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Goldman's Libya Salesman Was a Little Too Good

129 points by IBM 10y ago

ahh 10y ago
Matt Levine's column/newsletter is one of the things I look forward to each day. His vignettes into finance are consistently interesting, discussed both in depth and understandably to neophytes, and with a dry humor not matched by any other financial journalist. Him talking about DTC settlement is more interesting than anyone else I've seen talking about...pretty much anything in the news. It's a bit hard to find from the website, so here's the RSS link for everything he writes: http://www.bloomberg.com/view/rss/contributors/matt-levine.rss http://www.bloomberg.com/view/rss/contributors/matt-levine.r...
- IBM 10y ago
  His calling is definitely writing. It would have been a shame if he stayed in banking and didn't end up at Bloomberg. I'm not sure how he ended up doing that because there's probably almost no chance he's making more money blogging than working at Goldman, but I'm glad he did.
  - lint_roller 10y ago
    A family with money. No need. We're all better off for it.
- grizzles 10y ago
  Agreed. I can tell from the headline that it's a Matt Levine article. That's enough to make me rub my hands together with glee.
smallnamespace 10y ago
One good point this article makes is that despite popular opinion, just because someone is suing a bank doesn't mean that the bank actually did anything wrong. Any party that's suing a bank will act the part of the unsophisticated victim, even if they knew exactly what they were getting into. If a salesman offers you a bet that Citi shares will go up, and you take the bet, and Citi shares go up, and you don't get any money, and you ask him what happened, and he shrugs and says "derivatives are complicated, man" -- you should probably sue him. But if a salesman offers you a bet that Citi shares will go up, and you take the bet, and Citi shares lose 96 percent of their value, it looks a little funny to go to court and say "well we didn't understand the structural nuances of the bet." The nuances are not your problem.
- makapuf 10y ago
  > doesn't mean that the bank actually did anything wrong. Like paying prostitutes by example. Ah you meant illegal maybe.
  - smallnamespace 10y ago
    If a client comes to you and says "I want to buy some bank stocks", and you help them make that happen, what exactly did you do wrong? There's plenty of problems in finance, but you won't be helping fix any of them by identifying even normal transactions as somehow fraudulent.
    - makapuf 10y ago
      It depends on what you did by helping them. The article did not specifically underline the straightforward way of the deal. Or (God forbid) morality. For any measure of morality (well perhaps not a dictator one)
      - smallnamespace 10y ago
        The article was pretty specific: * The client came up with the trade idea (the spark seems to have come from Qaddafi himself.) * It was basically just a call option, not some complicated thing with many bells and whistles * The clients aren't even claiming they were duped in any way The problem is not that Kabbaj was lying. It's that he was too charming.
        claudius 10y ago
        > The problem is not that Kabbaj was lying. It's that he was too charming. Elsewhere, this sort of thing would be called corruption, specifically bribery of a public employee.
        notahacker 10y ago
        Yeah. I've no sympathy whatsoever for the Libyan officials[1]. They made a bad bet and lost money. It wasn't a bet that was purposely designed to lose, and was apparently actually less risky than the conventional stock purchase.[2] Their claim not to have known what they were doing makes them more culpable, not less, for anything that went wrong because they were supposed to be looking after a sovereign wealth fund FFS. That doesn't mean that internships-for-deals or prostitutes-for-deals is an appropriate thing for a bank employee to be offering. [1]the picture is somewhat complicated by the legitimate beneficiaries - the Libyan people - having had very little say in who ran their sovereign wealth fund, and the Libyan regime having radically changed since 2007 [2]not only was it less damaging than the equivalent long position in stock would have been with the benefit of hindsight, but other articles suggest the Libyans preferred the derivative option because they were less likely to be subject to asset freezes/seizures if the US government took a more anti-Gaddafi stance in future...
droithomme 10y ago
Not all cultures are the same. The article assumes a universal culture and values of "buyer beware" in which personal assurances, friendship, and honor, all mean nothing at all whatsoever. This is not how most of the world sees things. In the eyes of those who were assured of sure things, the brutal dismemberment and evisceration of the scammers, their families, and their pets, is justified, reasonable, and pretty certain to happen at some point, to protect one's honor. If one wishes to do business in other cultures one should understand those cultures.
- tedunangst 10y ago
  If the court case is in London, that suggests the business was being done in London (or at least the accounts were being kept there), so shouldn't the Libyans be the ones to understand the other culture?
  - wpietri 10y ago
