Title: Scandalous Wealth: The Untold Story of Libya’s Sovereign Fund and the Billion-Dollar Gamble

Libya’s Sovereign Wealth Fund: A Tale of Scandals and Nepotism

Amidst the chaos in Libya, the mismanagement of one of the country’s most valuable assets, the Libyan Investment Authority (LIA), a sovereign wealth fund with an estimated value of $65 billion, has come under scrutiny. Over the past ten years, this article uncovers a tale of scandals, nepotism, and questionable investments that have left the Libyan people questioning where their public money has gone.

The Birth of a Controversial Fund

With European and US sanctions against Libya beginning to lift in 2006, the concept of a Libyan sovereign wealth fund was born. With the country’s vast oil reserves, it seemed like a sound investment plan for a post-oil future. Libya’s Libyan Investment Authority (LIA) was established, with an initial investment of over $30 billion. By 2012, it was estimated to be worth nearly $65 billion. But the journey to such a vast fortune was far from honorable.

Orchestrated by the Late Dictator’s Son

Saif al-Islam Gaddafi, the late dictator’s son and perceived heir, was rumored to be the mastermind behind the LIA. During his time in Europe, he became known for his generous spending, winning favors and accolades from the Western world. With the LIA’s creation, he was envisioned as the modernizer and reformer that Libya needed. To start the fund, one of the first appointments was Mustafa Zarti, a close friend of Saif from their student days in Austria. However, Zarti had no significant experience in finance, raising skepticism over his appointment as LIA’s deputy head.

A Fund Shrouded in Secrecy

The opaque LIA faced numerous allegations of wild spending and unexplained investments. Its lack of transparency and what appeared to be a non-existent asset allocation strategy allowed the fund to invest vast sums of money in risky derivatives and structured products, making up 35% of LIA’s portfolio – far more than what is typical for a sovereign wealth fund.

Accountability and Insight: Investigative Journalism and the Al-Araby TV Documentary

In a bid for accountability and insight, investigative journalists Dr. Deena Dajani and Ikbel Tlili produced an Al-Araby TV documentary, shedding light on LIA’s murky dealings.

Exposés and Controversial Findings

One of the most damning exposés came in the form of leaked reports from a KPMG audit conducted in 2010. These documents revealed the extent of LIA’s shady investments and questionable business practices. LIA’s losses had already reached $2.4 billion before the audit was commissioned, and when then-CEO Sami Rais asked for the term sheets for causing losses, he was met with resistance. The audit’s findings were presented to the Board of Trustees in 2010, but despite its recommendations, the investments remained untouched.

The Arab Spring and the Frozen Assets

By the time of the Arab Spring in 2011, the LIA’s assets had been frozen under UN sanctions, preventing any new investments or management of existing ones. Libya’s revolution left the fate of the LIA and its investments uncertain, with estimates of losses reaching over $720 million during the sanctions period.

The Challenge of Rebuilding the LIA: A Daunting Task

In 2012, Muhssen Derragia, a lecturer at Nottingham University, was approached by Libyan officials to lead the LIA as its CEO. However, with the assets frozen and the fund’s leadership in disorder, rebuilding the fund would prove to be a daunting task. The competing camps within LIA – with technocrats advocating for pragmatic management and political allies seeking to maintain power through the fund – would face off, complicating any efforts to reconcile LIA’s troubled past and its uncertain future.