Goldman Sachs is under close surveillance, after a federal bankruptcy court approved a request made by unsecured creditors of the Bayou Group. The creditors were granted permission to probe into the Prime Brokerage, in an attempt to expose any fraudulent transfer of funds to Goldman Sachs Execution and Clearing.
“Goldman Sachs Execution and Clearing received funds from the debtors at a time when the debtors were insolvent and/or pursuing a fraudulent investment scheme,” the creditors committee stated.
Hoping to gain evidence to file a claim, the creditors seek to expose Sachs’ inside knowledge of the hedge fund’s financial condition, the amount of money transferred to GSEC, and whether or not they did anything to cause injury to the fund. The investigation also hopes to determine whether Bayou holds any claims against third parties that might benefit their bankruptcy estate.
The Stamford, Connecticut-based Bayou Group was convicted in 2005 of defrauding investors out of over $450 million. Many of their top officers were sentenced to lengthy prison terms, and a sizeable restitution order is expected to be delivered later this month.
Goldman Sachs has been the prime brokerage for Bayou since its launch in 2000, up until the collapse of the hedge fund in 2005. Ed Canaday, spokesman for Goldman Sachs, declined to comment on the issue.
Julie Scuderi
Contributing Editor for HedgeCo.Net
Email: [email protected]
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