A Platinum Exchange with the SEC – Civil Enforcement Case v. Criminal Case

Platinum Will Get SEC Docs While Criminal Case Advances

Law360, New York (July 10, 2017, 2:42 PM EDT) — A New York federal judge paused a civil enforcement case against the hedge fund Platinum Partners on Friday at the request of prosecutors while a related criminal case goes forward, rejecting complaints by several defendants that they would be deprived of the chance to learn about the government’s case against them.

As often happens, the U.S. Securities and Exchange Commission’s case against Platinum and executives accused of playing a role in a scheme to inflate the value of its investments was stayed for a criminal prosecution. All but two of the defendants asked for discovery to continue anyway, but U.S. District Judge Dora Irizarry said even limited document exchanges would threaten the defendants’ right against self-incrimination.

Besides, the judge’s order said, federal prosecutors have committed to turning over materials they get from the SEC, which will allow the defendants to prepare for the civil case during the criminal case. So far, she noted, government lawyers said they’ve turned over 13.5 million documents, with more to come.

“In effect, the only discovery that will not be had in this civil matter is ‘testimonial’ type discovery, such as depositions, as proposed by [several of the] defendants,” the judge wrote. “Opposing defendants can hardly be heard to complain that they will be deprived of discovery in this civil matter.”

The pending decision was mentioned briefly at a hearing Friday where the main item was the judge’s decision to sack the SEC’s receiver, Bart Schwartz of Guidepost Solutions LLC, after concluding that he improperly transferred millions from an escrow account to fund an investment the feds called “risky.”

In the underlying case, prosecutors and the government litigators accuse Platinum of covering up a liquidity crisis at one of its investment funds and lying to lenders to Black Elk Energy Offshore Operations LLC, a drilling company it owned, about the company’s health. Managers hid the hedge fund’s troubles until it filed for bankruptcy last year.

Kevin O’Brien of Ford O’Brien LLP, whose client Joseph Sanfilippo was a chief financial officer at one of Platinum’s funds, said Monday that the order was good news. Even though the case was stayed, he said, it was in some sense “only partial” because the defendants would still receive SEC documents.

……. To obtain the document from it’s original forum see http://www.law360.com

The case is Securities and Exchange Commission v. Platinum Management NY LLC et al., case number 1:16-cv-06848, in U.S. District Court for the Eastern District of New York.

More Huberfeld and Optionable Inc. – A PIECE OF PLATINUM ANYONE?

 

MURRAY HUBERFELD, MARK NORDLICHT AND OBTIONABLE….

Thanks to our contributor on this one. – LM

Murray Huberfeld grew up in the Bronx and growing up became accustomed to selling off bogus and fraudulent deals. He never grew out of the habit, evidenced by relentlessly ongoing activities in private sector and public market activities. Every case or situation in which he continues to remain unscathed represents an unfortunate continuation of the status quo. He is a link to the Rothstein scandal. I wonder what that’s a link to. Arnold Rothstein?
Optionable Inc, the brokerage located in Valhalla, New York, transacts in the brokerage of
energy derivatives to brokerage and financial services firms globally. On January 22, 2007, NYMEX Holdings, parent to the New York Mercantile Exchange, issued a news release that the they were purchasing a 19% stake in the pink sheet Optionable Inc (OTC:OPBL). While the purchase may be questionable in and of itself, the history of those involved and one particular person tend to stand out.

NYMEX Chairman R. Schaeffer’s announcement of a 19% stake in Optionable, which increased revenues to $16 million from under $6 million. Such was reflected in Optionable’s stock price. But behind the commodity derivative brokerage’s arguably manufactured numbers exists a clinging reliance on related party transactions and often depends on one sole supplier or customer. Such parties include Capital Energy Services, a firm with a President and CEO accounting for a significant interest in Optionable’s revenue last year.

The Bank of Montreal must come as no surprise. According to Optionable filings, this bank accounted for a comparable amount of the Company’s revenues. Optionable received an advantage from this practice, achieving almost 80% margins when otherwise comparing to 56% with nonrelated parties.

