Goldman Sachs has been trying to overturn the $20.5 million arbitration award arising from the 2005 collapse of the hedge fund manager Bayou Group. The NY Times Dealbook article explains that the now defunct Bayou Group accused Goldman Sachs of helping to perpetrate a Ponzi scheme. The United States Court of Appeals for the Second Circuit upheld the award to the creditors of Bayou last Tuesday, according to the article. The Bayou Group’s former chief executive is serving a 20 year sentence for his role in the fraud. He pleaded guilty to misrepresenting the value of Bayou’s funds and defrauding clients of more than $400 million.
If this large arbitration award is upheld, it may have broader ramifications on Wall Street. The article stated that Goldman Sachs and firms similar to Goldman Sachs, who clear billions of dollars in trades a year and have long-held that their job is simply to clear those transactions, have held that they did not have a duty to police the clients. This arbitration award and its symbolism to other Wall Street establishments has caused some experts to argue that the award could force a higher duty on Wall Street.
If you have a legal question about the suitability of a fund you’ve been sold, or if you feel a fund you purchased was misrepresented to you, please contact Richard Frankowski at 205-747-1903 to discuss your potential legal remedies.