Bayou's Ponzi, Vodka And Cocaine, Murder, And Frontrunning The Fed's "Secret" Bond Market

Tyler Durden's picture




 

Think the attempted fake suicide by Bayou Capital's Sam Israel which dominated the headlines for a few days in 2008 was strange? You ain't seen nothing yet: as the following excerpt of Octopus, The Secret Market And The World’s Wildest Con by Guy Lawson via the Daily Mail explains, that was merely the anticlimatic culmination of an amazing tale of bogus London traders, 'secret' Bond markets, frontrunning the Fed, fake CIA and MI6 spies, ponzi schemes and staged murders.

Israel's trading room

Some of the stunning excerpts. All of this happened.

Passing through the revolving doors, Israel stepped into the quintessence of London sophistication and money.

 

His family had stayed at Claridge’s for generations, and Sam moved with ease and entitlement.

 

For nearly a century his family had traded in cocoa, coffee, sugar and rubber, and become fantastically wealthy along the way.

 

Israel had been running his own hedge fund, Bayou, since 1996. To begin with returns were good.

 

But by the time of the first audit, Israel had been forced to start falsifying Bayou’s accounts – first in a panic to cover a single bad bet on gold, then systematically to hide regular losses.

 

By spring 2004, Bayou was down more than $100 million.

 

Israel needed a game-changing trading strategy that would make him tens of millions – and he needed it fast.

Renting from the Donald

At home his life was in crisis. He was plagued by back problems, and prescription drugs barely dulled the pain.

 

Vodka and cocaine were his way of coping, and he was becoming desperate.

 

His wife had thrown him out of the family home and he was renting a mansion owned by Donald Trump, complete with an 800-gallon saltwater fish tank and a menagerie of rare reptiles.

Frontrunning the Fed is where it's at:

He’d heard about a top-secret computer programme that enabled U.S. Intelligence Services to covertly see when and where the Federal Reserve injected money into the market.

 

Getting his hands on the programme would allow him to stay one step ahead, Israel calculated.

 

And the man who could get the software was a self-professed super-spook called Robert Booth Nichols.

 

The pair met at Israel’s third-floor suite in Claridge’s.

The fake CIA "spook" connection:

Nichols was alleged to be a CIA assassin, arms dealer and mob associate, involved in almost every nefarious covert plot carried out by the U.S. government for three decades.

 

He said he was part of a secret organisation dubbed ‘Octopus’ because its tentacles were wrapped around every aspect of society.

 

In fact, Nichols was a conman, whose house of mirrors made Israel’s own Ponzi scheme – in which investors were paid returns from their own money or the money paid by subsequent investors – seem tiny in comparison.

 

And like an episode of Hustle, Nichols would soon spin Israel an elaborate web of lies and deceit – involving bogus banks and traders across several European cities, the Zapruder film of President Kennedy’s assassination in 1963 and even a faked death – in an attempt to swindle him out of millions of dollars.

Frontrunning the Fed turns out is for amateurs: just trade in the Fed's shadow market:

Nichols told Israel to forget the computer software he was after – that he could get him much better returns trading bonds in a secret market Israel would never be able to gain access to unless he had $150 million in cash.

 

The institutions of the modern world – the U.S. government, the Federal Reserve, the International Monetary Fund, the largest banks – were all a front, Nichols said.

 

To keep the market solvent, the Fed secretly issued bonds at a huge discount and they were then traded in a shadow market.

 

The margins were huge. But the public could never know about it or there would be widespread panic.

 

Israel was instantly hooked. He wanted in.

Enter the MI6

A whirl of meetings followed, including one at the Grosvenor House hotel, where Israel was introduced to Nigel Finch and John Cassidy. 

 

According to Nichols, Finch, a veteran of MI6 with a refined accent, was the key to gaining entry to the secret bond market.

 

He ran a fine-art store and was a fellow of the Royal Society of Arts.

Cassidy, claimed Nichols, was a former CIA station chief in Hong Kong and a descendant of Butch Cassidy, the notorious outlaw of the Wild West.

 

Nichols, Finch and Cassidy said they had assisted wealthy people into the trades for years.

 

But they hadn’t been able to trade on their own account and reap the billion-dollar benefits. With Israel’s $150 million, they would at last have the chance to get into the game as principals.

 

They warned him, however, that simply attempting to enter the shadow market was extremely dangerous. Israel could be murdered at any moment by a rival faction.

Enter the trader with the face of an alcoholic:

That night, in a private dining room at the Ritz casino, sitting under crystal chandeliers, Nichols told Israel how the trades worked.

