Samuel Israel was a big money hedge fund manager desperate to succeed. He lived through the most decadent era in human history, and his hunger for fame and fortune — his greed — ultimately led to a scam that bilked investors out of $300 million.

This is the strange story of a con artist who eventually fell for the ultimate con himself!

Samuel Israel and his company Bayou Funds LLC appeared to be riding high in the 1990’s as the DOW explodes, technology stocks are the rage and savvy investor money is everywhere.  Israel’s friendly, outgoing personality easily convinces clients to invest.

But things are not as they seem.  Bayou’s investments are falling short.

Bayou eventually loses millions of investor dollars. At the end of 1989, Israel seeks help from his friend and partner, accountant Dan Marino.  Israel is willing to do anything  - including breaking the law – to ensure Bayou’s survival.  Together they devise a plan to hide the financial problems. They create their own independent auditing company…one run by Dan Marino.

FBI Special Agent Carl Carturo explains the new auditing company was the beginning of the end: “That’s a watershed because once you set up a phony accounting firm and they’re gonna do the quote unquote independent audit, now you’ve opened the door and you’ve entered the world of criminality.”

Bayou’s updated financial statements attract investors whose money will be used to pay redemptions for earlier clients.  Almost by accident rather than design, Bayou has become a ponzi scheme.

As the sham continues, Israel's tension mounts. His bad back and mounting business debt lead to an addiction to painkillers that seems to fuel his bad business decisions.

As Bayou’s investments continue to fail, Israel’s strange saga takes a wild turn.  A desperate Sam Israel (shown here in a U.S. Marshals mugshot) becomes the perfect bait.

In 2004 he makes a new friend who claims he can solve all of Bayou’s problems.  The contact tells of secret government projects all financed by select banks and available on “an invite only basis”.  If you buy in, you’re guaranteed an incredible rate of return.

The FBI Analyst Kevin Walsh says Israel’s contact was a shadowy figure:  “He'd actually told Sam that he was an ex-CIA officer, he was involved in Black Operations, lots of super secret spook stuff, which Sam just bought hook, line and sinker."

Israel buys in for $10 million dollars and becomes a victim of a high yield investment fraud scam.

Part of the con involved the contents of this (pictured) mysterious Federal Reserve box offered to Israel as collateral.  Supposedly it’s from World War II and contains more than $100 million in Federal Reserve bonds.

The catch?  The Federal Reserve issues notes – not bonds.  The box is an elaborate hoax.

An FBI investigation is triggered when Israel wires more than $150 million (essentially all Bayou’s remaining money) to the unidentified con man.  Agents interview Israel believing him to be just a victim.  But the more questions the agents ask, the more they realize there is something else going on besides the prime bank fraud.

FBI’s Carl Catauro (pictured right with agent Kevin Walsh): “This doesn’t make sense.  I mean this is a sophisticated investor, a guy who knows Wall Street, why is he engaging in this? What’s the need to earn a hundred percent every two weeks?”

Sam Israel is running out of time.   On July 27, 2005 he sends a surprise letter to investors announcing he’s shutting Bayou down and will send checks to investors. But Bayou has no money to send.

John Siegesmund was a Bayou investor.   “I call Bayou…I just wanted to know where the money was. But nobody had any idea if any of it was left. I mean as a practical matter, it appeared to be gone, just gone.”

Investigators close in on the case.   Sam Israel and Bayou bilked investors out of more than $300 million in less than a decade.  Eventually Israel cooperates with the authorities in hopes of a lenient sentence.   But, along with partner Dan Marino, he’s sentenced to 20 years in prison and ordered to pay the $300 million in restitution.

On June 9, 2008, the day Israel is supposed to report to prison to begin serving his 20 year sentence…but he never arrives.  Authorities find his GMC Envoy abandoned on this bridge over the Hudson River.

Scrawled out of the pollen on the abandoned SUV’s hood are the words “Suicide is Painless,” an attempt to make authorities believe that Israel has jumped to his death.  But when divers fail to find a body in the river…they doubt Israel committed suicide.

After three weeks on the run, Sam Israel turns himself in to the police. As a federal prisoner he has no chance of parole.

More Scams and Schemes:

• Slideshow: Unbelievable Scams and Schemes
• Quiz: How Much Do You Know About Greed?