Goldman May Take Heat for Bayou Hedge Fund Fraud

Disdained investors of the former Bayou hedge fund, run by one-time fugitive Sam Israel, are going after Goldman Sachs for $20 million to try and recover some of their losses.

...

The suit, which was filed as a private arbitration case in Federal Court, claims that Goldman Sachs Execution and Clearing provided monthly statements to Bayou highlighting its losses. The reports showed more than $88 million between August 1999 and August 2005. But while the reports may have been right on, creditors claim that Goldman knew that Bayou was turning around and reporting substantial gains to investors and did nothing about it.