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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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. 


prains's picture

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

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


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

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.’

bankruptcylawyer's picture

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

dannyboy's picture

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

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........

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:

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.

The Big Ching-aso's picture



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

The Big Ching-aso's picture



Sometimes people take stupid sarcasm too seriously.

DoChenRollingBearing's picture

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

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

Cognitive Dissonance's picture

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

El Oregonian's picture

"You just can't make this shit".

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

govttrader's picture

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

buzzsaw99's picture

a grifter named israel :shocked expression:

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?

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

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.

The Big Ching-aso's picture



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

Hook Line and Sphincter's picture

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


El Oregonian's picture

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

knukles's picture

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

Mercury's picture

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

malikai's picture

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

Satan's picture

Tyler? The Daily Mail? Really ?

Satan's picture

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

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.


edit: These two are somewhat related as well.


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.

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.

mkhs's picture

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

crzyhun's picture

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

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.

nmewn's picture

No wonder his ole lady kicked him outta the

Dr. Engali's picture

Sounds like the script for the next James Bond movie.

JR's picture

And we thought Hollywood was built on imagination…

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.

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?

StychoKiller's picture

Look up "Promis" software on wikipedia...

bigwavedave's picture

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

Cognitive Dissonance's picture

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

giggler123's picture

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

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.

ziggy59's picture

One phrase to rule them all..


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.