Hedge Fund Fraud

More than $100 million has been seized in Arizona that authorities claim is linked to the Connecticut-based hedge fund Bayou.^[1] Nearly $440 million dollars is missing from the fund, and Samuel Israel, who runs Bayou, told investors that it would close and return their money in August, but so far has not.^[2] The FBI, the SEC, the Connecticut Attorney General, and the Arizona Attorney General are all investigating the fund for various allegations of securities fraud.^[3] Earlier this afternoon, Mr. Israel was named in a civil lawsuit seeking $4.5 million for unpaid debts and breach of fiduciary duty.^[4]

A hearing on these funds is scheduled for tomorrow. The facts of this case may become clearer at that time.

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[1] Deborah Brewster, Bayou Mystery Raises Fund Fears, Fin. Times, Aug. 31, 2005, at 24, available here.
[2] Id.
[3] Id.
[4] Bayou Fund, Founder Face Lawsuits Over $4.5 Mln in Unpaid Debts, Bloomberg.com, Aug. 31, 2005, available here.