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.

Ross Intelisano, who represents eight investors that have collectively lost about $14 million in the fund, said: "We are extremely pleased because this means they will freeze Bayou's assets, and also focus on finding any assets that are floating around."

He did not, however, expect that much more money would turn up.

"It seems there were up to $200 millon in trading losses which they disguised," he said. "There might be a few million more found, but I don't get any sense there is another  $100 million in a secret bank account somewhere."

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