A Platinum Response – Fear Would Prevent Reporting, The Nordlicht Hedge

LAW360 [by subscription]

Law360, New York (May 28, 2019, 8:15 PM EDT) — A former chief financial officer for Platinum Partners on Tuesday told a New York federal jury that Platinum co-founder Mark Nordlicht told him that “mutually assured destruction” would keep aggrieved investors from ratting the hedge fund manager out to regulators, despite Platinum’s inability to make timely repayments.

Daniel Mandelbaum, who was Platinum’s CFO for about 9 1/2 months in 2014 and 2015, said he spoke to Nordlicht amid a liquidity crisis that year at Platinum’s signature fund, Platinum Partners Value Arbitrage Fund.

Mandelbaum testified that he was protesting Platinum’s practice of preferentially repaying certain investors — including insiders and those with large stakes in PPVA — ahead of other investors who had outstanding redemption requests.

Nordlicht, however, told Mandelbaum at a meeting in Nordlicht’s office that investors wouldn’t complain to the Securities and Exchange Commission, since if the regulator got involved, PPVA would be shut down and its assets sold at fire sale prices, Mandelbaum testified.

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The Three Identities of Fraud Within the Jewish Community – Platinum and the Hebrew, English and Yiddish Lexicon

Platinum Partners’ partners’ Indictments – Back to to the Very Beginning, and the Yiddish, Hebrew and English Identities of the Actors Involved

[Edited 5/27/19 5:23pm]

Dear Reader:

As a point of clarification, to our last blog post, we have gone back to the very beginning, the original indictments in 2016 as posted by the Department of Justice. (see below).

The entire scheme is extremely complicated and significant information has been added since the initial indictment. For our purposes, we caught on because the actors involved follow the same patterns in every fraud they commit, beginning as early as NorCrown Trust.  These men, particularly Huberfeld and Nordlicht did not deviate from a recipe that had already yielded them significant success and as time went on they simply perfected. There was not reason to.

However what has not been emphasized, and until recently with our own litigation playing out in the courts we did not realize, is that there is another aspect to these crimes, the KYC (Know Your Client) or in this case, knowing your audience and more particularly what language they would be most likely to warm up to. The players in these criminal endeavors, whether Platinum or real estate, mortgage fraud, nursing home fraud, all have something in comment – a keen sense of their audience. Platinum’s partners used that sense and the language required to provide the audience with comfort  to gain credibility, to gain trust and ultimately to play out a fraud of epic proportions. While the amount of money stolen out from under the hands of investors was not money of Madoff proportions, Madoff was straightforward in his scheme. He had been a reputable businessman. He was savvy, a grown up amongst men. There was a measure of honor among his type of thievery. Madoff’s crimes were less that of a seasoned criminal mastermind; but more like someone who stepped off the reservation… because he could.

In the case of Platinum, these guys understand the differences, however minute, between dealing with someone in Yiddish, someone in Hebrew and someone in English. These were three uniquely different types of clients and needed a vastly superior approach to gain their trust. The scheme involved a deep understanding of cultural differences and a brilliant mechanism for utilizing that knowledge to their advantage; and the perpetrators are masters of disguise. 

We have been told by multiple sources that the key to fraud within the religious community is really who calls whom by what name. For Mark Nordlicht, there were those who knew him as Moshe and those who knew him as Moshe Mark and those for whom he was simply Mark. It depended upon the shifting winds and the perceptions of the audience with which he was mingling. 

In Andrew Kaplan’s testimony he outlines 200 secret recordings he took of Mark Nordlicht, which he maintains were taken for the purpose of protecting his salary and other business matters. Perhaps he knew that at some point he would need to defend himself. One can only speculate. But it is clear from the testimony and the recordings that Nordlicht had a keen sense of language and which words to use for which thoughts he wanted to convey. This is no different from secret Morse codes or other codes used by governments and individuals communicating in languages they want kept between themselves. And the beauty of Hebrew and Yiddish is that each expression can have multiple meanings; but anyone speaking or listening knows exactly and precisely what is being said and in what context. The words have biblical messages and political messages and nuanced undertones. Gaining the key to how to communicate with the investors Platinum sought and the big money it wanted was in the language – the masters of disguise.

The same holds true of Moshe Mark Feuer. It is noted that he has maintained and continues to maintain his innocence, that he was a victim. We think that is farcical in all of its iterations, whether in Hebrew, Yiddish or English; but it is not for us to decide. Moshe Mark Feuer had all of the qualities of a businessman and the savvy to use words in different languages and lexicons which would state what he understood and give an indication on how to hide his thoughts from whomever was not on the “need to know” list at any given time. 

Expressions like “b’lev shalem” comes up quite often in the Kaplan tapes with Nordlict. It means wholeheartedly. The word “mehalech” in Hebrew is another. The translation referred to the complications they would have. Nordlicht’s brilliant defense team has maintained that this was all in humor and a jury comprised of African American jurors might accept that explanation, not understanding the cultural implications. But those of us sitting on the sidelines watching this play out know better. 

What we have discovered through our own experiences is that the usage of different names in different languages can be found on deeds and loans and financial transactions of people who function within the religious community. Moshe Mark Nordlicht has three separate identities as do many of the other actors within the communities we investigate. Their homes, their bank accounts, their businesses, their family trusts, their telephone number, their entire lives revolve around the ability to carefully maneurver three uniquely separate identities, one in Hebrew, one in English, on in Yiddish and sometimes iterations of those.  