    In western culture, yes. In Libyan culture, I'm guessing no. The particular cultural value you're appealing to here is rule of law: https://en.wikipedia.org/wiki/Rule_of_law https://en.wikipedia.org/wiki/Rule_of_law It is a value I'm personally fond of. But it's not the only way to run a country. I'm going to go out on a limb an suggest that a guy who engineered a coup, declared himself "Brotherly Leader and Guide of the Revolution of Libya," and stayed in power 40 years was maybe not the biggest fan of the theory that "law should govern a nation, as opposed to being governed by arbitrary decisions of individual government officials".
    - tedunangst 10y ago
      Actually, somewhat more generally, if culture X is going to conduct some business with culture Y, which culture dictates the norms of the transaction?
      - wastedhours 10y ago
        In theory you'd assume the engaging party (either proactive sellers or proactive buyers) would adapt to the cultural practices of the ones they're reaching out to, but to some degree it probably doesn't align with human nature all of the time.
rexf 10y ago
For what he (Kabbaj) did in Libya, he never got his 'guaranteed' $9M by Goldman. > the bank was willing to guarantee him $9 million in pay. It was an astonishing sum, even at Goldman. > Kabbaj never got his $9 million. via https://www.bloomberg.com/features/2016-goldman-sachs-libya/ https://www.bloomberg.com/features/2016-goldman-sachs-libya/
- rmason 10y ago
  I was left wondering what happened to the Libyan officials in question? In those days it wasn't unusual for those who displeased Kaddafi to face a show trial and quick execution.
  - ptaipale 10y ago
    Later developments didn't bother with much show in trials. It appears the mainly involved persons, Layas and Zarti, emigrated to live in Egypt and Vienna, respectively. I'd say that if Zarti applied for asylum in Austria, he'd be one of the applicants with best reasons to get one, by the terms of refugee treaties. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11052281/How-Libya-bet-billions-on-prosperity-and-lost.html http://www.telegraph.co.uk/finance/newsbysector/banksandfina...
- jessaustin 10y ago
  Shorting Kabbaj seems to imply that Goldman themselves thought there was something wrong with his work, perhaps even that it demonstrated "undue influence". IANAL, but one could certainly imagine an inference like that being drawn in court.
blizkreeg 10y ago
I was checking out Matt Levine's articles here https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matthew-s-levine https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matt... and it's interesting how the title of 99% of his articles is "Something and Something Else", "Something, something else, and some other thing". Wonder if he's aware of it himself :-)
- princeb 10y ago
  those money stuff articles are actually compilations of several pithy thoughts on different issues.
- imrehg 10y ago
  He has two series: one is Money Stuff, the daily (?) newsletter of finance news, that has such titles, and it is on purpuse for sure. The other is Wall Street (where this article is, the articles that have header images) that seem to have a pattern too, but less clear cut.
tominous 10y ago
> He treated them to dinners, musicals and prostitutes, with the "Lord of the Rings" musical being a particular favorite Can anyone explain why the words corruption and bribery are missing from the article? Is it normal to treat government workers to prostitutes?
- peteretep 10y ago
  What makes you think it isn't normal in the developing world?
  - cloudjacker 10y ago
    Developing world lmao, because Jordan Belfort didnt do hookers and blow
  - tominous 10y ago
    I'd expect firms that are based in the US or UK would be subject to laws against bribing foreign officials, e.g. the FCPA: https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act
- Singletoned 10y ago
  I was going to quote the same line, but because my brain found it particularly hard to parse. I assumed the clause beginning 'with' should refer to the last item in the list.
- segmondy 10y ago
  If it's legal out there, why not? Would it be corruption and bribery to treat them to dinner and drinks? Don't view the world only through your own lens. It didn't say where exactly they were treated to prostitutes. Hell, it could even be in Nevada.
  - tominous 10y ago
    As per my other comment, on the face of it, it does seem illegal under laws in the US and UK such as the FCPA. Maybe someone could clarify though. To add some more, there is an affirmative defense to the FCPA that it is ok to give gifts/payments that are lawful according to the written law of the country [1]. Libya has some laws against corruption but they are rarely enforced and may not have been in place at the time [2]. Anyway, it seems strange to me that this article is about a new legal theory of "undue influence" and a salesman being uniquely "too good" when the concept of bribery has been around for thousands of years. Maybe the article could have said something like, "Libya screwed itself over by not having anti-corruption laws, and therefore it's trying a different legal approach." [1] https://www.sec.gov/investor/alerts/fcpa.pdf https://www.sec.gov/investor/alerts/fcpa.pdf [2] https://www.state.gov/documents/organization/230900.pdf https://www.state.gov/documents/organization/230900.pdf
princeb 10y ago