David Lee, Bank of Montreal Commodity Trader, accounted for 18% of Optionable’s revenue. Mark Nordlicht founded Optionable Inc in 2000 with the backing of his like-minded morally challenged father, Jules Nordlicht, who had been federally prosecuted for manipulating the oil markets and withholding $27 million in illegal profits.

According to an April 2017 New York Post Article by Roddy Boyd, Jules owns 2.19 million shares.
635 Beach 19th Street
Far Rockaway, NY 11691
contact@optionable.com
Source: OTC Markets
NY Post: Roddy Boyd

Jona Rechnitz: Loan Shark? Diamond Dealer? Lucky Gambler? Real Estate Mogul? Shoshana by any other name…

 

jona rechnitz_crop_exact

NYPost: http://nypost.com/2017/04/26/key-witness-in-nypd-corruption-probe-was-an-alleged-loan-shark/

Key witness in NYPD corruption probe was an alleged ‘loan shark’’

The government’s key witness in multiple corruption probes was a part-time “loan shark” who made money doling out predatory loans, court documents alleged on Tuesday.

Jona Rechnitz — the government’s witness against two NYPD cops accused of taking bribes — “was nothing more than a loan shark” when it came to his business dealings with Hamlet Peralta, the former owner of a Harlem eatery that was popular with cops, Peralta’s lawyer said.

Peralta, the former owner of the Hudson River Cafe, stands accused of running a $12 million Ponzi scheme tied to an allegedly fictitious wholesale liquor business.

Peralta’s lawyer, Cesar de Castro, made the allegations against Rechnitz as part of a legal tug-of-war with feds about what evidence can be introduced at Peralta’s upcoming May trial.

The government wants to call as witnesses victims of Peralta’s alleged scheme who were recruited by Rechnitz — and who learned of the scheme through Rechnitz.

De Castro has objected, arguing that statements made by Rechnitz cannot be offered as the truth because he was engaged in his own loan-sharking scheme.

“Evidence at trial will show that (Rechnitz) was not Mr. Peralta’s agent but the architect of his own scheme in order to bleed Mr. Peralta dry,” de Castro said.

Rechnitz’s lawyer, Alan Levine, declined to comment.

Rechnitz, a real estate investor, is also the government’s key witness in the upcoming bribery trial of Norman Seabrook, former head of NYC’s correction officers’ union.

 

http://nypost.com/2017/04/26/key-witness-in-nypd-corruption-probe-was-an-alleged-loan-shark/

Platinum Partners – Where is this Going?

Det. Whitney Tilson Would’ve Caught These Platinum Scammers Years Ago

http://dealbreaker.com/2017/02/whitney-tilson-platinum-partners/

Platinum Partners – One Description

Unbelievable description of the Platinum fraud.

http://www.houstonchronicle.com/business/article/The-fall-of-Black-Elk-Energy-10855360.php

The fall of Black Elk Energy began in New York City nearly a decade ago, with a meeting, a handshake and a loan.

Looking back, those were halcyon days for John Hoffman, founder of the Houston oil and gas company – before an explosion tore through an offshore rig and killed three workers, before federal investigators accused the hedge fund that made the loan of bilking investors, and before one of his top executives turned on him.

Hoffman, forced out of Black Elk in 2014, is now at the helm of a new company, and barely keeping the doors open. Black Elk is bankrupt and facing criminal charges in a federal case awaiting trial. And Hoffman’s one-time backer, Platinum Partners, is under federal indictment, accused of pillaging Black Elk and the hedge fund’s investors.

Last month, federal investigators arrested six Platinum executives and the man who replaced Hoffman as CEO, alleging they overvalued Black Elk’s assets, concealed “severe cash flow problems,” extracted high management fees and illegally diverted to Platinum more than $95 million owed to creditors holding Black Elk’s bonds. Platinum attorneys did not return calls seeking comment.

“I didn’t think (Platinum) had the guts to take it all,” Hoffman said in an interview. “I thought they’d take a large share. Ends up they took it all.”

