Amusing Goldman court case

I just stumbled on this gem today... The full complaint, which the article below links to, is highly recommended reading.

Goldman Sachs Group, Inc., Sued By Prominent Singapore Investor For $34 Million Loss Caused By Fraud, Misrepresentation And Misinformation.

Goldman Sachs Group, Inc., the New York City based parent corporation for the global investment banking, securities and investment management firm, has been sued in the Supreme Court of the State of New York, County of New York, by a client related to a $34,000,000 loss allegedly caused by fraud, misrepresentation and misinformation. The client, a prominent Singaporean businessman, Oei Hong Leong, alleges that Goldman Sachs' employees fraudulently induced him to enter into two exotic currency option trades by willfully withholding and recklessly misstating information about the trades. The complaint alleges that as a result, Goldman Sachs reaped millions of dollars in fees and commissions while Mr. Oei lost over $34,000,000.

According to the complaint, Mr. Oei, a customer of Goldman Sachs since 2001, had stopped doing any significant business with Goldman Sachs following a $28,500,000 loss associated with a 2011 trade which Goldman Sachs employees had recommended. In 2012, Gary Cohn, the President and COO of Goldman Sachs, and other high level Goldman Sachs officers travelled to Singapore to meet with Mr. Oei to try to persuade him to resume trading with Goldman Sachs. Goldman Sachs, through Gary Cohn, assured him that he would receive the best possible service and that Cohn would personally make sure that Goldman Sachs and its employees and subsidiaries acted in Oei's best interest.

Shortly after Mr. Oei agreed to resume trading activities with Goldman Sachs, its employees strongly recommended two currency option trades involving the Brazilian Real ("BRL") and Japanese Yen ("JPY"). Mr. Oei alleges that he had no prior experience with the BRL and that he was assured by employees of Goldman Sachs that these trades were both suitable for him and in his best interest. In fact, Goldman Sachs employees repeatedly made specific reckless and knowingly false statements about the BRL by claiming that the BRL was anchored to the U.S. dollar similar to the way that the Hong Kong dollar is pegged to the U.S. dollar and that a BRL/JPY trade would behave very similarly to a U.S. dollar/JPY trade.

According to Mr. Oei, on May 16, 2013, one day after he entered into these two trades, he learned that the two strike prices Goldman Sachs used were not the same and that they were the worst prices of the day. In fact, he later learned that the second strike price was actually the worst of the year. The strike prices had also not been agreed to before the trades and had not been confirmed to him immediately after the trades. There were also no voice logs which is contrary to Hong Kong regulations. Concerned, he instructed Goldman to immediately unwind these trades at cost or better. However, Mr. Oei was not provided with an unwind price until five days later, on May 21, 2013, when he learned, to his shock, that Goldman Sachs wanted $18,000,000 to unwind these two trades which would result in him incurring an $8,000,000 net loss less than a week after entering into the two trades so highly recommended by Goldman Sachs employees despite the market conditions remaining similar.
Believing he was being taken advantage of and that the unwind price quoted by Goldman Sachs was much worse than he could have ever reasonably anticipated, he cancelled the unwind order that same day.

Link: Goldman Sachs Group, Inc., Sued By Prominent Singapore Investor For $34 Million Loss Caused By Fraud, Misrepresentation And Misinformation.

 

It is incredible that people with such capital as Mr. Oei are trading solely on the recommendation of brokers...

"Every man should lose a battle in his youth, so he does not lose a war when he is old"
 

"Conflict of interests" doesn't even seem to do this fiasco justice.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
 
Best Response

Well, clearly they have treated the guy as an institutional client, which, as far as I know, is considered to be a bad thing in many jurisdictions (it seems that even their internal investigation has concluded as much). Indeed, an institutional client would probably have known what the salesguy meant when he was talking about the BRL being "anchored" to USD by the central bank.

The really puzzling thing about this is that it happened after the following sequence of events (alleged): 1) Mr Oei loses money on a rates trade recommended by Goldman. 2) Mr Oei pulls Goldman's line. 3) Gary Cohn and other Goldman big cheeses come to dinner at Mr Oei's house and promise him that they'll treat him nice. 4) Mr Oei comes back to Goldman to punt some nice EMFX basket dual binary reverse window knockout digitals w/a cherry on the top.

