A Platinum 1 Billion Dollar Fraud – Black Elk – Platinum’s Partners and Mark Nordlicht

Dratch, Mark - large_medium
Mark Dratch, why are you not protecting those most vulnerable?

NASDAQ Reporting – A Platinum Fraud, Black Elk and Going Back to 2016… $1 Billion and Counting

NEW YORK, Feb 26 (Reuters) – Former Platinum Partners chief Mark Nordlicht and other executives of the now-defunct hedge fund group are due to go to trial on Tuesday on charges they defrauded investors out of $1 billion.

Opening statements are expected to begin in the morning before U.S. District Judge Brian Cogan in federal court in Brooklyn.

Prosecutors charged the defendants in December 2016 with orchestrating two fraudulent schemes involving Platinum, which struggled to attract large institutional clients despite years of golden returns from niche and unsavory investments.

In one scheme, Platinum was accused of overvaluing its often-illiquid assets to collect higher fees, and falsely reporting annualized returns topping 17 percent.

Authorities said Platinum operated “like a Ponzi scheme” by using new money to fund redemptions by earlier investors, which were referred to internally as “Hail Mary time.”

The second alleged scheme centered on Black Elk, a Platinum-controlled oil exploration company. Prosecutors said the defendants defrauded Black Elk’s bondholders out of $50 million by diverting the proceeds of asset sales to Platinum ahead of Black Elk’s 2015 bankruptcy.

Reuters described Platinum’s use of related parties in its Black Elk bond vote in an April 2016 Special Report:

To read the article in its entirety click here.

Advertisements

A Platinum Schemer and a Jewelry Show, the Benefits of Privilege and the Opportunities that Await… in Hong Kong

Jona Rechnitz

A TRIP TO HONG KONG FOR A DIAMOND DEALER, WHO JUST HAPPENS TO ALSO BE AN ADMITTED FRAUDSTER AND CON-ARTIST. 

To Our Readers:

We saw this story and found it quite astonishing. Jona Rechnitz has admitted to guilt for numerous crimes, crimes of significant magnitude, for which at least one member of the Platinum family, just got sentenced to 30 months.

He has testified with a level of arrogance fit only for rich, entitled, unrepentant fraudsters, flippantly waiving around the word “truth” as if he knows the significance of its foundation in the English language and jurisprudence. He has been smug, lied, admitted to numerous infractions of morality, ethics and the law and now he asks to be allowed to Hong Kong to attend a jewelry show.

Have we lost our collective minds? Perhaps he wants to ask his friends and accomplices for a “bisel gelt” [a little bit of money] to buy something nice, or to grease the palms of someone who can? He is one of a group of white, privileged criminals running roughshod over the law.

Let’s not forget that his early career started with a position working for LevLeviev’s Africa Israel. Leviev, a diamond magnate in his own right, is unable to travel the world these days as a result of the criminal laws of multiple countries. It is unclear whether Rechnitz and his well-connected family has broken ties. And let’s be reminded that the Israeli justice system is trying to maneuver testimony from that same Leviev regarding a major diamond smuggling endeavor. 

And Judge Hellerstein is being asked by a begging Jona Rechnitz to attend a jewelry show in Hong Kong? And the prosecutor is agreeing on condition that Rechnitz’s wife surrender her passport? Has the prosecutor not thought this through?

The exchange for Rechnitz’s wife’s passport is but a joke, a circus stunt. Both Jona Rechnitz and his wife likely carry numerous passports and the surrender is thus insignificant. Moreover, the ideal guarantee that Rechnitz would return from the Hong Kong jewelry show without a new bank vault of difficult to trace assets would be to freeze all of his bank accounts while he is gone… and perhaps those of his family and all of their closest friends and associates. 

Judge Hellerstein, you got the Murray Huberfeld verdict right, please think about what is really going on here. You are being asked to help a very wealthy, entitled, dishonest and connected man get just a little bit wealthier. He has committed crimes. He should not be rewarded for his willingness to testify on behalf of the government when few can discern if his testimony was lies, truth or some combination of the two. 

Corrupt de Blasio donor begs judge to let him attend Hong Kong jewelry show

A Mayor de Blasio donor who is out on $500,000 bail pending his sentencing for bribing cops wants a judge to allow him to travel to Hong Kong for a jewelry show later this month, according to new court documents.

Jona Rechnitz — a government cooperator who testified at two corruption trials — is asking Manhattan federal Judge Alvin Hellerstein to allow him to travel for nine days starting Feb. 25 “to attend an international jewelry show” for business, lawyer Alan Levine wrote in a letter to Hellerstein.

