Guilty Pleas for Bayou Brass

Investors suspect that Bayou, which was set up to primarily daytrade stocks, was losing money from the start. But instead of coming clean with their investors, Israel and Marino hatched a long-running scheme to cover up their losses and keep the hedge fund going.

Last week TheStreet.com reported that federal prosecutors are looking into a separate investment fund established by Israel and Marino called IM Partners.

TheStreet.com reported that IM Partners had invested at least $25 million in a number of different companies in deals brought to them by GH Venture Partners, a New York investment banking boutique.

Attorneys for some of the Bayou investors want to know whether any of the hedge fund's money was diverted to IM Partners.

As part of his guilty plea, Marino agreed to forfeit his interest in IM Partners and another side venture called IMG. He was released on $500,000 bond and will be sentenced on Jan. 9.

At the court proceeding, there was little explanation about what happened to the missing $200 million. The lack of information is frustrating some investors.

"Investors are pleased the US attorney has moved quickly in getting guilty pleas," says Ross Intelisano, who represents a group of investors who sunk about $10 million in to Bayou. "But they still want to know what happened to the other $200 million."