Bayou fraud puts focus on due diligence

The filing of a civil complaint against Stamford, Connecticut-based hedge fund Bayou Management last month has reignited calls for increased regulation in the hedge fund sector.

The alleged fraud has also raised questions about the level of due diligence conducted by fund-of-fund managers and consultants amid claims that Bayou falsified the trading gains disclosed in its annual reports.

The US attorney for the Southern District of New York, David Kelley, filed a civil complaint against Bayou Management and its affiliate companies on September 1, requesting for what remains of the firm's funds to be frozen. The complaint follows an investigation by Kelley's office in

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