A Platinum Vindication – Platinum Partners and Sufficient Evidence of Fraud

As the readers of this blog may remember, the Platinum Partners fraud was widely covered in and around 2016 and 2017. The coverage included years of research on the part of a small group of very dedicated people who collaboratively amassed a treasure trove of information regarding the Platinum Partners hedge fund, its activities, the defrauding of millions of dollars in investor money, bribery, securities fraud and the list goes on.

We attended hearings on the frauds related to Black Elk Energy in 2019 and, by all estimation and analyses, we had the partners dead-to-rights on, at the very least, the securities fraud. And then, in what we believed to be a shocking turn of events, Judge Cogan, an altogether brilliant member of the legal community, overturned a jury verdict and acquitted one of the partners and granted the other a new trial. Overturning a jury verdict is unusual. Acquitting a convicted man made our heads turn.

The Black Elk Energy deal, while complicated and nuanced, represented a clever, if not unimaginably creative manipulation of the rights of the unsecured bondholders against the secured bondholders, allowing the Platinum Partners (unsecured bondholders) to divest Black Elk of Millions and Millions of Dollars in valuable oil assets, thereby leaving the secured investors (those same voting shareholders) with nothing. You see, once the secured property is filtered out of any company, the secured holders of debt and financial obligations are left with nothing to secure. This can, if properly directed, reduce the secured bondholders to a position below the unsecured bondholders who, in the ordinary course, would have been paid out first. However, such a vote would have required the Platinum Partners responsible for that vote to have sat down and affirmatively orchestrated such a corporate action. This could not have lacked criminal intent, particularly when David Levy (who was acquitted on those grounds) was and continues to be, one of the largest beneficiaries of the Black Elk deal.

Taking a step back in time, the takeover of control of Black Elk, which began in 2007 when Platinum began investing in the Black Elk Energy company, was a corporate move that legends are made of, a slight of hand and a measure of serendipity. The slow bleed of that company of its assets and value, by the very partners who were supposed to be acting in the best interest of the company did not go unnoticed, at least by us. It was carefully orchestrated and it had a measure of well-honed finesse.

In simple terms convincing secured shareholders to vote on a measure which was framed to them as a vote in the best interest of the company, and ultimately paved the way for the Platinum Partners to drain assets, followed a pattern and practice of corporate behavior by Platinum’s Partners, at least for anyone keeping tabs of their activities.

And yet, at the end of it all Judge Cogan ruled that David Levy lacked criminal intent and Mark Nordlicht was entitled to a new trial. Sadly, we were left bereft by the miscarriage of justice. What occurred in the years leading up to that trial was more than criminally intentional, it was very dark. What has transpired since, is astounding.

The Partners have not starved, as one would think when a company goes from having $1.7 Billions of Assets under Management to nothing (at least nothing being reported). At the end of the day, the greatest beneficiaries of that vote, were the Platinum Partners, and despite contentions to the contrary, these men got very rich off their crimes.

And while Mark Nordlicht later filed for bankruptcy protection (in and around late 2019), anyone who looks hard enough will likely find that he siphoned off his personal assets to family members and offshore accounts and is really, not impoverished. Nor, might we add, is he entitled to bankruptcy protections.

On Thursday, November 5, 2021, a three panel U.S. Appeals Court, after 9 weeks of testimony, unanimously restored the convictions of Mark Nordlicht and David Levy. In a 102-page decision, they determined that the evidence supported the conviction of Mark Nordlicht and did not support a finding of David Levy’s lacking “criminal intent.”

A little vindication goes a long way. Murray Huberfeld’s dramatically reduced sentence remains a slap in the face for his victims in the Platinum Partners fraud. Hopefully David Levy and Mark Nordlicht and their high-priced legal team will not succeed in convincing a judge that they deserve a reduced sentence. They unequivocally do not.

See below for additional reading and a copy of he decision.

U.S. appeals court restores Platinum Partners executives’ fraud convictions

NEW YORK, Nov 5 (Reuters) – A U.S. appeals court on Friday restored the fraud convictions of two former top executives at the now-defunct Platinum Partners hedge fund, saying a trial judge erred in acquitting one defendant and granting the other a new trial.