> "To help plan the training sessions, one of Kabbaj’s colleagues e-mailed to ask about the level of the Libyans’ knowledge of derivatives. He responded: 'Baaaaaaaasic.'" bizarre. you don't really expect to have to walk through finance 101 with a 67-billion-dollar SWF... you just have to believe the guys hired to manage that fund are qualified right? these are not your grandma's retirement savings. and then they turn around and say they don't understand what they bought?
- trhway 10y ago
  >you just have to believe the guys hired to manage that fund are qualified right? being a second cousin of a wife of the "beloved leader"'s chief of security is the best qualification, easily beats your Princeton's MBA in Finance.
  - barry-cotter 10y ago
    Princeton doesn't have any professional schools, neither law, medicine nor business.
RangerScience 10y ago
"They don't seem to have ... asked?" I think this is my favorite bit. Which actually brings up a good proactive defense for the salesman: Make sure you let you client know what they should be asking, not just what they ARE asking. Not that this an easy question to answer - you're asking someone else to point out your unknown unknowns, but in turn, they're blinded by familiarity (example: I actually do experience slight surprise when people haven't heard of Hacker News).
lifeisstillgood 10y ago
I struggle with this. If you are buying billions of dollars of anything, it is incumbent on you to make sure you get a good deal. You can clearly afford good advisors, and you should not be treated like a consumer walking in off the street. The fact that a while oil rich country had given the nephew of someone the right to buy billions of dollars is the fault of the fucked up dictatorship ruling the country I can see why the new government wants to sue - but I suspect a new moral hazard should be introduced - when a dictatorship is buying, it should be automatically assumed that subsequent democratic governments can come and ask for the cash back no questions asked That alone should stop most dictatorships doing anything. Interesting idea?
- JohnnyFang 10y ago
  Interesting idea, although not new. It's called odious debt.
  - lifeisstillgood 10y ago
    https://en.m.wikipedia.org/wiki/Odious_debt https://en.m.wikipedia.org/wiki/Odious_debt """In some respects, the concept is analogous to the invalidity of contracts signed under coercion.""" (Thanks - V interesting)
aurelienb 10y ago
So a bank has an extraction team. Looks like a cyberpunk novel. I suppose extraction team come from a "security/mercenary" company. I'm curious of the legal implication.
- lmm 10y ago
  If you're large enough it makes sense to be vertically-integrated with services you need frequently. They have a lot of wealthy people who need to operate in insecure regions, it makes sense that they'd deal with kidnappings etc. relatively frequently (indeed I'd look askance at an employer that expected me to work in a dangerous region and didn't have a policy/plan for such occasions). There are any number of private security organizations; like any industry most (but not all) are professionals who know and operate within the relevant laws.
csomar 10y ago
I think the author is hiding (intentionally or not) an important part: The PUT option. This is supposed to hedge against the risk of the stock going down. It's very possible that the Libyans were informed that they are hedged against a crash, only to discover later that the PUT counterparty got liquidated. Any one willing to investigate this particular point deeper?
- tedunangst 10y ago
  They had a forward contract, which is not the right, but the obligation to buy citi shares at some price (though it was cash settled). If citi tanks, you can lose more than just the initial investment. The put was so that they only lost all their money, not more than all their money. The forward is identical to (long call, short put). You can see that would be bad if the stock goes down. So they bought puts to close out their short put position, leaving them with a long call which expired worthless.
pamelabuck 10y ago
Umm.... is this this how business is done in all 3rd world countries?
Iv 10y ago
Forget about the salesman, that's the best bit: "Did you know Goldman had an extraction team? In my time selling equity derivatives, it never came up."
Iv 10y ago
> But "duped" is not exactly the right word. Libya knew it was betting on bank stocks to go up, and those stocks went down. It's not claiming fraud. It's claiming "undue influence." The problem is not that Kabbaj was lying. It's that he was too charming. Libya isn't saying it was duped. It's saying it was seduced. Interesting twist here. I guess it must be hard to discern for someone who has lived in this trade for so long, and used this mindset as the core of his trade for most of his career but there are simple things that technical people (or even just lawyers) will easily discern: omissions and hiding of a client's best interest. If you know something is wrong in a company and you don't tell it to your employer, in many fields, that makes you at least negligent. If you know something is wrong and you don't tell it because it causes personal gain to you, it is actually illegal in most jobs and likely criminal. If you are paid for giving advices in the interest of your consumer and you hid an honest assessment of risks because you profit in your client's risky behavior, yeah, that's fraud. A doctor prescribing an addictive medicine, an IT guy selling a faulty software because he got share in the selling company, etc...

