Trader Alleges Goldman Ran IPO Scam

10 years ago

The New York Post has revealed that a former hedge fund staffer has told the US Securities & Exchange Commission (SEC) that while he was at hedge fund Cramer & Co (now known as Cramer Berkowitz & Co), Goldman Sachs agreed to allocations of 'hot' initial public offerings to the hedge fund on condition that the fund bought additional shares in the secondary market at a price to be determined later by Goldman.

The Post reports that Nicholas Maier, a former member of staff at Cramer, said that: 'The more I promised to buy in the aftermarket, the more shares I could expect to get. If I reneged on my aftermarket order, I could expect to feel the consequences, or be docked on future allocations.'

This practice, which many believe is still widespread on Wall Street, served to artificially inflate the price of stock in the secondary market. Arrangements of this kind are now thought to have fed investors' appetite for tech stocks and ultimately led to the bursting of the so-called 'internet bubble', which wiped out around $4 trillion in market value.

The SEC is conducting an investigation into illegal practices and there are several hundred lawsuits currently underway initiated by angry investors seeking millions in compensation.

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