Platinum Partners – One Description

Unbelievable description of the Platinum fraud.

http://www.houstonchronicle.com/business/article/The-fall-of-Black-Elk-Energy-10855360.php

The fall of Black Elk Energy began in New York City nearly a decade ago, with a meeting, a handshake and a loan.

Looking back, those were halcyon days for John Hoffman, founder of the Houston oil and gas company – before an explosion tore through an offshore rig and killed three workers, before federal investigators accused the hedge fund that made the loan of bilking investors, and before one of his top executives turned on him.

Hoffman, forced out of Black Elk in 2014, is now at the helm of a new company, and barely keeping the doors open. Black Elk is bankrupt and facing criminal charges in a federal case awaiting trial. And Hoffman’s one-time backer, Platinum Partners, is under federal indictment, accused of pillaging Black Elk and the hedge fund’s investors.

Last month, federal investigators arrested six Platinum executives and the man who replaced Hoffman as CEO, alleging they overvalued Black Elk’s assets, concealed “severe cash flow problems,” extracted high management fees and illegally diverted to Platinum more than $95 million owed to creditors holding Black Elk’s bonds. Platinum attorneys did not return calls seeking comment.

“I didn’t think (Platinum) had the guts to take it all,” Hoffman said in an interview. “I thought they’d take a large share. Ends up they took it all.”

The rise and fall of Black Elk Energy highlights the risks of the oil and gas business, which demands piles of cash that can quickly vanish through bad luck, bad planning, bad management or all three. It also reveals a shadow banking system that lends at double-digit interest rates to firms desperate for capital and has few qualms about gutting companies when they don’t perform.

BLACK ELK TIMELINE

MONEY TRAIL

2003 Investment manager Mark Nordlicht starts the hedge fund Platinum Partners in New York.

2007 Engineer John Hoffman and a partner open Black Elk Energy in Houston.

2008 Hoffman and partner fly to New York looking for capital; meet Platinum executives.

2009 Black Elk buys 35 oil fields on 71,000 acres from the Houston company W&T Offshore for $30 million, the first major purchase of many to come.

2011 Black Elk ends year with 240 oil production platforms in the Gulf of Mexico on 300,000 acres, producing about 14,500 barrels of oil and gas per day.

2012 Workers welding on a company platform in the Gulf ignite fuel vapors, leading to a string of exploding tanks and killing three.

2013 Black Elk signs drilling contracts worth about $90 million, but Platinum reneges on promises to send capital and Black Elk can’t pay the contractors.

2014 Renaissance Offshore, a Houston production company, buys Black Elk oil fields for $170 million; Platinum engineers a bondholders vote, federal investigators say, that diverts $95 million in proceeds to Platinum rather than contractors and bondholders.

2015 Federal prosecutors file involuntary manslaughter and other charges stemming from the Gulf explosion against Black Elk and contractor Grand Isle Shipyards. Black Elk files for bankruptcy.

2016 The U.S. attorney of the Eastern District of New York announces the indictment of six Platinum executives and one Black Elk executive, alleging they overvalued Black Elk assets, concealed “severe cash flow problems,” extracted high management fees and illegally diverted to Platinum money owed to bondholders.

Hoffman now says he had no idea of the financial disaster he was walking into when he flew from Houston to New York in 2008 and made a deal with Platinum. He thought he had found a deep-pocketed partner to fuel his vision for Black Elk at a time when loans were hard to come by. Even after disaster struck an offshore rig in the Gulf of Mexico, Platinum seemed to have the money and confidence to right Black Elk and put it back on a path to success.

But one day in 2014, Hoffman got suspicious pretty quickly.

Knocking on doors

The following account is based on interviews, financial filings and court records in civil and criminal cases:

Hoffman started Black Elk in 2007, raising money from private investors and using the cash to buy shallow-water oil fields in the Gulf for bottom-barrel prices from companies that no longer wanted them. Black Elk reworked the old wells with updated technology and boosted production.

Not a year later, the U.S. economy crashed, and oil prices with it. In late 2008, Hoffman and co-founder James Hagemeier flew to New York City to nail down capital. Over the course of two months, they knocked on the doors of at least 50 investment firms.

“It was a tough time to look for funds,” Hoffman said.

Finally, a middleman suggested the two meet the executives of the New York hedge fund Platinum Partners.

Platinum was founded in 2003 by Mark Nordlicht, who started as a young trader in the pits of the New York Cotton Exchange and opened two other investment firms before Platinum. He and Platinum gained a reputation for investing in risky companies and returning double-digit profits for investors.

