A former trader at Goldman Sachs pleaded guilty on Wednesday to fraud linked to a scheme to hide an unauthorized US$8 billion futures bet he made at the US banking giant.
Matthew Marshall Taylor surrendered to the US Federal Bureau of Investigation early in the day, then entered his guilty plea in Manhattan federal court. He could face a maximum penalty of 20 years in prison, but prosecutors recommended a much lighter 33 to 41 months as a result of the plea deal.
The trader was on Goldman Sachs Capital Structure Franchise Trading desk in New York with a salary of US$150,000 and expecting a bonus of US$1.6 million in 2007, the year that he turned rogue, prosecutors say.
In November 2007, after he lost a “significant portion” of profits he had earned in his account that year, Taylor was told by superiors to scale back his risk-taking and informed his bonus would be cut back.
It was then that he embarked on an unauthorized trading spree in S&P 500 E-mini futures that racked up an US$8.3 billion position — not only exceeding his own risk limits, but the limits for all the other traders on his desk, prosecutors said in the criminal information.
He then tried to cover up his trades with false records “to conceal and understate the true size” of his position, the criminal information said. Finally, his plot was discovered by internal management.
The motive for his rogue trading, which he hoped would buck his recent poor performances, was “to quickly increase the profitability of the Trading Account for the purposes of restoring his professional reputation within Goldman Sachs and increasing his performance based compensation,” the information said.
In November last year, the Commodities Futures Trading Commission filed a civil suit accusing Taylor of defrauding his employer of US$118.4 million as a result of the scheme.
In December last year, the commission also ordered Goldman Sachs to pay US$1.5 million in a fine for the actions of its trader, saying “it failed to diligently supervise its employees for several months in late 2007.”