Mark Nordlicht, Bernard Fuchs and Medical Technologies Innovation Asia, Ltd. – Another Slippery Divestment of Assets from Serial Profiteers – Platinum Partners, Mark Nordlicht and Company
We are going to tell you a story, in the words of the Plaintiffs by and through their attorney in the above-captioned lawsuit (see Photo above). We note that according to the comments below, the lawsuit was dismissed without merit. In our view, it does not mean that the story told was not the accurate depiction of events. We believe the narrative, with or without the surrounding lawsuit, has merit because it is a wholly accurate depiction of an ongoing, continuous and rather savage pattern of questionable business practices. A dismissal of the claims against the defendants simply exemplifies the savvy of their game.
With that in mind, from the directly quoted words below we are going to highlight the relevant parts in red to narrate. Our point, Platinum Partners through its principles Mark Nordlicht and Bernard Fuchs hollowed out the same path they always follow when targeting a company, divesting target of its assets, moving those assets into Platinum related entities, and walking away richer than they were when they started.
These corporate pirates join the board (or become major shareholders), summarily sign away the rights of the most valuable assets to their own related companies, walk away or vote themselves out and leave a company with nothing but defrauded investors. Once the company is scattered in bits and pieces, the bankruptcy courts take over.
No one ever investigates the companies that acquired the assets. In our view judges dismiss cases, not because the cases lack merit when taken as a sum of their parts, but because these judges see each case in a vacuum.
Platinum partners and their principals in our view are nothing more and nothing less than very savvy corporate raiders. We contend that they are invaders of the worst kind. We maintain that they are serial profiteers, fraudsters. For investors, as we see it these men and the funds they create are the corporate enemy. They are savvy, remarkably creative and will not stop until they are stopped.
We ask that you share this narrative with or without citing the lawsuit in which it is encapsulated. We warn investors to turn and run from everything with Mark Nordlicht’s, Bernard Fuch’s and Platinum’s name attached. The immediate rewards are, in our view, not worth the ultimate losses. These men and their companies make Bernie Madoff look like a wee puppy, frolicking among the flowers.
It is our view that you should be warned: until Mark Nordlicht, Bernard Fuchs and Platinum Partners are stopped, your money is not safe. How many times must this happen before you pay attention? We firmly believe that you are staring at the face of Jack Ripper of the Corporate world!
LostMessiah, March 17, 2017, edited at 17:34.
1. Defendant Echo Therapeutics, Inc. (“Echo”) is a public company trading on the (“OTC”) exchange under the symbol ECTE.~ Echo manufactures medical on non-invasive continuous glucose monitoring (“CGM”) and associated technologies. From Echo’s formation over $100,000,000 has been invested in creating Echo’s CGM technology.
2. Defendant Platinum Management (NY) LLC (“Platinum Mgt.”) is the hedge fund sponsor, advisor and manager for Platinum Partners Value Arbitrage Fund, L.P. (“Platinum Arb.”), which was the flagship hedge fund for Platinum Mgt. Defendants Mark Nordlicht (“Nordlicht”) and Bernard Fuchs (“Fuchs”) are co-owners and managing members of Platinum Mgt. Platinum Mgt., Platinum Arb., Nordlicht and Fuchs are at the center of widely reported investigations by the Securities and Exchange Commission (“SEC”), the Department of Justice and the Federal Bureau of Investigation, which raided the Platinum Defendants’ offices on June 22, 2016. Several civil lawsuits have recently been filed against Platinum and/or their employees and agents asserting allegations of fraud.
3. As set forth herein, the Platinum Defendants, Echo, Michael Goldberg (“M. Goldberg”) and Shepard Goldberg (“S. Goldberg”) made material misrepresentations and/or omissions in connection with Echo’s offer and sale of $6,000,000 of 10% senior secured convertible notes (the “Notes”), of which Plaintiffs purchased $800,000. These misrepresentations and/or omissions occurred through the means of a Confidential Private Placement Memorandum (“PPM”). In the PPM, Defendants intentionally and carefully concealed that Echo’s business and board of directors were under the direct and absolute control of the Platinum Defendants in violation of Federal Securities Laws. Through the Platinum Defendants’ undisclosed dominion over Echo, the Defendants have and continue to plunder Echo’s trade secrets, including its state of- the-art CGM technology in violation of the Economic Espionage Act of 1996 (as amended by the Defend Trade Secrets Act of 2016).
4. By in or about late 2014, the Platinum Defendants secretly assumed control over all aspects of Echo’s day to day business operations. From 2014 to date, Echo’s board of directors has been controlled by M. Goldberg and S. Goldberg (collectively, the “Goldberg Defendants”) for the benefit of the Platinum Defendants. The Goldberg Defendants are first-cousins. M. Goldberg has substantial ties to the Platinum Defendants, all of which were undisclosed in the PPM that Plaintiffs relied upon when purchasing the Notes.
5. The Goldberg Defendants, in their positions of control over Echo’s board of directors, have ensured that the Platinum Defendants’ instructions to plunder the assets of Echo were carried out. To this day, the Platinum Defendants, both directly and through the Goldberg Defendants, are proceeding to plunder Echo’s trade secrets by providing them to Defendant Medical Technologies Innovation Asia, Ltd. (“MTIA”)s, which has substantial ties to the Platinum Defendants and the Goldberg Defendants, the full extent of which is not yet known.
6. The Platinum Defendants’ actions set forth herein are consistent with their modus operandi of taking control over entities as undisclosed principals, inserting their own agents into positions of power and using their hidden control to engage in wrongdoing for the Platinum Defendants’ benefit.
