Goldman Appeals $20.6 Million Bayou Award

Mar 13 2012 | 8:11pm ET

Goldman Sachs has appealed a large arbitration award it was ordered to pay creditors of fraudulent hedge fund Bayou Group two years ago.

The Wall Street giant yesterday asked the U.S. Court of Appeals for the Second Circuit in Manhattan to vacate to $20.6 million award, the largest arbitration award ever levied against a securities firm. In its appeal, Goldman called the award "unreasoned and patently indefensible."

It is the second time that Goldman has sought to have the Financial Industry Regulatory Authority award tossed by the courts. But a lower court judge, Jed Rakoff, in 2010 rejected that bid, arguing that Goldman had "voluntarily" agreed to arbitration and "must suffer the consequences."

While much of Rakoff's opinion was a screed against arbitration—"Arbitration is touted as a quick and cheap alternative to litigation," although "experience suggests that it can be slow and expensive. But it does have these 'advantages'; unlike courts, arbitrators do not have to give reasons for their decisions, and their decisions are essentially unappealable"—he did reject Goldman's contention that the arbitrator "manifestly disregarded the law."

Bayou's unsecured creditors alleged that Goldman Sachs Execution and Clearing, which cleared trades for Bayou, showed "either gross negligence or a willful choice to ignore signs of fraud." Bayou collapsed five years ago, costing investors more than $400 million.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.