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Ex-Goldman Prop Trader Who Concealed $8.3 Billion Market Moving E-Mini Position, Turns Himself In To FBI

Tyler Durden's picture





 

The story of ex-Goldman's prop-trader Matt Taylor is well known: in November of last year, he was accused by the CFTC of concealing a massive, market-moving $8.3 billion ES position, and was charged by the CFTC, who sought a whopping $130,000 in penalties for what was obviously an attempt to move the market using size and scale (a la Bruno Iksil) on December 13 and 14, 2007. Taylor, who left Goldman in 2008 because apparently his attempt had been discovered amid allegations of "conduct related to inappropriately large proprietary futures positions in a firm trading account" and ended up working as Co-Head Single Stock Derivatives at Morgan Stanley until July 2012, prudently denied all accusations. However, roughly an hour ago, news broke that he had finally turned himself in to the Feds and is now expected to plead guilty to what for now are still unclear criminal charges.

From Reuters:

Ex-Goldman Sachs Group Inc trader Matthew Marshall Taylor has turned himself in to federal authorities in connection with charges that he defrauded the Wall Street bank out of $118 million in 2007, two sources familiar with the matter said.

 

Taylor voluntarily turned himself in to agents with the Federal Bureau of Investigation in New York around 8:30 a.m. EDT on Wednesday morning, said the sources, who spoke on condition of anonymity.

 

Taylor's move on Wednesday is related to criminal charges that are expected to come from federal prosecutors in New York. He is expected to plead guilty to those charges later on Wednesday, the sources said. It was not clear precisely what he will be charged with.

Some more on the pre-story from Bloomberg:

Morgan Stanley hired Taylor after a subprime mortgage- related trading position resulted in a $9.4 billion writedown in December 2007, which caused the New York-based company to oust co-president Zoe Cruz and sell a $5 billion stake to state- controlled China Investment Corp.

 

Taylor, who handled client-related equity derivative trading at Morgan Stanley, left the firm in July, said Mark Lake, a company spokesman in New York. Taylor’s departure wasn’t related to the CFTC complaint filed against him Nov. 8, said a person familiar with the situation who asked not to be identified because the information was private.

 

According to the CFTC complaint filed in federal court in Manhattan, Taylor concealed his position by bypassing the firm’s internal system for routing trades to the Chicago Mercantile Exchange and manually entering fabricated futures trades in a different internal system.

 

Matt Taylor provided false explanations when confronted about irregularities we detected in his account during the Dec. 14, 2007, trading day,” Michael DuVally, a Goldman Sachs spokesman, said in an e-mailed statement. “He admitted his misconduct following the market close, and was promptly removed from his job and terminated soon thereafter.”

 

Taylor’s lawyer, Ross Intelisano of New York, said his client denied all the allegations and is disappointed that the CFTC filed a complaint.

 

Matt never intentionally entered ‘fabricated trades’ to conceal any trading activity and Goldman never alleged he did so at the time of his termination or thereafter,” Intelisano, of Rich, Intelisano & Katz LLP, said in an e-mailed statement. “Matt, himself, brought the trading losses to the attention of senior managers at Goldman on the day they occurred.”

 

CFTC said in its complaint that by Dec. 13, 2007, “Taylor’s scheme culminated in his concealment of a notional value of an approximately $8.3 billion long e-mini futures position.” E-minis are futures contracts tied to the S&P 500 Index.

Take home lesson boys and girls? When attempting to corner the ES (and thus the entire stock market) by using a (failed) Monte Carlo strategy, i) have an unlimited balance sheet, kinda like what Bruno Iksil thought he had, preferably funded by customer deposits ii) keep doubling down and don't screw up; iii) if you screw up, never admit you did anything wrong, and iv) if i, ii and iii above fail, plead ignorance and get a job at Morgan Stanley which apparently will welcome anyone who has problems with i, ii and iii with open arms. And, of course, v, make sure to have lots and lots of money stashed in an offshore bank account for rainy days... preferably not in a Cypriot bank.

