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Group - 7:

Bayou Hedge
Fund Group
Scandal
Ronald Kirro C04
Tracy C18
Ashima Sharma C45
Karan Dhar C61
Manish Jambhulkar D06
Shreesh Tripathi D25

Bayou Hedge Fund Group


The Bayou Hedge Fund Group was a group of companies
and hedge funds founded by Samuel Israel III in 1996.
The group from investors raised approximately $450m.
Its investors were defrauded from the start with funds
being misappropriated for personal use.
After poor returns in 1998, the investors were lied to
about the fund's returns and a fake accounting firm was
set up to provide misleading audited results.

Bayou Hedge Fund Group Scandal


In 1996, investors gave the fund US$300 million.
Investors were promised that the fund would grow to
about US$7.1 billion in ten years.
In 1998-1999 trading losses accumulated quickly.
The company started a dummy accounting firm and
hired it to audit themselves.
According to federal prosecutors, Bayou had lied about
its operations since the beginning, by overstated gains,
understated losses, and reported gains where there
were losses.

Bayou Hedge Fund Group Scandal


Court documents show that Bayou never made any
money.
In mid-2004, Bayou sent a letter to investors, claiming
that its assets valued in excess of US$450 million.
In 2004, Samuel Israel III and Daniel Marino, the CEO
and CFO, respectively, stopped trading fully and spent
all resources on covering losses.
Over the course of six days in July 2004, Bayou withdrew
about $161 million from five bank accounts.
They were eventually caught, wiring US$100 million
overseas.

Bayou Hedge Fund Group Aftermath


In 2005, it was discovered that Bayou capital was
responsible for one of the most publicized hedge fund
frauds in history.
On September 29, 2005, the Commodity Futures Trading
Commission (CFTC) filed a complaint in the United
States District Court for the Southern District of New
York.
Alleging misappropriation and fraud involving
Connecticut hedge fund manager Bayou Management,
LLC (Bayou Management), its principals, Samuel Israel III
and Daniel E. Marino, and Richmond Fairfield Associates,
Certified Public Accountants PLLC (Richmond Fairfield).

Bayou Hedge Fund Group


Confession
Samuel Israel III and CFO Daniel Marino pleaded guilty to
multiple charges including conspiracy and fraud.
Marino was convicted of fraud and sentenced to 20
years in prison. Israel was sentenced to 20 years prison
and ordered to forfeit $300 million.
At his sentencing Israel said "I lied to you and I cheated
you and I cannot put into words how sorry I am."

Bayou Hedge Fund Group Aftermath


The hedge fund filed for Chapter 11 bankruptcy-court
protection in White Plains, New York, in 2006.
Over $100 million seized by authorities after the
collapse had not yet been distributed to victims as of
June 24, 2008.
On 10 June 2008, it was reported by the press that Israel
may have committed suicide after a car registered to
Israel was found abandoned on the Bear Mountain
Bridge that spans one of the deepest stretches of the
Hudson River in New York.

Bayou Hedge Fund Group Aftermath


It was the same day that Israel was supposed to begin
serving his 20-year prison sentence.
Israel later turned himself in to federal authorities in
Southwick, Massachusetts on July 2, 2008. NBC aired a
Dateline segment about him on September 5, 2008.

Thank You