A Platinum Receivership – The Millions Lost, the Millions Siphoned Off and the Trusts of the Partners who Remain Wealthy

Follow the Platinum Partners’ Money to Distribute Assets to Investors

The Platinum Partners Receivership has been published and it is a treasure trove of information. Due to privacy concerns of some of the investors, a list of investors has not been published but they were likely people who trusted the partners. Allegedly, $300 Million in assets is gone. We believe, those assets can be found in the private wealth of the partners, their families, their children and their yeshivas. We believe that every penny should be recoverable if the money trail is followed. We also believe that each of the partners should be forced into an involuntary bankruptcy proceeding to provide liquidity to refund the investors. The corporate veil(s), many veils should be broken, wholeheartedly and with gusto. If the partners are allowed to enjoy their wealth as their victims were stripped of the value of their investments, justice will not have been served.

http://docket_pdfs.gcg.net/PTM/16-06848/450_06848.pdf

VI. LIABILITIES OF THE RECEIVERSHIP ESTATE

Pursuant to Paragraph 47 of the Receiver Order, below, please find a description of the
Receivership Estate’s potential liabilities as of December 31, 2018. Certain liabilities described herein, particularly those pertaining to creditor claims, are uncertain, and will remain as such until the Receivership Team concludes its claims analysis and forensic investigative processes.

A. Creditors. The creditor-related information presented below is based on prior management’s books and records, which are as of December 19, 2016, the date Platinum entered receivership. The Receivership Team will test the veracity of these numbers as part of its ongoing forensic investigative and upcoming claims analysis processes. The validity and amount of claims may differ materially from the values reported by prior management.

 PPCO Lenders: PPCO owed $65.9 million to three (3) lenders.
 PPCO Unpaid Redemptions: PPCO owed $28.2 million to 21 PPCO unpaid
redeemers.
 PPLO Unpaid Redemptions: PPLO owed $6.5 million to three (3) PPLO unpaid
redeemers.
 PPCO and PPLO Outstanding Payables: PPCO and PPLO had $2.7 million of
outstanding payables attributable to 23 vendors.

Case 1:16-cv-06848-BMC Document 450 Filed 01/23/19 Page 33 of 37 PageID #: 11118
34

B. Accrued Administrative Expenses. As of December 31, 2018, accrued, unpaid
administrative expenses amount to approximately $4.5 million. These administrative expenses primarily consist of accrued and unpaid professional fees. In addition to these unpaid administrative expenses, the Receivership Estate has budgeted approximately $130,000 per month to pay the remaining in-house Platinum staff and to cover other operating expenses. The Receiver is continually looking to reduce these and other expenses.

C. Disbursements to Preserve the Value of Certain Investments. The Receiver
expects to incur expenses amounting to at least $110,000 per month to preserve the value of the LC Energy investments, pending the conclusion of the associated sales processes. The Receiver expended $386,000 with respect to the LC Energy asset during the Reporting Period.

D. Investors. The Receiver currently believes that there are 286 known investors.
The aggregate net cash invested by investors in the Platinum Entities is approximately $310,000,000. After conferring with the SEC, at this time, to protect the privacy of the investors, the Receiver is not filing with this Fourth Status Report a list of the names of each investor and the amount of such investor’s net cash investment. The actual amount and value of the investors’ claims is ultimately dependent upon the net recovery obtained on Receivership Property. The amount of “net cash invested” may be materially different than the amount ultimately received by the investor.

VII. CLAIMS ANALYSIS

Continue reading

The Platinum Investors and the Ultimate Swindle, Blame it on the Victim? And More to Come

The Investors Knew the Risks? Nonsense… Another Platinum Colored Misrepresentation – To the Legal and Judicial Community – Follow the Money

 

Opinion and Analysis – LM – 30.4.19

The claim that investors in the litany of Platinum swindles [Echo Therapeutics, Black Elk, Seabrook’s COBA Fund , Glacial Energy Holdings and Agera Energy LLC, among many others] knew the risks is absurd, utterly absurd. Perhaps if one argues that they should have known that they were dealing with swindlers and therefore the Ponzi Scheme was foreseeable, there is some logic; but no. Such an argument does not hold water, particular in the environment of fiduciary duty and fair dealing. The entire premise is akin to blaming any victim for a crime perpetrated upon him or her. The major difference between the Platinum Ponzi Schemes and brutal, violent crimes is that the investors in Platinum Partners were disavowed of their finances with a measure of finesse, charm and savior faire.  These guys did a better job of conning their victims out of money than Madoff. Madoff’s reputation preceded him, the impossible-to-believe-he-could-do-it criminal. With the Platinum Partners, for those of us who did years of research, it was obvious. For investors, the elegance of the schemes was extraordinary, which makes these crimes almost worse than a violent serial robber, thief or rapist. These guys based their entire swindle on betraying the trust of others.