 


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Wed, 04/03/2013 - 09:50 | Link to Comment 101 years and c...
101 years and counting's picture

"finally turned himself in to the Fed"

oops.  typo there.  if he had done that, they would pour champagne on him and send him to a non-extradition country.

Wed, 04/03/2013 - 09:54 | Link to Comment BaBaBouy
BaBaBouy's picture

SackMan GOLD ...

Wed, 04/03/2013 - 10:08 | Link to Comment rajat_bhatia
rajat_bhatia's picture

Bullshit! Goldmanites do God's work! And God works in mysterious ways. Connect the dots! Stop this malicious propaganda against those angels guided by Divine Blankfien. 

Wed, 04/03/2013 - 10:10 | Link to Comment malikai
malikai's picture

Jesus was arrested, too.

Wed, 04/03/2013 - 10:14 | Link to Comment Troll Magnet
Troll Magnet's picture

too bad for taylor. none of this would be happening if only he was a joo.

Wed, 04/03/2013 - 11:03 | Link to Comment NotApplicable
NotApplicable's picture

$8.3 Billion? Yeah, but that's just notional...

Wed, 04/03/2013 - 11:19 | Link to Comment Pegasus Muse
Pegasus Muse's picture

Wait a minute. The Federal Reserve/US Treasury rig the markets each and every day. So when does the Plunge Protection Team, The Gold Cartel, the Bullion Banksters, et. al. get their Perp Walk?

Wed, 04/03/2013 - 10:20 | Link to Comment localsavage
localsavage's picture

Goldmnites don't believe in Jesus

Wed, 04/03/2013 - 10:27 | Link to Comment EscapeKey
EscapeKey's picture

sure they are, he's after all their CEO

Wed, 04/03/2013 - 14:22 | Link to Comment ToNYC
ToNYC's picture

He didn't make any dough for the rabbis, nor the romans , and the public defender went out for a sandwich. Happens every day, but not everybody gets tagged with being the point man for the Hell antidote and prophylactic bleaching process, while assigning all copyrights and franchising rights to the Vatican Bank as annuity in perpetuity. Amor vincit.

Wed, 04/03/2013 - 11:04 | Link to Comment Political_Savage
Political_Savage's picture

One must wonder if there is a specific committee within Goldman's management team that decides who the scapegoat is... you know, the opposite of an investment committee.

Wed, 04/03/2013 - 11:24 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

Almost SIX years later, and they are finally on to this guy?? Sorry I'm not buying it. There is a reason this guy is getting thrown under the bus now. And it doesn't have a thing to do with enforcing the law. Because the SEC isn't in the business of enforcing the law, it is in the business of doing exactly what it is told to do, when it is told to do it, in order to either (1) settle scores on Wall Street, or (2) create the illusion of regulated markets. Since this is a 6 year old beef, it's a little late to be doing it to maintain an illusion. Therefore, we must conclude that a score is getting settled.

Wed, 04/03/2013 - 09:58 | Link to Comment TeamDepends
TeamDepends's picture

Bet his rear end is sore.

Wed, 04/03/2013 - 10:11 | Link to Comment Eireann go Brach
Eireann go Brach's picture

May he reveal what really goes on at Goldman so he brings down the bigger fish, so he gets to walk free!

Wed, 04/03/2013 - 10:57 | Link to Comment firstdivision
firstdivision's picture

He wil not reveal anything, and he will be sentenced to community service at best.  Probably pay a 10k fine.

Wed, 04/03/2013 - 11:58 | Link to Comment Papasmurf
Papasmurf's picture

He will be picking up trash along Fifth Avenue for half an hour. 

Wed, 04/03/2013 - 09:52 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Apparently he did not attend Goldman's training on how to properly execute fraud.

