Goldman Sachs and an Australian hedge fund agreed to end a $1bn lawsuit over the sale of mortgage-linked securities, including an investment known as “Timberwolf” that became a symbol of the financial crisis after it was cited in internal e-mails released by U.S. lawmakers.
Bloomberg News reports that terms of the agreement weren’t detailed in a June 10 court filing in state court in Manhattan.
Basis Capital’s Basis Yield Alpha Fund sued Goldman Sachs in 2010, accusing it of making false statements in connection with the sale of Timberwolf and another investment known as Point Pleasant. Both were collateralized debt obligations, or CDOs, a type of security stuffed with mortgages and their derivatives that caused billions in losses during the 2008 financial crisis. The fund sought more than $67m it said it lost in the deal and $1bn in punitive damages.
Timberwolf became notorious after an e-mail by a former Goldman Sachs executive, Thomas Montag, describing it as “one shi--y deal” was released by U.S. lawmakers investigating the bank that year. In an April 2011 report, the U.S. Senate said Goldman Sachs tried to manipulate prices of derivatives linked to subprime home loans in May 2007 for their own benefit.
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