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Sam Israel had a problem. The investors in his hedge fund, Bayou Capital, were expecting spectacular returns. Sam himself had spent years proclaiming the fund’s brilliant results. In reality, Sam had been marking his own homework, publishing fraudulent accounts and using these to lure in new investors.
What to do? Well, the logical thing of course: wait around for an extraordinary profitable streak, and in the meantime keep up the ruse…
This episode of Cautionary Tales was recorded live at the Bristol Festival of Economics and studies three incredible investment scams. How do pyramid and ponzi schemes snowball out of control, flattening victim and fraudster alike?.
Further reading
The first-hand account of the Women Empowering Women pyramid scheme is Julia Stephenson’s “Broken Hearts Club… or how my Sloaney friends and I fell for the oldest trick in the book”, published in the Mail on Sunday on 1 June 2003.
Daniel Davies’s wonderful book Lying for Money describes both the snowball effect and the Ladies Deposit Company scheme.
And we could barely scratch the surface of Sam Israel’s disappearance into a whirlpool of conspiracy theories. The incredible story is vividly told in Guy Lawson’s book, Octopus.