Wed, 04/03/2013 - 10:08 | Link to Comment Urban Redneck
Urban Redneck's picture

What do you expect when you can't even get/keep a copy of the power point deck for future reference?

Wed, 04/03/2013 - 10:22 | Link to Comment 101 years and c...
101 years and counting's picture

on page 1, section II of the manual:  "To commit financial fraud and escape prosecution, you need to be senior executive.  Unless you are at this level, just don't get caught"

Wed, 04/03/2013 - 09:54 | Link to Comment Charles Nelson ...
Charles Nelson Reilly's picture

hey, look at that, Bart Chilton is really making a difference!  what a great american he is. When he gets into the office at 11am after his daily hair appointment, I hope everyone congratulates him.

Wed, 04/03/2013 - 09:57 | Link to Comment bnbdnb
bnbdnb's picture

Taylor’s scheme culminated in his concealment of a notional value of an approximately $8.3 billion long e-mini futures position.”

What kind of market is it that has holes so big this can even happen? Makes no sense, whatsoever..

Wed, 04/03/2013 - 09:58 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

$8.3 B is a drop in the ocean relative to the derivatives sloshing around. 

(btw, Goldman IS the "market"...this is fodder to get the sheeple to take their eyes off of reality)

Wed, 04/03/2013 - 10:02 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Yeah exactly. I don't work in the field but aren't these large bets recorded as far as who/what/where/when/why and how goes with the CTFC through the system itself.

Wed, 04/03/2013 - 10:07 | Link to Comment Al Huxley
Al Huxley's picture

I thought excessive long e-mini positions were mandated by the FED.

Wed, 04/03/2013 - 09:55 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Cue Jack Ruby.

Wed, 04/03/2013 - 12:59 | Link to Comment eatapeach
eatapeach's picture

You mean Jack Rubinstein, Israeli mob in America guy? To wack a patsy before he can talk? Maybe.

Wed, 04/03/2013 - 09:56 | Link to Comment Jim in MN
Jim in MN's picture

What happens when you take 87 blue pills AND 133 red pills?

Look around.

Wed, 04/03/2013 - 10:01 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

You just gave me an awful image of Bob Dole, bub...  Now I need to take an iodine shower.

Wed, 04/03/2013 - 09:56 | Link to Comment Sandmann
Sandmann's picture

Witness Protection Program

Wed, 04/03/2013 - 09:59 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Would it shock you to find this guy sipping mimosa on a private beach in 6 months, using the alias "Pat C"...?

Wed, 04/03/2013 - 09:57 | Link to Comment mktsrmanipulated
mktsrmanipulated's picture

If you really believe Goldman had no idea what was going on I have a bridge to sell you or a safe bank account in Cypress where you can get 9% a year and have the ability to get all your money out at any time

Wed, 04/03/2013 - 09:58 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

What is the FBI into the horse and pony show now to like the SEC? They seem to be doing a lot of perp walks but no charges as of late.

Wed, 04/03/2013 - 09:58 | Link to Comment mattdubz86
mattdubz86's picture

bullish!

Wed, 04/03/2013 - 10:00 | Link to Comment IamtheREALmario
IamtheREALmario's picture

Maybe they need the size and scale for eminis, but in individual stocks they only need a computer.

Wed, 04/03/2013 - 10:01 | Link to Comment OldE_Ant
OldE_Ant's picture

lol.  We promptly got rid of him not because of the losing position he took.  But the fact the FED couldn't print enough cash that day to cover the losses.

Another f'n shill working on the behalf of the FED to cause the markets to lift skyward.  Hell if they kept those positions for longer than a day they probably would have made some serious cha-ching.

Of course anyone who works for the one of the big boys gets fired someone else wants them.

Talk about being on the inside.

Wed, 04/03/2013 - 10:02 | Link to Comment fuu
fuu's picture

Wonder what his ZH name is.