During testimony, Rechnitz said he currently works in real estate and jewelry.

Prosecutors agreed to the request as long as Rechnitz’s wife turns over her passport.

To read the article in its entirety, click here.

 

District Judge Alvin K. Hellerstein Got It Right, Those Who Think Otherwise Are Missing the Point

Murray Huberfeld in November 2017 outside federal court

Murray Huberfeld in November 2017 outside federal court in lower Manhattan. Photo Credit: Charles Eckert

Dear Reader:

We believe, in no uncertain terms, that District Judge Alvin K. Hellerstein, got it very right to the extent of his available sentencing capacity when he sentenced Platinum founder Murray Huberfeld to 30 months and $19M.

Judge Hellerstein understood the magnitude of the crime that Huberfeld perpetrated on the COBA members. He was clearly aligned with he notion that you cannot punish the bribed without punishing the person or people who orchestrated the scheme underlying that bribe. And Platinum Partners in all its glory was a scheme. Hellerstein recognized that Huberfeld’s “conduct was not only corrupt and criminal, but led to the loss of millions of dollars of union retirement benefits,” Manhattan U.S. Attorney Geoffrey Berman said.

According to the article in the Daily News

Prosecutors considered Huberfeld, who was the briber, less culpable than Seabrook, the bribe-taker. Assistant U.S. Attorney Martin Bell noted that Seabrook had deceived the correction officers he represented.

“(Huberfeld) didn’t know the correction officers. They didn’t know him. He had no responsibility to them,” Bell said.

Huberfeld attorney Henry Mazurek insisted that his client had not known that Platinum was doomed at the time he paid the bribe. Rather, Huberfeld had sought out COBA — using crooked Mayor de Blasio donor Jona Rechnitz as an intermediary — to boost his own status within the hedge fund.

For Assistant US Attorney, Martin Bell, to agree with Huberfeld’s attorneys is ridiculous. With all due respect it shows a fundamental lack of understanding of our financial system, a lack of clarity with regard to Huberfeld’s long history of trampling on our legal and financial system and a lack of disregard for the victims of Platinum’s fraud. US Attorney Martin Bell should be celebrating the work he did that led to Judge Hellerstein’s rulings, rather than giving impetus for a litany of appeals on the part of Marty Huberfeld. 

We applaud Judge Hellerstein’s comments with regard both to Huberfeld’s attorneys’ statements and if in agreement the statements of Bell when, as the Daily News states:

But Hellerstein called that argument “nonsense.” He held Seabrook, Rechnitz and Huberfeld jointly liable for the loss of the investment.

Hellerstein’s assessment of the absurdity of this argument speaks volumes.

Under legal regulatory guidelines a person who pedals an investment has a fiduciary duty to the investor, whether they know that investor or not. For a contrary argument to have even been raised highlights a lack of understanding of the SEC and the protections put in place to safeguard investments.

Were COBA to have been an ERISA fund, the fiduciary duty would have been greater. These were the livelihoods of people at stake, their futures and those of their children and grandchildren we placed at risk. And Murray Huberfeld knew it the moment he solicited the investment and bribed Norman Seabrook to transfer funds. The COBA investments and the fiduciary duty of Platinum’s partners and Norman Seabrook are the very foundation of investment policy. And they are no less legally bound.

The bribery and fraud underlying the loss of those investments was criminal. It lacked moral boundaries, put the foundation of the US financial system at risk and raises questions regarding the safeguards in place for investors.

Assistant US Attorney Martin Bell’s comments, if not taken out of context in the various new articles, increases the magnitude of the risks that Huberfeld and those like him pose to investors, if appropriate punishments are not levied.

LI hedge fund founder gets 30 months in prison in bribery case

A hedge fund founder from Lawrence who was part of a scheme to bribe the leader of New York City’s correction officers union to invest $20 million in his firm was sentenced to 30 months in prison Tuesday, officials said. His attorney vowed to appeal the term.

Murray Huberfeld, 57, who founded Platinum Partners hedge fund, was sentenced by U.S. District Judge Alvin K. Hellerstein in connection with the transfer of $60,000 that prosecutors said was used to bribe Norman Seabrook, the former president of the Correction Officers Benevolent Association, to invest tens of millions in Platinum.

In all, the union lost $19 million of its $20 million investment with Platinum. As much as $15 million was from a retirement benefits program funded by the City of New York that invests money for correction officers’ retirements.

