Platinum Partners, Implant Sciences Shareholders Heats Up
http://www.nasdaq.com/article/platinum-partners-implant-sciences-shareholders-heats-up-20161227-00331
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Implant Sciences Corp. shareholders are seeking bankruptcy-court permission to sue funds affiliated with troubled hedge fund Platinum Partners.
The official committee representing Implant Sciences shareholders last week filed papers asking the U.S. Bankruptcy Court in Wilmington, Del., to authorize it to sue DMRJ Group LLC and Monstant Partners LLC on Implant Sciences’ behalf. According to the shareholders, Implant Sciences has “taken no action” to pursue the legal claims it has against the funds.
The shareholders’ request comes in the wake of the recent arrest and indictment of six Platinum executives on charges of investment fraud. The Wall Street Journal has reported that the Platinum funds, which are liquidating, were a big investor in Implant Sciences.
A representative for Implant Sciences declined to comment Tuesday. Attorneys for the Platinum-affiliated funds, DMRJ and Monstant, didn’t immediately respond to requests for comment.
However, in a Monday court filing, the funds’ attorneys said shareholders are “relying on innuendo, misrepresentations and a lot of ‘where there is smoke there must be fire’ type allegations.” One of the funds’ attorneys has said nothing illegal happened between the lenders and Implant Sciences.
The shareholder committee has asked the Delaware bankruptcy court to consider their request to sue at a Jan. 10 hearing.
Brown Rudnick, the law firm representing the committee, has said such a suit could seek damages of at least $50 million.
Shareholders say their efforts to get the lawsuit off the ground have been stymied by “a substantial” number of missing documents and their inability to interview a Platinum executive who has been arrested.
In Monday’s filing, attorneys for DMRJ and Monstant said they had no control over the arrests that caused the delay in providing the requested paperwork and interviews.
Implant Sciences sought bankruptcy protection in October. In late November, shareholders were authorized to conduct an investigation into Platinum’s dealings with Implant Sciences. Earlier this month, Implant Sciences won court approval to sell its assets to L-3 Communications Holdings Inc. for $117.5 million.
If the shareholders successfully pursue litigation, it could boost the payout to creditors and shareholders in Implant Sciences’ chapter 11 case. The equity group wants to dig deeper into Implant Sciences’ primary source of debt, $86 million in bonds issued to a family of funds managed by Platinum and then converted into equity interests.
Based in Wilmington, Mass., Implant Sciences designs, manufactures and sells systems and sensors that detect trace amounts of explosives and drugs, according to court papers. Its customers include the U.S. Transportation Security Administration, the Canadian Air Transport Security Authority and European airports.
Write to Lillian Rizzo at Lillian.Rizzo@wsj.com
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