In a 102-page decision, the 2nd U.S. Circuit Court of Appeals in Manhattan said sufficient evidence supported the July 2019 jury convictions of Platinum co-founder Mark Nordlicht and co-chief investment officer David Levy.

The appeals court returned the case to U.S. District Judge Brian Cogan in Brooklyn for sentencing. Platinum was based in Manhattan and once had about $1.7 billion of assets.

Appeals Court Reinstates Convictions of Platinum Partners Executives

Hedge fund founder Mark Nordlicht and co-chief investment officer David Levy were convicted in 2019 of securities fraud and other charges

Mark Nordlicht, the founder of defunct hedge fund Platinum Partners, leaving federal court in the Brooklyn borough of New York in 2019.

The U.S. attorney’s office for the Eastern District of New York, which prosecuted the case, appealed that decision.

In Friday’s ruling, U.S. Circuit Judge Robert Sack wrote that there had been sufficient evidence for a rational jury to convict the defendants, and neither an acquittal or new trial was warranted.

“It is accordingly only in exceptional circumstances, where there is ‘a real concern that an innocent person may have been convicted,’ that a court ‘may intrude upon the jury function of credibility assessment’ and grant a [motion for a new trial],” he wrote, quoting from another case.

Lawyers for Messrs. Nordlicht and Levy didn’t respond to requests for comment.  A spokesman for the U.S. attorney’s office declined to comment.

The Decision decided on November 5, 2021 by the 3 Member Appellate Panel

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Finding Assets – Who Owns What? Platinum Partners and Their Trusts

The Personal Assets of Platinum’s Partners and Their Wives – Who Owns What? It is Well Hidden, The Trust Confusion

EDITED 9.23.19 3:49PM

We have posted a tax grievance filed by the wife of Mark Nordlicht, Dahlia Kalter. In the interest of privacy, we have redacted both the property address and the telephone numbers, though they are accessible publicly. 

To provide some background, Mark Nordlicht along with one of the partners was convicted in the Black Elk scheme and has unsurprisingly appealed that conviction.  But, perhaps the Judge who has yet to rule on the appeals, might want to consider what has happened to assets and the concerted efforts (often apparently confusing) to keep those assets hidden.

The holding companies/trusts/family investments vehicles are so confused, it would seem, that those charged with managing them and defending them (against things like tax assessments) can’t keep them straight.

The paperwork speaks for itself…

The losses to Black Elk Investors, well… those should somehow be recoverable. Perhaps one of the many trusts the money could have seeped into?

 

The Uniqueness of Platinum Partners and the Web Prosecutors Could not Eloquently Unwind [Law360]

Platinum Execs’ Fate Lies With Judge After Mixed Verdict

By Jody Godoy

Law360 (July 10, 2019, 10:25 PM EDT) — Brooklyn federal prosecutors failed to convict top Platinum Partners executives on what they once described as “one of the largest and most brazen investment frauds perpetrated on the investing public,” and the charges they convicted on are now in the hands of a skeptical judge — a far cry from the case’s headline-grabbing origins.

Two and a half years after they were indicted, Platinum Partners co-founder Mark Nordlicht and former co-chief investment officer David Levy were convicted Tuesday of defrauding bondholders in portfolio company Black Elk Offshore Operations LLC. But the jury acquitted entirely on the crux of the case: that Nordlicht, Levy and others had run Platinum’s key fund like a Ponzi scheme.

Former Platinum CFO Joseph SanFilippo was also accused of the scheme to defraud investors, and he was found not guilty. In all, the jury acquitted on 15 counts and convicted on six.

Una Dean of Fried Frank Harris Shriver & Jacobson LLP said that while the case took a number of twists and turns, the acquittal on the investment fraud scheme is not a total surprise given U.S. District Judge Brian Cogan’s skepticism of the evidence.