While Platinum Partners’ investor group was comprised of a fair share of “big-boys” people who were accredited investors or otherwise knew the rules of the investment road, many who were dragged in were friends and people who trusted Platinum’s partners. They “put a little faith in their friends,” far too much faith. Many still do. And those entrusted with the money were pathological scammers, godless characters who thought little of their victims. Friends were nothing more than income sources at the end of the day; or a name to drop for legitimacy purposes. 

Mark Nordlicht, Murray Huberfeld, Uri Landesman, David Levy are brilliant financiers, master manipulators, incredibly savvy and largely charming individuals. Jona Rechnitz and Jeremy Reichberg were peddling the Platinum wares with their friends in high places offering up a glamorous life to anyone dumb enough to take the bait. Jona Rechnitz began his career working side-by-side with diamond magnate Lev Leviev, one of the initial investors in Platinum through Africa Israel, a class-A mentor and the basis for an unbeatable resume. That Jona Rechntiz has made lying into an art form was just another piece to the greater picture of how this entire scheme was orchestrated.

The whole Platinum Partners endeavor had an air of legitimacy that even most savvy and experienced investors would have had a hard time seeing through.  The Platinum Partners’ partners had friends and friends of friends and big names behind them. They painted a very rosy picture and very few high level newspapers covered the unrealistic nature of Platinum’s returns, one of the exceptions being Reuters (Reuters).   

And Platinum chose their investors wisely. People like Norman Seabrook, the head of COBA, were simply not savvy enough to understand that all of the wining and dining was a show of just how stupid Murray Huberfeld thought Seabrook was. We have opined on this before. Sadly, Seabrook was nothing more than a dumb “shvartze” in the eyes of Huberfeld and Nordlicht. It’s a horrible and racist comment, admittedly. But, when examining the nature of the Platinum swindle, it’s simply reality. Seabrook did not have the financial savvy to understand he was being completely steamrolled with the investment being offered to him. And, well… the wining and dining and show of wealth, the trips to Israel and greetings from the un-“pious ones” at the Western Wall was too much temptation when coupled with the returns he was likely being promised and the side money and items being gifted. And with his investment into Platinum, the partners could turn around and show the next guy that they had value. If the head of the COBA investments gave his blessing to the fund, it had to be legitimate. 

The NFL football players, and the payday loans offered to them by a link of Platinum associated entities, was another of the many schemes, a little more unsettling than the others. Investors who were inserting the flow of capital while being guaranteed returns of high interest and fees from NFL players who were on strike and would inevitably be paid. It was a “no-fail” cool trick. While the football players were paying interest rates and savage fees, the Platinum or associated investors were being showered with money. The Platinum associated fund that offered the loans and corresponding investment opportunities was allowing its investors a proverbial taste of fine wine, enticing as it was, and easy money. Little could those investors know that they were being hustled into other more dangerous financial waters.  

While the payday loan piece of the Platinum Partners story has not gotten much press coverage in the grand Platinum fraud, nor have the football players involved, neither the investors nor the players themselves were savvy enough to know that they were being disenfranchised. The players sadly were vulnerable to both the NFL on one side and the fund that was backing them while they were on strike on the other. And these guys did not have the financial savvy or upper-crust white wealthy background to grasp that the millions they were to receive from the NFL was all too easily spent. The Platinum Partners were sharp enough in this game to know, understand and manipulate the mentality, the vulnerabilities and the financial struggles of these players.  Many of those players lost thousands of dollars. All the while, a bunch of hedge fund guys and their investors sat in cushy Herman Miller chairs in their gilded offices and laughed all the way to the bank. The investors who were smart enough to get out might not have lost their shirts. Those who decided to try the next proverbial bottle of wine, were hooked both to the adrenaline and to the returns, little did they know, unless they did. 

