Fraud: Bayou Hedge Fund

In: Business and Management

Submitted By susanserven88
Words 2072
Pages 9
On April 14, 2008, Bayou Management, LLC’s founder and CEO, Samuel Israel, III, was sentenced to 20 years in prison and ordered to pay $300 million in restitution for defrauding investors out of more than $450 million over nearly 10 years.

Prior to this, in January, 2008, Bayou's former CFO, Daniel Marino, and Bayou co-founder James G. Marquez, had also been sentenced to 20 years and 51 months in prison, respectively. (WSJ)

On June 9, 2008, on the day he was to begin his prison sentence, Mr. Israel’s car was found abandoned on the Bear Mountain Bridge, about 40 miles north of New York City, with “Suicide is Painless” written in the dust on the hood of his car, and with a suicide note left inside his car. He had told his girlfriend, Debbie Ryan, that he was driving himself to a federal prison in Ayer, Massachusetts. She was later also arrested and charged with helping him escape.

On Wednesday, July 2, 2008, Israel turned himself in to police (USA Today). On October 28, 2008, Israel avoided prison once again by pleading an addiction to painkillers, making him incompetent to enter a plea. He is ordered to undergo 90 days of psychiatric evaluation in a medical prison facility in North Carolina. (NYDailyNews.com)

Bayou Management, LLC, which was headquartered in Stamford, CT, is a group of companies and hedge funds founded in 1996 and managed by Samuel Israel, III and co-founder, James G. Marques. They raised funds from investors with the goal of investing in short term trades, but defrauded investors from the start by misappropriating funds for personal use. Investors were initially promised that the fund would grow to about $7.1m within ten years.
According to Bloomberg.com, Bayou
“had problems from the very beginning. In 1996, Israel managed to cobble together just $1.2 million for his fund from friends and former colleagues. Even as the U.S.…...

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