In Roman augury, omens on the left were unfavorable (Greek practice read the left as lucky). Latin sinister, simply "left," absorbed the negative reading and passed it into English.
Assessment: Documented, and the root of centuries of bias against left-handedness.
Stories
The Devil sits on the left shoulder
Folk tradition held that a demon whispered from the left shoulder and an angel from the right, which is why spilled salt is thrown over the left shoulder, into the Devil's eye.
Assessment: A genuine recorded folk belief, though it decorated the word's meaning rather than creating it.
Interesting claims
The suppressed left hand
The claim: left-handedness was deliberately driven out, children forced to switch, the word sinister standing as the fossil of a cultural purge. Stronger versions tie it to solar cults: the right hand serves the sun, the left belongs to the moon and the underworld, and Latin grammar took a side.
Assessment: The suppression of left-handers is documented well into the 20th century, which gives the claim real bones. The solar-cult anatomy is speculation laid on top. The word is evidence of prejudice, not of a priesthood.
Sources and further reading
OED, sinister, from Latin sinister, left, unlucky
Cicero, De Divinatione 2.39, on left-side auspices
Worth asking
If a direction can be convicted of evil, what else has language quietly condemned?