Tuesday, 29 July 2014
Last updated 9 hours ago
May 17 2011 | 1:56am ET
Victims of the Bayou Group Ponzi scheme will split another $13 million after the hedge fund’s estate defeated two hedge funds and four other Bayou investors in federal court.
A jury sided with the Bayou estate against Redwood Growth Partners and Heritage Hedged Equity, as well as the other investors. The defendants didn’t prove that they had conducted good-faith due-diligence into Bayou before redeeming the $13 million.
“This is the first time that a Ponzi scheme estate has been successful at a trial in defeating an investor’s good-faith defense and thus recovering the full principal, or amount paid to the redeeming investor,” Gary Mennitt, a lawyer for the estate, told Bloomberg News.
David Baum, who represents Redwood and Heritage Hedged, said his clients would appeal.
Bayou collapsed in 2005, costing investors $450 million. Several of the firm’s executives, including founder Samuel Israel, were convicted of fraud; Israel, who spent several weeks on the run in the summer of 2008 after faking his suicide, was sentenced to 20 years.
All told, the Bayou estate has recovered more than $60 million for the Ponzi scheme’s victims.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…