A former Goldman Sachs trader has pleaded guilty to fabricating trades on a manual system to hide an unauthorised $8.3 billion futures bet.
Having handed himself over to the FBI, this week Matthew Taylor pleaded guilty today in New York federal court to wire fraud over the scam.
In late 2007, Taylor was told by bosses to reduce the risk in a trading account because he had lost a chunk of profits in it. Instead, he did the opposite, significantly increasing the notional value of his long position in S&P E-mini futures by entering a series of trades through Goldman's electronic platform, Globex.
He then tried to conceal the position through fabricated trades which bypassed the bank's internal system designed for entering and routing electronically to the CME, manually putting them in a different internal system that routed only to the firm's books and records, not to the exchange.
The Commodity Futures Trading Commission filed charges against Taylor in Manhattan federal court in November, saying he defrauded the bank, which ended up losing $118.44 million. The watchdog has also fined Goldman's $1.5 million for supervisory failures.
In pleading guilty, Taylor said that he carried out the trades to boost his reputation and bonus. Although wire fraud carries a maximum 20 year jail term, he is expected to receive considerably less when sentenced on 26 July, having struck a plea deal.