129 points by IBM 10y ago

ahh 10y ago

Matt Levine's column/newsletter is one of the things I look forward to each day. His vignettes into finance are consistently interesting, discussed both in depth and understandably to neophytes, and with a dry humor not matched by any other financial journalist. Him talking about DTC settlement is more interesting than anyone else I've seen talking about...pretty much anything in the news. It's a bit hard to find from the website, so here's the RSS link for everything he writes: http://www.bloomberg.com/view/rss/contributors/matt-levine.rss http://www.bloomberg.com/view/rss/contributors/matt-levine.r...

IBM 10y ago
His calling is definitely writing. It would have been a shame if he stayed in banking and didn't end up at Bloomberg. I'm not sure how he ended up doing that because there's probably almost no chance he's making more money blogging than working at Goldman, but I'm glad he did.
- lint_roller 10y ago
  A family with money. No need. We're all better off for it.
grizzles 10y ago
Agreed. I can tell from the headline that it's a Matt Levine article. That's enough to make me rub my hands together with glee.

smallnamespace 10y ago

One good point this article makes is that despite popular opinion, just because someone is suing a bank doesn't mean that the bank actually did anything wrong. Any party that's suing a bank will act the part of the unsophisticated victim, even if they knew exactly what they were getting into. If a salesman offers you a bet that Citi shares will go up, and you take the bet, and Citi shares go up, and you don't get any money, and you ask him what happened, and he shrugs and says "derivatives are complicated, man" -- you should probably sue him. But if a salesman offers you a bet that Citi shares will go up, and you take the bet, and Citi shares lose 96 percent of their value, it looks a little funny to go to court and say "well we didn't understand the structural nuances of the bet." The nuances are not your problem.

