The Platinum (Teflon) Partners – and a New Trial for One an Acquittal for Another – An Unheard of Move…

Note to readers:

One of the problems with having lost total anonymity (see here) is the second hat worn by the blogger, that of an attorney. Unfortunately of late, attorneys have been suspended for criticizing judges. Whistle blowers are now at risk for their lives from the ruler of what used to be the free world; and the moral compass of the judicial system in the US seems to have turned on its axis. Being a nameless and faceless spokesperson for truth or some form of justice is risky; but putting a face to that is like removing a Kevlar vest. 

Anonymity provided protection, not by allowing us to type words we otherwise would not have typed, but by affording us with a voice without the weights and burdens of multiple degrees and professional demands and what could appear to be attorney advertising were it to have a face. Our voice spoke words of a faceless anybody who did the research and came to a set of conclusions. We no longer have that level of protection. So we tread lightly, a chilling of speech in full force and effect. And for the sake of attorney ethics, perhaps call this attorney advertising, perhaps not. View it as you will. 

And we digress. The ruling below by Judge Brian Cogan feels nothing short of a betrayal of justice for the victims, for justice and for the entire financial system. The jury had it right despite the theatrics of truly gifted attorneys representing the defendants. The attorneys did their jobs and the jury ruled, even at the many legal and judicial disadvantages imposed by Judge Cogan. And then the judge overruled. 

We don’t get it. It feels very wrong.

The jury was an unsophisticated jury with likely precious little by way of experience in the investment world. And yet they were convinced that there was enough evidence to convict Mark Nordlicht and David Levy. We were disappointed they missed the whole picture but they got a piece of it right.

Unfortunately the Prosecution team did a rather inadequate job of breaking up the entire fraud piece by precious piece; and missed so many crucial bits of evidence to put before the jury, not the least of which was a comparison to how the global markets were performing at the time the Platinum Partners were active. This comparison shed light on how lacking in transparency were the activities of Platinum Partners now Teflon Partners at the time.

It was all very complicated; but could have been broken down by someone with enough experience in investments to break it all down. Yet the jury got the significance of Black Elk, a feat of epic proportions. 

We have years of research behind our stories on this subject, a lifetime in the hedge fund world and extensive knowledge of the subject matter. The lawyers representing the State were out-played by master craftsmen. Simple.

But the jury got it right.

To be undone by the judge came as a surprise, accompanied by a deep sense of sadness and a feeling of despair for everything just and true about our judicial system, if such truth exists, and our financial markets. The markets work because of the integrity of the investment vehicles, the rules the hedge fund managers MUST play by.  Teflon/Platinum Partners did not play by those rules. It all only works in concert when the investors can count on the judicial system to ensure act as referees or alternatively dole out equitable and judicial remedies when all else has failed. In this case, the justice system was in discord, as we see it.

The world’s financial markets continue to function only when investors can trust the underlying materials about the risks,  solely when investors understand the thickness of the ice they are going to be skating on, which is supposed to be transparently laid out. There can be no substrata of lies and deceit or the entire endeavor is accompanied by hidden risks. That was the Teflon/Platinum Partners strategy. They hid risks, the ice was thinner in places. 

This case, if not for any other in our anonymous and not-so-anonymous viewpoint, is representative of an entirely broken system. If risks can be so well hidden that minutiae determine a Judge’s unilateral decision to overturn a verdict, no market is safe.

The jury understood the material and afforded us with a just result. The judge here we simply do not understand. 

Hopefully the prosecution team will retry this case; and perhaps they will contact those with an abundance of knowledge on the materials for assistance. If they decide not to retry the case, the victims will have been re-victimized by the very system designed to protect them. 

If the Prosecution does not retry this case it will only either serve to substantiate a belief in unequal justice for the wealthy or prove that the Securities Acts and the investor laws are meaningless or some combination of the two. The Jury got it right. One of those convicted has been acquitted by Judge Cogan. Game well played.

We implore upon the Prosecution to take up the case again and to do better. 