 

Their designated trader was Emily Hardwick, a woman in her early forties who spoke with an upper-class accent and had the blotched face of a heavy drinker.

 

Secrecy was paramount, Israel was told, so they met Hardwick at midnight, at the City offices of Barclays.

 

Encouraging a sense of paranoia, Nichols impressed on Israel the need to be vigilant.

 

They met often in public places, the second bench south of the U.S. Embassy in Grosvenor Square being a favourite rendezvous.

 

Nichols told Israel he never travelled without a gun, even in London.

And this is where the story begins. Read on here.

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Mon, 08/13/2012 - 12:52 | 2701059 MillionDollarBonus_
MillionDollarBonus_'s picture

 

The moral of this story is don’t be fooled by conspiracy theories. If Samuel Israel had not believed Nichols’ silly conspiracy theory about how the Federal Reserve manipulates the market, he would have saved himself millions of dollars. This just goes to show that conspiracy theories are not only ridiculous, but also dangerous. 

 

Mon, 08/13/2012 - 12:56 | 2701065 prains
prains's picture

so is transvaginal mesh MDB but that didn't stop you 

Mon, 08/13/2012 - 13:34 | 2701139 TruthInSunshine
TruthInSunshine's picture

Ponzi of You (alt title: Gotta Have Faith)

By: Kid Rock Bernank-Israel-Madoff Pyramid

 

Living my life in a slow hell
Different fiat groveling whore every night in a New York or London hotel
I haven't seen the sunshine in three whole days

Been fuelling up on cocaine and Manischewitz wine
Wish I had a good girl to miss me
Lord I wonder if I'll ever change my ways

I put your picture away
Deposited your initial funds today
I can't look at you while I'm lying next to these other pyramid scheme believing whores

I put your picture away
Used your initial funds to pay prior, angry investors today
I can't look at you while I'm lying next to these other fiat-worshipping skanks

wooooh-oooh-hoooo

I called you last night at the hotel
Everyone knows but they won't tell
But their half hearted cons & fronts
Tell me something just ain't right

I've been watching news of your faux suicide for sometime
Fuelling up on heartaches and Manischewitz wine
I ain't heard from you in three dam nights now

I put your picture away
I've wondered where my initial investment's been
I can't stand stomach your promises of gold turned into a house of tin

Mon, 08/13/2012 - 13:40 | 2701164 whstlblwr
whstlblwr's picture

Fucking corrupt government.

Manley warns the criminal he'll arrest him if he comes? Yeah, right.

"Nichols told Manley that the money was legitimate, and offered to fly to London to explain how the shadow market worked.

‘If you come to London I will arrest you,’ Manley replied.

‘I will charge you with fraud and money-laundering.’

Mon, 08/13/2012 - 13:53 | 2701209 bankruptcylawyer
bankruptcylawyer's picture

mdb, you actually were funny this time. it's been a while. good job.

Mon, 08/13/2012 - 12:05 | 2700962 dannyboy
dannyboy's picture

Nothing else to do today I suppose aye tylers? What a snoozefest start to the week.

Mon, 08/13/2012 - 12:12 | 2700981 ihedgemyhedges
ihedgemyhedges's picture

Yeah really.  Could've thrown in some pics of some Brazilian beach volleyball chix or something........

I say bring back Money McBags with his rants and links........

Mon, 08/13/2012 - 12:50 | 2701057 DoChenRollingBearing
DoChenRollingBearing's picture

I cannot promise beach volleyball chicks, but I can promise a picture of four generations of pretty Peruvian women in one photo (including the "newest member of Ameru's Team").  Also we made a big sale to our largest customer last week.  Take a look:

http://tinyurl.com/974lpfo

Mon, 08/13/2012 - 13:18 | 2701066 The Big Ching-aso
The Big Ching-aso's picture

 

 

Only safe place 2 invest 2day is at the race track.  Horses aren't intelligent enuff yet 2 cheat.

Mon, 08/13/2012 - 14:00 | 2701235 Doña K
Doña K's picture

riders and trainers are

Mon, 08/13/2012 - 14:54 | 2701466 The Big Ching-aso
The Big Ching-aso's picture

 

 

U have the option 2 bet on all the horsies in race.  Safest bet around.  Always a winnah.

Mon, 08/13/2012 - 15:36 | 2701481 The Big Ching-aso
The Big Ching-aso's picture

 

 

Sometimes people take stupid sarcasm too seriously.

