The U.S. Commodity Futures Trading Commission (CFTC) has fined Goldman, Sachs & Co. (“Goldman”) $1.5 million to settle CFTC charges that Goldman failed to diligently supervise an employee and have proper supervisory and compliance systems in place in late 2007.
Specifically, during November and December 2007, former Goldman trader, Matthew Marshall Taylor, bought $8.3 billion in e-mini S&P 500 futures contracts. He also circumvented Goldman’s risk management, compliance, and supervision systems, by entering fake e-mini S&P 500 sell trades into Goldman’s manual trading system. By doing so, he created the false appearance that he had hedged the $8.3 billion position that he had amassed. Goldman ultimately lost more than $118 million when it unwound Mr. Taylor’s trades.
The CFTC accused Goldman of failing to have policies or procedures reasonably designed to detect and prevent the manual entry of fabricated futures trades. In a related action, the CFTC filed an enforcement action in the Federal District Court for the Southern District of New York, charging Mr. Taylor with defrauding Goldman.