Huberfeld pleaded guilty in May to wire fraud conspiracy. Specifically, he pleaded to conspiring with Jona Rechnitz, a real estate businessman and star government witness in several federal corruption trials, to cause Huberfeld’s hedge fund to pay $60,000 to Rechnitz’s company by falsely representing that the money was payment for courtside tickets to eight New York Knicks basketball games.

Prosecutors said that money was really intended for Seabrook, a payment for making the investment of the union’s funds. Rechnitz had testified in Seabrook’s trial that he delivered $60,000 in cash to Seabrook in a Salvatore Ferragamo bag in 2014 after the union’s funds were invested with Platinum.

“Not content with being a successful businessman, Murray Huberfeld sought to grow his fund through fraud and deception, playing a critical role in a pernicious kickback scheme,” said Manhattan U.S. Attorney Geoffrey S. Berman in a statement. “His conduct was not only corrupt and criminal, but led to the loss of millions of dollars of union retirement benefits. The sentence imposed today reflects the magnitude of his crimes and untold pain his conduct caused to others.”

To read the article in its entirety click here.

A Not-Quite-Platinum Result – Huberfeld Sentenced to 30 Months and $19M

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

FOR IMMEDIATE RELEASE
Tuesday, February 12, 2019

Hedge Fund Founder Sentenced To 30 Months In Connection With Bribery Of Former Correction Officers Union Leader

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MURRAY HUBERFELD was sentenced to 30 months in prison for his role in a scheme to submit false paperwork to Platinum Partners (“Platinum”), a hedge fund founded by HUBERFELD, in order to facilitate a bribe to Norman Seabrook, the former president of the nation’s largest municipal correction officers union.  HUBERFELD previously pled guilty to conspiring to commit wire fraud and thereby causing Platinum to fund a $60,000 bribe payment to Seabrook, which HUBERFELD intentionally concealed by falsely documenting the payment as one for courtside tickets to New York Knicks basketball games.  As a result of the bribe, Seabrook caused the investment of millions of dollars of union funds into Platinum. Today’s sentence was imposed by U.S. District Judge Alvin K. Hellerstein.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Not content with being a successful businessman, Murray Huberfeld sought to grow his fund through fraud and deception, playing a critical role in a pernicious kickback scheme.  His conduct was not only corrupt and criminal, but led to the loss of millions of dollars of union retirement benefits.  The sentence imposed today reflects the magnitude of his crimes and untold pain his conduct caused to others.”

According to the Superseding Information, Superseding Indictment, Indictment, and Complaint filed in this case, other public filings, statements made during the plea proceeding, and evidence and testimony presented at trial proceedings in the fall of 2017 and the summer of 2018:

HUBERFELD was a founder of Platinum, a hedge fund that he had founded and continued to control unofficially even after his formal affiliation with the fund had ceased.  In late 2013, HUBERFELD and Jona Rechnitz, an acquaintance and real estate businessman, sought to attract public and institutional investors to the fund.  In late 2013, Rechnitz told HUBERFELD that a contact of his – Norman Seabrook president of the Correction Officers’ Benevolent Association (“COBA” or the “Union”) – would likely invest COBA money in Platinum if HUBERFELD were willing to pay Seabrook money.  Over the next few months, Seabrook caused COBA to invest approximately $20 million of its funds into Platinum, including $15 million from a retirement benefits program funded by the City of New York that invests money for correction officers’ retirements.

In or around December 2014, arrangements were made to pay Seabrook for the millions of dollars the Union had invested over the course of that year.  Rechnitz paid Seabrook $60,000 in cash, delivered to Seabrook in a men’s luxury handbag.  HUBERFELD and Rechnitz arranged for Platinum’s management company to receive a fraudulent invoice for $60,000 – generated by Rechnitz – that, on its face, billed Platinum for seven pairs of courtside tickets to New York Knick games given to Platinum by Rechnitz, who owned Knicks season tickets.  In truth, and as HUBERFELD knew, the reason given to Platinum was false, and no Knicks tickets had changed hands.  The real purpose of the payment was to reimburse Rechnitz, who had paid Seabrook for his efforts in securing COBA’s investments.  Three days later, Platinum issued Rechnitz a $60,000 check.  Over the next few months, Rechnitz, HUBERFELD, and Jeremy Reichberg, another co-conspirator, continued to work together to lobby Seabrook for more money.  However, after a lawsuit filed by a former COBA board member referred to the Platinum investments, and the U.S. Attorney’s Office grand jury investigation resulted in subpoenas to Platinum and COBA in May 2015, no further investments were made.  Ultimately, Platinum collapsed, and COBA lost $19 million of its investment.

