More clues regarding the implosion of Stamford, Conn.-based Bayou Management emerged late last week in a pair of court proceedings at opposite ends of the country.

In Manhattan on Sept. 1, the U.S. Attorney's Office filed the first official fraud allegations against the hedge fund, whose CEO, Samuel Israel III, abruptly announced in July that it would shut down its operations and ceased contact with his investors. The court papers, according to a report in The Wall Street Journal, reveal that the firm was "rife with fraud" and that Israel began overstating assets and returns as early as 1998, just one year after Bayou's launch. At one point, Bayou said it was managing $400 million when in reality that figure was closer to $160 million.

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