Platinum offered Black Elk two loans together worth about $50 million – at 20 percent interest. But Platinum’s business model didn’t just loan money to desperate companies. The loans came with “kickers,” or clauses that gave Platinum growing ownership stakes in the firms over the lives of the loans.

“We were new and so small,” Hoffman recalled. “We didn’t draw much interest from the bigger players. Platinum seemed like a good fit.”

In 2009, Black Elk began a buying spree with Platinum’s cash, later supplemented by $150 million raised in a bond sale. By 2011, it owned leases on 300,000 acres in the Gulf of Mexico that produced about 14,500 barrels of oil and gas per day, according to securities filings.

“All I know was when we had an acquisition, Mark Nordlicht said, ‘Don’t worry about it,’ ” Hoffman said. “And he always had the money.”

By 2012, Black Elk, with a market value that Platinum estimated at nearly $300 million, was the largest asset in Platinum’s most successful fund, then valued at $700 million. Then it all unraveled.

In November 2012, workers welding on a Black Elk platform ignited fuel vapors, leading to a string of exploding tanks. The explosion killed three workers, injured at least two others and spilled hundreds of gallons of oil into the Gulf.

The fall out was immediate for Black Elk’s finances. Oil production fell. Legal fees mounted. (In 2015, federal prosecutors filed involuntary manslaughter and other criminal charges against Black Elk and contractor Grand Isle Shipyards, which both pleaded not guilty. Hoffman was not charged individually.)

BUSINESS

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Black Elk’s lenders reduced lines of credit and demanded more collateral. Black Elk started selling assets to raise cash.

Still, in December 2012, Hoffman flew to New York to present Black Elk’s growth strategy to Nordlicht and another Platinum executive, David Levy. Platinum promised as much as $120 million in capital for the company’s 2013 drilling campaign, Hoffman said, and Black Elk signed drilling contracts worth about $90 million with energy services companies.

Four months later, Platinum reneged on its pledge, leaving Black Elk unable to pay the contractors.

“It was just such a deep hole,” Hoffman said. “We couldn’t dig out of it.”

‘This is code red’

By the start of 2014, Black Elk had a new chief financial officer, Jeffrey Shulse, a lawyer and accountant whom Hoffman had hired a few years earlier to run a well-plugging company created by Black Elk. Platinum pushed Hoffman hard to make Shulse the CFO of Black Elk, Hoffman said.

Shulse wanted Hoffman out of the company. He wouldn’t comment for this story but said in a court deposition that Black Elk was ineptly managed, spending money it didn’t have on luxuries like boats, helicopters and cigar rooms at the office. Hoffman began secretly tracking and reading Shulse’s every email, Shulse said in the deposition; Shulse hired investigators to see if Hoffman had bugged his office.

Black Elk was by then effectively insolvent, federal investigators said.

Platinum, however, owned a $98 million stake in Black Elk, about 76 percent of the company, according to Hoffman’s files. And Platinum had a plan to get as much money back from the sinking oil company. It ordered Shulse to find a buyer willing to pay $170 million for Black Elk’s seven most valuable oil fields.

Shulse, meanwhile, was secretly trying to get Hoffman’s job. In March 2014, Shulse sent an email to Levy asking to take over as Black Elk CEO – and, according to the indictment, get paid $1 million from sales of the Black Elk’s assets.

“I want to be aligned with Platinum and friends of Platinum,” Shulse wrote in an email seized by investigators. “What’s good for them is good for me.”

Shulse found a buyer, the Houston production company Renaissance Offshore, for the Black Elk holdings. But Platinum still had a problem. The terms of Black Elk’s bonds required the company to pay off bondholders before it did anything else with the money.

Platinum was having its own problems. No longer generating double-digit returns, investors were pulling out money, and Platinum was barely able to pay redemption requests to investors, according to the indictment. Failure to cash in on Black Elk assets would “be the end of the fund,” Nordlicht wrote in an email. “This is code red,” he later said.

By May 2014, Platinum executives decided they had to persuade bondholders to let Black Elk use the sale proceeds for other purposes than paying off the bonds. And that change required a vote of the bondholders.

Hoffman didn’t like the move. But he didn’t oppose it, either. What bondholder “with half a brain,” Hoffman thought, would agree to give up his rights?

Platinum, again, had it figured out. It began buying Black Elk bonds – so that it could vote to pay itself, according to the indictment.

Platinum executives leaked information about Black Elk’s finances, driving down the value of the bonds, which they then bought at healthy discounts, federal prosecutors alleged. By April 2014, Platinum owned $99 million of the original $150 million in bonds, but concealed its ownership, investigators said, by selling all but $18 million to four investment funds that Platinum controlled.