Mon, 08/13/2012 - 13:11 | 2701104 DoChenRollingBearing
DoChenRollingBearing's picture

One reader told me that the photo did not come up, so I put in a link that will show it.

Mon, 08/13/2012 - 12:06 | 2700964 jjsilver
jjsilver's picture

"We shall have world government whether or not we like it. The only question is whether world government will be achieved by conquest or consent."
-- James Paul Warburg - In an address to the U.S. Senate, July 17th, 1950

Mon, 08/13/2012 - 12:18 | 2700973 Cognitive Dissonance
Cognitive Dissonance's picture

You just can't make this shit up. For exciting fiction, tune in to reality.

Mon, 08/13/2012 - 12:20 | 2700999 El Oregonian
El Oregonian's picture

"You just can't make this shit".

Come on, we all can... Eat and wait a few hours...

Mon, 08/13/2012 - 12:10 | 2700975 govttrader
govttrader's picture

Just makes me salivate for a vodka martini with extra olives...shaken...not stirred...hmmm

http://govttrader.blogspot.com

Mon, 08/13/2012 - 12:11 | 2700979 buzzsaw99
buzzsaw99's picture

a grifter named israel :shocked expression:

Mon, 08/13/2012 - 12:22 | 2701005 slewie the pi-rat
slewie the pi-rat's picture

check this out, buZZ_99:  Legalize Competing Currencies
By: Dr. Ron Paul, U.S. Congressman

:> They should be free to use gold, silver, or other currencies with no legal restrictions or punitive taxation standing in the way. Restoring the monetary system envisioned by the Constitution is the only way to ensure the economic security of the American people.  <:

the slewiePlankTM  YaY!!! 

prez0 better not take a nappy on this idea, if he wants to keep michelle happy fo4mo years

he should have the chairstan announce the Legal tender 3-way pre-emptively at the BBQ this month doncha think?

Mon, 08/13/2012 - 12:31 | 2701021 buzzsaw99
buzzsaw99's picture

the all-seeing joo-eye and joo-god only endorse joo-bux and do not believe in having sexual relations with the goyim unless it is for purely non-breeding purposes

Mon, 08/13/2012 - 13:25 | 2701130 LMAOLORI
Mon, 08/13/2012 - 12:59 | 2701074 Peter Pan
Peter Pan's picture

OK, why can't the FED issue actual physical fiat with a use by date based on a 100 day life span. In other words the paper notes will lose 1% per day. In this way at least the shit caused by money printing will be short lived and will encourage circulation rather than the present system whereby it's given to the banks which in turn just place it with the FED at slightly higher interest.

Mon, 08/13/2012 - 13:01 | 2701083 The Big Ching-aso
The Big Ching-aso's picture

 

 

Becuz the drug cartel won't cotton to that shit.

Mon, 08/13/2012 - 12:13 | 2700985 Hook Line and S...
Hook Line and Sphincter's picture

The advertisements I experience between my dreams are becoming quite compelling.

Zzzzzzzzzz

Mon, 08/13/2012 - 12:17 | 2700993 El Oregonian
El Oregonian's picture

Olympics are now officially over... Bring on the clowns.

Mon, 08/13/2012 - 13:26 | 2701133 knukles
knukles's picture

With Angelina back from Va-Cay the car will soon disgorge hundreds of non-sequesters by impostors of knowledge and truth.

Mon, 08/13/2012 - 12:21 | 2700998 Mercury
Mercury's picture

And to think that when Nigerian princes try to pull this shit, no one takes them seriously...

Mon, 08/13/2012 - 12:20 | 2701001 malikai
malikai's picture

It's like a modern day Yellow Kid Weil story.

Mon, 08/13/2012 - 12:23 | 2701006 Satan
Satan's picture

Tyler? The Daily Mail? Really ?

Mon, 08/13/2012 - 14:05 | 2701242 Satan
Satan's picture

i stand corrected. I'll give myself a red arrow. Sigh*

Mon, 08/13/2012 - 14:42 | 2701330 Disenchanted
Disenchanted's picture

 

 

 

s/ Nope, none of this ever happened. Put your hats back on silly tin foilers.

 

Conspiracies never happen here in this pristine, whiter than snow nation that has no corruption whatsoever. /s

 

Here's some widely varied sources on a story similar to Sam Israel's with Robert Booth Nichols playing a key role in the book at the first link.

 

http://www.amazon.com/The-Last-Circle-Casolaros-Investigation/dp/1936296004

 

http://www.wired.com/wired/archive/1.01/inslaw.html?topic=&topic_set=

 

http://www.nytimes.com/1991/08/17/us/reporter-is-buried-amid-questions-o...