“It’s not common, and it definitely signals something about the nature or sufficiency of the evidence in the case — as perceived by the court at least,” Dean said of the judge’s rulings.

Nordlicht, Levy, SanFilippo and two others were charged with committing a complex fraud on investors in the Platinum Partners Value Arbitrage Fund between 2012 and 2016, as a number of those investors sought to pull funds out of the PPVA. The fund was stocked with oil and gas assets that were still in the exploration stage, making them difficult to sell.

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Platinum and Black Elk, Jury Finds Platinum’s Partners Innocent of Ponzi Scheme but Guilty in Black Elk

Platinum’s Co-Founder Nordlicht Is Found Guilty of Conspiracy and Fraud

Platinum Partners co-founder Mark Nordlicht was convicted of defrauding investors in what prosecutors likened to a Ponzi scheme and once called one of the biggest investment frauds ever.

The verdict was returned Tuesday by a federal jury in Brooklyn, New York.

When Platinum’s flagship hedge fund was on the brink of collapse, Nordlicht and other executives concealed the truth from investors to stave off withdrawals and bring in fresh capital, prosecutors said. The government, which initially called it a $1 billion investment fraud, ultimately argued to jurors that Nordlicht and his co-defendants cheated investors out of millions, after the trial judge narrowed the scope of their case.

For more than a decade, Platinum Partners boasted some of the headiest numbers in the hedge fund industry, including 17% average gains through 2015 for the flagship fund, Platinum Partners Value Arbitrage. The U.S. said the fraud also involved two other funds Nordlicht operated.

Nordlicht, former co-chief investment officer David Levy, and Joseph SanFilippo, who was chief financial officer of the Value Arbitrage fund, were accused of using loans and money from new investors to pay off old ones, as Ponzi schemes do, prosecutors claimed.

In a second scheme, the U.S. charged that in 2016, Nordlicht and his alleged co-conspirators inflated the value and liquidity of unprofitable oil projects to exalt a fund that “held no more value than a tarnished piece of cheap metal.” Prosecutors called it “one of the largest and most brazen investment frauds perpetrated on the investing public.” The U.S. alleged that Nordlicht and Levy diverted the proceeds of asset sales tied to Black Elk Energy, one of the largest companies in Platinum’s portfolio.

Nordlicht was convicted of three counts tied to the Black Elk scheme: one of securities fraud, one of conspiracy to commit securities fraud, and one of wire fraud conspiracy. He was cleared of the Platinum fraud charges.

Levy was convicted of the same charges. SanFilippo was acquitted of all charges.

Liquidity Crisis

At the trial, which began April 23, prosecutors called as witnesses several former Platinum employees who had agreed to testify about their role in the alleged fraud. Among them was Andrew Kaplan, the former chief marketing officer, who pleaded guilty and secretly recorded telephone calls and meetings with Nordlicht and others, which were played for the jury.

Even as a liquidity crisis gripped the fund in January 2015, Assistant U.S. Attorney Alicyn Cooley argued, Nordlicht and his team exaggerated its prospects to get a fresh infusion of cash, promising the fund’s value would be up 8% by April of that year.

“They announced this made-up number when the fund was about to go under,” Cooley said. “The concept is, if you tell a lie because you hope things will work out, it doesn’t change the fact that you told a lie.”

Nordlicht’s lawyer, Jose Baez, told the jurors in his closing argument that the case was a “disgrace” and that it was the prosecutors who were lying — to them. Baez said there was no evidence Nordlicht intended to commit fraud and instead had a “good faith” belief that he could resolve the fund’s woes.

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A Platinum Verdict – Black Elk Guilty, PPVA Scheme Not Guilty

Jury finds Platinum Partners founder guilty in fraud trial

The verdict was handed up by a jury in federal court in Brooklyn following a nine-week trial. Platinum’s former co-chief investment officer, David Levy, was convicted of the same conspiracy and securities fraud charges.

A third defendant, former Chief Financial Officer Joseph SanFilippo, was cleared of all charges against him.

