Bayou
Overview of Bayou Hedge Fund Group and the man behind it:
1. What is Bayou: Bayou Capital is a Hedge Fund company.
2. What happened to it: Founded in 1996 with 450 millions raised from investors. Furnished for the first 2 years. But losses started mounting ever since. Eventually, Bayou collapsed in 2005. And 2 founders were pledged to guilty due to a serious fraud and conspiracy.
3. Who is this man behind the fraud: Sam Israel III A rich kid from New Orleans. The Israel's founded a commodities trading powerhouse that made millions from America's addiction to coffee and socialized with the famous and wealthy of New York.
Personality: Likable, a good salesman. An author said this after interviewed Mr. Israel in jail: “it becomes impossible to tell where the truth ends and deception begins.”
He started as an errand boy in a small Wall Street trading outfit in the early 1980s. He paints a picture of rampant criminality all around him — insider trading, front-running, bags of cash — and contends that all of Wall Street was similarly corrupt, a transparent bit of rationalization.
Personal Issues: broken marriage, chronic back pain, a nasty drug problem.
It appears that fraud is much more prevalent than you might think. Below is a table with the top hedge funds by value recently accused of fraud or Ponzi schemes.
General incentives for Hedge Fund managers to conduct fraud:
1. The nature of HF:
a. Hedge funds are minimally regulated private investment partnerships that historically accept only high-wealth investors
Because H-W investors invest a large amount of money, they are extremely sensitive to the profit.
Hedge Fund keeps current investors by showing good numbers on the account.
HF manager attracts new high-wealth investors by reputation. The profitability is tied to Hedge Fund manager’s reputation.
b. Hedge funds can invest in equities, bonds, options, futures, commodities, as well as illiquid investments such as real estate.
Incentives:
Opportunities:
1. What is Bayou: Bayou Capital is a Hedge Fund company.
2. What happened to it: Founded in 1996 with 450 millions raised from investors. Furnished for the first 2 years. But losses started mounting ever since. Eventually, Bayou collapsed in 2005. And 2 founders were pledged to guilty due to a serious fraud and conspiracy.
3. Who is this man behind the fraud: Sam Israel III A rich kid from New Orleans. The Israel's founded a commodities trading powerhouse that made millions from America's addiction to coffee and socialized with the famous and wealthy of New York.
Personality: Likable, a good salesman. An author said this after interviewed Mr. Israel in jail: “it becomes impossible to tell where the truth ends and deception begins.”
He started as an errand boy in a small Wall Street trading outfit in the early 1980s. He paints a picture of rampant criminality all around him — insider trading, front-running, bags of cash — and contends that all of Wall Street was similarly corrupt, a transparent bit of rationalization.
Personal Issues: broken marriage, chronic back pain, a nasty drug problem.
It appears that fraud is much more prevalent than you might think. Below is a table with the top hedge funds by value recently accused of fraud or Ponzi schemes.
General incentives for Hedge Fund managers to conduct fraud:
1. The nature of HF:
a. Hedge funds are minimally regulated private investment partnerships that historically accept only high-wealth investors
Because H-W investors invest a large amount of money, they are extremely sensitive to the profit.
Hedge Fund keeps current investors by showing good numbers on the account.
HF manager attracts new high-wealth investors by reputation. The profitability is tied to Hedge Fund manager’s reputation.
b. Hedge funds can invest in equities, bonds, options, futures, commodities, as well as illiquid investments such as real estate.
Incentives:
Opportunities: