Société Générale is next on the Libyan Investment Authority’s (LIA) legal hitlist, The Independent has learnt.
On Thursday it emerged that the LIA was suing Goldman Sachs for $1bn (£608m) in losses made on a series of trades in derivatives linked to shares plus $350m in profits made on fees and interest.
The LIA is, however, planning multiple legal assaults on banks which dealt with the sovereign fund when it was run by placemen of the country’s since overthrown dictator, Colonel Muammar Gaddafi, with the French bank next in line.
In its legal claim the LIA alleged that Goldman funded luxury trips to Morocco and plied staff members with gifts of chocolate and aftershave as it sought to cultivate a close relationship with the $60bn fund, set up to invest the country’s vast oil wealth.
Western banks had flooded into the North African nation during the middle years of the last decade, prompted by a thaw in international relations and encouraged by Western governments keen to bring Libya in from the cold.
In 2011 the Financial Times reported that Société Générale had structured a $1bn bet on its own shares for the LIA, which went bad after they fell sharply leaving the Libyans facing a massive loss.
The bet was placed not long after the bank had racked up losses of €4.9bn (£4bn) as a result of the actives of the “rogue” trader Jérôme Kervial in 2008 when it was felt that the shares were undervalued.
As the effects of the financial crisis continued to shake the world’s markets the shares failed to recover as the gamble had anticipated.
Société Générale has previously argued that it was working with the fund in a transactional capacity rather than as an adviser. It declined to comment last night.
Goldman Sachs is expected to make similar arguments in its defence. On Thursday, the US bank said it would defend the claim vigorously and believed it was “without merit”.
The Financial Conduct Authority is understood to be maintaining a watching brief, and will closely follow any Goldman trial before deciding whether to take the matter further, if it gets that far.
Regulated firms are under a responsibility to keep the watchdog informed of any incidents which may be of interest to it, so it will expect any banks involved in the situation to keep it regularly updated.
A spokesman declined to comment las night.
The LIA was run by Moha–med Husain Layas, a commercial banker hired at the suggestion of the late Gaddafi. His deputy, Mustafa Zarti, owed his position to a friendship with Gaddafi’s son, Saif al Islam.
Mr Zarit’s brother, Haitem, was allegedly handed an internship in London and Dubai as the relationship between Goldman and the LIA deepened.