The language did play a role in encoding the nature of the transactions and this should be something a jury is helped to understand. It is key to the frauds that we have covered on each page of this blog in one form or another, with very few exceptions.

We just hope someone equally matched with the brilliance of the defense team and a cultural understanding of the interactions between the bad actors in this sordid affair is listening and paying attention; and has the ability to convey this to the Platinum Partners’ partners’ jurors.

 

Department of Justice
U.S. Attorney’s Office
Eastern District of New York

FOR IMMEDIATE RELEASE
Monday, December 19, 2016

Platinum Partners’ Founder And Chief Investment Officer Among Five Indicted In A $1 Billion Investment Fraud

Two Additional Individuals Indicted In A $50 Million Bond Fraud Involving Black Elk Energy, One Of Platinum’s Largest Portfolio Companies

BROOKLYN, N.Y. – An eight-count indictment was unsealed this morning in federal court in Brooklyn, New York, charging seven defendants, all of whom are or were formerly affiliated with Platinum Partners L.P. (Platinum), a purportedly $1.7 billion hedge fund based in New York, New York.  The indicted individuals are: Mark Nordlicht, the founder and Chief Investment Officer of Platinum; David Levy, the co-Chief Investment Officer of Platinum; Uri Landesman, the former Managing Partner and President of Platinum; Joseph SanFilippo, the Chief Financial Officer of Platinum’s signature hedge fund; Joseph Mann, a member of Platinum’s Investor Relations and Finance Departments; Daniel Small, a former Managing Director and co-Portfolio Manager of Platinum; and Jeffrey Shulse, the former Chief Executive Officer and Chief Financial Officer of Black Elk Energy Offshore Operations, LLC (Black Elk).[1]

Nordlicht, Levy, Landesman, SanFilippo and Mann are charged with securities fraud, investment adviser fraud, securities fraud conspiracy, investment adviser fraud conspiracy and wire fraud conspiracy for defrauding investors through, among other things, the overvaluation of their largest assets, the concealment of severe cash flow problems at Platinum’s signature fund, and the preferential payment of redemptions.  Nordlicht, Levy, Small and Shulse are charged with securities fraud, securities fraud conspiracy and wire fraud conspiracy for defrauding Black Elk’s independent bondholders through a fraudulent offering document and diverting more than $95 million in proceeds to Platinum by falsely representing in the offering document that Platinum controlled approximately $18 million of the bonds when, in fact, Platinum controlled more than $98 million of the bonds.

Nordlicht, Levy, Landesman, SanFilippo, Mann, Small and Shulse will be arraigned later today before United States Magistrate Judge Lois Bloom at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.  Shulse’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the United States Courthouse, 515 Rusk Avenue, Houston, Texas.

The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Philip Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS).

“As alleged, Nordlicht and his cohorts engaged in one of the largest and most brazen investment frauds perpetrated on the investing public, earning Platinum more than $100 million in fees during the charged conspiracy.  Platinum Partners purported to be a standard bearer in the hedge fund industry, reporting annual average returns of more than 17 percent since inception in 2003.  In reality, their returns were the result of the overvaluation of their largest assets, which eventually led to Nordlicht and his co-conspirators operating Platinum like a Ponzi scheme, where they used loans and new investor funds to pay off existing investors,” stated United States Attorney Capers.  “The charges and arrests announced today reflect our steadfast commitment to holding accountable hedge funds on Wall Street who rip off investors for personal gain.”  Mr. Capers thanked the Securities and Exchange Commission, New York Regional Office (SEC) for their significant cooperation and assistance during the investigation.

“This case shows how several members of this firm allegedly manipulated and lied to investors about the health of the investments they were making, and then plotted ways to cover up their actions.  The FBI and our law enforcement partners do all we can to stop these schemes and to keep fraudsters from stealing from investors, but we can’t do it alone.  We need people to call us when they see things that don’t add up, or don’t make sense,” stated FBI Assistant Director-in-Charge Sweeney.

“These Platinum Partners employees devised a scheme to lure investors to funds they managed knowing the funds were insolvent and would not return the high yields they claimed. Postal Inspectors will never tolerate unfairness in the market and will vigorously pursue and bring to justice anyone who breaks the law, ensuring there is an honest and secure trading environment for investors,” stated USPIS Inspector-in-Charge Bartlett.

*          *          *

As detailed in the indictment, between 2011 and 2016, Nordlicht and Levy, together with their co-conspirators, orchestrated two separate schemes: (i) a scheme to defraud investors and prospective investors in funds managed by Platinum; and (ii) a scheme to defraud third-party holders of Black Elk’s bonds.

The Fraudulent Investment Scheme

Platinum was a hedge fund founded in 2003 and based in New York, New York.  Since September 2011, Platinum was registered with the SEC as an investment adviser.  Platinum managed several hedge funds, but the vast majority of its assets were invested through Platinum Partners Value Arbitrage Fund, L.P. (PPVA) and Platinum Partners Credit Opportunities Master Fund, L.P. (PPCO).  Platinum charged its investors a two percent management fee and a 20 percent incentive or performance fees.  In March 2016, Platinum reported to regulators, including the SEC, that it had $1.7 billion in assets under management (AUM), including approximately $1.1 billion in gross asset value in PPVA and more than $590 million in PPCO.

