The lowest of the low

Discussion in 'Wall St. News' started by SWScapital, Jun 19, 2007.

  1. Bayou Offer to Investors:
    Give Back Half
    June 15, 2007; Page C3

    Investors in Bayou Management LLC could be made whole again -- well, half, anyway -- under a plan filed by the failed Connecticut hedge fund in bankruptcy court.

    Under the plan, the hedge fund would settle lawsuits it brought against more than 100 investors who got out of the fund before Bayou imploded in 2005. Bayou is proposing that those investors give back half the money they took out -- rather than the full amount that the lawsuits are seeking.

    "It would put everybody on equal terms," says Ross Intelisano, who is representing 20 other Bayou investors who collectively lost $20 million. "But, people who decide not to settle will at the very least pay a ton of legal fees."

    Several defendants bristle at the idea of returning a penny. One investor asked, "Am I supposed to give back profits from a stock, too, if it goes down after I sell?"

    The outcome of the case holds broad ramifications for the hedge-fund business. Some $1 trillion is invested in these lightly regulated funds for institutions and wealthy individuals. Investors often pull their money out if they sniff out problems at a fund. If they are forced to give money back after getting out, it would increase the risks of investing in hedge funds in the first place.

    The phenomenon has been dubbed "Hotel California" after a line in the Eagles song: "You can check out anytime you like, but you can never leave."

    Bayou collapsed in 2005 after two founders admitted that they lied about the $450 million they claimed to have in the fund. The founders pleaded guilty to fraud and await sentencing. Last year, Bayou filed for bankruptcy protection.

    Among those being sued to give back money is fund manager Sterling Stamos. In early 2005, it withdrew tens of millions of dollars from Bayou, according to people close to the matter.

    Trustees liquidating Bayou are attempting to reclaim more than $140 million from investors who cashed out before the fund's failure. Only $16 million of that sum is profit. An additional $126 million is the original money the investors poured into Bayou.

    The proposal, filed Wednesday in U.S. Bankruptcy Court in the Southern District of New York, would let defendants settle by giving back all the fictitious profits, and half of the principal they originally put in. Then, along with all the other investors, they would receive a claim in the bankruptcy case and receive their share of the pool of money.
  2. If the scumbag attorneys and HF "managers" pull this off you can expect some major changes in this portion of the industry.

    I mean, its not like you go to the ATM and pull out cash at will. Redemptions need to get approved and then wired out.

    And the portion I highlighted....thats the type of attitude that is absolutely destroying our country.

    What a bunch of lowlifes.
  3. RhinoGG

    RhinoGG Guest

    I'll return half of what I gained, on a contigency basis of course. First need to sell of all the property I re-inevsted those gains into.
  4. Were you really involved or just joking? Would love to hear about what prompted the rush for the door before the collapse.
  5. There has to be more to the story, no? What is the initial lawsuit even based on? It looks like these guys were smart enough (lucky enough) to get out before the fund tanked. Like the one guy said, that would be like asking people who sold a stock that then went down afterwards to give it back, or a house, anything. Not only the profit, but 1/2 of the principal too? :confused:
  6. Nope. Just scumbags reaching. Why doubt it? After all..the fund was a conduit to commit fraud.
  7. [​IMG]
  8. Unless this was in the original agreement, that if Bayou tanked and they could pull back earlier redemptions (or similar wording) this is an open and shut NON case.

    Taking your money out of a fund was neither immoral or illegal, last time I checked.
  9. Eddiefl


    I am taking a trip to the Florida Keys next weekend. I'll look for this guy there. A lot of fugitives like to hide out down there.

  10. #10     Jun 14, 2008