As it becomes clear that investors have lost at least half of their money in the collapsed hedge funds at Bayou Management, the law firm representing investors is focusing on third-party liability according to a Financial Times report.

The Stamford, Conn.-based hedge fund manager has allegedly masked heavy losses by faking its returns from as early as 1998, according to lawyers and regulators investigating the firm's collapse. The U.S. Attorney's Office filed a court claim to seize the group's assets, including $101 million held by Arizona authorities.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.