Between November 2012 and December 2016, Nordlicht, Levy, Landesman, SanFilippo and Mann, together with others, participated in a scheme to defraud investors and prospective investors in Platinum through lies and omissions relating to, among other things: (i) the performance of some of PPVA’s highly illiquid and privately-held assets; (ii) PPVA’s accessibility to cash or assets that could easily be converted into cash; (iii) the purpose of loans raised through investors and the use of those loan proceeds; and (iv) PPVA’s preferential redemption, or investor payment, process.  Specifically, Platinum fraudulently overvalued some of PPVA’s highly illiquid and privately-held assets in order to, among other things, boost performance numbers, attract new investors, retain existing investors and extract high management and incentive fees.  From 2012 through 2016, Platinum extracted more than $100 million in fees based, in large part, on their overvalued assets.  Platinum’s overvaluation of some of their assets precipitated a severe cash crunch, which Platinum initially attempted to mitigate through high-interest loans between its various hedge funds and related entities.  When the inter-fund loans proved insufficient to resolve PPVA’s cash crunch, Platinum began selectively paying some investors ahead of others, contrary to the terms of its governing documents.

As early as 2012, Nordlicht and his co-conspirators knew that PPVA was in trouble, but concealed that reality from investors and prospective investors.  For example, on November 6, 2012, upon learning that PPVA’s investors had sought $27 million in redemptions, Nordlicht exchanged emails with Landesman that stated, in part: “If we don’t exceed [the $27 million in redemptions] in [subscriptions] . . . we are probably going to have to put black elk in side pocket . . . It’s just very daunting.  It seems like we make some progress and then [redemptions] are relentless almost.  It’s tough to get ahead in [subscriptions] if u have to replace 150-200 a year.”

By 2014, the defendants were relying almost exclusively on new investments and inter-fund loans to pay redemptions to PPVA’s investors.  For example, on April 29, 2014, when faced with requests from investors who had not yet received their redemptions, Nordlicht sent an email to SanFilippo that stated, in part: “Start paying down [redemptions] as [you] can.  Between [a new investor] and [a one-off loan] (additional 10 million), [should] have decent short term infusion.  Hopefully some [M]ay 1 [new investments] show up as well.  Have a few more outflows to discuss but this is obviously the priority.”  Nordlicht and his co-defendants concealed PPVA’s cash crunch and selective redemption payments from investors.  For example, in an investor call on January 14, 2015, Nordlicht stated, in part: “If we look historically, we’ve been very very fortunate . . . we’re running about a billion four between all our different entities . . . I think we’ve returned about double that in cash to investors, so that is really an indication of . . . being very very liquid and nimble . . . in terms of 2015 for PPVA, we are targeting much higher returns than normal.”

Nordlicht’s and Landesman’s knowledge of Platinum’s dire situation was perhaps best illustrated by an email exchange on December 13, 2015.  When Nordlicht forwarded an email to Landesman where he had informed a co-conspirator that his wife was convincing him to get on a flight to Israel if he was unable to get a loan from his partners to save the fund, Landesman responded: “You should get on the flight if there is no bridge [loan], probably even if there is . . . We need to go through the mehalech of how we are going to share this with clients and employees, going to be very rough, big shame . . . it was nice seeing you, hopefully the girls will reacclimate [sic] quickly.”  Notwithstanding the above email exchange, on February 7, 2016, Landesman sent an email to an investor that stated, in part: “Fund is sound, I believe, new structure ideal.  Mark [Nordlicht] is really energized.  Hope to be beyond liquidity concerns forever by end of May, we welcome your further investment.”

PPVA was heavily invested in oil and gas companies that performed significantly below expectations and the valuations that Platinum attributed to them.  These valuations were further undermined by the plummeting price of oil, which dropped from approximately $105 per barrel in December 2013, to approximately $60 per barrel in December 2014, to approximately $36 per barrel in December 2015.

Despite the severe problems that PPVA was facing beginning in at least 2012, Platinum reported that PPVA’s AUM increased from approximately $727 million at the end of 2012, to approximately $757 million at the end of 2013, to approximately $770 million at the end of 2014, to approximately $910 million at the end of 2015.  Platinum collected two percent management fees off these amounts and 20 percent incentive fees off the profits.

The Fraudulent Black Elk Bond Scheme

From approximately November 2011 to December 2016, Nordlicht, Levy, Small and Shulse, together with their co-conspirators, orchestrated a fraudulent scheme to defraud third-party holders of Black Elk’s publicly-traded bonds (the bondholders) by diverting the proceeds from the sale of the vast majority of Black Elk’s most lucrative assets to Platinum even though the bondholders had priority over Platinum’s equity interests.  As early as November 2011, Nordlicht, Levy and Small were plotting to deceive the bondholders.  For example, when Nordlicht learned about the relevant covenants associated with the bonds, he sent an email to Levy, Small and another that stated: “Seem like there are bond[s] to be had out there and an additional 60 million is 24 down . . . We [would] have to figure it out . . . I’m sure we can get them in friendly hands if the covenants are going to be an obstacle.”

By late 2013, faced with the fact that Black Elk was effectively insolvent but knowing that Black Elk still possessed certain valuable assets, the defendants pursued opportunities to sell Black Elk’s assets while simultaneously pursuing a fraudulent strategy to divert the proceeds from any such asset sale to the preferred equity stockholders, which were controlled by Platinum, instead of the bondholders.  To execute this scheme, in early 2014, the defendants caused Platinum to purchase Black Elk bonds on the open market to gain control of a majority of the $150 million of outstanding bonds.  Platinum purchased and then transferred the bonds through a number of related entities in an effort to conceal Platinum’s ownership and control of the bonds.

