An arbitration panel reportedly ordered Goldman Sachs Group Inc. to pay nearly $21 million to creditors owed money from Bayou Group, a onetime Stamford hedge fund whose founder is in prison for running a Ponzi scheme.
Arbitrators under the Financial Industry Regulatory Authority agreed with some 200 unsecured creditors who had accused Goldman of negligently missing what plaintiffs said were obvious signs of fraud at Bayou Group, in Goldman”™s role as a lender and clearing house for trades.
Goldman can appeal in the courts, and indicated it has yet to decide whether it will do so.
Investors lost more than $400 million when Bayou Group collapsed in 2005. On the eve of his incarceration in 2008, founder Samuel Israel III fled and spent two months on the lam before being discovered at a Massachusetts campground. He is serving a 22-year sentence.
