Goldman Sachs unit to pay $21m to Bayou Group creditors

29 June 2010

A unit at investment bank Goldman Sachs has been ordered to pay almost $21 million to the creditors of the collapsed hedge fund Bayou Group.

According to reports, a document produced by the Financial Industry Regulatory Authority backed the creditor’s claims that Goldman neglected to investigate fraudulent trades related to the fund.

The Bayou Group is alleged to have ran a Ponzi scheme before its collapse in 2005, which is believed to have cost investors up to $400 million.

Ross Intelisano, a lawyer for the creditors committee of Bayou, told the Financial Times: “There were certainly really significant red flags that would have put Goldman Sachs on notice that there was something wrong.”

“The panel is not going to allow Goldman to stick its head in the sand when Sam Israel is running a Ponzi scheme.”

Samuel Israel, chief executive officer at the group at the time, is now serving a 20-year sentence after pleading guilty to misleading the fund’s investors.

Ed Canaday, Goldman Sachs spokesman, said: “We are disappointed in the award and we are considering our options."

By Jim Ottewill

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