7. In a complaint filed in the action entitled, Bankers Conseco Life Insurance Co. et al. v. Moshe M. Feuer, et. al., 16-cv-07646 (S.D.N.Y.) on or about September 29, 2016 (the “Beechwood Action’’), it is alleged that Platinum Partners, L.P. (another Platinum Mgt. related entity), through its founders, Huberfeld and Nordlicht, formed a reinsurer that was ostensibly unrelated, but in fact, secretly controlled and funded by Platinum Partners, L.P. It is alleged that Beechwood Re was formed by Platinum Partners, L.P. in order to create the appearance of an independent entity that would obtain reinsurance trust assets. However, Beechwood Re is alleged to have used the trust assets to invest in Platinum controlled funds and other entities. Essentially, it is alleged that Beechwood Re was a secret fundraising division of the Platinum Defendants that appeared to the public as an independent reinsurer. The Wall Street Journal reported on September 17, 2016 that “for years, Platinum had little success in attracting insurance-company money and considered starting a reinsurer to do so…, but after Feuer and Taylor opened Beechwood Re, more than 40% of Beechwood’s equity was held by family-member trusts of Platinum’s founders as well as a former Platinum employee.“
8. In a complaint filed in the action entitled, In Re: Black Elk Energy Offshore Operations, LLC v. Platinum Partners Value Arbitrage Fund, L.P. et. al., 15-34287 (Bank. S.D. Tex.) on or about October 26, 2016 (the “Black Elk Action”), it is alleged that Platinum Mgt. and Nordlicht, through various Platinum-related entities (including Beechwood Re), took dominion and control over Black Elk Energy Offshore Operations, LLC (“Black Elk”). The complaint filed in the Black Elk Action alleges that Platinum Mgt. and Nordlicht took control over Black Elk by forcing the company to hire executives who were, in fact, controlled by the Platinum Defendants. It is further alleged in the Black Elk Action that the Platinum Defendants secretly took complete day to day business control over Black Elk’s business operations, through which the Platinum Defendants engaged in a scheme to plunder Black Elk’s assets, enrich themselves, and then force Black Elk into bankruptcy. It is alleged that Platinum never disclosed to Black Elk’s investors that Platinum had complete dominion and control over Black Elk’s business operations.
9. On October 26, 2016, the Court in the Black Elk Action issued a temporary restraining order freezing $118 million belonging to the Platinum Defendants. The Court held, “[i]f the funds are not frozen, the court finds that the funds are likely to leave the United States and this Court’s practical ability to control them… This would result in a total loss to the Plaintiffs and constitutes irreparable injury.”
10. Despite all of the publicity concerning the allegations against the Platinum Defendants’ alleged bribery of union officials, fraud and plundering of corporate assets, the Platinum Defendants are steadfast in continuing a pattern of fraud and theft of corporate assets for the benefit of the Platinum Defendants and others. Over the last year and a half, the Platinum Defendants and the Goldberg Defendants have directed Echo’s chief executive officers and Research and Development (“R&D”) team to disclose to MTIA Echo’s trade secrets concerning its coveted CGM technology.
Plaintiff’s Purchase of the Notes
11. Plaintiffs are purchasers of the Notes and Plaintiff JEB Partners is also a shareholder of Echo. The Notes are securities for purposes under Federal Securities Law.
12. Plaintiffs and the other investors (collectively, the “Secured Parties”) purchased a total of $6,000,000 of Notes and were granted a security interest in the assets of Echo, including, but not limited to, Echo’s intellectual property.
13. The purchase of the Notes occurred in two tranches. Plaintiffs closed on the first tranche on or about January 29, 2016 and the second tranche on or about May 3, 2016.
14. The Notes are convertible into “validly issued” shares of Echo’s common stock at a conversion price of $1.50 or 80% of the average of the ten lowest closing prices the Common Stock less than $1.50 “during the 90 days following the first effective date of a Registration Statement filed pursuant to the Registration Rights Agreement.” The Notes also granted Plaintiffs common stock purchase warrants.
15. Simultaneously, Plaintiffs and Echo also executed a Registration Rights Agreement, whereby Echo agreed to “file with the SEC the Initial Registration Statement on Form S-3 covering the resale of all of the Initial Registrable Securities.’’6
16. The PPM identified Platinum Arb. as the Collateral Agent for the security interest:
Pursuant to the Security Agreement that each investor will be required to become a party to (as attached hereto as Exhibit E), Platinum Partners Value Arbitrage Fund L.P. will act as the collateral agent (“Collateral Agent”) and will hold and control a security interest in a certain property of the Company and its subsidiaries (the “Collateral”). The Collateral Agent will have extensive control over the Collateral, including in the event of the event of default under the Notes, the power to take possession of the Collateral and to assign, sell, lease or otherwise dispose of all or any part of the Collateral [sic] the benefit of the secured parties.
17. The Security Agreement between Echo and Platinum Arb states:
in order to induce the Secured Parties to extend the loans evidenced by the Notes, Debtor [i.e., Echo] has agreed to execute and deliver to the Collateral Agent this Agreement and to grant Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in certain property of such Debtor to secure the prompt payment, performance and discharge in full of all of Debtors’ obligations under the Notes and Transaction Documents.”
18. At all relevant times, the Platinum Defendants have been in control of both Echo and the Collateral that acts as Plaintiffs’ security in the event of a default by Echo under the Notes, which as set forth below, has occurred. The Platinum Defendants’ dual roles as undisclosed principals of Echo and Collateral Agent creates an inherent conflict of interest. Plaintiffs would have never purchased the Notes had they known that the Platinum Defendants were both the undisclosed principals of the Echo and the Collateral Agent for the Notes.