Investigation into Platinum Widens, The Direction it Should Take?

 

Our Take on Events –

PLATINUM PARTNERS AND THE NUMEROUS FRAUDS AND PONZI SCHEMES

Since 2016, LM has been reporting on Platinum Partners and the various partners and schemes. It is and has always been our position that Platinum Partners, as a firm, has been nothing more and nothing less than one giant Ponzi Scheme, with some pretty frightening tentacles. Platinum Partners’ establishment with the assistance of then Africa Israel employee Jona Rechnitz, along with other members of AFI is all the more unsettling because we believe the earlier Platinum Fund, itself, was partially financed by Lev Leviev and his connection to the Platinum and its partners cannot and should not be ignored, particularly not by law enforcement reviewing all angles.

We will provide continued information to our readers on investigations it becomes available. Having said that, we do not believe that Murray Huberfeld should be given anything but the harshest sentence and we further believe that if the Platinum Partners’ liquidators are looking for all Platinum’s assets they need begin to look at the personal family fortunes of Huberfeld, David Bodner and Huberfeld’s longtime friend and co-partner Mark Nordlicht.

The men involved in Platinum, Black Elk, Echo Therapeutics, and all of the associated businesses and investments, should be scrutinized, bar none. And Jona Rechnitz should not remain unpunished for his involvement. He knew what he was doing when he introduced Norman Seabrook to the Platinum investments that tanked COBA. He knew what he was doing when he elicited money from Hamilton Peralta.

As we mentioned in a previous post, Murray Huberfeld’s attorneys in their remarkable eloquence would have us believe that he is a great altruist, naive and burdened by a scheme he knew nothing about. That is pure and utter nonsense. The many men involved in years and years of frauds and schemes and their associates are savvy, creative and cunning businessmen. These are not men who should be permitted to walk a higher ground because they purport to believe in a “higher authority” [borrowed from an old advertisement]. We have little choice but to give credit where credit is due and these men, in all of their financially lucrative glory, deserve the lions’ share. On the flip side of that very valuable coin, their moral compasses do not necessarily all point in the same directions as their victims’.

There have been thousands of victims over the years. We should be focusing on them: compensation, investment returns, justice and retribution. The money was siphoned off into personal family funds and other investments. And it should be recovered. 

As to COBA and its heralding a $7M recovery for COBA members, that is a financial farce. Murray Huberfeld will be repaying $4M initially with the additional $3M over time. This is utterly reprehensible as he will have use of funds during that time. He will be generating income over the course of that time. Platinum Partners, the fund, the individuals, should all be repaying COBA and its members, plus interest, investment losses and other compensation. Only then should those currently in charge take pride in their recovery.

 

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Platinum Partners Hedge Fund Investigation Reportedly Widens

 

The Platinum Partners saga may have further twists in store.

The New York-based hedge fund has begun liquidating its funds, after the firm’s longtime associate Murray Huberfeld was accused last month of arranging for a $60,000 kickback to be delivered — in a Salvatore Ferragamo bag — to a correctional officers’ union official in exchange for directing the union’s retirement fund investments to Platinum.

Now, Platinum and its chief investment officer, Mark Nordlicht, may face scrutiny as the probe widens, according to a report from the Wall Street Journal.

Platinum’s woes began with the June 8 announcement of bribery charges against Huberfeld and Norman Seabrook, president of the New York City Correction Officers Benevolent Association.

Prosecutors say that Huberfeld, through an intermediary, arranged for the delivery of the kickback to Seabrook after the union official directed $20 million in union investments into the Platinum Partners Value Arbitrage Fund. Huberfeld then arranged for the hedge fund to reimburse the intermediary for the kickback using a fraudulent invoice for the purchase of New York Knicks basketball tickets, the U.S. Attorney’s Office said. Both Seabrook and Huberfeld pleaded not guilty to the charges on Friday.

The fund itself had not been implicated in the criminal case against Huberfeld, whom prosecutors describe as a co-founder and manager at Platinum, claiming he was not listed on the firm’s registration documents to avoid scrutiny. Huberfeld has been previously fined by the Securities and Exchange Commission.

Federal agents raided Platinum’s office in late June, after the charges were announced, as part of an investigation that’s reportedly separate from the bribery case. And there are other rumblings of wider fallout.

Since its founding in 2003, Platinum Partners has appeared to be one of the world’s best-performing hedge funds, claiming a 17% annual return for its main fund as of last fall. But the firm has made investments in assets that are potentially hard to value or liquidate, such as private placements in a distressed company’s debt. These are known in accounting parlance as “Level 3” assets, which have significant “unobservable” value inputs. Nearly all of Platinum’s investments are Level 3, according to the Wall Street Journal.

Among the illiquid investments are several that have raised eyebrows. In 2007, according to SEC investigators, Platinum created a subsidiary called BDL Group for the purpose of investing in variable annuities for hospice patients, which paid out a bonus when the patient died. Several involved in the plan agreed to pay settlement fines to the SEC, but Platinum and Nordlicht were not accused of wrongdoing.

Other Platinum investments include financing for payday lenders, which offer short-term loans at the equivalent of a 400% annual rate or higher. The industry has long been the target of regulatory crackdowns.

Platinum’s payday borrowers include CashCall, according to Bloomberg. CashCall has been suedby the Consumer Financial Protection Bureau for allegedly charging interest in excess of what state laws allow; the company contests those claims and the case is pending in federal court in Los Angeles.

All of this adds up to signals that, at best, it may take Platinum some time to liquidate its funds, a subject that was already making some investors antsy. Two prominent investors reported Platinum to the SEC in November for non-payment of redemptions, according to The Observer.

The Wall Street Journal, citing sources, now says that the investigation into Platinum is examining whether it overstated the value of its holdings, or paid out exiting investors from new investments or borrowings. A Platinum spokesperson rejected those claims in a statement to the Journal.

To read the article in its entirety click here.

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