Goldman Sachs Group Inc. failed to vacate a $20.1 million award an arbitration panel had granted Bayou Group LLC creditors who sued Goldman for failing to detect Bayou funds for which it did transfers were a fraud.
U.S. District Judge Jed Rakoff in Manhattan said in a ruling today that Goldman failed to show that the arbitration panel had “manifestly disregarded the law” in granting the award.
The creditors group sued Goldman in 2008 after Bayou Group executives pleaded guilty to running a Ponzi scheme and the company’s hedge funds went into bankruptcy. The creditors alleged Goldman failed to diligently investigate the funds and was liable for fraudulent transfers. The arbitration panel awarded the creditors the full $20.1 million they sought.
Ed Canaday, a Goldman spokesman, declined to comment on Rakoff’s ruling.
The case is Goldman Sachs Execution & Clearing LP v. the Official Unsecured Creditors Committee of Bayou Group, 10-05622, U.S. District Court, Southern District of New York (Manhattan.)