Prosecutors charged Nordlicht, Levy and SanFilippo with fraud in December 2016, saying they and others at Platinum bilked investors out of “millions and millions of dollars” in two different schemes.

In one scheme, the three men were accused of lying to investors about the health and liquidity of its flagship fund, Platinum Partners Value Arbitrage. Prosecutors said Platinum operated “like a Ponzi scheme” by using new money to fund redemptions by earlier investors, a practice referred to internally as “Hail Mary time.”

The jury, however, rejected those charges, finding all three men not guilty.

In the second scheme, according to prosecutors, Nordlicht and Levy defrauded bondholders in Black Elk, an oil exploration company Platinum owned, by diverting money from asset sales to Platinum ahead of Black Elk’s 2015 bankruptcy. The jury found them guilty of two counts of conspiracy and one count of securities fraud related to that scheme.

SanFilippo was not charged with taking part in the Black Elk scheme.

Lawyers for Nordlicht and Levy were not immediately available for comment.

Kevin O’Brien, one of SanFilippo’s lawyers, said in an email: “Joe is thrilled by the jury’s verdict of acquittal, which affirms what we have consistently maintained, that this case never should have been brought.”

Platinum’s assets are being liquidated under the oversight of court-appointed receivers.

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Black Elk’s “Rigged” Bond Vote – Orchestrated by Mark Nordlicht and David Levy, the Details

Ex-Black Elk Atty Gives ‘Painful’ Detail On Bond Vote

By Jody Godoy

Law360 (May 31, 2019, 9:44 PM EDT) — A former attorney for defunct energy firm Black Elk walked jurors through a bond vote that the government alleges former executives at Platinum Partners rigged in their favor, with the prosecutor on the case getting into a level of detail that a judge called “painful” on Friday.

Former Black Elk outside counsel W. Robert Shearer gave a second day of direct testimony at the trial where Platinum co-founder Mark Nordlicht and former Platinum co-chief investment officer David Levy are accused of working with others to secretly control the bulk of $150 million in Black Elk bonds ahead of a vote in order to direct millions back to Platinum itself.

Now a partner at Akin Gump Strauss Hauer & Feld LLP, Shearer was at the time at BakerHostetler. While jurors had heard of Nordlicht’s involvement the day before, Friday’s direct testimony was centered mostly on email interactions between Shearer, former Platinum managing director Daniel Small and former Black Elk CEO Jeffrey Shulse. Shulse and Small are scheduled to be tried separately on related charges. The government has not accused Shearer of wrongdoing.

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Black Elk and the “Secret Sway” of Mark Nordlicht and David Levy to Wield Control – a Power Grab

Jurors Hear Of Platinum Boss’ Role In Alleged Bond Scheme

By Stewart Bishop

Law360, New York (May 30, 2019, 9:59 PM EDT) — Jurors in the securities fraud trial of former top Platinum Partners executives on Thursday heard of how co-founder Mark Nordlicht floated plans to wield control over bonds of the hedge fund’s portfolio company Black Elk Offshore Operations LLC using Platinum affiliates, which prosecutors say was part of a scheme to defraud the oil and gas driller’s bondholders.

Prosecutors say Nordlicht, former Platinum co-chief investment officer David Levy and others used their secret sway over the majority of $150 million in Black Elk bonds to funnel the bulk of proceeds from a sale of the company’s assets back to Platinum, ahead of bondholders who had priority to the funds.

During the testimony of Black Elk’s former outside counsel at BakerHostetler, W. Robert Shearer, the jury heard of how a group of independent bondholders in late 2013 were threatening to push the bonds into default after Black Elk violated the indenture’s terms by exceeding its limits on capital expenditures.

Jurors were shown a February 2014 email from Nordlicht to a Black Elk executive, in which Nordlicht describes a plan to potentially deal with aggrieved bondholders by exerting majority control over the debt.

“FYI — I am close to buying 20 million bonds from [an independent bondholder]. It will at that point be [an] easy task to buy additional 25 if bondholders don’t behave and we can change covenants at any time by flipping our bonds to friendlies who will do right by the company,” Nordlicht said in the email.

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