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.

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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.

 

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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.

Murray Huberfeld and a Platinum Laden 45 Pages, He Should be Sharing a Cell with Madoff, Not Given Leniency

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huberfeld, submission, 7 million restitution

Respectfully Submitted, Platinum Was a Ponzi Scheme and Huberfeld is a Serial Fraudster, a Pattern and Practice that Began in the 90’s

https://www.sec.gov/litigation/litreleases/lr15826.txt

We began reporting on Murray Huberfeld and his involvement with the Platinum Partners fraud in 2016. He defrauded investors, full stop. He defrauded a pension fund, COBA. His willingness to repay $7M back to COBA, as set forth in the 45 page call for leniency by his attorneys, is not an act of generosity. In fact, it is a slap on the wrist for someone who has turned defrauding investors, siphoning off money and then starting again into an art form. He admitted to a very minor offense in comparison to what charges could have been served. Moreover, we think the repayment to COBA may very well represent an admission to a different crime. He does not seem to have admitted to defrauding the COBA investors.

The above is a link to the 45 page submission provided by Mr. Huberfeld’s attorneys to the Judge in his sentencing hearing. It makes for nauseating reading, and that is being quite kind. It includes pages and pages of statements by family and friends. It is worth noting that at least two of those friends, included in the myriad of support he received, are convicted felons. If we are defined by the company we keep?

The sprawling display of creative lawyering speaks of apologies and humility and the unusual circumstances of this particular fraud. What made this one different? Murray Huberfeld got caught. He should be punished for a pattern and practice of criminal behavior, one that has defined his life, at least since the 90’s. Murray Huberfled should not be rewarded for his hollow attempts at restitution and alleged quasi-generosity.

He is not living a life of “tsinius” by any means.

Like the others in his litany of Madoff-like Ponzi schemes, he will likely escape unscathed, only to begin another. Contrary to comments by his attorneys, Marty Huberfeld is a criminal mastermind. He is a brilliant architect of intricate schemes. He is well versed in energy regulatory structures, diamond mining, real estate, healthcare and nursing homes. The man is not the naive fool as alleged by his attorneys. Quite the contrary. Well crafted fraudulent schemes are his modus operandi. Platinum partners was just one in a non-exhausted serial of enterprises: Broad, Centrion, Viridian, Black Elk, COBA, and the list goes on and on and on. 

Make no mistake, Murray Huberfeld is no Robin Hood and, contrary to the eloquence of his attorneys, he does not have integrity sweating from his pores as that 45 pages would have us believe. He has used charity to provide the cover of philanthropy and altruism; and we would argue, to launder money. Whatever financial benefit he has given away has not been based upon altruism and bleeding heart generosity. It has been a ruse to cover up behavior far darker, a serial pattern and practice of fraud and lies.

Sadly, Mr. Huberfeld’s plea by his attorneys includes letters and statements, testaments of beneficiaries of Huberfeld’s supposed generosity. He is supported by his friends and family which include other convicted felons. His attorneys have painted a picture of unicorns and rainbows; and it is all remarkably ill-gotten.   

We ask: what about his victims? Do they not matter? What about the family fortunes and lives ruined by his crimes? What about government institutions, the SEC, the tax authorities, the Federal Energy Regulatory Commission, the laws of the land? They have been and continue to be demeaned and disgraced by his actions? Are those to be ignored because one life ruined is outweighed by the 45 pages of fluff provided by his attorneys? 

Those 45 pages are insultingly absent the clarity that Mr. Huberfeld is a serial fraudster. He began in the 1990’s by paying someone else to sit for his SEC licensing exams. He was given a pass, one which paved the way for him to perfect his ability to outwit law enforcement. That should not go unnoticed. We contend that if the past speaks to the future it will not end here.

Murray Huberfeld would not be truly sorry for the depth of the damage he has caused, not only to individual investors, the victims of each of his schemes, but to the integrity of the markets, unless he were given the harshest possible sentence.

We hope the Judge in the case has the moral fortitude and good sense to do just that, to overlook the statements of his supposed beneficiaries, those who were afforded nothing more than the benefits of dirty money, and to finally give him more than a simple slap on the wrist.  

 

 

ADDITIONAL READING:

https://www.haaretz.com/us-news/.premium-jewish-hedge-fund-execs-charged-in-1-billion-ponzi-scheme-1.5477337

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https://www.institutionalinvestor.com/article/b150xwhg75tcth/platinum-to-manage-centurion-fund

 

Their Platinum Wives: Dahlia Kalter – Kalter Gilad Cook Islands Trust, OBH 2308 LLC, RRR

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Please, dear reader read carefully. The irony cannot be lost on you that every penny that disappeared from the various Platinum entities, wound up in the wives’ funds, accounts, trusts, real estate holdings, jewelry foundations etc.

Mark Nordlicht has all but convinced the courts that he is penniless. That’s probably true. But Dahlia Kalter Nordlicht? She has way more than 2 nickles to rub together.

Have you forgotten about the Herbert Stettin case from 2011? Have you not considered the defendants in that case and the connections among them?

