Goldman Sachs Loses Attempt to Set Aside $20.6 Million Award

Goldman Sachs’ attempt to have a $20.6 million FINRA award set aside has been denied by a U.S. District Court judge. The award is thought to be the largest ever against an investment bank and the first where a bank has been held accountable for being the middleman in a Ponzi scheme. Goldman Sachs cleared trades and lent money to the Bayou Group, which was a Connecticut hedge fund that failed in 2005. The founder of the group, Samuel Israel III, faked his suicide and is now serving 22 years in prison for fraud. The allegation against Goldman, who had access to Bayou’s trading records that showed losses and marketing materials that showed gains, was that they either knew or should have known about the fraud of the Bayou Group. The bottom line is, a firm cannot claim clean hands if it has knowledge of illegal activity being committed by one of its hedge funds

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