The rise and fall of Black Elk Energy highlights the risks of the oil and gas business, which demands piles of cash that can quickly vanish through bad luck, bad planning, bad management or all three. It also reveals a shadow banking system that lends at double-digit interest rates to firms desperate for capital and has few qualms about gutting companies when they don’t perform.

BLACK ELK TIMELINE

MONEY TRAIL

2003 Investment manager Mark Nordlicht starts the hedge fund Platinum Partners in New York.

2007 Engineer John Hoffman and a partner open Black Elk Energy in Houston.

2008 Hoffman and partner fly to New York looking for capital; meet Platinum executives.

2009 Black Elk buys 35 oil fields on 71,000 acres from the Houston company W&T Offshore for $30 million, the first major purchase of many to come.

2011 Black Elk ends year with 240 oil production platforms in the Gulf of Mexico on 300,000 acres, producing about 14,500 barrels of oil and gas per day.

2012 Workers welding on a company platform in the Gulf ignite fuel vapors, leading to a string of exploding tanks and killing three.

2013 Black Elk signs drilling contracts worth about $90 million, but Platinum reneges on promises to send capital and Black Elk can’t pay the contractors.

2014 Renaissance Offshore, a Houston production company, buys Black Elk oil fields for $170 million; Platinum engineers a bondholders vote, federal investigators say, that diverts $95 million in proceeds to Platinum rather than contractors and bondholders.

2015 Federal prosecutors file involuntary manslaughter and other charges stemming from the Gulf explosion against Black Elk and contractor Grand Isle Shipyards. Black Elk files for bankruptcy.

2016 The U.S. attorney of the Eastern District of New York announces the indictment of six Platinum executives and one Black Elk executive, alleging they overvalued Black Elk assets, concealed “severe cash flow problems,” extracted high management fees and illegally diverted to Platinum money owed to bondholders.

Hoffman now says he had no idea of the financial disaster he was walking into when he flew from Houston to New York in 2008 and made a deal with Platinum. He thought he had found a deep-pocketed partner to fuel his vision for Black Elk at a time when loans were hard to come by. Even after disaster struck an offshore rig in the Gulf of Mexico, Platinum seemed to have the money and confidence to right Black Elk and put it back on a path to success.

But one day in 2014, Hoffman got suspicious pretty quickly.

Knocking on doors

The following account is based on interviews, financial filings and court records in civil and criminal cases:

Hoffman started Black Elk in 2007, raising money from private investors and using the cash to buy shallow-water oil fields in the Gulf for bottom-barrel prices from companies that no longer wanted them. Black Elk reworked the old wells with updated technology and boosted production.

Not a year later, the U.S. economy crashed, and oil prices with it. In late 2008, Hoffman and co-founder James Hagemeier flew to New York City to nail down capital. Over the course of two months, they knocked on the doors of at least 50 investment firms.

“It was a tough time to look for funds,” Hoffman said.

Finally, a middleman suggested the two meet the executives of the New York hedge fund Platinum Partners.

Platinum was founded in 2003 by Mark Nordlicht, who started as a young trader in the pits of the New York Cotton Exchange and opened two other investment firms before Platinum. He and Platinum gained a reputation for investing in risky companies and returning double-digit profits for investors.

Platinum offered Black Elk two loans together worth about $50 million – at 20 percent interest. But Platinum’s business model didn’t just loan money to desperate companies. The loans came with “kickers,” or clauses that gave Platinum growing ownership stakes in the firms over the lives of the loans.

“We were new and so small,” Hoffman recalled. “We didn’t draw much interest from the bigger players. Platinum seemed like a good fit.”

In 2009, Black Elk began a buying spree with Platinum’s cash, later supplemented by $150 million raised in a bond sale. By 2011, it owned leases on 300,000 acres in the Gulf of Mexico that produced about 14,500 barrels of oil and gas per day, according to securities filings.

“All I know was when we had an acquisition, Mark Nordlicht said, ‘Don’t worry about it,’ ” Hoffman said. “And he always had the money.”

By 2012, Black Elk, with a market value that Platinum estimated at nearly $300 million, was the largest asset in Platinum’s most successful fund, then valued at $700 million. Then it all unraveled.