By approximately April 2014, Platinum owned and controlled approximately $98 million of the $150 million of outstanding bonds.  Between March 2014 and April 2014, Platinum and its related parties also purchased the vast majority of the outstanding preferred equity that was owned by third parties to obtain nearly 100 percent ownership of the preferred equity.  By approximately May 2014, when alternative approaches failed, the defendants, together with others, determined that the only path to getting the preferred equity paid ahead of the bondholders was through a cash tender offer and consent solicitation process.  On July 2, 2014, Small forwarded an email from a Platinum trader to Nordlicht and Levy that set forth the following summary of the $98,631,000 of the bonds controlled by Platinum: (i) PPCO: $32,917,000; (ii) PPVA: $18,321,000; (iii) PPLO: $17,046,000; (iv) BAM [a related entity]: $13,360,000; and (v) BBIL [a related entity]: $16,987,000.  Nevertheless, in response to a query from an attorney, on July 9, 2014, Small sent an email that stated, in part: “$18,321,000 bonds are controlled by PPVA and should be disclosed and excluded from the calculation.  I believe this implies that $65,840,000 are required to obtain a majority consent.”

On July 16, 2014, Black Elk announced that it had commenced a public offer for the bonds (the Consent Solicitation).  The Consent Solicitation and accompanying press release provided, among other things, that: (i) Black Elk had commenced a cash tender offer to purchase the outstanding bonds at par value; (ii) Black Elk was soliciting bondholders’ consents to modify certain of the restrictive covenants governing the bonds; (iii) the bondholders that tendered their bonds would be considered to have validly delivered their consent to the proposed amendments; (iv) the bondholders could also consent to the proposed amendments without tendering their bonds; (v) the Consent Solicitation was being made in connection with the sale of assets and the net proceeds of the sale would be used by Black Elk to purchase the tendered bonds; and (vi) the offer would expire at 5:00 p.m. New York time on August 13, 2014.

Notably, the Consent Solicitation prohibited “any person directly or indirectly controlling or controlled by or under direct or indirect common control with [Black Elk]” from voting in the Consent Solicitation process.  Thus, the approximately $98 million of bonds controlled by Platinum should have been excluded from the voting process.  Nonetheless, the defendants caused Black Elk to disclose in the Consent Solicitation that: “[PPVA] and its affiliates, which own approximately 85% of our outstanding voting membership interests, own[ed] approximately $18,321,000 principal amount of the outstanding Notes.  Otherwise, neither we, nor any person directly or indirectly controlled by or under direct or indirect common control with us, nor, to our knowledge, any person directly or indirectly controlling us, held any Notes.”

The defendants then caused Platinum’s related parties to consent to the proposed amendments but not tender their bonds.  As of the offer’s expiration on August 13, 2014, bondholders that held $11,333,000 of the BE Bonds validly had tendered and were paid.  To the surprise of the remaining bondholders, who were unaware of Platinum’s control of $98,631,000 or approximately 65 percent of the BE Bonds, the trustee revealed that the holders of $110,565,000 or approximately 73.71 percent of the bonds had validly consented to the Consent Solicitation, thereby allowing the preferred equity to get paid from the proceeds of Black Elk’s sale of assets.

On or about August 11, 2015, Black Elk’s creditors filed a petition to place the company into an involuntary Chapter 7 bankruptcy, which was converted on or about September 1, 2015 to a voluntary Chapter 11 bankruptcy.  As of December 2016, a number of bondholders who did not tender their BE Bonds have yet to receive the principal amount of their holdings.

*          *          *

The criminal case has been assigned to Chief Judge Dora L. Irizarry of the United States District Court.  If convicted, each of the defendants faces a maximum sentence of 20 years’ imprisonment.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Winston Paes, Alicyn Cooley, Lauren Elbert and Sarah Evans are in charge of the prosecution, with assistance provided by Assistant United States Attorney Brian Morris of the Office’s Civil Division.

*          *          *

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit http://www.StopFraud.gov.

The Defendants:

MARK NORDLICHT
Age: 48
Residence: New Rochelle, New York

DAVID LEVY
Age: 31
Residence: New York, New York

URI LANDESMAN
Age: 55
Residence: New Rochelle, New York

JOSEPH SANFILIPPO
Age: 38
Residence: Freehold, New Jersey

JOSEPH MANN
Age: 24
Residence: Brooklyn, New York

DANIEL SMALL
Age: 47
Residence: New York, New York

JEFFREY SHULSE
Age: 44
Residence: Houston, Texas

E.D.N.Y. Docket No. 16-CR-640 (DLI)

 


 

[1] The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.

Topic(s):
Financial Fraud
Securities, Commodities, & Investment Fraud
StopFraud
Updated December 19, 2016

CNO and Beechwood Re: The Platinum Zeroth’s Law and the Money that Isn’t Created Nor Destroyed, It Just Changes Hands

FINANCIAL ENTROPY, THE THERMODYNAMICS OF PLATINUM PARTNERS’ MONEY AND ZEROTH’S LAW AS IT APPLIES TO THE DIFFERENT STRATEGIES

[To be updated]

Dear Reader:

The notion of entropy in thermodynamics is chaos. The same is true, in very simplified terms, of financial entropy. Investors who manage to understand the chaos of a given set of financial principles are generally the ones who fare the best. Investors who can manipulate the entropy and maneuver it are magicians. Platinum Partners chief strategists were and have always been that, financial magicians. We give them credit.

