RiskTech Forum

Goldman Sachs Trader Charged with Fraud

Posted: 12 November 2012  |  Source: CFTC

A Goldman Sachs trader has been charged with fraud for fabricating and concealing trades from his employer as well as obstructing their discovery.

The U.S. Commodity Futures Trading Commission (CFTC) filed an enforcement action charging Matthew Marshall Taylor with defrauding his employer, a large futures commission merchant (FCM), by intentionally concealing from the FCM the true huge size, as well as the risk and potential profits or losses (P&L) associated with the S&P 500 e-mini futures contracts (e-mini futures) position in a firm account traded by Taylor.  Taylor, a Florida resident, was a trader at the FCM.

The CFTC’s civil complaint, filed November 8, 2012, in the U.S. District Court for the Southern District of New York, alleges that for several months, including at least November and December 2007, Taylor, while trading an FCM firm account, entered fabricated e-mini futures trades into the FCM’s manual trade entry system, thus concealing and misrepresenting the size of his true e-mini futures position within his employer’s internal systems. Taylor entered fabricated trades by bypassing the FCM’s internal system designed for entering and routing electronic trades to the Chicago Mercantile Exchange (CME), and instead manually entered them in a different internal system that routed the fabricated trades only to the FCM’s books and records and not to the CME.

Additionally, Taylor allegedly obstructed his employer’s discovery of his scheme by, among other things, providing false, misleading or deceptive information and reports to the FCM’s employees about the FCM’s e-mini futures position, risk, and P&L.

On or about December 13, 2007, Taylor’s scheme culminated in his concealment of an approximately $8.3 billion long e-mini futures position, measured by notional value, as well as the corresponding risk and P&L associated with that position, the complaint charges.  Taylor’s e-mini futures trades and his concealment resulted in realized losses to the FCM of approximately $118,440,000 after the FCM’s offset and liquidation of the position, according to the complaint.

In its continuing litigation, the CFTC seeks civil monetary penalties, trading and registration bans, and a permanent injunction prohibiting further violations of the federal commodities laws, as charged.

CFTC Division of Enforcement staff responsible for this case includes Janine Gargiulo, Trevor Kokal, Judith Slowly, David Acevedo, Lenel Hickson, Stephen Obie, and Vincent McGonagle.