See for yourselves: 

https://www.law360.com/articles/268406/rothstein-trustee-goes-after-hedge-fund-heads-for-40m

Fast-forward to 2016 and The Talk of the Sound:

Two New Rochelle Men Among Seven Indicted In A $1 Billion “Ponzi-esque” Investment Fraud

The Wall Street Journal reported that Platinum’s investors were focused in the observant Jewish community. Nordlicht and his wife Dahlia Kalter-Nordlicht are active members of Young Israel of New Rochelle, both are board members of the Westchester Torah Academy located in New Rochelle, NY and endowed The Fred Kahane Technological High School, an Americans for Israel and Torah (AMIT) school in Ashkelon Israel.

Three of those arrested attended Yeshiva University, according to The Commentator, the school’s official student newspaper,  Mark (Meir) Nordlicht graduated from Yeshiva University in 1990 with a bachelor’s in philosophy. Uri Landesman attended Yeshiva University in the 1980s. David Levy graduated from Yeshiva University in 2006.

According to news reports, Mark Nordlicht was considering taking out a second $7.5M mortgage on his home.

As the New York City-based hedge fund began to go under in December 2015, Nordlicht wrote that he was thinking about using $7.5 million from a second mortgage on his home to try to keep it afloat, the papers say. He also was considering fleeing the country, they say.

That property could not have been his primary residence in New Rochelle which is estimated to be worth about $1.5 million and is held in a trust. As Platinum Partners faltered, some time between 2012 and 2016, the property at 245 Trenor Avenue was transferred from Dahlia Kalter, Nordlicht’s wife and a past employee of Platinum Partners, to Kalter Gilad Cook Islands Trust Limited.

The property may have instead been one in Florida owned by OBH 2308 LLC, a limited liability company which owns 10295 Collins Ave Unit 2308 at One Bal Harbour Ritz Carlton. The 5,266 square foot apartment, with 4 bedrooms and 5 bathrooms overlooking the ocean, is currently listed for sale at $9,995,000, The realtor describes the property as “the largest unit for sale in the building”.

The Principal of OBH 2308 LLC is Dahlia Kalter.

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.

 

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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.

A Platinum Receiver – The Filings so Far and the Connections to be Made

On December 19, 2016, the United States Attorney’s Office for the Eastern District of New York announced the indictments of seven individuals who were then or were previously associated with Platinum Partners.  The same day, the U.S. Securities and Exchange Commission filed a civil complaint in the United States District Court for the Eastern District of New York against the same individuals, along with certain Platinum corporate entities.  Together with its complaint, the SEC asked the Court to appoint a Receiver over several Platinum entities affiliated with Platinum Partners Credit Opportunities Master Fund LP and Platinum Partners Liquid Opportunity Master Fund LP.  The Court appointed Bart M. Schwartz as Receiver.  Important filings in these cases are linked below.  This page will be updated regularly.

U.S. Securities and Exchange Commission Filings

A Platinum Array of Victims – Arrests are Not Enough

File photo of rescue crews surrounding Black Elk oil platform in the Gulf of Mexico
Rescue crew surrounds an oil platform operated by Houston-based Black Elk Energy which exploded off the coast of Louisiana in the Gulf of Mexico, in this November 16, 2012 file photo. REUTERS/Sean Gardner/Files

 

Platinum Partners arrests are scant consolation for alleged victims

By Lawrence Delevingne | NEW YORK

When six executives of Platinum Partners, including founder Mark Nordlicht, were arrested on Monday on federal charges of running a more than $1 billion hedge fund fraud, people who had long alleged they were harmed by the New York-based firm felt some vindication.

But the possibility that each defendant might face prison terms has done little to soothe their continued anger over losses that may never be recouped.

One such person is Houston-based energy entrepreneur John Hoffman. In the charges, the U.S. Department of Justice and the U.S. Securities and Exchange Commission alleged what Hoffman had long believed – that Platinum, with the help of a seventh man also arrested, Jeffrey Shulse, had illegally profited from the failure of Hoffman’s company, Black Elk Energy Offshore Operations LLC. 

Hoffman said in a telephone interview on Wednesday that he did not expect to recover anything and that his involvement with Platinum had cost him the company he founded and at least $500,000 in legal fees. He also described stress-related health problems and difficulty fundraising for a new energy venture.

Hoffman expressed anger that thousands of Gulf Coast-area families were stiffed: mostly the small businesses that were never paid for work on Black Elk’s oil and gas drilling platforms before it went bankrupt amid lower oil prices and Platinum’s alleged corporate cash grab.

All six Platinum executives pleaded not guilty and an attorney for Shulse told Reuters he plans to do the same. A spokesman for Platinum declined to comment for this article, and the firm has not offered any public comment. A person familiar with Platinum’s thinking told Reuters in April that the firm always acted within the limits of the law despite its aggressive investment approach.

Launched in 2003, Platinum was known as a high-performing hedge fund manager that backed struggling companies and employed esoteric investment strategies such as litigation finance and high-interest consumer loans. (Reuters Special Report: reut.rs/1TRovwx)

The government charges on Monday included allegations of over-valuing assets and misleading clients on the health of the firm. The government demanded that the hedge fund return money that was allegedly illegally taken from clients and Black Elk bondholders, and pay related penalties.

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