Understanding how the pieces fit together is key to understanding the magnitude and complexity of the slight of hand of Platinums’ partners. It is like they were counting multiple decks in a casino and doing so flawlessly, until they weren’t.

Platinum Parterns’ connections to Beechwood Re and to CNO were integrally intertwined. Each one was intended to provide Platinum with a more diverse portfolio of investments, though CNO claims there was some distance between itself and Platinum, that Beechwood was an intermediary and they did not know the involvement. It is our contention that Beechwood Re was Platinum’s alter-ego. As to CNO, that is a bit less clear. 

Beechwood Re  was an extremely clever and somewhat macabre strategy for making money. It required that nursing home patients take out insurance policies written to the benefit of the nursing homes and then to die quickly.  The key, as we saw it at the time, was in knowing who would die and when. Sadly, the success of that strategy required the Platinum/Beechwood guys to get that information from someone in the nursing home business willing to either or both of convince the patients to sign over policies and to then share that information outside of the privacy considerations of the patients. We have a idea who it was, an odd connection to President Trump and someone he met in the 80’s and who had an integral understanding of long term care and the associated insurance. As to that story, that’s for another day. 

In 2014, Beechwood Re had obtained significant funding from CNO, a “reinsurer” who was providing insurance on the insurance policies held by Beechwood. The policies being written for CNO were “backstopping” the Beechwood policies. And the CNO policies, it would appear to have been long-term care policies and not necessarily life insurance.

CNO’s problem at the time was that it had underwritten numerous “long-term-care insurance” policies in the 1980’s and the payouts 25-30 years later were far higher than anticipated. In the best of circumstances, they would have made enough money with their own investment strategies on those policies over the 25-30 intervening years that they would not have been struggling. The calculations for an underwriter for long-term care insurance is based in part on actuarial tables and the health of the population. For CNO to have been a lucrative endeavor, they would have had to invest well and people would have needed to drop dead long before they utilized the policies. For the few who manage to live long enough to use the underlying policy for which they have paid a lifetime, the hope of the insurer is that the care required would be less than the money made during the intervening years. What policy underwriters at the time did not consider was the rising costs of healthcare, that people would live longer and spend more time in long term care.

For Beechwood, the relationship with CNO initially provided it with a reputable firm, the sharing of capital and resources and an underlying “good-will”. In addition, CNO had relationships with other banks and other underwriters, as did Beechwood (through the Platinum guys) and as such, the two entities could name drop for the purposes of working together and as a cost-benefit to one another. The two insurance strategies were slightly different. Whether or not CNO knew Beechwood was an arm of Platinum is unclear and in retrospect, they likely would have stuck with Beechwood regardless so long as the money was flowing.

Beechwood has argued that they were not and alter-ego of Platinum and actually they, too were the victims of a the fraud. That is not even a rational argument, particularly given the familial relationships involved. Beechwood was, to simplify the story,  a feeder fund for Platinum and one of its many investment vehicles or arbitrage funds, just an altogether different strategy. 

CNO on the other hand, may have been a victim of Platinum; but we believe it was also a victim of its own poor planning and greed. We also believed that even when they realized they were dealing with Platinum they made a choice to stay in the game. Platinum at the time was coining money. 

But then there’s “Black Elk”. The Black Elk investment strategy was oil. Black Elk had discovered a clever way to drill the remnants of other wells and obtain the smaller amounts of oil at the bottom of old wells. It is akin to trying to get the last drop of cola from a can. If you can figure out how to get all of the drops out of all of the cans and resell  the cola bottled differently, you can make money. That was the theory behind Black Elk. But no matter which way you play it, once the CEO was removed from his position, Black Elk was, in simple terms, another of Platinum’s feeder funds. 

The people involved were ultimately the same:  Moshe Mark Nordlicht, David Levy,  Moshe “Mark” Feuer, Jeffrey Shulse (who has argued his innocence) [https://casetext.com/case/united-states-v-nordlicht-2] Josephe SanFilippo, Scott Taylor [https://dockets.justia.com/docket/new-york/nysdce/1:2018cv12018/507059], Murray Huberfeld and a number of other Platinum Partners’ partners.

There are dozens of people whom we would argue should have been indicted, who were also original owners and/or initial investors in some of these strategies and were either family members or had previous relationships with the main funds’ players. How they have so far managed to remain outside the numerous indictments perplexes us.

Unfortunately for Platinums’ partners, we believe that the partners knew everything. There were no blind, deaf and dumb people playing in this game. There were no secrets amongst the men involved, just as there are no secrets the neighborhood where many of these men lived only blocks from one another. Many of these men were also related to one another, uncles, cousins, brothers. These were people who in large part had worked together before like Oceans 11 and were going to work together again like in Oceans 12 and 13. And, just like in the movies, they were extremely clever.

The strategies were hedged against one another. They could have gone on for years had a perfect storm of evens not occurred: Black Elk has an explosion on one of its rigs killing some of it’s employees, Beechwood being compelled to payout more than anticipated, and outside investors not deciding the funds’ returns were simply too high. 

Had Platinum Partners’ top brass not been so greedy, they would have succeeded in defrauding the financial systems. But, like Zeroth’s law of thermodynamics: “If two systems are each in thermal equilibrium with a third system, they are in thermal equilibrium with each other.” Similarly, Black Elk was an alter-ego of Platinum Partners as was Beechwood Re. They were also an alter ego of one another. How CNO fits into this, it remains to be seen. We can’t discount he possibility that they were also in thermal equilibrium with Platinum.

