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Former Goldman VP Pleads Guilty Following Scheme

Friday, April 5, 2013
Matthew Taylor, a former Goldman Sachs & Co. (GS) derivatives trader, pleaded guilty to one count of wire fraud April 3 in the U.S. District Court for the Southern District of New York over his alleged role in a fraudulent scheme that eventually cost the firm $118 million (United States v. Taylor, S.D.N.Y., No. CR-13-_, 4/3/13).

According to the criminal information report Taylor traded S&P 500 E-mini futures contracts. In November 2007, according to the report, Taylor lost a significant portion of the profits he had earned on trades up to that time, threatening his reputation and million dollar-plus compensation. Instead of reducing his market position as directed by his supervisors, however, Taylor in December secretly increased his--and Goldman's--market exposure, hoping to earn back his profits.

Soon, his exposure of $8.3 billion exceeded not only his individual allowable risk limit, but that of the entire desk on which he worked. To conceal the size of his position, Taylor allegedly recorded multiple false entries in the firm's manual trade entry system and later made numerous false statements to firm officials.

Goldman Sachs eventually lost approximately $118 million unwinding Taylor's position once it was discovered.

The wire fraud charge carries a maximum of 20 years in prison, with a stipulated guideline range of between 33 months and 41 months. The parties also agreed to a fine range of between $7,500 and $75,000, although the statutory maximum is the higher of $250,000 or twice Goldman Sach's loss.

Late last year, Goldman Sachs agreed to be fined $1.5 million in December to settle Commodity Futures Trading Commission allegations it failed to supervise Taylor diligently (236 SLD, 12/10/12).

The Commodity Futures Trading Commission sued Taylor in November based on related alleged misconduct (218 SLD, 11/13/12).

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