CFTC Moves To Revoke Bayou Registration

by Glen Shapiro, LawAndTax-News.com, New York

13 October 2006

The US Commodity Futures Trading Commission (CFTC) announced this week that on September 27, 2006 it filed a Notice of Intent to Revoke Registration (Notice) against Bayou Management LLC.

The Notice alleged that, under the Commodity Exchange Act, Bayou Management is subject to a statutory disqualification of its registration based on a federal court’s entry of a permanent injunction against it.

The Notice specifically alleged that on April 3, 2006, the US District Court for the Southern District of New York entered a partial consent order of permanent injunction against Bayou Management in an action brought by the CFTC in September 2005.

The CFTC’s complaint in that action alleged that Bayou Management and others committed fraud by: misappropriating customer funds; acquiring funds through false pretenses; engaging in unauthorized trading; and misrepresenting material facts to actual and prospective investors, including the rates of return the hedge fund earned, the value of assets under management, and the existence and identity of the accounting firms that had purportedly audited the commodity pools managed by Bayou Management.

In September, the Commission announced its intent to revoke the registration of former Bayou manager, Samuel Israel III, who presided over the collapse of the hedge fund last year, leaving investors out of pocket to the tune of millions of dollars.

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