PLATINUM PARTNERS AND THEIR OUTRAGEOUS RETURNS
LostMessiah 4 January 2016
LostMessiah was and has been the brainchild of several people who began this venture last February with a few stories already in our heads, Platinum being front and center.
From the very beginning we made clear that something was very wrong with Platinum, beginning with the extraordinary, though irrational returns. We then raised the question of David Bodner and a piece of property (191 Viola Road) that transferred names rather nefariously in Rockland County, New York.
We questioned the Africa-Israel connection and most notably those who financed Platinum in its early years: David Bodner and Murray Huberfeld and their band of merry… Philanthropists? No.
We posted diagrams.
We showed you the connections between Seabrook and Platinum, COBA and Platinum. We even spoke of Black Elk, a story still in its making. We believe that most of the Platinum investor money (which is likely currently in the family trusts of Bodner and Huberfeld and in the yeshivas begun by Nordlicht and his family) belongs to Black Elk investors who were taken for a ride during a tender offer which was specifically intended to drain the company of its assets.
That story is still one to be told but unfortunately 12 pages later, we have found a web of lies and a spider with far more than eight legs and we have not even scratched the surface.
The investor money has not been spent, in our view. It has been funneled. The trick is going to be getting it out from under the various trust laws protecting it. The key to Huberfeld’s participation in all of this beyond his family trusts is his property which has more recently been transferred to his wife in a quit-claim deed.
There were people questioning – just too few listening.
No One Questioned This Hedge Fund’s Madoff-Like Returns
Red flags abounded while hedge fund claimed 17% annual gains
Platinum was embroiled in rogue trades, Florida Ponzi scheme
In the years before Mark Nordlicht was arrested for what’s alleged to be one of the biggest investment frauds since Bernie Madoff’s, U.S. authorities had plenty of reasons to suspect something might have been fishy about his hedge fund, Platinum Partners.
As far back as 2007, Bank of Montreal accused Nordlicht of helping a rogue trader, costing it more than $500 million. Three years later, when the Securities and Exchange Commission was investigating what it called a “scheme to profit from the imminent deaths of terminally ill patients,” the agency discovered that Platinum had funded the deals. And in 2011, a Florida lawyer who confessed to running a $1.2 billion Ponzi scheme testified that Nordlicht, his biggest funder, lied to help him lure new investors.
And then there were the remarkable profits: 17 percent annually on average from 2003 through 2015, with no down years. The returns were almost as smooth as the fake gains that Madoff claimed year after year, as measured by a popular metric called the Sharpe ratio. Continue reading
A Monster Inc. Pump and Dump? Perhaps Much Ado About Nothing… We Don’t Think So…. The Hudson Group Connection? Platinum???
By: LostMessiah, 29/12/16
Yesterday, in a fluke series of events, one of us noticed that the shares of several companies were behaving irrationally. Among them were the shares of Monster Digital Inc.. At about 1:00pm (EST) Monster Digital, Inc.’s (MSDI) share price had nearly doubled from the morning. Its trading volume was nearly quadrupled. At one point during the day it had gone up 114%. As the day continued, the shares peaked and then began sliding.
There was no news, nothing of any interest that should have logically pushed the shares up as high as they were trading or as low as they landed. http://www.marketwatch.com/investing/stock/msdi
Tweets were going crazy (see below) as were Bloomberg posts, most of which were both perplexed and ecstatic, depending upon what positions were held by the particular “tweeter”. One trader thanked the market for his significant short on the shares of MSDI. Another came right out and said that the company was the perfect target for a “pump and dump”. http://stocktwits.com/symbol/MSDI
Today, the shares are not only down from their open yesterday morning but they have sunk further as of today’s opening. Again there was no news yesterday and no new news today that should have caused this much activity in this particular company.
We decided to dig because this company fits with impeccable clarity the pattern of companies serially targeted by Platinum Partners: an obscure company, tech or oil/energy driven, with a following of tech geeks or oil bigwigs, small, IPO over-valued, followers unsophisticated, etc. etc. We decided to go digging for a Platinum Partners connection.
And we found one.
Of recent notice, on December 5, 2016 Monster Digital, Inc. exhibited new products at the Hudson Group show in Las Vegas. An article in Marketwired on the 9th mentioned the show. The link to the article is listed as follows: http://www.nasdaq.com/press-release/monster-digital-inc-exhibits-new-products-at-hudson-group-show-20161209-00411
As it would happen, the current Chief Marketing Officer of Platinum Partners is also the former Chief Marketing Officer of Hudson Group. The two week span of time between the Hudson Show (wherein Monster exhibited) and yesterday’s market activity is simply too hard to ignore.
We may be wrong. Who knows? This may just be coincidental. We don’t think so. Looks like a duck. Smells like a duck… You know the rest…
In fact, we think that we found the tiniest of threads to link MSDI with Platinum. We have little doubt that there is something far more nefarious lurking. There were other stocks that behaved oddly yesterday and some today. Many of them fit the pattern. We are simply too understaffed to follow all of the breadcrumbs. We are banking on the possibility that by posting this, someone will follow leads where we cannot. Forgive the banking pun…
We hope that people who read this will send along information, watch the newswires and market industry news and tweets. We hope the federal authorities are paying attention.
TWEETS TO FOLLOW:
Platinum Partners arrests are scant consolation for alleged victims
When six executives of Platinum Partners, including founder Mark Nordlicht, were arrested on Monday on federal charges of running a more than $1 billion hedge fund fraud, people who had long alleged they were harmed by the New York-based firm felt some vindication.