Seabrook was convicted of honest services fraud and conspiracy on August 18, 2018, after a 10-day trial in Manhattan federal court.  On February 8, 2019, Judge Hellerstein sentenced Seabrook to 58 months in prison and ordered him to pay restitution in the amount of $19 million.

On January 2, 2019, Reichberg was found guilty of honest services fraud, conspiracy, and obstruction of justice in connection with a separate scheme in which he and Rechnitz provided gifts and benefits to a number of high-level officers of the New York City Police Department (“NYPD”) in exchange for official police action for themselves and their associates.  He is due to be sentenced by U.S. District Judge Gregory H. Woods on April 4, 2019.

*                *                *

In addition to the prison term, HUBERFELD, 58, of Lawrence, New York, was sentenced to three years of supervised release, and ordered to pay restitution in the amount of $19 million.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Division.

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Martin S. Bell, Russell Capone, and Lara Pomerantz are in charge of the prosecution.

Topic(s):
Public Corruption
Press Release Number:
19-036

FOR ADDITIONAL INFORMATION SEE BELOW:

Hedge Fund Founder Sentenced To 30 Months In Connection With Bribery Of Former Correction Officers Union Leader

 

A Platinum Enterprise – Bad Press not Fraudulent Transactions Tanked the Fund

FROM LAW 360

Law360 is a Subscription Only site so we are unable to provide you with the entirety of the article. The Headline is as follows:

Platinum Exec Wants Trial Halted Pending Media Leak Review

We will provide you with a few brilliant highlights in the hope that we are withing the site’s copyright protections; and the we recommend that you subscribe to that site for a constant stream of information, related not only to Platinum, if you are so inclined. There is a wealth of information.

And this is not a paid advertisement. 

Law360 (February 7, 2019, 9:09 PM EST) — Platinum Partners founder Mark Nordlicht asked a Brooklyn federal judge on Thursday to stop the fraud case against him from going to trial until the Second Circuit can review his latest mandamus petition that includes allegations that a prosecutor leaked grand jury information to the media.
Nordlicht, the chief investment officer for the defunct investment firm, has argued damaging stories about Platinum contributed to the failure of its funds, not misconduct by him and co-defendants.
Lawyers for Nordlicht have said the emails, which show reporters from several outlets arranging drinks and meetings with former Assistant U.S. Attorney Winston Paes, strongly suggest Paes provided information about the Platinum investigation that appeared before Nordlicht’s arrest. The government has said the letters don’t evidence a grand jury leak at all, however, and Paes hasn’t responded to comment requests.

We would like it to be known that we did not speak to anyone associated with the Prosecution’s case. We think that the Prosecution is missing information that would make the case even stronger and we would be glad to provide it. We don’t need anything to come to the conclusions we have drawn. It is all out there in public filings.

It did not take a rocket scientist, or even someone particularly savvy to figure out that Platinum and its associated funds were engaging in what was tantamount to a Ponzi Scheme over the course of many, many years. We have pages and pages of research from publicly available sources, subscription sources and our own analysis and we could likely mount a pretty significant case for the allegations for which he is charged and others which may or may not be embedded in the initial charges. 

We would be more than happy to provide assistance. We feel Nordlicht is getting off easy. If the press is blamed for the failure of Platinum’s fund, then some Judge is not doing his or her homework. Investors lost millions and Mark Nordlicht cannot cry poverty. It’s an unfortunate scenario.

And if he gets off easy, it further substantiates our consistent claims (to Norman Seabrook regarding the color of his skin and his lack of political clout) and so many others on this blog, that people are being bought.

Can’t someone bring a modicum of integrity to the system?

The Platinum Ponzi – Seabrook, Huberfeld, Orthodox, Pre-Ordained Wealth versus Self-Made… Prison?

rechnitz-seabrook-300x214

Seabrook, a Relatively non-Savvy, non-Orthodox Jew up Against a System Rigged to Keep the Orthodox Out of Prison or in Ottisville

Dear Reader:

We believe that if anyone deserves a lengthy prison sentence for the COBA investment scheme and subsequent losses the members incurred, it is the person or people responsible for the sham investment strategy in which Seabrook invested. Norman Seabrook should not be standing alone. Seabrook was enticed to Platinum by Murray Huberfeld, Jona Rechnitz, Jeremy Reichberg and others connected past or present to Platinum Partners on promises of extraordinarily high returns. He was bated, hook, line and sinker.

