{"id":5116,"date":"2010-12-14T00:00:00","date_gmt":"2010-12-14T06:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2010\/12\/goldman_sachs_co_clearing_unit"},"modified":"2022-04-04T12:52:31","modified_gmt":"2022-04-04T17:52:31","slug":"goldman-sachs-co-clearing-unit","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/goldman-sachs-co-clearing-unit\/","title":{"rendered":"Goldman Sachs & Co. Clearing Unit Must Pay Unsecured Creditors of Bayou Hedge Funds $20.5M FINRA Arbitration Award, Says District Court"},"content":{"rendered":"

A district court has rejected Goldman Sachs & Co.\u2019s (GS ) challenge to a $20.5 million securities fraud award<\/a> for unsecured creditors of the failed Bayou hedge funds. The unsecured creditors are blaming the investment bank of failing to look at certain red flags and, as a result, facilitating the massive scam. The U.S. District Court for the Southern District of New York said it was sustaining the award issued by the Financial Industry Regulatory Authority arbitration panel.<\/p>\n

The court said that contrary to Goldman\u2019s argument, the FINRA panel \u201cdid not \u2018manifestly disregard the law\u2019 when reaching its conclusion. Also, the court noted that the panel had found that Goldman Sachs Execution and Clearing unit was not innocent of wrongdoing in that it failed to take part in a \u201cdiligent investigation\u201d that could have uncovered the fraud.<\/p>\n

The Bayou Hedge Funds group collapsed in 2005. According to regulators, investors lost over $450 million as a result of the false performance data and audit opinions that were issued. The Securities and Exchange Commission and the Justice Department sued the group\u2019s founders, Daniel Marino and Samuel Israel III over the investors\u2019 financial losses and the firm\u2019s collapse. Both men have pleaded guilty to criminal charges and are behind bars.<\/p>\n

The court not only disagreed with the Goldman Sachs clearing unit that the panel was not in manifest disregard of the law, but also, it found that as Goldman\u2019s client agreements with the Bayou funds provided it with \u201cbroad discretion\u201d over the use of securities and money in the funds\u2019 accounts, it was not unusual for a \u201creasonable arbitrator\u201d to find that Goldman\u2019s rights in relation to the accounts provided it with \u201csufficient dominion and control to create transferee liability.\u201d<\/p>\n

Related Web Resources:<\/strong><\/p>\n

Court Rebuffs Goldman ChallengeTo $20.5M Bayou Arbitration Award, BNA, December 9, 2010<\/p>\n

Goldman Sachs<\/a>, Stockbroker Fraud Blog<\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A district court has rejected Goldman Sachs & Co.\u2019s (GS ) challenge to a $20.5 million securities fraud award for unsecured creditors of the failed Bayou hedge funds. The unsecured creditors are blaming the investment bank of failing to look at certain red flags and, as a result, facilitating the massive scam. The U.S. District […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3752,3739,3947,3741],"tags":[],"class_list":["post-5116","post","type-post","status-publish","format-standard","hentry","category-financial-firms","category-finra","category-goldman-sachs","category-securities-fraud"],"yoast_head":"\nGoldman Sachs & Co. 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