By Steve Eder and Matthew Goldstein

NEW YORK (Reuters) – An Australian hedge fund is suing Goldman Sachs Group Inc over an investment in a subprime mortgage-linked security that contributed to the fund’s demise in 2007.

The lawsuit filed on Wednesday accuses Goldman of misrepresenting the value of the notorious Timberwolf collateralized debt obligation, which garnered a lot of attention during a recent congressional hearing.

Basis Yield Alpha Fund sued Goldman to recoup the $56 million it lost on the CDO, said Eric Lewis, a Washington-based lawyer for the fund. The suit also seeks $1 billion in punitive damages.

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