The founder and chief executive of Bayou Group (search) on Thursday pleaded guilty to conspiracy and fraud charges stemming from the collapse of the multimillion-dollar hedge fund (search).

CEO Samuel Israel and the fund's head of finance, Daniel Marino, entered guilty pleas in separate appearances in federal court.

They admitted to defrauding investors by misrepresenting the value of the hedge fund's assets and reporting fictitious rates of return, as well as creating a phony accounting firm for the fund to conceal its financial health.

In a brief statement, Israel, 46, told U.S. Magistrate Judge George Yanthis that he knowingly sent false quarterly and annual statements and bogus newsletters to investors.

"My purpose was to induce these people to invest in Bayou or keep their investments in Bayou," Israel said.

Israel, who founded the fund in 1996, appeared somber during the proceedings is U.S. District Court in White Plains, a suburb of New York City.

He pleaded guilty to one count of conspiracy, one count of investment adviser fraud, and one count of mail fraud. The charges carry a penalty of up to 30 years in prison. Each count also carries possible restitution of as much as $300 million dollars and a $250,000 fine.

Marino pleaded guilty to four counts, including conspiracy and three counts of fraud. The fraud charges include investment advisor fraud, mail fraud and wire fraud.

The judge said both men could be released on personal recognizance bonds of $500,000 each.

Israel and Marino agreed to travel restrictions, and to surrender their passports.

Sentencing for both was set for Jan. 9.

Federal prosecutors sued Bayou on Sept. 1 under civil forfeiture laws to recover millions of dollars of missing funds after investors complained that they were unable to communicate with the Stamford, Conn.-based fund.