makapuf 10y ago
> doesn't mean that the bank actually did anything wrong. Like paying prostitutes by example. Ah you meant illegal maybe.
- smallnamespace 10y ago
  If a client comes to you and says "I want to buy some bank stocks", and you help them make that happen, what exactly did you do wrong? There's plenty of problems in finance, but you won't be helping fix any of them by identifying even normal transactions as somehow fraudulent.
  - makapuf 10y ago
    It depends on what you did by helping them. The article did not specifically underline the straightforward way of the deal. Or (God forbid) morality. For any measure of morality (well perhaps not a dictator one)
    - smallnamespace 10y ago
      The article was pretty specific: * The client came up with the trade idea (the spark seems to have come from Qaddafi himself.) * It was basically just a call option, not some complicated thing with many bells and whistles * The clients aren't even claiming they were duped in any way The problem is not that Kabbaj was lying. It's that he was too charming.
      - claudius 10y ago
        > The problem is not that Kabbaj was lying. It's that he was too charming. Elsewhere, this sort of thing would be called corruption, specifically bribery of a public employee.
        notahacker 10y ago
        Yeah. I've no sympathy whatsoever for the Libyan officials[1]. They made a bad bet and lost money. It wasn't a bet that was purposely designed to lose, and was apparently actually less risky than the conventional stock purchase.[2] Their claim not to have known what they were doing makes them more culpable, not less, for anything that went wrong because they were supposed to be looking after a sovereign wealth fund FFS. That doesn't mean that internships-for-deals or prostitutes-for-deals is an appropriate thing for a bank employee to be offering. [1]the picture is somewhat complicated by the legitimate beneficiaries - the Libyan people - having had very little say in who ran their sovereign wealth fund, and the Libyan regime having radically changed since 2007 [2]not only was it less damaging than the equivalent long position in stock would have been with the benefit of hindsight, but other articles suggest the Libyans preferred the derivative option because they were less likely to be subject to asset freezes/seizures if the US government took a more anti-Gaddafi stance in future...

droithomme 10y ago

Not all cultures are the same. The article assumes a universal culture and values of "buyer beware" in which personal assurances, friendship, and honor, all mean nothing at all whatsoever. This is not how most of the world sees things. In the eyes of those who were assured of sure things, the brutal dismemberment and evisceration of the scammers, their families, and their pets, is justified, reasonable, and pretty certain to happen at some point, to protect one's honor. If one wishes to do business in other cultures one should understand those cultures.

tedunangst 10y ago
If the court case is in London, that suggests the business was being done in London (or at least the accounts were being kept there), so shouldn't the Libyans be the ones to understand the other culture?
- wpietri 10y ago
  In western culture, yes. In Libyan culture, I'm guessing no. The particular cultural value you're appealing to here is rule of law: https://en.wikipedia.org/wiki/Rule_of_law https://en.wikipedia.org/wiki/Rule_of_law It is a value I'm personally fond of. But it's not the only way to run a country. I'm going to go out on a limb an suggest that a guy who engineered a coup, declared himself "Brotherly Leader and Guide of the Revolution of Libya," and stayed in power 40 years was maybe not the biggest fan of the theory that "law should govern a nation, as opposed to being governed by arbitrary decisions of individual government officials".
  - tedunangst 10y ago
    Actually, somewhat more generally, if culture X is going to conduct some business with culture Y, which culture dictates the norms of the transaction?
    - wastedhours 10y ago
      In theory you'd assume the engaging party (either proactive sellers or proactive buyers) would adapt to the cultural practices of the ones they're reaching out to, but to some degree it probably doesn't align with human nature all of the time.