With Platinum and its entities holding most of the bonds, the proposal to spend the cash from the oil field sales as the company saw fit was easily approved.

Ripping TVs off walls

On Aug. 18, 2014, Platinum sent an email to Shulse directing him to wire $70 million to Platinum. Two days later, Black Elk sent another $25 million from the Renaissance sales to Platinum.

The next Monday, Hoffman showed up at Black Elk. The doors were locked and office vacated, he said, and he had to call the building superintendent to get in. What was left of the company had moved in with Shulse’s well service company, which was by then also controlled by Platinum.

Not a week later, Shulse, now CEO, held something of a yard sale in the old office. Afterwards, former Black Elk employees said they went back inside the building. Computers, refrigerators and office furniture were all gone. Trash littered the floor. TVs yanked out of the walls, mounts and all, left fist-sized holes in the drywall.

“What a disgraceful way to go out,” Hoffman said.

By then, Black Elk had laid off about 100 workers, most of its staff.

On Sept. 11, 2014, Platinum authorized Shulse to pay himself a $275,000 bonus. Platinum executives, meanwhile, were paying themselves as well, according to the indictment. From 2012 to 2015, even as Black Elk crashed and Platinum scraped for cash, executives consistently told investors the fund was returning double-digit profits, justifying charges of as much as 20 percent in management and incentive fees, or $111 million in total over the four years, federal authorities alleged.

Many of Black Elk’s contractors were never paid. In August 2015, some filed a petition to liquidate Black Elk through Chapter 7 bankruptcy and use the proceeds to pay creditors. By the following June, Platinum didn’t have enough cash to pay investors trying to pull their money out the Platinum fund.

On Dec. 19, the U.S. Attorney of the Eastern District of New York announced the indictment of seven on fraud and conspiracy charges: Platinum executives Uri Landesman, Joseph Sanfilippo, Joseph Mann, Daniel Small, Levy and Nordlicht as well as Shulse. They all pleaded not guilty.

U.S. Attorney Robert L. Capers, whose office investigated the case, estimated that investors in Platinum’s fund lost $1 billion.

Shulse’s attorney, F. Andino Reynal, said Shulse was told what to do by Platinum.

“He didn’t commit a crime here,” Reynal said. “I’m very confident that once the jury has heard all the facts, they’ll determine he’s not guilty.”

Hoffman’s hands still shake when talking about Platinum. His cheeks still redden. The scandal has hamstrung his new company, P3 Petroleum, which can’t raise money to grow. The company pumps about 50 barrels a day and employs seven workers.

“We’ve been going at it for more than two years now,” Hoffman said. “We don’t have a lot to show for it.”

THE PLATINUM QUESTION – WAS ANYBODY LISTENING?

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.

Huberfeld Ponzi1.3

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.

 

See also:

https://lostmessiahdotcom.wordpress.com/2016/04/13/the-seabrook-connection-investments-gone/

https://lostmessiahdotcom.wordpress.com/2016/04/15/the-long-short-nope-the-dead-undead/

https://lostmessiahdotcom.wordpress.com/2016/04/14/theres-not-enough-time-in-the-day-to-discuss-nordlicht-huberfeld-bodner/

READ FURTHER:

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

Mark Nordlicht – The Line That Says it All

MarkNordlicht

Nordlicht Was 22 When it All Began…. A Serial “Risk Adjusted” Delivery Man is and Always Will Be a “Risk Adjusted” Delivery Man

This line says it all—

“is a multi-strategy hedge fund seeking to deliver risk adjusted returns uncorrelated to any broader market activity

Mark Nordlicht

https://www.platinumlp.com/About_MarkNordlicht#

Mark Nordlicht, Chief Investment Officer of Platinum Partners Hedge Fund, brings over 20 years of experience to the fund. The Platinum Partners Hedge Fund, which Mr. Nordlicht founded in 2003, is a multi-strategy hedge fund seeking to deliver risk adjusted returns uncorrelated to any broader market activity. Mr. Nordlicht is responsible for oversight of all trading, asset allocation and risk management for the company, which is headquartered in New York.
Mr. Nordlicht started his career as the youngest trader in the pits of the New York Cotton Exchange; he was 22 at the time. In 1991, Mark Nordlicht founded Northern Lights Trading and was its general partner until 2000. Northern Lights Trading was a proprietary options firm based in New York which employed traders in cotton, coffee, natural gas, crude oil, gold and silver. From 1997 to 2001, partially overlapping his time at Northern Lights, Mark Nordlicht was a founder and managing partner of West End Capital, a New York-based money management firm.