We believe that while Seabrook may have sold out the people entrusted by him to maintain the safety of their investments, he was simply too lacking in savvy to know how artfully he was duped. He was drawn in by the glitz, glamour and ego- stroking of those who bribed him to invest in their fund. They knew he was going to lose his shirt and the investments of every one of the COBA members. Anyone who thinks differently simply does not know the dynamic. We would tend to believe that the entire affair has left him far from penniless and those for whose investments he was responsible should be outraged. But, he was not the person they should have trusted to do the investing. He had motive, opportunity and not enough smarts to run in the opposite direction.

Perhaps Norman Seabrook should have asked himself some more intelligent questions like why they were pushing such a hard sell. Why was he being brought to Israel and treated like a king? Why were Orthodox Jews, who really are generally quite “anti-schvartze” (racist, to put it kindly) spending so much time wooing him? The reality is, “tachlis” (in not so many words), the Orthodox men who were responsible for Platinum, its years of scheming and defrauding investors, likely had numerous laughs over all of the people they conned and continue to scam, Seabrook being the black man who worked his way to the top, an admirable quality but still a Shvartze. 

To our point, quoting from Too Good to Be True  about the rise and fall of Bernie Madoff and speaking on the subject of Ezra Merkin, one of Madoff’s earliest investors, Erin Arvedlund writes: “Wall Street is just twenty guys selling each other stuff, while some schwartzer in the basement does all the work,” Merkin would joke privately. Publicly, however, Merkin acted like a Wall Street sage.” Seabrook could be described as a step up from the guy in the basement; but likely there are those who are still finding his involvement a point of good humor, particularly those who are facing lighter sentences than Seabrook.

Sadly, he lavished in the lifestyle they were offering him. One can almost hardly blame him. The men who enticed him are practiced con artists, with a lifetime of experience, born into privilege and by no means altruistic or compassionate. They are responsible for duping the members of COBA who have lost millions and ultimately it is because of them that those members will likely NEVER recover all of their losses. Seabrook wanted his palms greased and in exchange thought he’d increase a portfolio of assets. Platinum knew they were taking money that would cover other losses and it is each and every one of those men for whom the Court’s contempt should be obvious, swift and harsh. The Platinum Partners’ partners were lacking in conscience and compassion when they destroyed the COBA investments and it is they in our view who should pay harshly. But will they? White, Jewish, privileged and politically well-connected, probably they will not. 

Norman Seabrook, in all of his arrogance as seen in photographs was as much a victim as he was a perpetrator. Sadly, if he had a true “in” with the Chabad/Orthodox community with whom he was fraternizing, he would be sitting with Murray Huberfeld, facing far less time. The color of his skin, the lack of privilege in multiple forms, and the lack of Orthodox providence says a lot in our view.

One must wonder if anyone not connected to the Orthodox community in Brooklyn or NYC can ever have an even remotely fair shake, and that includes Norman Seabrook. 

Investigation into Platinum Widens, The Direction it Should Take?

 

Our Take on Events –

PLATINUM PARTNERS AND THE NUMEROUS FRAUDS AND PONZI SCHEMES

Since 2016, LM has been reporting on Platinum Partners and the various partners and schemes. It is and has always been our position that Platinum Partners, as a firm, has been nothing more and nothing less than one giant Ponzi Scheme, with some pretty frightening tentacles. Platinum Partners’ establishment with the assistance of then Africa Israel employee Jona Rechnitz, along with other members of AFI is all the more unsettling because we believe the earlier Platinum Fund, itself, was partially financed by Lev Leviev and his connection to the Platinum and its partners cannot and should not be ignored, particularly not by law enforcement reviewing all angles.

We will provide continued information to our readers on investigations it becomes available. Having said that, we do not believe that Murray Huberfeld should be given anything but the harshest sentence and we further believe that if the Platinum Partners’ liquidators are looking for all Platinum’s assets they need begin to look at the personal family fortunes of Huberfeld, David Bodner and Huberfeld’s longtime friend and co-partner Mark Nordlicht.

The men involved in Platinum, Black Elk, Echo Therapeutics, and all of the associated businesses and investments, should be scrutinized, bar none. And Jona Rechnitz should not remain unpunished for his involvement. He knew what he was doing when he introduced Norman Seabrook to the Platinum investments that tanked COBA. He knew what he was doing when he elicited money from Hamilton Peralta.

