Judge Junks Goldman Effort To Junk Bayou Award

Nov 8 2010 | 1:14pm ET

Goldman Sachs has lost its bid to vacate the largest arbitration award ever levied against a securities firm, one stemming from the Bayou Group hedge fund fraud case.

U.S. District Judge Jed Rakoff today denied Goldman's petition to vacate the $20.6 million award to the unsecured creditors of Bayou, which collapsed four years ago, costing investors more than $400 million. A Financial Industry Regulation Authority made the award earlier this year after the creditors claimed that Goldman, which cleared Bayou's trades, showed "either gross negligence or a willful choice to ignore signs of fraud."

Goldman denied those allegations. The firm could still appeal the arbitration award.

Ross Intelisano, a lawyer for the Bayou creditors, said of Rakoff's decision, "we are looking forward to investors finally getting some of their money back from this tragic fraud."

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