 

http://www.theforbiddenknowledge.com/hardtruth/casolaro_octopus.htm

 

http://copi.com/articles/Guyatt/octopus.html

 

http://www2.fiu.edu/~mizrachs/octopus.html

 

http://w2.eff.org/legal/cases/INSLAW/inslaw_hr.report

 

edit: These two are somewhat related as well.

 

http://www.amazon.com/Compromised-Clinton-Bush-Terry-Reed/dp/1883955025

http://www.amazon.com/Barry-Boys-Americas-Secret-History/dp/0970659105

 

I'm not saying that that the content in these articles/books I've linked(I own copies of all books linked) is all 'gospel truth', but there sure was/is a lot of smoke. Was there some fire underneath all that smoke? You'll have to be your own judge of that.

Mon, 08/13/2012 - 12:25 | 2701008 Canadian Dirtlump
Canadian Dirtlump's picture

I don't know if I'm long or short vodka and cocaine, but I'd like to spend a weekend with this asshole.

Mon, 08/13/2012 - 15:02 | 2701513 mkhs
mkhs's picture

I know I am short vodka, and I better go to the store for more.

Mon, 08/13/2012 - 12:26 | 2701010 crzyhun
crzyhun's picture

I am SURE all of this happened in the mind of author. Pleaaaase!

Mon, 08/13/2012 - 12:30 | 2701016 Rainman
Rainman's picture

Only a greedy and delusional bi-polar drug addicted alcoholic like Israel could get into some shit like this. Cons conning cons is always a great story !...marvelous.

Mon, 08/13/2012 - 12:31 | 2701019 nmewn
nmewn's picture

No wonder his ole lady kicked him outta the house...lol.

Mon, 08/13/2012 - 12:31 | 2701020 Dr. Engali
Dr. Engali's picture

Sounds like the script for the next James Bond movie.

Mon, 08/13/2012 - 12:36 | 2701030 JR
JR's picture

And we thought Hollywood was built on imagination…

Mon, 08/13/2012 - 12:36 | 2701026 Quinvarius
Quinvarius's picture

Honestly, there is probably a lot of truth here when you take off all the CIA and conspiracy bluster.  What the Fed and treasury have been doing, issuing debt and then buying it back at a higher price is pretty much the basis of QE and what he describes as a hidden bond market.  I have no doubt that they are giving secret deals with a better spread to some bankers.  And software that lets you see where the Fed is doing an intervention?  GS and JPM have that locked as they carry out Fed and Treasury market orders.  Remove the spin, this stuff is real and in the open.

If you are on the in crowd, you get free money.  End of story.  It will always find a way.  It is corruption.  It is why the Federal Reserve system could never work in 1 million years.

Mon, 08/13/2012 - 15:06 | 2701529 mkhs
mkhs's picture

I think you miss the point of the Fed.  the primary dealers already get the fresh paper, before inflation, as well as low cost borrowing and unlimited repos.  Who needs Byzantine plots?

Tue, 08/14/2012 - 02:03 | 2703090 StychoKiller
StychoKiller's picture

Look up "Promis" software on wikipedia...

Mon, 08/13/2012 - 12:33 | 2701027 bigwavedave
bigwavedave's picture

Will be waiting for todays post about the *even more abismal* volume figures.  

Mon, 08/13/2012 - 12:38 | 2701034 Cognitive Dissonance
Cognitive Dissonance's picture

However it seems your avatar is not lacking in volume. :)

Mon, 08/13/2012 - 12:44 | 2701050 giggler123
giggler123's picture

34C?   No that's a flat on Rothschild Boulevard, Israel.

Mon, 08/13/2012 - 12:39 | 2701036 Red Heeler
Red Heeler's picture

"But by the time of the first audit, Israel had been forced to start falsifying Bayou’s accounts – first in a panic to cover a single bad bet on gold, then systematically to hide regular losses."

He made a single bad bet on paper, no doubt. If he'd made a bet on physical he'd have been OK.

Mon, 08/13/2012 - 12:41 | 2701040 ziggy59
ziggy59's picture

One phrase to rule them all..

WTF!

Mon, 08/13/2012 - 12:47 | 2701056 Quinvarius
Quinvarius's picture

I had a gold ring with that inscription.  Some scrawny banker bit my finger off to get it in front of a cash for gold store.

Mon, 08/13/2012 - 13:22 | 2701127 Bastiat
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