth a fraction of the sale price.  As a result, Basis lost more than $66 million in a matter of weeks.



Goldman Sachs ‘shitty’ deal link to failed Aussie hedge fund

| Apr 30, 2010 1:30PM


Australia’s biggest GFC casualty has emerged as a central investor in the now infamous Timberwolf CDO sold by Goldman Sachs and that later died a nasty death, taking the hedge fund with it.  According to a Goldman email released by the US Senate’s Investigations Committee this week, a senior bank executive described Timberwolf as “one shitty deal”. And so it proved for the Basis Yield Alpha Fund.

The Financial Times reported overnight that Goldman Sachs is in talks to try and settle claims with Basis Alpha.  Goldman Sachs is in talks over a potential settlement with an investor that claims that it lost money and went out of business after buying into a $1 billion mortgage-backed security that was later privately crictised by a senior executive at the bank.  Goldman was the underwriter and sole marketer of the Timberwolf deal, which lost 80% of its value within five months of its March 2007 completion. The hybrid collateralised debt obligation was liquidated early the next year.

Basis Yield Alpha Fund, a hedge fund, is seeking compensation over its $100 million investment in Timberwolf, a complex security, say several people familiar with the matter.  Basis Yield Alpha Fund was a Cayman Islands-registered hedge fund specialising in corporate and structured credit. It filed for bankruptcy protection in the US in August 2007 after the sudden implosion of credit on August 8/9 around the world. Goldman Sachs was one of the groups that issued default notices against Alpha. So it sold Alpha a dog and then helped put it into liquidatio



Basis Seeks Bankruptcy Protection on Subprime Woes (Update4)

By Laura Cochrane and Tiffany Kary - August 30, 2007

Aug. 30 (Bloomberg) -- Basis Capital Fund Management Ltd., the Australian investment company that hired Blackstone Group LP to sell assets, sought bankruptcy protection for its second-biggest hedge fund. The Sydney-based company's petition to liquidate the Basis Yield Alpha Fund stokes concern that the rout in the U.S. subprime market will lead other hedge funds to report losses when they disclose August valuations to investors next week, said James Chirnside, chief investment officer at Asia Pacific Asset Management in Sydney.


Basis Capital, founded in 1999 by Steve Howell and Stuart Fowler, had more than $1 billion in assets as recently as May. Losses at the Yield Alpha Fund could exceed 80 percent, according to the petition filed yesterday. The fund had delivered an annual return of 18.7 percent for the year ended June 30, 2006, according to a report by research company Lonsec Ltd.   Investors in the Yield Alpha Fund should know within two weeks if they have any ``hope'' of a return on their investments, said Paul Billingham, a liquidator for the Basis fund at accounting firm Grant Thornton.