New Life In Platinum Partners Case, Acquittal And New Trial

In a rare move, U.S. District Judge Brian Cogan (Eastern District of New York) overturned a jury’s conviction.  Cogan acquitted David Levy and granted a new trial for Mark Nordlicht.  Levy and Nordlicht, both executives at now defunct hedge fund Platinum Partners, were convicted of securities fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud in July of this year after a 9-week trial.  A third defendant, former Chief Financial Officer Joseph SanFilippo, was cleared of all charges.

Back on December 14, 2016, seven individuals were indicted for their alleged participation in transactions at Platinum Partners, which was founded in 2003.  Two of the primary targets of the investigation were Nordlicht, one of Platinum’s founder partners and its Chief Investment Officer, and David Levy, a senior executive at Platinum who also served as co-portfolio manager for Black Elk, an oil and gas company that Platinum controlled from August 2010 through September 2015.

As the trial approached,  Nordlicht made a change in counsel from high powered attorneys at Quinn Emanuel Urquhart & Sullivan LLP to Jose Baez who gained notoriety when he won “not-guilty’ decisions in two separate high profile murder cases defending Casey Anthony (Florida) and former New England Patriot tight end Aaron Hernandez.  It was an interesting strategy and one that seems to have paid off for now.

There is no doubt that there was some great lawyering here, but the case is also interesting because it went from some slam dunk Ponzi scheme, to a real hedge, who had some exotic investments, that went out of business after the FBI raided the place.  So was it the hedge fund that was a fraud or an FBI raid that caused the fund to shut down?  One thing is clear, there was a raid.

Platinum managed multiple funds, including Platinum Partners Value Arbitrage Fund, L.P. (“PPVA”), Platinum Partners Credit Opportunities Master Fund, L.P. (“PPCO”), and Platinum Partners Liquid Opportunity Master Fund L.P. (“PPLO”). One transaction involved the valuation of one of the funds’ investments, Black Elk – an oil and gas company that Platinum controlled from August 2010 through September 2015, and the subsequent sale.

Government prosecutors claimed that Nordlicht and Levy hatched a plan to get the money from Black Elk’s sale through misrepresentations to bondholders.  The Government claimed that the evidence would show that the defendants rigged the Black Elk bond consent solicitation.  At trial, the jury found Nordlicht and Levy guilty on counts six to eight (related to the Black Elk) but not guilty on counts one to five, which related to Platinum.   

After a 9-week trial and the partial guilty verdict, Nordlicht and Levy moved for a judgment of acquittal under Federal Rule of Criminal Procedure 29 and for a new trial under Federal Rule of Criminal Procedure 33. Judge Cogan deferred ruling on these motions until Nordlicht, Levy, and the government prosecutors fully briefed their respective positions.  So just when prosecutors thought the trial was over, it wasn’t.  After hearing arguments from both sides, Judge Cogan acquitted Levy and stated that Nordlicht’s motion for acquittal was denied, but a new trial was approved as prosecutors did not provide enough evidence to sustain the conviction.

Judge Cogan wrote;

“In considering whether to grant a new trial, a district court may itself weigh the evidence and the credibility of witnesses, but in doing so, it must be careful not to usurp the role of the jury .. The ultimate test is whether letting a guilty verdict stand would be a manifest injustice. … There must be a real concern that an innocent person may have been convicted.”

Although the Government adduced sufficient evidence for a judgment of acquittal to be unwarranted, letting the verdict stand against Nordlicht would be a manifest injustice. Thus, Nordlicht’s motion for a new trial is granted.

It was a complex case but Platinum was a complex hedge fund, something any jury would struggle with.  It all started with an FBI raid, allegations that Nordlicht was seeking to flee the country and that the hedge fund was a Ponzi scheme.  It turns out that the FBI’s raid was successful in taking down the Platinum but there was no clear motivation as to the defendants when they began to experience a liquidity crisis at Platinum (a real issue but not necessarily criminal).  It’s not against the law to make bad decisions or to lose money … something that seems to have been criminalized in this case.

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