In recent years, Goldman Sachs has been charged by the Securities and Exchange Commission (SEC) for several different violations, including providing misleading ESG information, IPO and trading violations, recordkeeping failures, and violations of the Foreign Corrupt Practices Act.
Employees of Goldman Sachs who know of such activity can anonymously report concerns through several distinct U.S. whistleblower laws, many of which provide strong protection against employer retaliation, and possibly even awards to those who qualify and meet the minimum requirements.
Continue reading to learn more about the types of violations Goldman Sach has been involved in over the years, and the whistleblower laws available to you if you decide to come forward with information. Your information could help protect companies and investors from financial harm.
Goldman Sachs Notable Fraud Cases
The Goldman Sachs Group, Inc. is a multinational financial services company and investment bank located in Lower Manhattan in New York City. It is the second largest investment bank in the world behind JPMorgan Chase, with a reported $46 billion in revenues in 2023.
However, Goldman Sachs has charged with engaging in a number of financial crimes in the past few decades, including manipulation of LIBOR, fraud and misconduct in the creation and trading of mortgage-backed securities, and foreign bribery, among other violations of federal securities and AML laws.
Here are some of the most notable cases in greater detail:
1MDB Scandal (2020)
The 1MDB scandal involved the massive embezzlement of billions of dollars from 1Malaysia Development Berhad (1MDB), a Malaysian state-owned investment fund. Goldman Sachs played a central role by underwriting $6.5 billion in bond offerings for 1MDB.
Investigations revealed that a portion of these funds was diverted into the personal accounts of high-ranking officials, including the then-Prime Minister of Malaysia. Goldman Sachs faced accusations of misleading investors and facilitating the movement of these misappropriated funds.
In 2020, the bank agreed to pay a $2.9 billion penalty to the U.S. Department of Justice to settle criminal charges related to its involvement in the 1MDB scandal. Goldman Sachs also paid $606.3 million in disgorgement and a $400 million civil penalty in a parallel case brought by the SEC.
Mortgage-Backed Securities (2005-2016)
Goldman Sachs was deeply involved in the creation and trading of mortgage-backed securities (MBS) and related products in the lead-up to the 2008 financial crisis. These securities were comprised of pools of subprime mortgages – loans issued to borrowers with poor credit histories. Goldman Sachs, along with other financial institutions, packaged and sold these risky MBS to investors, often downplaying the significant risks associated with them.
When the housing market collapsed, the value of these MBS plummeted, causing substantial losses for investors and contributing significantly to the global financial crisis.
Goldman Sachs faced financial penalties for its role in this crisis, including a $550 million fine from the SEC, a $5.1 billion settlement with the U.S. Department of Justice, a $2.385 billion civil monetary penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), and other significant payouts totaling billions of dollars.
LIBOR Scandal (2012)
Goldman Sachs was among several major financial institutions implicated in the manipulation of LIBOR (London Interbank Offered Rate), a key benchmark interest rate used globally.
Traders at these institutions allegedly colluded to submit inaccurate or biased interest rate submissions for LIBOR, influencing the rate to their own advantage. This manipulation affected a wide range of financial products, including loans, mortgages, and derivatives, impacting both individuals and businesses worldwide.
Goldman Sachs was fined $120 million by the Commodity Futures Trading Commission (CFTC) for its role in the LIBOR manipulation scheme.
Other Violations
- IPO Violations: Goldman Sachs was charged with the improper allocation of shares in initial public offerings (IPOs).
- Record-keeping Violations: Goldman Sachs has been charged with multiple record-keeping violations, including failure to record certain phone lines and allowing employees to use off-channel communications methods to conduct business.
- ESG Violations: Goldman Sachs Asset Management was charged with so-called “greenwashing” and misleading investors about its environmental, social, and governance (ESG) practices.
- Commodities Manipulation: Goldman Sachs has been accused of manipulating various commodities markets, including aluminum and other metals.
- Insider Trading: The bank has faced allegations of insider trading by its employees, leading to investigations and legal settlements.
- Conflicts of Interest: Goldman Sachs has faced criticism and scrutiny regarding potential conflicts of interest in its business dealings.
These examples further illustrate the range of legal and regulatory challenges faced by Goldman Sachs.
Whistleblower Award Programs
If you feel strongly about blowing the whistle on Goldman Sachs, there are several whistleblower award programs available that offer anonymity, protection, and potential awards. Below is a list of the applicable whistleblower award programs available and the respective violations that they cover:
SEC Whistleblower Program
The SEC Whistleblower Program allows whistleblowers to submit anonymous tips of a broad range of securities laws violations, including fraudulent scheme, such as a Ponzi scheme, insider trading, market manipulation, accounting fraud, offering fraud, investment adviser fraud, cryptocurrency fraud. The key benefits of this program include the following:
- Monetary Awards: Eligible whistleblowers can receive substantial awards of up to between 10% and 30% of the monetary sanctions collected by the SEC in successful enforcement actions, when the sanction amount exceeds $1 million.
- Related Action Awards: If monetary sanctions exceed $1 million, whistleblowers may also be eligible to receive an award if the same information led to a related action brought by certain other authorities, such as a parallel criminal prosecution.
- Anti-Retaliation Protections: The program provides robust anti-retaliation protections for whistleblowers. These protections aim to prevent employers from taking adverse actions against employees who report suspected securities law violations.
- Anonymity: Whistleblowers can blow the whistleblower anonymously. However, to be eligible for an award, whistleblowers must have an attorney represent them in connection with their submission.