As we mentioned in a previous post, Murray Huberfeld’s attorneys in their remarkable eloquence would have us believe that he is a great altruist, naive and burdened by a scheme he knew nothing about. That is pure and utter nonsense. The many men involved in years and years of frauds and schemes and their associates are savvy, creative and cunning businessmen. These are not men who should be permitted to walk a higher ground because they purport to believe in a “higher authority” [borrowed from an old advertisement]. We have little choice but to give credit where credit is due and these men, in all of their financially lucrative glory, deserve the lions’ share. On the flip side of that very valuable coin, their moral compasses do not necessarily all point in the same directions as their victims’.

There have been thousands of victims over the years. We should be focusing on them: compensation, investment returns, justice and retribution. The money was siphoned off into personal family funds and other investments. And it should be recovered. 

As to COBA and its heralding a $7M recovery for COBA members, that is a financial farce. Murray Huberfeld will be repaying $4M initially with the additional $3M over time. This is utterly reprehensible as he will have use of funds during that time. He will be generating income over the course of that time. Platinum Partners, the fund, the individuals, should all be repaying COBA and its members, plus interest, investment losses and other compensation. Only then should those currently in charge take pride in their recovery.

 

huberk23n-5-web

Platinum Partners Hedge Fund Investigation Reportedly Widens

 

The Platinum Partners saga may have further twists in store.

The New York-based hedge fund has begun liquidating its funds, after the firm’s longtime associate Murray Huberfeld was accused last month of arranging for a $60,000 kickback to be delivered — in a Salvatore Ferragamo bag — to a correctional officers’ union official in exchange for directing the union’s retirement fund investments to Platinum.

Now, Platinum and its chief investment officer, Mark Nordlicht, may face scrutiny as the probe widens, according to a report from the Wall Street Journal.

Platinum’s woes began with the June 8 announcement of bribery charges against Huberfeld and Norman Seabrook, president of the New York City Correction Officers Benevolent Association.

Prosecutors say that Huberfeld, through an intermediary, arranged for the delivery of the kickback to Seabrook after the union official directed $20 million in union investments into the Platinum Partners Value Arbitrage Fund. Huberfeld then arranged for the hedge fund to reimburse the intermediary for the kickback using a fraudulent invoice for the purchase of New York Knicks basketball tickets, the U.S. Attorney’s Office said. Both Seabrook and Huberfeld pleaded not guilty to the charges on Friday.

The fund itself had not been implicated in the criminal case against Huberfeld, whom prosecutors describe as a co-founder and manager at Platinum, claiming he was not listed on the firm’s registration documents to avoid scrutiny. Huberfeld has been previously fined by the Securities and Exchange Commission.

Federal agents raided Platinum’s office in late June, after the charges were announced, as part of an investigation that’s reportedly separate from the bribery case. And there are other rumblings of wider fallout.

Since its founding in 2003, Platinum Partners has appeared to be one of the world’s best-performing hedge funds, claiming a 17% annual return for its main fund as of last fall. But the firm has made investments in assets that are potentially hard to value or liquidate, such as private placements in a distressed company’s debt. These are known in accounting parlance as “Level 3” assets, which have significant “unobservable” value inputs. Nearly all of Platinum’s investments are Level 3, according to the Wall Street Journal.

Among the illiquid investments are several that have raised eyebrows. In 2007, according to SEC investigators, Platinum created a subsidiary called BDL Group for the purpose of investing in variable annuities for hospice patients, which paid out a bonus when the patient died. Several involved in the plan agreed to pay settlement fines to the SEC, but Platinum and Nordlicht were not accused of wrongdoing.

Other Platinum investments include financing for payday lenders, which offer short-term loans at the equivalent of a 400% annual rate or higher. The industry has long been the target of regulatory crackdowns.

Platinum’s payday borrowers include CashCall, according to Bloomberg. CashCall has been suedby the Consumer Financial Protection Bureau for allegedly charging interest in excess of what state laws allow; the company contests those claims and the case is pending in federal court in Los Angeles.

All of this adds up to signals that, at best, it may take Platinum some time to liquidate its funds, a subject that was already making some investors antsy. Two prominent investors reported Platinum to the SEC in November for non-payment of redemptions, according to The Observer.

The Wall Street Journal, citing sources, now says that the investigation into Platinum is examining whether it overstated the value of its holdings, or paid out exiting investors from new investments or borrowings. A Platinum spokesperson rejected those claims in a statement to the Journal.

To read the article in its entirety click here.