Trade – Securities Fraud, Prison Sentence

jesse

NYPOST – http://nypost.com/2017/04/26/ex-jefferies-trader-jesse-litvak-gets-2-years-in-prison-again/

Ex-Jefferies trader Jesse Litvak gets 2 years in prison – again

NEW HAVEN, Conn. — There will be no stay in “Broker Raton” for this bond trader.

After four years and two trials, Jesse Litvak, a former Jefferies bond trader, was sentenced to two years in prison for lying about the price of bonds and ripping off clients — the same punishment he received nearly three years earlier for the same crimes.

In addition to the time behind bars, Connecticut federal judge Janet C. Hall imposed three years of probation and a $2 million fine, which was heftier than the $1.75 million fine he got when originally convicted.

The sentence came at the end of a four-and-a-half-hour court hearing that was hotly contested by Litvak’s team of lawyers. This time around, Litvak wanted 8 months of house arrest at his home in Boca Raton, Fla. — a town so chock full of traders it’s gotten the nickname “Broker Raton.”

Prosecutors, however, wanted to put Litvak in federal prison until 2028. In the end, it was Litvak’s own actions that did him in, Judge Hall said.

“Your victims would not have paid you what they paid you had they known the truth,” she said near the end of the marathon sentencing. “You did this to make more money.”

Litvak, 42, was at the center of a closely-watched Wall Street drama over lying to customers about the price of mortgage-backed securities — and one of the few traders to ever get caught.

His conviction and sentence is likely to have a ripple effect and lead to charges against other traders, and even whole banks, who were involved in the same practice.

The investment bank bigwig was once a rising star at Jefferies, generating major profits for an investment bank that has a notoriously rough-and-tumble culture.

But the boost came at too high a price: In 2013, Litvak was arrested on charges of making $2.25 million in illegal profit between 2009 and 2011 by puffing up the price of bonds he was selling — and ripping off investors in the process.

One of the most damning pieces of evidence against the trader to have come out during the January trial was a chat transcript that Litvak edited to make it look like one customer had paid more for bonds.

He then sent that faked conversation to a second trader at Invesco—in order to get that person to pay the higher price.

Litvak’s lawyer Dane Butswinkas, claimed during in January that the tactics were unsavory — he compared his client to a “used car salesman” — but that they weren’t illegal. Litvak’s clients included large, sophisticated investors like AllianceBernstein, which has nearly $500 billion in assets under management.

That argument ultimately failed to persuade a jury, and he was found guilty of a single count of securities fraud.

In deciding the guidelines to sentence Litvak, Judge Hall considered about $6.3 million worth of fraud over 76 transactions, all but one of which he wasn’t convicted on.

This isn’t the first time that Litvak has faced a prison sentence.

In 2014, the trader was originally found guilty of ten counts of securities fraud in the same 100-year old courthouse, and was sentenced to two years behind bars.

A Manhattan appeals court later tossed the jury’s verdict tossed when it came to light that evidence favorable to his defense shouldn’t have been excluded.

His behavior between trials ended up hurting his chance for leniency. Not only had he been caught sending text messages decrying “dumb juries” and declaring “victory,” but in 2015 he filed a suit against AllianceBernstein trader Michael Canter, who testified against him.

Judge Hall said that that suit in particular may have affected Canter’s demeanor on the stand, since during the second trial he was less enthusiastic and animated.

https://wordpress.com/post/lostmessiahdotcom.wordpress.com/31462

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.

The Platinum Serial – Look Back to Bernie Madoff – Don’t Ignore the Pictures

“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.

http://video.vanityfair.com/watch/vintage-vf-bernie-madoff-s-victims-speak-out

 

For further information:

Madoff Victims’ Payout Nears $7.2 Billion, Trustee Says

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

 

Implant Sciences – Another Platinum Victim

Implant Sciences Shareholders Call for Platinum Partners Investigation

http://www.wsj.com/articles/implant-sciences-shareholders-call-for-platinum-partners-investigation-1479328676

Continue reading

Platinum Partners and the People Involved…. Tickets to Israel, Anyone?

 

If we were the Federal Authorities, we would be focusing on preventing a mass exodus of Platinum Partners’ Principles to Israel.

For more information on the fund click, here.

