FRIENDS OF ROB ASTORINO
As the current criminal trial against Norman Seabrook and others plays out, our previous statements connecting the dots to Mark Nordlicht, Platinum Partners, Echo Therapeutics, Jona Rechnitz, Africa Israel, Black Elk and the current bankruptcy should become more and more obvious.
Anyone who thinks that each movement of Platinum and its ever Philanthropic Partners are exclusive of one another is simply missing the big picture. If someone would take a diamond in exchange for a wide angle lens, perhaps the creditors of Platinum Partners and Echo Therapeutics, the COBA members defrauded of millions might actually get justice and some of their money back. There are no coincidences. And we believe, it’s all a diamond in the rough.
Mark Nordlicht knows his way around paying money for what he wants. Let’s not be naive. Neither you nor him were born yesterday.
The below is an article that was posted in Valuewalk. The author asks some obvious and reasonable questions. Taken in a vacuum, one might wonder. However, when viewed through the looking glass of Platinum corporate savagery, the answers to those questions take on a whole new perspective.
Our comments are in red. – LM
Echo Therapeutics Inc (ECTE) – A Stock With No Revenue And A Short Catalyst
Platinum Partners is the largest investor in Echo Therapeutics (common, warrants, pref and debt). Below is the author’s take on the stock itself, but it raises some bigger questions regarding Platinum such as:
- why was platinum (a $1 billion fund) repeatedly investing in such a micro cap stock. Because as part of Platinum’s strategy, Platinum acts as the savior “institutional investor,” proceeds to increase value through name recognition, to take control, divest the company of its most valuable assets and equity and then to tank the stock and leave nothing for investors. Most likely in bankruptcy, Platinum repurchases the company at a substantial discount or holds onto the assets and sells them.
- How did Platinum value its investment in the warrants and preferred as there is no “market” for these illiquid investments. The value is an arbitrary number intended to guide other investors who view Platinum’s investment as a benchmark. As you know there were some questions about how Platinum valued some of its other investments. See Black Elk and Optionable, Echo Therapeutics and dozens if not hundreds of others. They all follow the same pattern of setting a benchmark, enticing other investors to increase capital thereby increasing value and then tanking the company by divesting it of its assets through a series of tender offers, mergers, special purpose vehicles or strategic partners. In Echo’s case it was a Chinese partner who made promises of Chinese FDA approval to appear legitimate.
- Did Platinum invest in ECTE while at the same time preventing Platinum investors from withdrawing from the fund (aka failing to honor redemption requests). Most likely or they created a class of shares in which they too were investors and then voted one class over the other thereby diluting the equity for the second class. That was followed by removing the value through a series of tenders, mergers, corporate takeovers, strategic partnerships…
Echo Therapeutics Inc (ECTE) – An Overvalued Stock
Echo Therapeutics (ECTE) has no revenue, is losing money, is facing delisting from the Nasdaq exchange, needs capital, recently filed a shelf offering (very late in the day on a Friday!) and faces competition from much larger industry competitors. According to the latest 10Q, the company had only $42k of unrestricted cash (not much cushion for a company that burns over $1mm per quarter) yet boasts an equity market cap of almost $35 million (using the 20 million shares, which includes convert pref,…most data sources like yahoo and Bloomberg use only 11 million shares outstanding). The company also expects to have negative cash flows for the foreseeable future as it funds its operating losses and capital expenditures. Echo Therapeutics is up 25% YTD and up 100% from its 52 week low. This was not the case initially. The software had value. The company was a Platinum target from start to finish.
To make it an even more attractive short candidate, consider that its largest shareholder is Platinum Partners, the fund that one of its executives has been accused of paying bribes to a union boss in exchange for an investment and the same fund that yesterday the FBI raided on reportedly as part of an investigation into Platinum’s valuation of its hard to value illiquid assets. It has also been reported that Platinum will be liquidating some or all of its funds (which makes the short even more interesting). Finally, it has been reported that Platinum failed to honor redemption requests from investors and that Platinum has defaulted on a $30 million loan from New Mountain Capital…in other words, Platinum appears to have some very serious problems and their future is uncertain. Platinum Partners gets involved to give the company seeming legitimacy, name recognition, institutional investor interest thereby enticing other investors.
Furthermore, Platinum’s investment (and ECTE’s market cap) are larger than it might initially appear as most of Platinum’s investment is in the form of convertible Preferred stock, so the number of shares outstanding is, theoretically larger than it appears on the cover of the 10q. In addition there are Blockers limiting the number of shares that the preferred can be converted into, so the ownership table in the proxy table understates Platinum’s true ownership, although the footnotes give more accurate information. Precisely why their pattern of corporate savagery works.
