A Platinum Vindication – Platinum Partners and Sufficient Evidence of Fraud

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Appeals Court Reinstates Convictions of Platinum Partners Executives

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

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

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

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

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

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

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

19-3207_opnDownload

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

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

EDITED 9.23.19 3:49PM

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

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

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

The paperwork speaks for itself…

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

 

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

Platinum Execs’ Fate Lies With Judge After Mixed Verdict

By Jody Godoy

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

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

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

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

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

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

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

Jury finds Platinum Partners founder guilty in fraud trial

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

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

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

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

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

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

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

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

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

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

To continue reading click here.

The Remarkable Truths About Platinum Partners and the Traps Set to Ensnare Naive or Trusting Investors [Opinion]

“Rav Safra was approached to sell something he had and was offered a price which suited him, but he was unable at the time to signify his consent because he was reciting his prayers and was unable to interrupt them. The prospective buyer, under the impression that the rabbi had rejected his bid, kept on increasing the price but the rabbi insisted on selling for the original price to which he had consented “in his heart.” Naturally, this kind of exemplary conduct was not intended for all, otherwise it would not have been recorded for a saintly man like Rav Safra.

But the stern injunctions throughout Jewish literature against cheating and dishonesty in business affairs and in other areas of life are directed toward every Jew, as when the prophet says of his people: “They have taught their tongue to speak lies, they weary themselves to commit iniquity” (Jeremiah 9:4).”

https://www.myjewishlearning.com/article/truth-and-lies-in-the-jewish-tradition/

The Illusions We Want to Believe About People – Platinum Parnters

Simply Because an Investment Manager is Invested in the Fund he Manages Does not Mean he Cannot Defraud Other Investors in the Same Fund –

[OPINION Edited 7.2.19 11:46am]

In his closing statement, Jose Baez, the attorney for Mark Nordlicht asked rhetorically, how Mark Nordlicht could have defrauded investors when he himself was invested. “For you to believe he defrauded them, he would have had to defraud himself,” Baez said.

Read more at: here.

But that is a far cry from the realities of our financial markets. That was the bait for the trap Nordlicht set for investors. Most hedge fund managers are also investors who have money invested in their own schemes, not enigmatic but rather a show of legitimacy intended to entice new money. If Nordlicht had not been invested, he would have lacked credibility and would not have attracted investors. 

Baez, an incredibly gifted attorney, presented a remarkably simplistic view of hedge funds and private equity funds to the jury. Fund managers don’t just invest and get returns on their investments. They earn (a loaded word in the case of Platinum) management fees and dozens of other benefits, depending upon how the fund is established. Nordlicht was well compensated during his Platinum tenure. There were so many funds, so many scams, so many left bereft of their financial futures and Nordlicht was enriched.

The fact that Mark Nordlicht had deferred compensation of $55,000,000.00 at the end of the day, which he allegedly lost as a result of the fall of his empire, does not speak to what money he had received up until that point – on the order of tens of millions. He had been paid management fees and other benefits that were not clearly elaborated during the trial. He had been enriched when the fund was prospering. The problem was, Nordlicht’s kingdom was made of glass.

Baez claimed that the government told lies, many investors made money. The fact that many investors profited from their investment is not mutually exclusive of those defrauded in the scheme. Were that to be the case, Madoff would be a free man.

Hedge Fund Managers nearly always invest in their funds. Investors frequently make money in fraudulent schemes, never the wiser to having been initially defrauded. This is not uncommon. Hedge fund managers can simultaneously defraud investors and have their own money locked up in the fund; and it is an absurdity of epic proportions to assume that because they are invested, they are judgement proof for the unthruths they tell their investors. Many of Madoff’s investors got very wealthy on Madoff’s trickery, whether they knew of frauds committed or otherwise. 

With respect to Platinum, the “deferred compensation” and the other money Nordlicht had tied in the fund, the role he played in keeping each entity wholly compartmentalized, the return of the money to the Holocaust survivor as a preferential withdrawal were all part of the show. These particulars, are evidence of guilt as opposed to innocence, they point to the premeditation involved. That they added a perception of honesty, credibility and integrity was an illusion created to ensnare new investors. And he should be held to account. 

When a hedge fund manager, a private equity company, an investment group defrauds investors it undermines the integrity of the entire financial investment culture. When Jewish hedge funds do it, they undermine the worldview of Judaism and Jewish morality. Both have unintended consequences and each must be addressed with an equal level of gravity. 

If the defendants are acquitted of the charges against them, both with respect to the Platinum Partners Value Arbitrage Fund and with respect to Black Elk, there will be little need to have a Securities and Exchange Commission in place because their acquittal will invite market participants to follow in the footsteps of the defendants in the current case. Moreover, an acquittal will pave the way for these men to do the same again, just in a different format. It will render each defendant now and in the future impervious, virtually untouchable. In addition, an acquittal will leave each defrauded investor with little recourse and it will set a bad example for the future of Jews, particularly those honest among us engaged with and perhaps more honestly, married to the financial world. 

In the late 1990’s Murray Huberfeld and David Bodner (two of the earliest investors in Platinum and their precursor entities) paid someone to take their SEC registration exams. To an outsider looking in, this payment was not only a sign  of a wholesale willingness to cheat the system but something more nefarious. It was a show of fundamentally and unequivocally morally bankrupt behavior. 

Huberfeld and Bodner were let off with little more than a slap on the wrist, setting an example for future generations, placing them in the bubble of the impervious, two of the untouchables. Nordlicht, Levy, SanFilippo and the others have been  disciples, learning a craft. The stage Huberfeld and Bodner set for all in their sphere of influence was a profoundly public license to skirt the laws, or more accurately to plow right through them. 

It is now nearly twenty five years since those events; and history repeats itself.  All of the men involved in these grand and elaborate schemes have mentored others. They, along with their Platinum understudies, have repeatedly exhibited a pattern and practice of skirting the laws, shared by so many Jewish men within their social sphere.

It is about time that the legal and judicial system put an end to it. The honest should not be forever left at the mercy of the half-truths of those who have no problem telling them, and have the money to defend themselves on the rare occasion they get caught.  

A Platinum Roller Coaster and the Lies We Tell Ourselves about Misdeeds

Platinum CIO Says No Evidence Of Misdeeds In ‘Bogus’ Case

By Stewart Bishop

Law360, New York (June 27, 2019, 10:11 PM EDT) — Former Platinum Partners co-chief investment officer David Levy’s attorney told a New York federal jury on Thursday in the securities fraud trial of the hedge fund manager’s top executives that prosecutors’ case is “bogus and flawed to the core,” citing a lack of evidence that Levy engaged in any wrongdoing.

Michael Sommer of Wilson Sonsini Goodrich & Rosati PC began his closing arguments in U.S. District Judge Brian Cogan’s Brooklyn courtroom, saying prosecutors have failed to show that Levy ever deceived or lied to investors in Platinum’s signature fund, Platinum Partners Value Arbitrage Fund.

“The evidence related to David in this trial was almost nonexistent,” Sommer told the jury. “Many of the witnesses said they didn’t even know David.”

Prosecutors say Levy, Platinum co-founder Mark Nordlicht and former chief financial officer Joseph SanFilippo defrauded PPVA investors by lying about a liquidity crisis at the failing fund that left it unable to meet a flood of redemption requests. The executives also allegedly deceived investors about Platinum’s practice of making preferential payments to certain investors and high interest interfund loans that were being used to keep PPVA afloat.

Nordlicht and Levy are further charged with defrauding bondholders in oil and gas Platinum portfolio company Black Elk Offshore Operations LLC.

 

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

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

By Jody Godoy

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

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

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

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