Goldman Sachs loses bid to throw out $20m arbitration award

10 November 2010

Goldman Sachs’ attempt to have a $20.6 million arbitration award thrown out of a court has been rejected by a judge.

Jed Rakoff, US district judge, has upheld an award by the Financial Industry Regulatory Authority (FINRA) made earlier in the year which could provide the unsecured creditors of Bayou with the sum.

Although the award could still be contested by Goldman Sachs, it is thought to be the largest ever claim made against an investment bank.

Goldman Sachs has been accused of ignoring signs of fraud at the hedge fund by the Bayou creditors.

In a filing Judge Rakoff said: “After full consideration of the parties’ briefs and oral argument, the court hereby denies the petition to vacate the arbitration award and grants the cross-petition to confirm the award.”

Ross Intelisano, a partner at New York law firm Rich & Intelisano, a representative for Bayou, said: “We are looking forward to investors finally getting some of their money back from this tragic fraud.”

Bayou went out of business during 2005 and Samuel Israel III, the firm’s former chief executive officer, is now serving 20 years for fraud.

By Jim Ottewill

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