NEW YORK (CNNMoney) -- Goldman Sachs managed $1.3 billion worth of trades in currencies and other investments for the Libyan Investment Authority in 2008, according to a report published Tuesday.
After those investments lost nearly all of their value in the market turmoil of 2009, Goldman offered Libya the chance to become one of its biggest stakeholders, according to the Wall Street Journal.
The discussions eventually fell apart, and the LIA has since been sanctioned by the international community, with the United States and other governments seizing most of its assets.
Goldman Sachs declined to comment on the report. But a source familiar with the matter confirmed that Goldman did manage money for Libya, and that the investments performed poorly.
A call to the phone number listed for the LIA's main office in Tripoli was not answered and an e-mail requesting comment was not returned.
The Journal, citing internal documents and interviews with people familiar with the matter, said Goldman handled nine equity trades and one currency transaction for the fund.
As the credit crisis took hold in 2009, the investments went south and the $1.3 billion investment fell to just $25.1 million as of February 2010 -- a decline of 98%.
According to the report, Libya was "furious" with Goldman and pressured the company to recoup their losses.
Goldman executives, including CEO Lloyd Blankfein, did not want to damage their relationship with the sovereign wealth fund and offered it an opportunity to buy a $3.7 billion stake in the company, the newspaper said.
The report said Goldman made three different proposals between May and July of 2009 that would have offered Libya a stream of payments that would offset the fund's losses.
But a source familiar with the matter said that none of the offers could have been converted into an equity stake, and that the Federal Reserve would have had to approve any investment by the LIA.
Libya set up the LIA in 2007, three years after the United States lifted sanctions on the country. The fund aggressively sought to invest billions of dollars around the world, and Wall Street firms such as Goldman (GS, Fortune 500) were eager to do business with the oil-rich nation.
But Libya has once again been the target of international sanctions.
In February, the United States and other nations seized billions of dollars worth of assets linked to the Gadhafi government, which as been battling opposition forces backed by NATO forces for months. 