Beechwood Re

Cayman Islands authorities to wind up Beechwood Re following fraud scandal

29th November 2018

The Grand Court of the Cayman Islands has approved a petition for the winding up of Beechwood Re, a locally domiciled reinsurer that is being sued for fraud in the U.S and has ties to the hedge fund Platinum Partners, which collapsed after a federal investigation last year. Grand Court Justice … Read the full article

Beechwood sold after reputation loss from Platinum Partners scandal

3rd August 2017

Beechwood, a group of reinsurance and asset management companies, has been sold in a last ditch attempt to salvage the firm instead of shutting it down after it suffered reputation loss when hedge fund Platinum Partners collapsed after a federal investigation, Reuters reported. Platinum’s top executives and founder were arrested … Read the full article

 

 

Beechwood Re To Close $590 Million Reinsurance Transaction

Beechwood Re, Ltd. to Reinsure In-Force Long-Term Care Liabilities of CNO Financial Group Subsidiaries


NEWS PROVIDED BY

Beechwood Re, Ltd. 

Feb 12, 2014, 09:56 ET

W YORKFeb. 12, 2014 /PRNewswire/ — Beechwood Re, Ltd., a life reinsurer, announced today that it had executed definitive documents to complete a reinsurance transaction with subsidiaries of CNO Financial Group, Inc. (CNO).

(Logo: http://photos.prnewswire.com/prnh/20140212/NY63663LOGO )

The deal will have CNO’s subsidiaries cede $550 million of statutory reserves and approximately $40 million of other capital associated with closed blocks of long-term care insurance underwritten by Bankers Conseco Life Insurance Company and Washington National Insurance Company.  The reinsurance transaction and associated structures have obtained all required regulatory approvals necessary to proceed.

“We are very pleased to have entered into this agreement with CNO,” said Beechwood Re CEO Mark Feuer.  “These transactions exemplify the creative reinsurance solutions that Beechwood Re has to offer.  We look forward to working with our new partner through a smooth transition and providing them with ongoing reinsurance support.”

Ed Bonach, CEO of CNO said, “Our reinsurance agreements represent a meaningful step forward in addressing our run-off business. We are pleased to have Beechwood Re as our partner in this transaction and look forward to a successful relationship moving forward.”

As a part of the transaction, Bankers Conseco and Washington National will transfer to Beechwood the in-force reserves and liabilities associated with the blocks of business.  The transactions are to be completed on a 100% coinsurance basis, with Beechwood holding reserves and required over-collateralization in trusts, with investment guidelines and periodic true-up provisions.

Fuzion Analytics, of Carmel, Indiana, will provide data analytics and coordination of Third Party Administration services on behalf of Beechwood Re to ensure best-in-class policyholder services following the transition.  Willis Re, a global reinsurance intermediary, was instrumental in the deal, led by Michael Kaster of their Life Solutions Group.

The transaction is expected to be fully consummated by the end of February.

About Beechwood Re, Ltd and Beechwood Bermuda International Ltd.

The Beechwood family of companies includes Beechwood Re, a reinsurer domiciled in Grand Cayman and regulated by the Cayman Islands Monetary Authority (CIMA), and Beechwood Bermuda International Ltd., a licensed long-term insurer located in Hamilton, Bermuda and regulated by the Bermuda Monetary Authority (BMA).  The companies were formed with the belief that there is a shortage in attractive capacity for the life markets, driven by a need for flexibility and creativity in underwriting the life and annuity reinsurance market associated with asset risk.  The Beechwood companies provide life and annuity reinsurance to primary insurance companies in the United States and Internationally.  Beechwood seeks to provide flexibility for companies to manage their balance sheets and risk profiles through a variety of solutions.  Target markets include reinsuring in-force blocks and ongoing quota-shares of fixed and indexed annuities, in addition to in-force, closed blocks of long-term care and long-term disability policies for primary writers.

More information is available by contacting Susan Sweetin, Media Relations at ssweetin@beechwoodreinsurance.comor (212) 260-5050 ext. 204

SOURCE Beechwood Re, Ltd.

Platinum Investor Conference Call – Landesman and Nordlicht – Distancing from Murray… and “Tickets”?

 

DRAFT TRANSCRIPT1
Platinum Investor Conference Call

June 14, 2016

Participants: Uri Landesman
Mark Nordlicht (“MN”)

Length of Recording: Approximately 23 minutes and 21 seconds

[2:18-5:24:]
MN: But let me talk right at the get-go about the events that created a firestorm
for us last week. It’s uh obviously very, very painful uh for us to talk about
it. You know, the lawyers and the PR people would tell us to–we should
distance ourselves from Murray and uh, uh, just, you know, say we had
nothing to do with it. At the end of the day, that’s just not our nature.
That’s not the way I was brought up, and that’s not the way I think uh the
majority of Platinum um behaves and carries themselves. While it is true it
was specifically um, pretty much focused on Murray in this particular case–
there weren’t a lot of other people involved–we do feel very strongly that
uh that the allegations are false, will be proven false, hopefully. And you
know um, and we very much feel that–that none of that probably ever
happened. Um that having been said from my perspective, you know, I tell
my kids life isn’t fair, you have to deal with the repercussions. It is what
is, and you have to deal with it. And um, and so we have to deal with the
outgrowth, both with this terrible headline and and what’s come subsequent
to that. I would just make one point, by the way, even on the allegations
against Murray, we should just make, be very, very clear that this was
related to funds that were forwarded from the management company,
essentially personal funds, um, at the time. And, so no investor funds and
and that’s a good segue to just make the point that in terms of, of the
positions at Platinum, this has no direct effect on any of the positions, and
we feel very, very good about the positioning um of both funds, and in terms
of the outlook of them being successful and being successfully liquidated
over time. Um in terms of the outgrowth, I would say, the issue is it’s not
related—I think this headline in itself was one headline too far maybe? Um,
in and of itself, but, the problem that you have is, and you know what we
think is unfair, but what we have to deal with, is it doesn’t stop right there.
Based on that, on the same day, we started to receive a lot of questions from
1 The transcript contained herein is in draft form and is subject to revision.