Echo Therapeutics is trying to develop a non-invasive (aka no needles), wireless, continuous glucose monitoring system. You can see the latest presentation at http://echotx.com/investors/investor-relations/ . The company has been developing its products for several years now but still has no commercially viable product. It probably doesn’t help that they spend more on SG&A than they do on R&D and that they compete with companies with significantly greater resources. ECTE does talk about getting approval from the Chinese FDA (we have our doubts) and the company does put out press releases on things that we believe are of limited real value. Promises of Chinese FDA approval was a ruse to add seeming legitimacy to its choice of strategic partner, also a Platinum related entity, in China. Meetings were held in China, thereby removing the US entrepreneurs and board members from earshot. To reiterate, the supposed FDA Approval in China was a ruse intended to make the entire scheme appear legitimate, reasonable and even value enhancing.
To avoid delisting from the Nasdaq, by the July 5, 2016 ECTE will need stockholders’ equity above $2.5 million (last quarter it was negative $4.7 million) and to provide projections that it can maintain that amount through June 30, 2017 (remember the company loses money and lost $2.6 million last quarter). ECTE could, theoretically meet the Nasdaq requirements by doing one of 2 things, neither of which would be good for current shareholders: 1) Raise equity through a recently filed (but not yet effective) $25 million shelf, although it is unclear if ECTE has enough time to pursue this option and who would buy the stock or 2) Have Platinum convert some/all of its preferred stock into common stock, although given Platinum’s other problems I’m not sure how focused they are on ECTE at the moment.
In addition to being ECTE’s largest shareholder, Platinum has the right to nominate one director to ECTE’s Board. Platinum’s designee is ECTE’s Chairman, Michael M. Goldberg. Goldberg’s previous biographies indicate he used to work for Platinum. However his employment by Platinum is not mentioned in the bio listed in ECTE’s SEC filings and we wonder why. (Note: Mr. Goldberg is also Board Director for ticker NAVB, another Platinum related company whose stock has cratered recently.) Each and every member of the Platinum team from start to finish is a Platinum person, friend, family member, financial colleague and co-conspirator. This is part of the same Platinum pattern. Platinum Controls all aspects of the entity it takes over. It is carefully planned, reflecting savvy, a clear understanding both of the markets and of investor behavior and a willingness to destroy the most vulnerable, those who began the venture and did not know enough to prevent Platinum from stepping in.
Besides Michael Goldberg, Echo Therapeutics has 2 other non-employee directors, one of whom is Mr. Goldberg’s first cousin. Couldn’t ECTE find a qualified director who was not related to an existing Board member? To be clear, we don’t know either of the Goldbergs nor are we suggesting they have done anything wrong. However, their ties to Platinum (and each other) are red flags for us. They should be huge red flags, warning signs a cause for running in the opposite direction.
Not surprisingly, ECTE has failed to attract much interest from institutional investors. If ECTE is such an interesting investment, why have so many sophisticated investors avoided it? Our opinion is that Platinum owns shares when the company is functioning with moderate returns, dumps those shares into the market, tanking the stock, which serves to make a company appear less financially viable. They then enter as the “legitimate institutional investor” at a lower market price, take over a majority of shares and proceed to acquire control in seemingly legal contracts and transactions then divest the company of its most valuable assets under the guise of trying to rebuild a company. In reality the entire path from start to finish is a well orchestrated ballet, with a chorus of additional dancers waiting at the sideline to step in and steal the show.
Based on the latest proxy as of April 2016 we estimate Platinum’s investment to consist of 783k common shares, 5.6 mm shares (theorectically convertible from preferred stock) and 2.8 million warrants. Clearly exiting its position will be challenging considering the company needs to sell shares too to raise cash and the trading volume is limited. No surprises. It was orchestrated in similar fashion in EVERY other deal that Platinum has entered (see Objectionable, Black Elk and others).
Echo Therapeutics is an overvalued stock where we believe both insiders and the company will need to sell large numbers of shares and we don’t see how either can occur at these prices. Echo Therapeutics can be saved if the Receiver in Bankruptcy sees the company through the looking glass of Platinum’s involvement and facilitates its recovery by denying Platinum and its partners any involvement.
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.
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.
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 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.
For further information:
Platinum Partners arrests are scant consolation for alleged victims
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.
The 18 Cases to Follow – A Thread that Ties Black Elk, Platinum and Optionable, Inc. – oh… and Where’s Bodner?