In November 2012, workers welding on a Black Elk platform ignited fuel vapors, leading to a string of exploding tanks. The explosion killed three workers, injured at least two others and spilled hundreds of gallons of oil into the Gulf.

The fall out was immediate for Black Elk’s finances. Oil production fell. Legal fees mounted. (In 2015, federal prosecutors filed involuntary manslaughter and other criminal charges against Black Elk and contractor Grand Isle Shipyards, which both pleaded not guilty. Hoffman was not charged individually.)

BUSINESS

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Black Elk’s lenders reduced lines of credit and demanded more collateral. Black Elk started selling assets to raise cash.

Still, in December 2012, Hoffman flew to New York to present Black Elk’s growth strategy to Nordlicht and another Platinum executive, David Levy. Platinum promised as much as $120 million in capital for the company’s 2013 drilling campaign, Hoffman said, and Black Elk signed drilling contracts worth about $90 million with energy services companies.

Four months later, Platinum reneged on its pledge, leaving Black Elk unable to pay the contractors.

“It was just such a deep hole,” Hoffman said. “We couldn’t dig out of it.”

‘This is code red’

By the start of 2014, Black Elk had a new chief financial officer, Jeffrey Shulse, a lawyer and accountant whom Hoffman had hired a few years earlier to run a well-plugging company created by Black Elk. Platinum pushed Hoffman hard to make Shulse the CFO of Black Elk, Hoffman said.

Shulse wanted Hoffman out of the company. He wouldn’t comment for this story but said in a court deposition that Black Elk was ineptly managed, spending money it didn’t have on luxuries like boats, helicopters and cigar rooms at the office. Hoffman began secretly tracking and reading Shulse’s every email, Shulse said in the deposition; Shulse hired investigators to see if Hoffman had bugged his office.

Black Elk was by then effectively insolvent, federal investigators said.

Platinum, however, owned a $98 million stake in Black Elk, about 76 percent of the company, according to Hoffman’s files. And Platinum had a plan to get as much money back from the sinking oil company. It ordered Shulse to find a buyer willing to pay $170 million for Black Elk’s seven most valuable oil fields.

Shulse, meanwhile, was secretly trying to get Hoffman’s job. In March 2014, Shulse sent an email to Levy asking to take over as Black Elk CEO – and, according to the indictment, get paid $1 million from sales of the Black Elk’s assets.

“I want to be aligned with Platinum and friends of Platinum,” Shulse wrote in an email seized by investigators. “What’s good for them is good for me.”

Shulse found a buyer, the Houston production company Renaissance Offshore, for the Black Elk holdings. But Platinum still had a problem. The terms of Black Elk’s bonds required the company to pay off bondholders before it did anything else with the money.

Platinum was having its own problems. No longer generating double-digit returns, investors were pulling out money, and Platinum was barely able to pay redemption requests to investors, according to the indictment. Failure to cash in on Black Elk assets would “be the end of the fund,” Nordlicht wrote in an email. “This is code red,” he later said.

By May 2014, Platinum executives decided they had to persuade bondholders to let Black Elk use the sale proceeds for other purposes than paying off the bonds. And that change required a vote of the bondholders.

Hoffman didn’t like the move. But he didn’t oppose it, either. What bondholder “with half a brain,” Hoffman thought, would agree to give up his rights?

Platinum, again, had it figured out. It began buying Black Elk bonds – so that it could vote to pay itself, according to the indictment.

Platinum executives leaked information about Black Elk’s finances, driving down the value of the bonds, which they then bought at healthy discounts, federal prosecutors alleged. By April 2014, Platinum owned $99 million of the original $150 million in bonds, but concealed its ownership, investigators said, by selling all but $18 million to four investment funds that Platinum controlled.

With Platinum and its entities holding most of the bonds, the proposal to spend the cash from the oil field sales as the company saw fit was easily approved.

Ripping TVs off walls

On Aug. 18, 2014, Platinum sent an email to Shulse directing him to wire $70 million to Platinum. Two days later, Black Elk sent another $25 million from the Renaissance sales to Platinum.