rexf 10y ago

For what he (Kabbaj) did in Libya, he never got his 'guaranteed' $9M by Goldman. > the bank was willing to guarantee him $9 million in pay. It was an astonishing sum, even at Goldman. > Kabbaj never got his $9 million. via https://www.bloomberg.com/features/2016-goldman-sachs-libya/ https://www.bloomberg.com/features/2016-goldman-sachs-libya/

rmason 10y ago
I was left wondering what happened to the Libyan officials in question? In those days it wasn't unusual for those who displeased Kaddafi to face a show trial and quick execution.
- ptaipale 10y ago
  Later developments didn't bother with much show in trials. It appears the mainly involved persons, Layas and Zarti, emigrated to live in Egypt and Vienna, respectively. I'd say that if Zarti applied for asylum in Austria, he'd be one of the applicants with best reasons to get one, by the terms of refugee treaties. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11052281/How-Libya-bet-billions-on-prosperity-and-lost.html http://www.telegraph.co.uk/finance/newsbysector/banksandfina...
jessaustin 10y ago
Shorting Kabbaj seems to imply that Goldman themselves thought there was something wrong with his work, perhaps even that it demonstrated "undue influence". IANAL, but one could certainly imagine an inference like that being drawn in court.

blizkreeg 10y ago

I was checking out Matt Levine's articles here https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matthew-s-levine https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matt... and it's interesting how the title of 99% of his articles is "Something and Something Else", "Something, something else, and some other thing". Wonder if he's aware of it himself :-)

princeb 10y ago
those money stuff articles are actually compilations of several pithy thoughts on different issues.
imrehg 10y ago
He has two series: one is Money Stuff, the daily (?) newsletter of finance news, that has such titles, and it is on purpuse for sure. The other is Wall Street (where this article is, the articles that have header images) that seem to have a pattern too, but less clear cut.

tominous 10y ago

> He treated them to dinners, musicals and prostitutes, with the "Lord of the Rings" musical being a particular favorite Can anyone explain why the words corruption and bribery are missing from the article? Is it normal to treat government workers to prostitutes?

peteretep 10y ago
What makes you think it isn't normal in the developing world?
- cloudjacker 10y ago
  Developing world lmao, because Jordan Belfort didnt do hookers and blow
- tominous 10y ago
  I'd expect firms that are based in the US or UK would be subject to laws against bribing foreign officials, e.g. the FCPA: https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act
Singletoned 10y ago
I was going to quote the same line, but because my brain found it particularly hard to parse. I assumed the clause beginning 'with' should refer to the last item in the list.
segmondy 10y ago
If it's legal out there, why not? Would it be corruption and bribery to treat them to dinner and drinks? Don't view the world only through your own lens. It didn't say where exactly they were treated to prostitutes. Hell, it could even be in Nevada.
- tominous 10y ago
  As per my other comment, on the face of it, it does seem illegal under laws in the US and UK such as the FCPA. Maybe someone could clarify though. To add some more, there is an affirmative defense to the FCPA that it is ok to give gifts/payments that are lawful according to the written law of the country [1]. Libya has some laws against corruption but they are rarely enforced and may not have been in place at the time [2]. Anyway, it seems strange to me that this article is about a new legal theory of "undue influence" and a salesman being uniquely "too good" when the concept of bribery has been around for thousands of years. Maybe the article could have said something like, "Libya screwed itself over by not having anti-corruption laws, and therefore it's trying a different legal approach." [1] https://www.sec.gov/investor/alerts/fcpa.pdf https://www.sec.gov/investor/alerts/fcpa.pdf [2] https://www.state.gov/documents/organization/230900.pdf https://www.state.gov/documents/organization/230900.pdf

princeb 10y ago

> "To help plan the training sessions, one of Kabbaj’s colleagues e-mailed to ask about the level of the Libyans’ knowledge of derivatives. He responded: 'Baaaaaaaasic.'" bizarre. you don't really expect to have to walk through finance 101 with a 67-billion-dollar SWF... you just have to believe the guys hired to manage that fund are qualified right? these are not your grandma's retirement savings. and then they turn around and say they don't understand what they bought?

trhway 10y ago
>you just have to believe the guys hired to manage that fund are qualified right? being a second cousin of a wife of the "beloved leader"'s chief of security is the best qualification, easily beats your Princeton's MBA in Finance.
- barry-cotter 10y ago
  Princeton doesn't have any professional schools, neither law, medicine nor business.