Case 1:16-cr-00640-DLI Document 122-7 Filed 04/26/17 Page 1 of 3 PageID #: 729

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two separate regulatory agencies related to Platinum—related a lot to the
tickets and different, different things with Murray and Da– and uh, Murray,
but also some more general questions about Platinum. Primarily actually a
lot of questions that were already in the press and really just very, very
general questions which we’re very, very comfortable with. Um, you know
we are very comfortable with how we conduct Platinum, and we feel very,
very strongly that the likelihood is that nothing will come out of these
questions. But, it is a distraction, and uh we know from when we had just
a routine audit what kind of distraction that was in terms of the volume of
questions. This is actually less questions, but perhaps a little bit more
uncomfortable given the context that they’re being, that they’re being asked
right now.

[5:36:]
MN: [M]y gut right now is to, certainly in regards to PPVA, is to unwind the fund
in an ordinary fashion.

[7:50:]
MN: You know, to the extent that we’re winding down, certainly PPVA, we’re
winding down, we’re not closing down. . . . I want to not just get the money
back, I want to produce nice returns on the way out. . . . I really want to, you
know, do a bang-out job on the way out, certainly in terms of PPVA . . . .

[10:05:]
MN: In terms of PPVA, um obviously the only thing I’m a little nervous about is
the energy positions because it’s a very, very wide delta in terms of what
the outcome could be.

[17:30:]
MN: My initial inclination was also wind down that [the Platinum Partners Credit
Opportunities Fund (“PPCO”)], from a personal level I was thinking
actually that, you know what, maybe that’s um, certainly from a personal
level it’s probably better for me, um, but nevertheless we have gotten some
large investor feedback that, resisting, um, resisting taking the same
measures on PPCO. So I’m gonna hold back on making that decision . . . .
But really again that’s something that we’re gonna be looking at very, very
closely and by the end of next week, we’ll probably have made a, a
definitive decision . . . .

Case 1:16-cr-00640-DLI Document 122-7 Filed 04/26/17 Page 2 of 3 PageID #: 730

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[22:15:]
MN: So I think in terms of the the, um, positions going forward we’ll leave it at
that, because obviously I think most of the concern was was just, you know,
what’s the outlook going forward and what’s going on. . . . Again, from my
perspective if it was just the headline – we’re fighters here, so I fought
through a lot. I worked very, very hard to get PPVA where it is now,
whereby we were just in the midst of breaking through, so it is frustrating,
but sometimes um a message is sent to you from outside that maybe it just
wasn’t meant to be. Uh that’s the way I feel in PPVA certainly right now,
and PPCO we’re going to outlook, we’ll have some answers for you
certainly by the end of next week.

Platinum, Witness Tampering, Alleged Federal Overreach, Claims that Investors Were Warned, Due Diligence and Links

Dear Readers:

Over the past few years we have not covered the witness tampering aspect of Platinum Partners, the fund or the individuals. We were contacted many times by a number of witnesses and whistle-blowers, at least one of whom was genuinely frightened for his/her safety, her/his reputation and his/her livelihood. So, we have no doubt that Platinum’s Partners made a concerted effort to keep anyone who voiced concerns about the fund silenced. 

The Nordlicht defense team has tried to paint the Feds as responsible parties claiming leaked evidence in 2016. A Boston journalist called the investigation “Federal overreach”. That is in an abundance of arrogance. Anyone who obsessed over the numbers, the patterns of each and every scheme, dating back to Optionable (the original backer for Platinum) and on forward would have seen the same exact pattern just repeating itself like a broken record. There was no difference between Optionable, Black Elk, Glacial Energy, Echo Therapeutics and the list goes on and on. It was simply a matter of financial gymnastics and business plan semantics. There was nothing that the Feds or anyone else could have said or done that would have made the picture any clearer, except perhaps to the unsavvy investor and in that case, they may have saved some ill-equipped investors significant heartache, if indeed they leaked evidence that a smart journalist did not uncover on his own.

To claim that the investors were warned, a claim of the defense team, is to perpetuate a fraud on the court, the justice system and every investor who invests in the stock market, either regularly or on occasion. The investors who took each and every scheme in a vacuum and who did not do deep-dive due diligence on the people in whom they were entrusting their money would have had no reason to think that Platinum was a radioactive hedge fund. Every investment document has standard language regarding risks, so much so that the language has become mundane.

Anyone who wants due diligence on a hedge fund, an investment, an investment vehicle or the people involved, going forward, should contact the site and we will provide you with some attorney advertising and a place to go for that information. There are those among us who obsess over the fraudulent and dishonest within the financial system and markets and are hell bent on protecting the less savvy and most vulnerable. That is the very heart of this site.  

