Samuel Israel, founder of the Bayou hedge fund group has disappeared the day he was to begin a 20 year prison term for defrauding investors of $450 million. Police have put out 'Wanted' posters, and describe him as 'armed and dangerous.'
Founded in 1996, the fund raised about $300 million from investors, promising them that the fund would grow to $7.1 billion in ten years. The fund however never seems to have made any money and got along by overstating gains, or reporting gains where there were losses. In 1998, about three years after the fund was launched, international financial markets were in turmoil following the Asian crisis, and in America things were made worse by the threatened collapse of Long Term Capital Management. The fund made huge losses. In order to cover their losses the group approached investors for fresh money. In order to attract investors , Israel allowed them to join by bringing in a minimum of only $250,000, which is much smaller than the amounts typically demanded by hedge funds. He also waived his management fees and charged only 20% of the fund's profits as his remuneration. Simultaneously he hired a fresh firm of auditors who were willing to fake accounts to hide the mountain of losses the firm was saddled with.
But it was these very practices that started making people suspicious. As news got around about the true state of affairs, investigations were started, and in September 2005 the Commodity Futures Trading Commission filed a complaint in court alleging misappropriation and fraud.
In April of this year, Israel was sentenced to 20 years in prison and ordered to pay a fine of $300 million after pleading guilty to defrauding investors. On the 10th of June he vanished just hours before he was to begin serving his sentence. It could be suicide, but people suspect that he has faked his death and is on the run.