U.S. regulators on Thursday accused a former Goldman Sachs Group Inc trader of defrauding the Wall Street bank of $118 million in a scheme of fabricated trades and fake entries.
In a lawsuit filed in the U.S. District Court in Manhattan, the Commodity Futures Trading Commission (CFTC) said Matthew Marshall Taylor had manually entered fake trades in November and December 2007, in an attempt to conceal an $8.3 billion position in futures contracts.
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The scheme cost the bank $118.44 million, the CFTC said.
"By entering fabricated trades and concealing the position ... (the) defendant engaged in fraudulent acts and practices," the civil fraud complaint said. "Taylor's fabricated trades had the effect of concealing and misrepresenting the size of his e-mini futures position within his employer's internal systems."
The CFTC is seeking a $130,000 civil penalty against Taylor, who currently resides in Florida, the complaint said.
Ross Intelisano, a lawyer for Taylor, could not immediately be reached for comment.
The CFTC complaint did not name Goldman but referred to Taylor's employer at the time of the suspected fraud only as a "large Futures Commission merchant."
However, broker records from the Financial Industry Regulatory Authority, Wall Street's industry funded regulator, showed that Taylor was discharged from Goldman in December 2007 for "alleged conduct related to inappropriately large proprietary futures positions in a firm trading account."
A Goldman Sachs spokeswoman said the bank had terminated Taylor's employment after his suspected conduct had been discovered, and that customer funds had not been affected.
"The trader provided false explanations when confronted about irregularities we detected in his account during the December 14, 2007 trading day," Goldman spokeswoman Tiffany Galvin said in a statement.
The complaint said that as Taylor's supervisors began questioning him about discrepancies in his numbers, Taylor at one point "falsely represented that he had misbooked a trade or put too many zeroes in the quantity field."
At the time of the suspected offense, Taylor was a vice president at the bank's Capital Structure Franchise Trading desk, the complaint said.
After leaving Goldman, he went on to work at Morgan Stanley, broker records showed. A spokesman for the bank declined comment.
The case is U.S. Commodities Futures Trading Commission v. Matthew Marshall Taylor, U.S. District Court for the Southern District of New York, No 12-cv-8170.
(Additional reporting by Lauren Tara LaCapra; Editing by Richard Pullin)