Court dismisses Goldman Sachs hedge fund appeal An Australian hedge fund that lost $US67 million when it bought toxic mortgages from Goldman Sachs is a step closer to having its day in court against the investment bank, after a New York court quashed Goldman's attempt to have the case thrown out. ""We welcome the appellate court's 5-0 decision and we look forward to putting our fraud claim to a jury once discovery has been completed later this year,"" Basis managing director Nick Reeves said. At the centre of the case are two collateralised debt obligations (CDOs) sold by Goldman, known as Timberwolf and Point Pleasant. Basis says it lost $US67 million when the assets collapsed in value soon after they were purchased. It claims that while Goldman was selling the assets, it also considered them to be of dubious value and was trying to reduce its exposure to sub-prime debt. One sales executive is alleged to have described the Timberwolf instrument as ""one shitty deal"" in an email. While the judges this week denied the bank's push for the fraud claims to be dismissed, they also threw out Basis's claims of negligent misrepresentation, unjust enrichment and rescission. A spokeswoman for Goldman noted this, and stressed that Basis was a sophisticated investor. ""The court upheld the dismissal of several of Basis's claims,"" she said. ""We are confident that we will ultimately prevail on the remaining claim by Basis, which was one of the world's most sophisticated investors in mortgage products." Investment banks have faced a series of legal claims over the sale of sub-prime products to investors, but the case is noteworthy for its direct links to Australian investors and the local arm Goldman. The lawyer representing Basis, Lewis Baach partner Eric Lewis, said Australian sales staff of Goldman were likely to give out of court testimony through depositions as part of the case. The case was especially significant because the bank had been unable to avoid conducting arbitration in secret, he said, and because the assets had been particularly "toxic." This is the one where they got caught with the most toxic of toxic CDOs. It's clear that internally they knew exactly what they were selling. They constructed these to fail and fail quickly," he said. Goldman has argued that it disclosed key risks to Basis through disclaimers that detailed potential conflicts of the interest and difficulties in the US housing market. However, the judges said the disclosures ""simply provide boilerplate statements regarding the speculative and risky nature of investing in mortgaged-backed CDOs and the possibility of market turns."" ""If plaintiff's allegations are accepted as true, there is a "vast gap" between the speculative picture Goldman presented to investors and the events Goldman knew had already occurred,"" the judges said.