The Financial Industry Regulatory Authority has ordered Goldman Sachs (NYSE: GS) to pay $20.6 billion to victimized investors of a Ponzi scheme run by Bayou Hedge Funds. The three-person arbitration panel for the financial regulatory agency ruled that Goldman Sachs should have been aware of the Ponzi scheme being run at the hedge fund.
Goldman Sachs’ clearing unit is being held directly liable in the complaint. The $20.6 million is the amount that Bayou Hedge Funds deposited into its accounts at Goldman, which handled the funds trading between 1999 and 2004.
According to recent reports, the majority of victims invested anywhere from $300,000 to $500,000, with the total amount of fraud being estimated at about $250 million.
Bayou investors claimed in their suit that Goldman showed have known that there was some form of fraud or deception going on as they had marketing materials from the firm that claimed consistent returns, while the firms accounts showed losses.
Goldman argued that all it did was process transactions for Bayou Hedge Funds and was not aware of the fraud and by law is not required to investigate those holding accounts.
The ruling against Goldman Sachs will likely stand as arbitration cases are not overturned very often.
This article (Goldman Sachs (NYSE: GS) Ordered To Pay $20.6 Million Related To Bayou Hedge Fund Fraud) was originally developed by and is property of American Banking News.
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