We have provided you with links to some further reading below, to another site (with which we have absolutely NO connection). The Platinum related articles may be of interest, including the witness tampering that has today led Mark Nordlicht to jail. Their take on Platinum Partners, the charges against the people involved, and Seabrook is accompanied by a thorny sense of humor. We are not reposting but providing you with the links as follows:

[Please note by way of disclaimer that we are neither endorsing that site or their views nor are we assuming in any way that they endorse ours.]

We cannot vouchsafe the research behind the articles or the authors. Their perspective has some similarities and some differences from ours but the sense of humor and biting sarcasm is worth the read if only to take it for what it’s worth. 

Platinum Partners

A Platinum Outcome – Mark Nordlicht, No Humility and No Remorse, and his Temper Might (Should) Land Him in Jail

MarkNordlicht

Platinum Co-Founder’s ‘Rage’ at Lawyer May Land Him in Jail

U.S. prosecutors asked a judge to revoke Platinum Partners LLP co-founder Mark Nordlicht’s bail, saying he “forcibly intimidated” a government attorney last week during a break in his fraud trial.

Nordlicht and two other former executives of the defunct hedge fund are accused of inflating the value of Platinum’s largest assets and using loans and money from new investors to pay off old ones, while falsely claiming to regulators the firm had about $1.7 billion in assets under management.

On Monday, prosecutors in Brooklyn said in a letter to the judge that Nordlicht should be sent to jail for the remainder of the trial for trying to intimidate a prosecutor. Nordlicht and his wife were passing a group of prosecutors in a hallway on May 2 when he “angrily shouted” at one of them, the prosecutors said. As his wife tried to restrain him, Nordlicht “continued to curse and pursued the prosecutor in a rage while screaming,” they said.

“His rage was directed at the prosecutor for doing her job and was clearly meant to intimidate her and interfere with the performance of her official function,” the U.S. said. “Nordlicht’s physical aggression — sufficiently threatening that his wife had to restrain him for over 10 seconds and nearly removed his jacket in the struggle — inspired fear of immediate harm in the prosecutor.” The government didn’t identify the prosecutor.

An attorney for Nordlicht didn’t immediately respond to a request for comment.

 

To read the article in its entirety click here.

A Platinum Receivership – The Millions Lost, the Millions Siphoned Off and the Trusts of the Partners who Remain Wealthy

Follow the Platinum Partners’ Money to Distribute Assets to Investors

The Platinum Partners Receivership has been published and it is a treasure trove of information. Due to privacy concerns of some of the investors, a list of investors has not been published but they were likely people who trusted the partners. Allegedly, $300 Million in assets is gone. We believe, those assets can be found in the private wealth of the partners, their families, their children and their yeshivas. We believe that every penny should be recoverable if the money trail is followed. We also believe that each of the partners should be forced into an involuntary bankruptcy proceeding to provide liquidity to refund the investors. The corporate veil(s), many veils should be broken, wholeheartedly and with gusto. If the partners are allowed to enjoy their wealth as their victims were stripped of the value of their investments, justice will not have been served.

http://docket_pdfs.gcg.net/PTM/16-06848/450_06848.pdf

VI. LIABILITIES OF THE RECEIVERSHIP ESTATE

Pursuant to Paragraph 47 of the Receiver Order, below, please find a description of the
Receivership Estate’s potential liabilities as of December 31, 2018. Certain liabilities described herein, particularly those pertaining to creditor claims, are uncertain, and will remain as such until the Receivership Team concludes its claims analysis and forensic investigative processes.

A. Creditors. The creditor-related information presented below is based on prior management’s books and records, which are as of December 19, 2016, the date Platinum entered receivership. The Receivership Team will test the veracity of these numbers as part of its ongoing forensic investigative and upcoming claims analysis processes. The validity and amount of claims may differ materially from the values reported by prior management.

 PPCO Lenders: PPCO owed $65.9 million to three (3) lenders.
 PPCO Unpaid Redemptions: PPCO owed $28.2 million to 21 PPCO unpaid
redeemers.
 PPLO Unpaid Redemptions: PPLO owed $6.5 million to three (3) PPLO unpaid
redeemers.
 PPCO and PPLO Outstanding Payables: PPCO and PPLO had $2.7 million of
outstanding payables attributable to 23 vendors.

Case 1:16-cv-06848-BMC Document 450 Filed 01/23/19 Page 33 of 37 PageID #: 11118
34

B. Accrued Administrative Expenses. As of December 31, 2018, accrued, unpaid
administrative expenses amount to approximately $4.5 million. These administrative expenses primarily consist of accrued and unpaid professional fees. In addition to these unpaid administrative expenses, the Receivership Estate has budgeted approximately $130,000 per month to pay the remaining in-house Platinum staff and to cover other operating expenses. The Receiver is continually looking to reduce these and other expenses.

C. Disbursements to Preserve the Value of Certain Investments. The Receiver
expects to incur expenses amounting to at least $110,000 per month to preserve the value of the LC Energy investments, pending the conclusion of the associated sales processes. The Receiver expended $386,000 with respect to the LC Energy asset during the Reporting Period.

D. Investors. The Receiver currently believes that there are 286 known investors.
The aggregate net cash invested by investors in the Platinum Entities is approximately $310,000,000. After conferring with the SEC, at this time, to protect the privacy of the investors, the Receiver is not filing with this Fourth Status Report a list of the names of each investor and the amount of such investor’s net cash investment. The actual amount and value of the investors’ claims is ultimately dependent upon the net recovery obtained on Receivership Property. The amount of “net cash invested” may be materially different than the amount ultimately received by the investor.

VII. CLAIMS ANALYSIS

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