RangerScience 10y ago

"They don't seem to have ... asked?" I think this is my favorite bit. Which actually brings up a good proactive defense for the salesman: Make sure you let you client know what they should be asking, not just what they ARE asking. Not that this an easy question to answer - you're asking someone else to point out your unknown unknowns, but in turn, they're blinded by familiarity (example: I actually do experience slight surprise when people haven't heard of Hacker News).

lifeisstillgood 10y ago

I struggle with this. If you are buying billions of dollars of anything, it is incumbent on you to make sure you get a good deal. You can clearly afford good advisors, and you should not be treated like a consumer walking in off the street. The fact that a while oil rich country had given the nephew of someone the right to buy billions of dollars is the fault of the fucked up dictatorship ruling the country I can see why the new government wants to sue - but I suspect a new moral hazard should be introduced - when a dictatorship is buying, it should be automatically assumed that subsequent democratic governments can come and ask for the cash back no questions asked That alone should stop most dictatorships doing anything. Interesting idea?

JohnnyFang 10y ago
Interesting idea, although not new. It's called odious debt.
- lifeisstillgood 10y ago
  https://en.m.wikipedia.org/wiki/Odious_debt https://en.m.wikipedia.org/wiki/Odious_debt """In some respects, the concept is analogous to the invalidity of contracts signed under coercion.""" (Thanks - V interesting)

aurelienb 10y ago

So a bank has an extraction team. Looks like a cyberpunk novel. I suppose extraction team come from a "security/mercenary" company. I'm curious of the legal implication.

lmm 10y ago
If you're large enough it makes sense to be vertically-integrated with services you need frequently. They have a lot of wealthy people who need to operate in insecure regions, it makes sense that they'd deal with kidnappings etc. relatively frequently (indeed I'd look askance at an employer that expected me to work in a dangerous region and didn't have a policy/plan for such occasions). There are any number of private security organizations; like any industry most (but not all) are professionals who know and operate within the relevant laws.

csomar 10y ago

I think the author is hiding (intentionally or not) an important part: The PUT option. This is supposed to hedge against the risk of the stock going down. It's very possible that the Libyans were informed that they are hedged against a crash, only to discover later that the PUT counterparty got liquidated. Any one willing to investigate this particular point deeper?

tedunangst 10y ago
They had a forward contract, which is not the right, but the obligation to buy citi shares at some price (though it was cash settled). If citi tanks, you can lose more than just the initial investment. The put was so that they only lost all their money, not more than all their money. The forward is identical to (long call, short put). You can see that would be bad if the stock goes down. So they bought puts to close out their short put position, leaving them with a long call which expired worthless.

pamelabuck 10y ago

Umm.... is this this how business is done in all 3rd world countries?

Iv 10y ago

Forget about the salesman, that's the best bit: "Did you know Goldman had an extraction team? In my time selling equity derivatives, it never came up."

Iv 10y ago

> But "duped" is not exactly the right word. Libya knew it was betting on bank stocks to go up, and those stocks went down. It's not claiming fraud. It's claiming "undue influence." The problem is not that Kabbaj was lying. It's that he was too charming. Libya isn't saying it was duped. It's saying it was seduced. Interesting twist here. I guess it must be hard to discern for someone who has lived in this trade for so long, and used this mindset as the core of his trade for most of his career but there are simple things that technical people (or even just lawyers) will easily discern: omissions and hiding of a client's best interest. If you know something is wrong in a company and you don't tell it to your employer, in many fields, that makes you at least negligent. If you know something is wrong and you don't tell it because it causes personal gain to you, it is actually illegal in most jobs and likely criminal. If you are paid for giving advices in the interest of your consumer and you hid an honest assessment of risks because you profit in your client's risky behavior, yeah, that's fraud. A doctor prescribing an addictive medicine, an IT guy selling a faulty software because he got share in the selling company, etc...