NEW YORK, Dec. 4, 2013 /PRNewswire/ -- 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.
Three days later, on May 24, 2013, Goldman Sachs employees belatedly provided Mr. Oei with a "Sensitivity Analysis" which confirmed that the two trades he had entered into were illiquid, that the BRL was not anchored to the U.S. dollar and that it could be difficult or impossible to liquidate these positions on favorable terms. In fact, on June 10, 2013, when Goldman Sachs belatedly provided Mr. Oei with a written trade confirmation, he refused to sign it as it referenced the two strike prices which by now he knew were unfair and much worse that he could have reasonably anticipated. Eventually, after six margin calls, on June 17, 2013, Mr. Oei unwound the two BRL/JPY trades at a loss of over $34,000,000.
Because of perceived abuses in the trading of financial derivatives, such as the currency options involved in Mr. Oei's case, the Commodity Futures Trading Commission ("CFTC"), an independent agency of the United States government that regulates futures and option markets, and the Board of Governors of Federal Reserve have promulgated various regulation seeking to ensure that customers are aware of the inherent conflicts of interest that exist on such trades. These regulations mandate that financial firms such as Goldman Sachs provide their customers with disclosures about their conflict of interest and that these trades often involve a situation where the financial firm will make more money when their client loses money. Goldman Sachs' own disclosures now state: "Conflicts of interests can arise in particular when Goldman Sachs has an economic or other incentive to act, or persuade you to act, in a way that favors Goldman Sachs or its affiliates." Our "advice may not be consistent with, or may be contrary to, your interests or to positions which are the subject of advice previously provided by Goldman Sachs or its affiliate to you, and unless otherwise disclosed in writing, we are not necessarily acting in your best interest and are not assessing the suitability for you of any Contract or related financial instrument." Mr. Oei alleges that Goldman Sachs never disclosed this conflict of interest or other relevant facts before he entered into the trades that resulted in his more than $34,000,000 loss.
The complaint sets out causes of action alleging fraudulent misrepresentation, breach of fiduciary duty, corporate malfeasance, fraudulent inducement, unjust enrichment and aiding and abetting of fraudulent conduct. Mr. Oei seeks compensatory and punitive damages in this action.
See the full filed complaint here: http://mcnultylaw.com/wp-content/uploads/2013/12/Filed-Summons-Complaint_-NYSCEF-Doc.-No.-1.pdf
Peter McNulty of the Los Angeles based McNulty Law Firm is lead counsel for Mr. Oei. Alan Friedman of the Jersey City, NJ firm Bagolie Friedman is local counsel for Mr. Oei.
For further information contact Peter McNulty at 310-471-2707 or email@example.com.
SOURCE McNulty Law Firm