NEW YORK (Reuters) - A US judge sentenced the "mastermind" behind the collapsed hedge fund Bayou Group to 20 years in prison yesterday, a sentence that reflects the big losses suffered by investors in the $400 million fund.

Samuel Israel III, 48, is the last of three officials at the defunct fund to be sentenced for their role in bilking investors in Connecticut-based Bayou out of millions. The fund's demise rocked the $1.8 trillion hedge fund industry and led to calls for more oversight.

US District Judge Colleen McMahon rejected requests for leniency by Mr. Israel's lawyer - who cited the Bayou founder's lengthy list of medical problems, including a bad back, heart problems, and gout - and said it would be difficult for him to endure a lengthy prison term. She said he was the "mastermind of this scheme."

Mr. Israel was also ordered to make $300 million in restitution. In addition, the judge ordered him to forfeit his interests in a Bank of America Corp account that held a little more than $100 million.

Mr. Israel pleaded guilty in September 2005 to charges of conspiracy and fraud in connected with stealing from Bayou investors over an eight-year period.

Mr. Israel and his co-defendants, former Bayou chief financial officer Daniel Marino and co-founder James Marquez, admitted that they lied to customers about their funds' profits and losses, fabricated audits and financial statements, and created a brokerage that, while executing money-losing trades for clients, generated millions in commission for themselves.

MR. Marino received 20 years in prison. Mr. Marquez, who left the fund in 2001, was held less responsible for the long-term fraud and sentenced to four years and three months.