And what of the religious investors who saw the Yeshiva connection as a sign of integrity? Torah Usemorah loaned money to a failing hedge fund while the partners donated money to a different yeshiva, or not. Of course if a Yeshiva is going to loan money to a hedge fund, the fund must be worth its weight in salt, yes? No. This was just another part of the swindle. It gave the entire venture a different level of credibility, that of the religious kind.  How were investors supposed to know that the Platinum Partners’ promised returns were a sham when the men in charge looked like G-d-faring philanthropists? 

They couldn’t. 

The picture that was painted was glorious and quite irresistible to investors and adrenaline junkies who sought high returns. Huberfeld’s friendships with Charlie Kushner (albeit a red flag for some) gave him some Wall Street cred. Few remembered that he had hired someone to take his SEC exams years earlier. And the forgiveness he got from the SEC was enough to show the world that if he was donned with his various SEC credentials, whatever he did was worth the forgiveness. And it was not. Someone who does ample due diligence would have stayed far away. But while Murray Huberfeld was convincing his Chabad friends to invest, Jona Rechnitz was peddling Platinum investments to people via his connections with seemingly credible organizations (Simon Wiesenthal Center, the Brooklyn Shomrim, his multiple connection to de Blasio and his Leviev history).

Mark Nordlicht was using his connections to the Westchester Torah Academy and a variety of his long-standing friendships with prominent Jewish families made him look like a reliable place to put some money. He wasn’t. He isn’t. He will never be. We will be surprised if Westchester Torah Academy doesn’t lose its shirt in the end also.

To blame the investors by stating that they knew the risks is a travesty, an affront to morality, ethics and the law. These men spent years and years cultivating and perfecting their ability to defraud the financial system, almost like a master fly fisherman does as sport. The difference is the the fly fisherman is an honest sportsman and doesn’t generally turn around and blame the fish for taking the bait. 

The outcome of this case with all of its many tentacles and the various webs woven will determine how the next aspiring fraudster views the investment climate. If the SEC, the judicial system, and the taxing authorities do not take this seriously and are somehow swayed by the argument that “they knew the risks” the next fraud will be worse and it will likely come from the same people who will either be directly guilty or guilty by mentoring.

Platinum’s partners knew the “friarim” (loose translation – “suckers”) in the system and they are playing those adjudicating these cases for absolute fools. Our financial system is based upon trust. The Investors, defrauded of millions should be able to trust in the system and get justice. The money that was filtered out of these funds can be traced to the personal accounts and trust of the partners, their friends, their shuls or their children. It is not gone and it should be recovered with whatever means are necessary. No one should be fooled here.

To the legal and judicial community, you now know the risks of letting this go without justice.

 

LAW360 – By subscription only

Ex-AG Mukasey Won’t Testify At Platinum Founder’s Trial

Law360 (April 26, 2019, 9:10 PM EDT) — A New York federal judge accused Platinum Partners co-founder Mark Nordlicht on Friday of trying to “dazzle” a jury by having former U.S. Attorney General Michael B. Mukasey testify at his criminal trial, knocking down a subpoena targeting Mukasey and another attorney at Debevoise & Plimpton.

U.S. District Judge Brian M. Cogan granted Mukasey’s bid to quash a subpoena from Nordlicht, on trial for fraud related to the $1 billion hedge fund’s collapse, who’d said in a letter one day earlier that he wanted Mukasey, now of counsel for Debevoise, to testify about his representation of Platinum during a five-month period in 2013 that was “during the heart of the alleged conspiracy.”

Nordlicht said in his letter that “the mere fact of [Mukasey’s] representation is critical and of course has bearing.”
Read more at: https://www.law360.com/securities/articles/1154097/ex-ag-mukasey-won-t-testify-at-platinum-founder-s-trial?

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.

A Platinum Gilded Friendship – Mark Nordlicht and Rob Astorino going back 2013

Astorino 2013

FRIENDS OF ROB ASTORINO

Dear Reader:

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.

LM

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.

Echo Therapeutics Inc, one in a String of Platinum Decimated Companies…. Answering Some Questions.

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:

  1. 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.
  2. 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.
  3. 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.