Mark Nordlicht, Westchester Torah Academy – Hogwarts and Platinum’s Magical Missing Money

 

projectpartners

The Mark Nordlicht Connection… Following the Money?

Mark Nordlicht was the founder of an organization called the “Affordable Jewish Education Project” (www.ajeproject.com).  The address for the AJE Project was the New York address for Platinum Partners, same address and same floor. There is no mistaking that they are one in the same. Platinum owns the entire floor.
Yet, interestingly,  all mention of Nordlicht has been removed from the AJE website; and two days ago we were able to find a previous archive page from an earlier capture of the site with Nordlicht’s name on it. As of today, we cannot.
In fact, a glance at the website of the AJE Project makes it look like all but a legitimate organization. That is, with the exception of Nordlicht’s now absent involvement.
Westchester Torah Academy, however, is a link that has not yet been broken.

Continue reading

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.

Continue reading

Platinum and Black Elk – an Explosive Combination

http://www.reuters.com/article/us-platinumpartners-lawsuit-idUSKBN1481BI

U.S. charges Platinum Partners executives with $1 billion fraud

 

Top executives of New York-based hedge fund manager Platinum Partners were arrested on Monday and charged with running an approximately $1 billion fraud that federal prosecutors said became “like a Ponzi scheme” as its largest investments lost much of their value.

Mark Nordlicht, Platinum’s founding partner and chief investment officer, was arrested at his New Rochelle, New York, as federal prosecutors in Brooklyn accused him and six others of participating in a pair of schemes to defraud investors.

“The charges relating to these two schemes highlight the brazenness and the breadth of the defendants’ lies and deceit,” Brooklyn U.S. Attorney Robert Capers told reporters.

Led by Nordlicht, Platinum, the subject of a Reuters Special Report in April, was known for years for producing exceptionally high returns by taking an usually aggressive approach to investing and fund management. (reut.rs/2h36duU) (reut.rs/1TRovwx)

But a 48-page indictment said since 2012, Nordlicht and four other defendants defrauded investors by overvaluing illiquid assets held by its flagship Platinum Partners Value Arbitrage Fund LP, mostly troubled energy-related investments.

This caused a “severe liquidity crisis” that Platinum at first tried to remedy through high-interest loans between its funds before selectively paying some investors ahead of others, the indictment said.

“So to some extent, there is a Ponzi-esque aspect to this scheme,” Capers said.

Prosecutors said David Levy, Platinum’s co-chief investment officer, and Uri Landesman, the former president of the firm’s signature fund, also participated in the scheme, which prosecutors said allowed Platinum to extract more than $100 million in fees.

Nordlicht, Levy and Jeffrey Shulse, former chief executive officer of Platinum’s majority-owned Black Elk Energy Offshore Operations LLC [BLCELB.UL], also schemed to defraud bondholders of Black Elk, a now-defunct Texas energy company, out of $50 million, prosecutors said.

The indictment said the scheme involved using a group of reinsurance companies called Beechwood, partially controlled by Platinum’s principals, to rig a bond vote and pay the hedge fund manager ahead of creditors.

A Platinum spokesman declined to comment. Nordlicht’s lawyer did not immediately respond to requests for comment. Michael Sommer, Levy’s lawyer, said he looked forward to clearing his client.

Lawyers for the other defendants did not immediately respond to requests for comment.

Founded in 2003, Platinum until this year had more than $1.7 billion under management, with more than 600 investors, authorities said. Its Value Arbitrage fund reported average returns of more than 17 percent from its inception, according to prosecutors.

This year, a series of investigations tied to Platinum came to a head. The firm hired an independent monitor in July to unwind its funds, and a Cayman Islands court in August placed its main offshore funds into liquidation.

Those moves came after the June arrest of Murray Huberfeld, a longtime Platinum associate, on charges in Manhattan federal court that he orchestrated a bribe to the head of the New York City prison guards’ union, Norman Seabrook, to secure a $20 million investment with the firm.

Seabrook pleaded not guilty, as did Huberfeld who was also arrested.

Two weeks later, the FBI and U.S. Postal Inspection Service raided Platinum’s Manhattan offices in a separate fraud investigation that culminated in Monday’s indictment.

Others indicted on Monday include Joseph Sanfilippo, Value Arbitrage’s former chief financial officer; Joseph Mann, a former Platinum marketing employee; and Daniel Small, a Platinum managing director.

The U.S. Securities and Exchange Commission said on Monday that it was seeking a court-appointed receiver for funds managed by Platinum Credit Management, the firm’s second-largest vehicle after Value Arbitrage.

The case is U.S. v. Nordlicht et al, U.S. District Court, Eastern District of New York, No. 16-cr-640.