Wed, 04/03/2013 - 10:16 | Link to Comment Charles Nelson ...
Charles Nelson Reilly's picture

MillionDollarBonus_

Wed, 04/03/2013 - 10:02 | Link to Comment Temporalist
Temporalist's picture

Free Jon Corzine!

Wed, 04/03/2013 - 10:04 | Link to Comment Downtoolong
Downtoolong's picture

ended up working as Co-Head Single Stock Derivatives at Morgan Stanley until July 2012

In spite of the CFTC allegations against him for his conduct at Goldman? That's some personnel department they have there at Morgan.

Wed, 04/03/2013 - 14:33 | Link to Comment ToNYC
ToNYC's picture

Simple theory: he knew how to make big money, and the last guy took the hit and got it out of his system. The Currency trader newbie guy that made a 100 miilion for BofA back in the 90s got a single million and good nighted. That's the converse: he won't make a new 100 million next year and then piss people off, so blow him off quick.

Wed, 04/03/2013 - 10:04 | Link to Comment Benjamin Glutton
Benjamin Glutton's picture

Busted bitchez!!!

Wed, 04/03/2013 - 10:05 | Link to Comment mktsrmanipulated
mktsrmanipulated's picture

RICO -

Under the law, the meaning of racketeering activity is set out at 18 U.S.C. § 1961. As currently amended it includes:

sounds like a good year at goldman

Wed, 04/03/2013 - 10:05 | Link to Comment Peter Pan
Peter Pan's picture

Like they say......we take off our hat to big crooks and we hang the little ones. How else does one explain the almost manic propensity to jail insignificant offendors in the USA and to let the big ones continue on happily?

Wed, 04/03/2013 - 10:35 | Link to Comment lemarche
lemarche's picture

IN EUROPE THE LEGAL NAME WHEN A POLITICIAN STEALS PUBLIC FUNDS IS CALLED "DEVIATION OF PUBLIC FUNDS". WHEN IT SHOULD BE CALLED PLAIN SIMPLE "STEALING"!!!!... NO DOUBT, WHEN YOU STEAL AN EGG THAT S STILL CALLED STEALING AND YOU GO STRAIGHT TO JAIL FOR DOING THAT WAITING FOR THE TRIAL.....

Wed, 04/03/2013 - 10:11 | Link to Comment EscapeKey
EscapeKey's picture

$130k fucking lol

i was going to write a really sarcy low-ball estimate of damages to be paid as a "fine" but i see the hard-working people at the SEC beat me to it.

 

Wed, 04/03/2013 - 10:11 | Link to Comment Zer0head
Zer0head's picture

the difference betwen this dude and the 'man in the mirror' is exactly what?

 

 

Wed, 04/03/2013 - 10:18 | Link to Comment Temporalist
Temporalist's picture
Francois Hollande on defensive over tax fraud scandal

François Hollande was forced to deny offering any “protection” to his former tax fraud tsar amid claims he knew as early as December that Jérôme Cahuzac likely had an undeclared Swiss bank account.

"Le Canard now alleges, citing police and political sources, that Mr Hollande was informed by his interior minister in December that the voice on the tax fraud recording was “likely” that of Mr Cahuzac.

Edwy Plenel, head of Mediapart, the investigative website that broke the story in December, said Mr Hollande ‘has no excuse” for reacting so slowly to the scandal.

“(He) knew full well what everyone knew,” he said."

http://www.telegraph.co.uk/news/worldnews/francois-hollande/9968615/Fran...

 

 

Barclays bankers tried to 'win at all costs', independent review concludes

Anthony Salz's 244-page report – commissioned after Libor scandal – finds pay 'contributed significantly to a sense among a few that they were somehow unaffected by the rules'

http://www.guardian.co.uk/business/2013/apr/03/barclays-pay-profits-inde...

Wed, 04/03/2013 - 10:16 | Link to Comment Ban KKiller
Ban KKiller's picture

Is he the "right size" for prosecution? Only if he is not currently employed by the banks. 