But the possibility that each defendant might face prison terms has done little to soothe their continued anger over losses that may never be recouped.
One such person is Houston-based energy entrepreneur John Hoffman. In the charges, the U.S. Department of Justice and the U.S. Securities and Exchange Commission alleged what Hoffman had long believed – that Platinum, with the help of a seventh man also arrested, Jeffrey Shulse, had illegally profited from the failure of Hoffman’s company, Black Elk Energy Offshore Operations LLC.
Hoffman said in a telephone interview on Wednesday that he did not expect to recover anything and that his involvement with Platinum had cost him the company he founded and at least $500,000 in legal fees. He also described stress-related health problems and difficulty fundraising for a new energy venture.
Hoffman expressed anger that thousands of Gulf Coast-area families were stiffed: mostly the small businesses that were never paid for work on Black Elk’s oil and gas drilling platforms before it went bankrupt amid lower oil prices and Platinum’s alleged corporate cash grab.
All six Platinum executives pleaded not guilty and an attorney for Shulse told Reuters he plans to do the same. A spokesman for Platinum declined to comment for this article, and the firm has not offered any public comment. A person familiar with Platinum’s thinking told Reuters in April that the firm always acted within the limits of the law despite its aggressive investment approach.
Launched in 2003, Platinum was known as a high-performing hedge fund manager that backed struggling companies and employed esoteric investment strategies such as litigation finance and high-interest consumer loans. (Reuters Special Report: reut.rs/1TRovwx)
The government charges on Monday included allegations of over-valuing assets and misleading clients on the health of the firm. The government demanded that the hedge fund return money that was allegedly illegally taken from clients and Black Elk bondholders, and pay related penalties.
The 18 Cases to Follow – A Thread that Ties Black Elk, Platinum and Optionable, Inc. – oh… and Where’s Bodner?
U.S. charges Platinum Partners executives with $1 billion fraud
Top executives of New York-based hedge fund manager Platinum Partners were arrested on Monday and charged with running an approximately $1 billion fraud that federal prosecutors said became “like a Ponzi scheme” as its largest investments lost much of their value.
Mark Nordlicht, Platinum’s founding partner and chief investment officer, was arrested at his New Rochelle, New York, as federal prosecutors in Brooklyn accused him and six others of participating in a pair of schemes to defraud investors.
“The charges relating to these two schemes highlight the brazenness and the breadth of the defendants’ lies and deceit,” Brooklyn U.S. Attorney Robert Capers told reporters.
Led by Nordlicht, Platinum, the subject of a Reuters Special Report in April, was known for years for producing exceptionally high returns by taking an usually aggressive approach to investing and fund management. (reut.rs/2h36duU) (reut.rs/1TRovwx)
But a 48-page indictment said since 2012, Nordlicht and four other defendants defrauded investors by overvaluing illiquid assets held by its flagship Platinum Partners Value Arbitrage Fund LP, mostly troubled energy-related investments.
This caused a “severe liquidity crisis” that Platinum at first tried to remedy through high-interest loans between its funds before selectively paying some investors ahead of others, the indictment said.
“So to some extent, there is a Ponzi-esque aspect to this scheme,” Capers said.
Prosecutors said David Levy, Platinum’s co-chief investment officer, and Uri Landesman, the former president of the firm’s signature fund, also participated in the scheme, which prosecutors said allowed Platinum to extract more than $100 million in fees.
Nordlicht, Levy and Jeffrey Shulse, former chief executive officer of Platinum’s majority-owned Black Elk Energy Offshore Operations LLC [BLCELB.UL], also schemed to defraud bondholders of Black Elk, a now-defunct Texas energy company, out of $50 million, prosecutors said.
The indictment said the scheme involved using a group of reinsurance companies called Beechwood, partially controlled by Platinum’s principals, to rig a bond vote and pay the hedge fund manager ahead of creditors.
A Platinum spokesman declined to comment. Nordlicht’s lawyer did not immediately respond to requests for comment. Michael Sommer, Levy’s lawyer, said he looked forward to clearing his client.
Lawyers for the other defendants did not immediately respond to requests for comment.
Founded in 2003, Platinum until this year had more than $1.7 billion under management, with more than 600 investors, authorities said. Its Value Arbitrage fund reported average returns of more than 17 percent from its inception, according to prosecutors.
This year, a series of investigations tied to Platinum came to a head. The firm hired an independent monitor in July to unwind its funds, and a Cayman Islands court in August placed its main offshore funds into liquidation.
Those moves came after the June arrest of Murray Huberfeld, a longtime Platinum associate, on charges in Manhattan federal court that he orchestrated a bribe to the head of the New York City prison guards’ union, Norman Seabrook, to secure a $20 million investment with the firm.
Seabrook pleaded not guilty, as did Huberfeld who was also arrested.
Two weeks later, the FBI and U.S. Postal Inspection Service raided Platinum’s Manhattan offices in a separate fraud investigation that culminated in Monday’s indictment.
Others indicted on Monday include Joseph Sanfilippo, Value Arbitrage’s former chief financial officer; Joseph Mann, a former Platinum marketing employee; and Daniel Small, a Platinum managing director.
The U.S. Securities and Exchange Commission said on Monday that it was seeking a court-appointed receiver for funds managed by Platinum Credit Management, the firm’s second-largest vehicle after Value Arbitrage.
The case is U.S. v. Nordlicht et al, U.S. District Court, Eastern District of New York, No. 16-cr-640.
Platinum Hedge Fund Executives Charged With $1 Billion Fraud