Current news for this fund:
Bayou Group - Quant. fund turned Ponzi scheme/fraud
Count of distinct funds: 1
Update, 2008-06-10: Sam Israel, who had just been sentenced to 20 years, has disappeared and may have committed suicide.
Update, 2008-02-01: James Marquez, one of the principals at Bayou, has been sentenced to 51 months as a "co-conspirator" in the fraud. He has been ordered to pay over $6M in restitution. CEO Israel and CFO Marino have not yet been sentenced.
Bayou Group LLC, a hedge fund founded by Samuel Israel in the mid-90s, operated a Ponzi Scheme of reporting false returns both to satisfy existing investors as well as attract new investors. The scheme seems to have officially begun around the end of 1998 when Israel brought on Daniel E. Marino as CFO. According to an extensive article in the New York Times, Clues to a Hedge Fund's Collapse:
The scheme continued along until mid-2005 when Israel told investors that he would be closing the Bayou funds. It seems that by this time Bayou had little capital left to continue maintaining the illusion of success.
According to a CNN Money article on Bayou Group, the fund swindled around $450 mm from investors, approximately $100 million of which ended up being seized by the State of Arizona.
Comments: Be the first to add a comment
Note: Comments may take a few minutes to show up on this page. If you go to the forum thread, however, you can see them immediately.
Important: This fund is on our list of hedge funds that have "imploded" (see also ailing lenders). However, please note that "imploded" is a somewhat subjective. The "imploded" list contains hedge funds (or other unregulated and autonomous speculative investment funds) which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.