In FY 2024, the SEC Whistleblower Program received a record 24,980 whistleblower tips and awarded whistleblowers over $255 million. The SEC has awarded more than $2.2 billion to 444 individual whistleblowers since the Program’s inception in 2011, making it one of the most successful whistleblower programs ever created.
CFTC Whistleblower Program
The CFTC Whistleblower Program is like the SEC Whistleblower Program, in that it allows whistleblowers to anonymously submit tips to the CFTC. Whistleblowers can report violations such as market manipulation (such as spoofing, wash trading, or layering), fraudulent trading (such as front-running or insider trading), registration violations, customer protection violations, false statements, and other violations of the Commodity Exchange Act (CEA). Key highlights of the CFTC program include:
- Monetary Awards: The CFTC pays awards between 10% and 30% to eligible whistleblowers who provide the CFTC with original information about violations that leads the CFTC to bring a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.
- Related Action Awards: If monetary sanctions exceed $1 million, whistleblowers may also be eligible to receive an award if the same information led to a related action brought by certain other authorities, such as a parallel criminal prosecution.
- Anti-Retaliation Protections: Employers are prohibited from discharging, demoting, suspending, threatening, harassing, or any other discriminating against a whistleblower in the terms of employment because they chose to blow the whistle.
- Anonymity: Whistleblowers can blow the whistleblower anonymously with or without the help of a whistleblower attorney. However, to be eligible for an award, whistleblowers must follow strict rules and requirements – failure to do so many result in an award denial.
The CFTC Whistleblower Program, established in 2014, has issued 53 awards totaling nearly $390 million to whistleblowers. These awards stem from enforcement actions that have collectively yielded over $3.2 billion in monetary relief.
Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act (FCPA) is a U.S. law that prohibits the bribery of foreign officials to obtain or retain business. The anti-bribery provisions contained within the FCPA makes it illegal for U.S. persons and companies to offer, pay, or promise to pay money or anything of value to foreign government officials to influence their actions in favor of the business.
The FCPA also has accounting provisions that require publicly traded companies to maintain accurate books and records and have a system of internal controls to prevent and detect bribery. The FCPA applies to U.S. companies and individuals, as well as foreign companies that are listed on U.S. stock exchanges. Other key benefits include the following:
- Potential for an Award: If a whistleblower provides original information that leads to a successful FCPA enforcement action, they may be eligible for a substantial award under the SEC or DOJ whistleblower programs, depending on the specific circumstances.
- Anti-Retaliation Protections: The Dodd-Frank Act, which strengthened the FCPA’s whistleblower provisions, prohibits employers from retaliating against individuals who report potential violations. This protection aims to encourage individuals to come forward without fear of reprisal.
- Anonymity: While the FCPA itself does not have a specific provision for anonymous reporting, the SEC’s program allows individuals to submit tips anonymously through their attorney. Which in many foreign corruption cases, is strongly advised.
The FCPA is a critical piece of legislation in combating corruption in international business. It complements the efforts of whistleblower programs by providing a legal framework for addressing bribery and encouraging individuals to come forward with information about potential violations.
FinCEN Anti-Money Laundering and Sanctions Whistleblower Program
The FinCEN Anti-Money Laundering and Sanctions Whistleblower Program, established by the Anti-Money Laundering Act of 2020, encourages individuals to report violations of anti-money laundering (AML) laws and sanctions regulations.
The program focuses on violations of the Bank Secrecy Act (BSA), which is the cornerstone of U.S. AML laws, and violations of certain designated sanctions laws. This includes, but is not limited to, money laundering, terrorist financing, and sanctions evasion. Features include:
- Monetary Awards: Eligible whistleblowers can receive awards of 10% to 30% of the monetary sanctions collected in successful government enforcement actions resulting from their information.
- Anti-Retaliation Protections: Whistleblowers can receive protection from retaliation. This means an employer may not terminate, demote, harass, or otherwise take consequential action against a whistleblower for engaging in a protected activity such as whistleblowing.
- Anonymity: Even though strict confidentiality is adhered to, whistleblowers who utilize the AML whistleblower program are eligible to report their concerns anonymously. However, they must do so with the assistance of a U.S-based attorney.
Under the updated amendments, the program allows for whistleblowers to blow the whistle on violations of the BSA or sanctions laws up to six years under 31 U.S.C. § 5321(b) and up to five years for criminal penalties under 18 U.S.C § 3282(a).
Seeking Assistance? Hire Us.
To discuss blowing the whistle on Goldman Sachs, we suggest getting in touch with an experienced whistleblower attorney at KKC who can help guide you through the process. Our whistleblower attorneys work on a contingency basis, meaning they don’t get paid unless you collect an award. Whistleblower attorneys can help you understand the law, protect your identity, assist with evidence gathering, and negotiate on your behalf.
Our Firm
Our firm specializes in representing whistleblowers in high-stakes financial cases. We have a proven track record of success in some of the largest banking scandals of recent times.
Our clients include prominent whistleblowers like Howard Wilkinson, who exposed a massive $230 billion money laundering scheme at Danske Bank, and Bradley Birkenfeld, who uncovered a massive tax evasion scheme at UBS involving over 4,450 U.S. taxpayers. Mr. Birkenfeld’s courageous actions resulted in a record-breaking $104 million whistleblower award from the IRS.
If you suspect illegal activity at a financial institution such as Goldman Sachs, our team of experienced whistleblower attorneys can provide the expert guidance and support you need. We offer free, confidential case evaluations and work on a contingency fee basis, ensuring you pay nothing unless we secure a successful outcome for your case. Contact us today for a confidential consultation.