The next Monday, Hoffman showed up at Black Elk. The doors were locked and office vacated, he said, and he had to call the building superintendent to get in. What was left of the company had moved in with Shulse’s well service company, which was by then also controlled by Platinum.

Not a week later, Shulse, now CEO, held something of a yard sale in the old office. Afterwards, former Black Elk employees said they went back inside the building. Computers, refrigerators and office furniture were all gone. Trash littered the floor. TVs yanked out of the walls, mounts and all, left fist-sized holes in the drywall.

“What a disgraceful way to go out,” Hoffman said.

By then, Black Elk had laid off about 100 workers, most of its staff.

On Sept. 11, 2014, Platinum authorized Shulse to pay himself a $275,000 bonus. Platinum executives, meanwhile, were paying themselves as well, according to the indictment. From 2012 to 2015, even as Black Elk crashed and Platinum scraped for cash, executives consistently told investors the fund was returning double-digit profits, justifying charges of as much as 20 percent in management and incentive fees, or $111 million in total over the four years, federal authorities alleged.

Many of Black Elk’s contractors were never paid. In August 2015, some filed a petition to liquidate Black Elk through Chapter 7 bankruptcy and use the proceeds to pay creditors. By the following June, Platinum didn’t have enough cash to pay investors trying to pull their money out the Platinum fund.

On Dec. 19, the U.S. Attorney of the Eastern District of New York announced the indictment of seven on fraud and conspiracy charges: Platinum executives Uri Landesman, Joseph Sanfilippo, Joseph Mann, Daniel Small, Levy and Nordlicht as well as Shulse. They all pleaded not guilty.

U.S. Attorney Robert L. Capers, whose office investigated the case, estimated that investors in Platinum’s fund lost $1 billion.

Shulse’s attorney, F. Andino Reynal, said Shulse was told what to do by Platinum.

“He didn’t commit a crime here,” Reynal said. “I’m very confident that once the jury has heard all the facts, they’ll determine he’s not guilty.”

Hoffman’s hands still shake when talking about Platinum. His cheeks still redden. The scandal has hamstrung his new company, P3 Petroleum, which can’t raise money to grow. The company pumps about 50 barrels a day and employs seven workers.

“We’ve been going at it for more than two years now,” Hoffman said. “We don’t have a lot to show for it.”

THE PLATINUM QUESTION – WAS ANYBODY LISTENING?

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.

Huberfeld Ponzi1.3

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.

 

See also:

https://lostmessiahdotcom.wordpress.com/2016/04/13/the-seabrook-connection-investments-gone/

https://lostmessiahdotcom.wordpress.com/2016/04/15/the-long-short-nope-the-dead-undead/

https://lostmessiahdotcom.wordpress.com/2016/04/14/theres-not-enough-time-in-the-day-to-discuss-nordlicht-huberfeld-bodner/

READ FURTHER:

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

The Platinum Serial – Look Back to Bernie Madoff – Don’t Ignore the Pictures

“THE TRAIL OF PEOPLE WHO CALLED HIM THEIR BROTHER, THEIR BEST FRIEND”…

We have read dozens of comments about Huberfeld, Nordlicht and Landesman, amongst others, many of which accuse us of attacking their friends. We have one particular commenter who thinks we should leave this story alone, particularly where Huberfeld is concerned. He is a good person, she says. He has family. He did not go in intending to defraud his investors.

Yes. He did. As did the others.

She then said that if people lost their children’s college funds they were, in sum, foolish to have invested it all. Well, the same has been said of Madoff. In fact, in some interview somewhere Madoff is quoted as saying something like: If they were stupid enough to trust me with all of their money, they deserved to lose it.

We beg to differ.

Platinum’s partners are serial manipulators, preying on the greed of some, the weakness of others and the trust of their friends and families. You, the investors were taken for a ride. The same can be said of Madoff’s investors.

See the video below.

http://video.vanityfair.com/watch/vintage-vf-bernie-madoff-s-victims-speak-out

 

For further information:

Madoff Victims’ Payout Nears $7.2 Billion, Trustee Says

U.S. charges Platinum Partners execs with $1 billion fraud