A former Goldman Sachs Group Inc. (GS:US) commodities trader was accused by U.S. regulators of concealing an $8.3 billion position and causing the firm to lose $118 million.
Matthew Marshall Taylor in 2007 fabricated trades and obstructed the firm’s discovery of his position, risk and profits and losses, the U.S. Commodity Futures Trading Commission said in a complaint filed yesterday in federal court in New York.
Taylor concealed the position by bypassing the firm’s internal system for routing trades to the Chicago Mercantile Exchange and manually entering fabricated futures trades in a different internal system, according to the complaint. Goldman Sachs, which wasn’t identified in the CFTC lawsuit, said Taylor allegedly made the trades while employed at the firm.
“Matt Taylor provided false explanations when confronted about irregularities we detected in his account during the Dec. 14, 2007, trading day,” Michael DuVally, a Goldman Sachs spokesman, said in an e-mailed statement. “He admitted his misconduct following the market close, and was promptly removed from his job and terminated soon thereafter.”
“Since these events, which had no impact on customer funds, we have further enhanced our controls.”
Taylor, a resident of Royal Palm Beach, Florida, was a vice president and trader on the firm’s Capital Structure Franchise Trading desk, according to the CFTC complaint.
Taylor’s lawyer, Ross Intelisano of New York, said his client denies all the allegations and is disappointed that CFTC filed a complaint.
“Matt never intentionally entered ‘fabricated trades’ to conceal any trading activity and Goldman never alleged he did so at the time of his termination or thereafter,” Intelisano, of Rich, Intelisano & Katz LLP, said in an e-mailed statement. “Matt, himself, brought the trading losses to the attention of senior managers at Goldman on the day they occurred.”
Taylor was hired by Morgan Stanley (MS:US) less than three months after Goldman Sachs disclosed in a public filing that he had been fired for building an “inappropriately large” proprietary trading position. Goldman Sachs cited the alleged misconduct in a so-called U-5 form, according to a Financial Industry Regulatory Authority document. Morgan Stanley, which had employed Taylor before he joined Goldman in 2005, re-hired him in March 2008, according to the Finra records.
Morgan Stanley hired Taylor less than three months after a subprime mortgage-related trading position resulted in a $9.4 billion writedown in December 2007, which caused the New York- based company to oust co-president Zoe Cruz and sell a $5 billion stake to state-controlled China Investment Corp.
Taylor left Morgan Stanley in July, according to Mark Lake, a company spokesman in New York. His departure wasn’t related to the CFTC complaint filed against him yesterday.
CFTC said in its complaint that by Dec. 13, 2007, “Taylor’s scheme culminated in his concealment of a notional value of an approximately $8.3 billion long e-mini futures position.” E-minis are futures contracts tied to the S&P 500 Index.
The suit seeks a penalty of $130,000 or triple Taylor’s monetary gain for each violation, whichever is higher.
The case is U.S. Commodity Futures Trading Commission v. Taylor, 12-cv-8170, U.S. District Court, Southern District of New York (Manhattan).
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