Rich & Intelisano, LLP won a $20.5 million arbitration award against Goldman Sachs related to the Bayou hedge fund Ponzi scheme. The award is 100% of the compensatory damages requested. It is the largest arbitration award ever rendered against Goldman and the sixth largest customer arbitration award against any Wall Street firm. It is also the first win in any court or arbitration forum by investors against a clearing or prime broker related to a hedge fund Ponzi scheme based upon fraudulent transfer theories.
Partner John Rich masterminded the case, and tried it together with partner Ross Intelisano, with significant help from Matt Woodruff, Diane Mall Sammarco and Eric Clem of our office.
The award is on Finra’s website. The Firm represented the Bayou Creditors’ Committee in the 18 day arbitration hearing. The three arbitrator panel held over 13 pre-hearing sessions and 36 hearing sessions in 2008 through 2010.
From 1999 through 2005 Goldman Sachs Execution & Clearing, Goldman’s clearing broker, served as the sole prime and clearing broker for the Bayou funds. During 2002 through 2004, Goldman earned over $5 million in fees from Bayou. The Bayou victims alleged in their complaint that Goldman knew or should have known that Bayou was committing fraud and should have done an investigation into Bayou’s activities at Goldman. Instead, Goldman turned a blind eye to numerous red flags and suspicious activity in order to continue to reap fees.