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BAYOU FUND FRAUD
On September 29th, 2005, Samuel Israel III and Daniel Marino plead guilty and admitted to defrauding investors of hundreds in the Bayou family of funds of hundreds of millions of dollars. Mr. Israel founded Bayou Management LLP in 1996 to advise the Bayou Accredited Fund LLP, the Bayou Affiliates Fund, LLP, the Bayou No Leverage Fund LLP, and the Bayou Superfund, LLP (the “Funds”), as well as several related offshore funds organized in the Cayman Islands. Mr. Marion served as the Chief Financial Officer.
Through the use of a phony accounting firm created by Mr. Marino, as well as other means of deception, the two were able to induce investors to invest over $450 million, despite suffering continuous trading losses. In 2004, the two began to invest the Funds assets in a series of high risk prime bank instrument trading programs in Europe. Over the next 12 months, Israel and Marino undertook a number of transfers that somehow eventually culminated with a $101 million transfer to a Wachovia bank account in Flemington, N.J. Bank officials notified the Arizona Attorney General that there was reason to believe the transfer was made in connection with a fraud, and the Arizona Attorney General seized the funds in the spring of 2005. This began a series of events that eventually resulted in the disclosure of the fraud and conviction of Israel and Marino.
The SEC and CFTC have initiated civil actions against Israel, Marino, the Funds and the management entities seeking disgorgement and civil penalties. In addition, an unofficial creditors committee has been organized and has initiated an action to appoint a receiver to collect funds on behalf of the on-shore investors. Sadis & Goldberg currently represents certain on-shore investors. If you have any questions about the Bayou fraud, please contact Douglas Hirsch.
