Investigators believe that Bayou’s deceptions go back as far as 1998, and it is thought that the firm had lured investors to commit some $300 million by overstating returns and concealing losses in the intervening years. It has also emerged that Bayou used a phony accounting firm to audit its financial statements, which, according to federal prosecutors, contained glaring errors; one entity, Bayou Superfund, reported assets of $192 million and trading gains of $27 million at end 2003 when in reality it had a value of $53 million and had lost $35 million.

The founder of Bayou, Samuel Israel III, abruptly shut down the fund last July, saying that he wanted to spend more time with his children after a messy divorce. On August 11 he wrote to investors saying that 90% of their money would be returned within a week and the remainder by the end of the month. Samuel Israel III, and its finance chief, Daniel Marino, finally plead guilty to fraud and conspiracy charges in September 2005. However, investors are still waiting to be reimbursed.

Bayou’s lawyers “are preparing to launch an aggressive bankruptcy and litigation initiative” to recover “phony profits” paid out to some early investors, Jeff J. Marwil, a lawyer appointed to oversee the handling of the funds’ assets, said in a court filing.

A recent revelation of a 6 page confession cum suicide note (of a suicide which never happened) from the company’s Chief Financial Officer, Daniel E. Marino, has helped to throw some light on the entire modus operandi of the master bluffer. Arizona Authorities have recently seized $101 million seized which seems to belong to Bayou Funds investors further confirms some part of the story. “If you intend to steal someone’s money, based on our experience, they would have left, not spoken to the clients at all,” Intelisano told the cable television network. He also said that the last two months of statements from the fund were “certainly false.”