I would have thought that, given the history above, the very least that GS FX sales would be doing is treating this particular client VERY VERY gently. Like show him really nice prices on the way in, let him get out at mid if he wants to, etc etc. It appears that they proceeded to do exactly the opposite, which I am extremely puzzled by.

 
cc66:

"If you can't spot the sucker within the first half hour at the table, then you ARE the sucker"

-Rounders

Trade exotics with GS, wait for them to put something in writing that's clearly wrong and that they should know better about, follow their recs, and when the trade goes the wrong way, sue them for the losses and get punitive damages.

GS is the sucker here. It's HQ'd in a place that lets them get dragged into a Manhattan courtroom.

 

What happens to the broker in a case like this where there is a lawsuit based on the trades you recommended?

"I must create a system or be enslaved by another man's." William Blake
 
DickFuld:

I really, really hope Goldman loses a lot more than $34 million (which is nothing in the scheme of things). I hope even more that this case is very well publicized It's hard to believe that people still do business with this criminal organization.

Still kinda with you on that, Mr. Fuld. Though I'm a lot less convinced they are an evil organization than we were on Sept. 12th 2008 (the Friday before Sept. 15th).
 

I'm pretty sure this guy has pulled the same stunt several times with several banks. He's a sophisticated investor who trades exotic options, lost a bunch of cash, and is trying to claw it back.

Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard. -30 Rock
 
Revsly:

I'm pretty sure this guy has pulled the same stunt several times with several banks. He's a sophisticated investor who trades exotic options, lost a bunch of cash, and is trying to claw it back.

Precisely... This is the second possible scenario, i.e. Mr Oei is a "serial offender" and has done this to a few banks.

However, in this case, given the guy's history is pretty public, why on earth would Goldman go to all the trouble to get him back on board? Why bring Gary Cohn et al for dinner at his house? Surely, it's not for the sake of the few bucks of bid/offer that the Goldie's EMFX desk made on his BRLJPY punt?

Somebody screwed up big time here and, if I were Gary Cohn, I sure would be itchin' to fire some people.

 

Marcus, people in business don't care about how many hookers you screw. They do care if GS is trying to screw their clients. From a practical standpoint, if Mr. Oei isn't married or if his wife is French, GS has far more to lose in all of this than Mr. Oei.

Even if Mr. Oei loses at trial, the Dems on Capitol Hill may very well want another congressional investigation on "shitty deals" and one of their favorite institutions. Do you think Gary Cohn wants to go in front of a congressional committee and answer questions about how GS entertains clients, whether it's supporting sex trafficking, how GS is really any different from any other RICO organization other than the fact that they don't have Italian accents.

If GS is smart, they will unwind the trade and pay Mr. Oei another $10M just to keep his mouth shut. There's really not much they have to threaten Mr. Oei with, and almost anything Mr. Oei is associated with, GS becomes associated with in front of a Senate committee.

 

Ducimus vero suscipit temporibus recusandae. At sed ad et.

Rem nulla voluptas soluta. Fuga soluta deleniti itaque corrupti velit suscipit. Consequatur fuga blanditiis modi ducimus. Enim facilis voluptatem molestias non.

Eos et qui minima et delectus sit. Fugit illo est tempore et. Inventore corporis repellat aperiam magni a velit. Sunt dolor facere quam eum consequatur eius.

 

Autem id nesciunt et cupiditate ipsa. Numquam qui est modi sunt exercitationem. Dolor velit vitae eaque ut tenetur quaerat.

Aspernatur labore dolore quibusdam officiis quo ipsum. Laboriosam dicta velit culpa laboriosam. Assumenda accusamus illum delectus fugiat nam nobis. Impedit animi fugit consequuntur suscipit porro consequatur.

Ad autem a neque est eum maiores. Labore culpa enim ipsum debitis. Earum cumque vel ea quos repellat sapiente. Quo dolores cumque qui ullam. Ab beatae quo dolorem. Sint adipisci praesentium ut.

Career Advancement Opportunities

May 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Lazard Freres No 98.8%
  • Harris Williams & Co. 25 98.3%
  • Goldman Sachs 17 97.7%
  • JPMorgan Chase 04 97.1%

Overall Employee Satisfaction

May 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

May 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

May 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (21) $373
  • Associates (91) $259
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (68) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
CompBanker's picture
CompBanker
98.9
7
kanon's picture
kanon
98.9
8
GameTheory's picture
GameTheory
98.9
9
numi's picture
numi
98.8
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”