PLATINUM MANAGEMENT NY LLC- Ratings & Rankings by Symmetric

Mark A. Nordlicht Owner, Co-Cio – Platinum Management (Ny) Llc,Platinum Credit Management Lp, Platinum Liquid Opportunity Management (Ny) Llc January-2002
Paul A. Poteat Chief Technology Officer (All Advisers) June-2007
Gilad Kalter Owner Platinum Mgmt (Ny) Llc,Platinum Credit Mgmt Lp, Platinum Liquid Opportunity Mgmt (Ny) Llc, Bayberry Cf Mgmt Llc June-2007
Naftali Manela Chief Operating Officer (All Advisers) February-2008
Brian Jedwab Owner And Cio Of Bayberry Cf Management Llc June-2007
David I. Levy Owner & Co-Cio Platinum Mgmt (Ny) Llc,Platinum Credit Mgmt Lp, Platinum Liquid Opportunity Mgmt (Ny) Llc January-2015
David Ottensoser Chief Compliance Officer (All Advisers) December-2014
Feng Shi Chief Risk Officer (All Advisers) February-2015
Bernard Fuchs Owner – Platinum Management (Ny) Llc,Platinum Credit Management Lp, Platinum Liquid Opportunity Management (Ny) Llc January-2014
Daniel Mandelbaum Chief Financial Officer (All Advisers) January-2015
Isaac Y. Barber Manging Member Of Marbridge Management Ii Llc March-2015
David I. Levy Owner Of Bayberry Cf Management Llc January-2015
Joseph . Sanfilippo Chief Financial Officer – Platinum Management (Ny) Llc February-2005
Joel . Edelstein Director Of Operations – Platinum Credit Management L.P. December-2009
Joel . Edelstein Director Of Operations – Bayberry Cf Management Llc December-2009
Uri D. Landesman President/Managing Member – Platinum Management (Ny) Llc April-2010
Uri D. Landesman Principal – Platinum Credit Management L.P. April-2010
Uri D. Landesman Owner – Platinum Liquid Opportunity Management (Ny) Llc April-2010
&Quot;Stewart&Quot; (. Kim Chief Risk Officer – Platinum Management (Ny) Llc May-2012
Will W. Slota Chief Operations Officer – Platinum Management (Ny) Llc January-2013

A Platinum Investigation

 

Thompson

EQUITY ALERT: Rosen Law Firm Announces Investigation of Securities Claims on Behalf of Investors in Platinum Partners Funds

 

NEW YORK –(BUSINESS WIRE)

Rosen Law Firm, a global investor rights law firm, announces it is investigating potential securities claims on behalf of investors in Platinum Partners’ funds resulting from allegations that Platinum Partners may have issued materially misleading business information to the investing public.

On June 8, 2016 news outlets reported that a manager at Platinum Partners, Murray Huberfeld, was arrested for allegedly bribing a union leader in exchange for an investment in Platinum Partners. According to the criminal complaint, Huberfeld is a founder and part owner of Platinum Partners and he may have been playing a leading role at Platinum Partners that was not publicly acknowledged by the firm. On June 22, 2016, agents from the FBI and the U.S. Postal Inspection Service raided the headquarters of Platinum Partners. On July 25, 2016, The Wall Street Journal reported that federal agents are not only investigating alleged bribery at the fund, but are investigating the fund for fraud. According to The Wall Street Journal, federal agents are probing whether Platinum Partners misstated values of some of its holdings, probing the firm’s service providers, including auditors who certified its figures, and probing whether, before Platinum Partners suspended redemptions of its main fund, Platinum Partners Value Arbitrage Fund, Platinum Partners had been paying some reported investment gains to exiting investors with money from incoming investors.

Rosen Law Firm is preparing a class action lawsuit to recover losses suffered from investors in Platinum Partners funds. If you invested with Platinum Partners please visit the firm’s website athttp://rosenlegal.com/cases-924.html for more information. You may also contact Phillip Kim, Esq. or Kevin Chan, Esq. of Rosen Law Firm toll free at 866-767-3653 or via email atpkim@rosenlegal.com or kchan@rosenlegal.com.

Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation.

Attorney Advertising. Prior results do not guarantee a similar outcome.