On August 18, 2011, the United States Court of Appeals for the Second Circuit upheld a district court’s $60 million restitution order imposed on Matthew Marino (defendant) to repay the victims of the Bayou hedge fund group Ponzi scheme orchestrated by his brother Daniel Marino, Samuel Israel III and James Marquez.  As previously reported in the Hedge Fund Law Report, Daniel Marino, Israel and Marquez engaged in a Ponzi scheme using the Bayou group of hedge funds, which cost investors – according to numbers in the Second Circuit’s decision – upwards of $500 million.  For a discussion of the mechanics of the Ponzi scheme, as well as a detailed analysis of relevant litigation, see “Recent Bayou Judgments Highlight a Direct Conflict between Bankruptcy Law and Hedge Fund Due Diligence Best Practices,” Hedge Fund Law Report, Vol. 4, No. 25 (Jul. 27, 2011).  The likelihood of collecting $60 million from Marino is probably as fanciful as the “independent auditor” that purportedly employed him.  Nonetheless, the decision evidences the willingness of an important appellate court to cast a wide net of liability and restitution in connection with a hedge fund Ponzi scheme.  Accordingly, the decision may bear on – among other legal and investment matters – the value of claims in connection with other or future frauds.  See “Two Key Levels of Risk Facing Hedge Funds That Buy or Sell Bankruptcy Claims,” Hedge Fund Law Report, Vol. 4, No. 27 (Aug. 12, 2011).  This article details the relevant factual background and the Court’s legal analysis.