The Massachusetts Institute of Technology graduate pleaded guilty about four months after the Commodities Futures Trading Commission filed a civil complaint against him. The CFTC accused Taylor of fabricating trades to conceal a huge, unauthorized position in e-mini Standard & Poor's futures contracts, which bet on the direction of the S&P 500 index. He also admitted to making false statements to Goldman personnel who questioned him about the position, which led to a $118 million loss for Goldman Sachs. "I am truly sorry," Taylor said. Taylor, who joined Goldman in 2005, worked in a 10-person group called the Capital Structure Franchise Trading (CSFT), and was responsible for equity derivatives trades. After his trading profits plunged in late 2007, his supervisors told Taylor his bonus was going to be cut and instructed him to reduce risk-taking, the charging documents said. Instead, he "amassed a position that far exceeded all trading and risk limits set by Goldman Sachs, not only for individual traders ... but for the entire CSFT desk," according to charging documents. Taylor attempted to hide his actions by putting false information into a manual entry system, according to charging documents filed in his case. When supervisors and other employees confronted him about discrepancies compared with his actual positions, Taylor repeatedly lied, the document said. In court, Taylor said he covertly built the position in an effort to restore his reputation and increase his bonus. He earned a $150,000 salary and expected a bonus of $1.6 million, according to court documents. Taylor was fired from Goldman in December 2007, shortly after the incident, according to brokerage industry records. He then took a job at Morgan Stanley, where he had first worked after graduating from MIT, but left that firm again last summer. Prosecutors are seeking a prison sentence of 33 months to 41 months and a fine of $7,500 to $75,000. During the hearing, Pauley questioned how the government came up with its proposed sentence, given the size of Goldman's loss. Steve Lee, a prosecutor, said it was based on Taylor's compensation. Pauley stressed the "court may not be bound by that calculation" come sentencing, adding that he was "puzzled" by the deal. He cooked Goldman's books, and that's not sophisticated? Pauley asked. A person familiar with Goldman's equities trading business said Taylor's trading position was significant - representing roughly 20 percent of e-mini trading volume the day it was established. For perspective, the $8.3 billion position Taylor took in the e-mini futures market was twice the size of the $4.1 billion trade the U.S. Securities and Exchange Commission highlighted in a report on the causes of the May 6, 2010, "flash crash" in which a series of e-mini trades caused the Dow Jones Industrial Average to plunge 700 points in a matter of minutes. Taylor said he knew his actions were wrong and illegal but established the trade anyway to augment his reputation and increase his compensation. Taylor's bail includes a $750,000 bond with two co-signers. The case is United States v. Taylor, U.S. District Court, Southern District of New York, No. Reporting by Lauren Tara LaCapra and Nate Raymond; additional reporting by Emily Flitter; Editing by Matthew Goldstein, Gunna Dickson and Maureen Bavdek