 

The Platinum Plethora of Indictments –

104175941-2ed1-sa-platinumpartners-i-121916-600x400

US charges hedge fund founder, others with $1 billion fraud

http://www.cnbc.com/2016/12/19/us-prosecutors-charge-platinum-partners-ceo-nordlicht-and-six-others-with-securities-fraud.html

Top executives of New York-based hedge fund manager Platinum Partners were arrested on Monday and charged with running an approximately $1 billion fraud that federal prosecutors said became “like a Ponzi scheme” as its largest investments lost much of their value.

Platinum, led by Mark Nordlicht, for years was known for producing exceptionally high and consistent returns by taking an usually aggressive approach to investing and fund management, as outlined by a Reuters Special Report in April.

“As alleged, Nordlicht and his cohorts engaged in one of the largest and most brazen investment frauds perpetrated on the investing public,” Brooklyn-based U.S. Attorney Robert Capers said in a statement. The charges detailed schemes that included exaggerating the value of their investments, paying some clients ahead of others and rigging a bond vote in their favor.

 

Nordlicht, Platinum’s 48-year-old founding partner and chief investment officer, was arrested at his New Rochelle, New York, home on charges listed in an indictment filed in federal court in Brooklyn.

Others arrested included David Levy, 31, Platinum’s co-chief investment officer, and Uri Landesman, 55, the former president of the firm’s signature fund, said Federal Bureau of Investigation spokeswoman Adrienne Senatore.

Platinum is already liquidating its hedge funds, two of which have received bankruptcy protection. The firm and some of its executives also face lawsuits accusing them of stealing money or intellectual property from companies they invested in.

A fatal explosion on a Black Elk oil platform in the Gulf of Mexico, pictured here soon after the blast, helped push the company into bankruptcy, but not before major asset sales that benefited Platinum Partners ahead of creditors.

Sean Gardner | Reuters
A fatal explosion on a Black Elk oil platform in the Gulf of Mexico, pictured here soon after the blast, helped push the company into bankruptcy, but not before major asset sales that benefited Platinum Partners ahead of creditors.

The nearly 50-page indictment on Monday said that since 2012, Nordlicht, Levy and Landesman schemed to defraud investors by overvaluing illiquid assets held by its flagship Platinum Partners Value Arbitrage Fund LP, mostly energy-related investments hit by the dramatic decline in oil prices.

This caused a “severe liquidity crisis” that Platinum at first tried to remedy through high-interest loans between its funds before selectively paying some investors ahead of others, the indictment said.

Nordlicht, Levy and Jeffrey Shulse, former chief executive officer of Platinum’s majority-owned Black Elk Energy Offshore Operations, also defrauded the Texas energy company’s bondholders, the indictment said.

Black Elk is now defunct. A remaining litigation trust is attempting to claw back money from Platinum and its executives over a scheme, described in the U.S. Department of Justice charges on Monday and by Reuters in April, that used the Beechwood group of reinsurance companies to rig a bond vote and pay the hedge fund manager ahead of creditors.

A Platinum spokesman declined to comment. Nordlicht’s lawyer and a Beechwood spokesman did not immediately respond to requests for comment.

Michael Sommer, Levy’s lawyer, said he looked forward to clearing his client’s “good name.”

Lawyers for Shulse and the other defendants could not be immediately identified.

Founded in 2003, Platinum until this year had more than $1.7 billion under management, the indictment said. The Value Arbitrage fund reported average returns of more than 17 percent from its inception, according to prosecutors.

But this year, a series of investigations tied to Platinum came to a head. This led the firm to hire an independent monitor in July to unwind its funds, and a Cayman Islands court in August placed its main offshore funds into liquidation.

Those moves came after the June arrest of Murray Huberfeld, a Platinum associate who prosecutors say was a founder, on charges in Manhattan federal court that he orchestrated a bribe to the head of the New York City prison guards’ union, Norman Seabrook, to secure a $20 million investment with the firm. Both have pleaded not guilty.

Two weeks later, the FBI and U.S. Postal Inspection Service raided Platinum’s Manhattan offices in a separate fraud investigation that culminated in Monday’s indictment.

Others indicted on Monday include Joseph Sanfilippo, Value Arbitrage’s former chief financial officer; Joseph Mann, a former Platinum marketing employee; and Daniel Small, a Platinum managing director.

The U.S. Securities and Exchange Commission said on Monday that it was seeking a court-appointed receiver for funds managed by Platinum Credit Management, the firm’s second-largest vehicle after Value Arbitrage.

The case is U.S. v. Nordlicht et al, U.S. District Court, Eastern District of New York, No. 16-cr-640.