Wed, 04/03/2013 - 10:24 | Link to Comment q99x2
q99x2's picture

Give Madoff a new bunky. Arrest Loyd Bankfeind.

Wed, 04/03/2013 - 10:28 | Link to Comment dbTX
dbTX's picture

An ex Goldman guy did something like that, tell me it's not so.

Wed, 04/03/2013 - 10:31 | Link to Comment lemarche
lemarche's picture

GOLDMAN IS TO BLAME FOR F*%ING BAD RISK MANAGEMENT !!!!! LEAVE THE POOR GUY ALONE !...

Wed, 04/03/2013 - 10:38 | Link to Comment buzzsaw99
buzzsaw99's picture

DO YOU SEE WHAT HAPPENS LARRY? DO YOU SEE WHAT HAPPENS WHEN YOU TRY TO FUCK A VAMPIRE SQUID IN THE ASS?

Wed, 04/03/2013 - 10:38 | Link to Comment theorist
theorist's picture

Why is this a surprise to anyone? None of the banks have any proper risk control procedures in place. The trading desks generally bully the risk management people, and tell them they don't know anything. Also, the people in risk aren't usually very good and too afraid to question the traders. Furthermore, as shown by the whale episode, complex positions are constantly mis-marked, thus inflating the bank's P&L or in that case, reducing or hiding losses. The ultimate decider of a reasonable mark is the trading desk. That's a bit like asking a mental patient to run the asylum. In almost all of these cases management are awre that these things are going on and turn a blind eye. After all, who wants their large bonus cut, when all it takes is a shuffling of a few numbers. The losses can be accrued over time!!!!And people wonder why the banking system is in trouble?!!!!

Wed, 04/03/2013 - 10:41 | Link to Comment Mototard at Large
Mototard at Large's picture

From Baby Credits to Carbon Credits.  Speaking of GS and its carbon credit trading,  President Obama’s science czar John Holden was an advocate of baby credits to control global cooling before he advocated carbon credits to control global warming.  You cannot make this stuff up. http://tinyurl.com/d9cdqwe

Wed, 04/03/2013 - 10:46 | Link to Comment squexx
squexx's picture

That's what happens when you let the Satanic Tribe run unchecked!

Wed, 04/03/2013 - 10:52 | Link to Comment Father Lucifer
Father Lucifer's picture

Book and movie soon.

Wed, 04/03/2013 - 10:55 | Link to Comment bdub2
bdub2's picture

I'm just glad this isn't happening in the gold/silver markets

Wed, 04/03/2013 - 11:05 | Link to Comment tbone654
tbone654's picture

Martingale fail...

Wed, 04/03/2013 - 11:17 | Link to Comment denverdolomte
denverdolomte's picture

This is probably the closest thing to the SEC in real life that I could find : https://www.youtube.com/watch?v=mv7CtLrQ3hU

Wed, 04/03/2013 - 11:19 | Link to Comment torak
torak's picture

He probably got a worse hand-slapping during catechism my Sister Mary Margarette than the hand-slapping the the justice department will give him.

Wed, 04/03/2013 - 11:24 | Link to Comment geotrader
geotrader's picture

I'm guessing he's got a lot more problems than the FBI.  I.e, turning himself in for their "protection".  Bet more comes from this.

Wed, 04/03/2013 - 15:52 | Link to Comment dolph9
dolph9's picture

The patsies are dropping like flies.  Things are speeding up.

Wed, 04/03/2013 - 16:15 | Link to Comment Ura Bonehead
Ura Bonehead's picture

So screw the firm and the Fed's open a can of whipass on you - you'll never see the light of day.  But let the firm screw the public and you're TBTF.  Got it.

Wed, 04/03/2013 - 18:05 | Link to Comment dime2962
dime2962's picture

MS is good for taking in those without a home. Didn't they hire a bunch of Enron traders after it blew up?

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