A Comprehensive Hedge Fund Fraud Case Study on Platinum Partners

Photo: Business Insider


Platinum is a valuable precious metal, but it’s actually difficult to distinguish it from other materials, such as white gold and silver, by simply looking at them. However, platinum is harder to dent, not as soft as gold or silver, and weighs more than each of them. There is no bargain for platinum, either. With common sense and little knowledge, you can avoid buying fool’s platinum.

Platinum Partners is a New York-based hedge fund manager with more than a billion dollar assets under management — only a few people have heard of them and even fewer people enjoyed their stellar returns. Over the last 13 years of operations, its flagship Platinum Value Arbitrage fund generated 17% annualized return without having any negative year. However, Platinum Partners’ track record was nothing but fool’s platinum.

Case Profile:


For years, a little-known New York hedge fund called Platinum Partners stood out for its stellar double-digit investment returns. Platinum Partners Value Arbitrage Fund, Platinum Partners’ flagship fund, generated 650%, or 17% p.a., over the 13 years since inception with only three months of greater than 2% loss. In sum, there was something uncomfortably consistent about their performance. It turned out that those returns were nothing but ‘fool’s platinum’.

Platinum Partners Value Arbitrage Fund

Source: The Corporate Prof

Mark Nordlicht (CIO) and Murray Huberfeld (President) co-founded Platinum Partners in 2001 and launched their flagship fund, Platinum Partners Value Arbitrage Fund (“PPVA”), in 2003. Their impeccable performance attracted money from investors and their assets under management stood $1.7 billion as of 2015, according to Platinum Partners’ last SEC filing. PPVA claimed a multistrategy investment approach which sought to generate consistent returns through several uncorrelated sub-strategies. According to the interview with Uri Landesmann in 2011, PPVA invested across seven strategies: Long Short Fundamental, Quantitative, Opportunistic/Macro, Energy Related Arbitrage, Asia Based Arbitrage, Event Driven and Asset Based Finance (Energy, General and Mining). In particular, the PPVA fund changed allocations among strategies dynamically over time based on the opportunity sets created by inefficiencies. The largest targeted allocation of the portfolio was Asset Based Finance, which represented 43% of PPVA’s net asset value.

Source: Risk.net

Nordlicht, 48, is a second-generation commodities-options trader. He started his career as a trader in the pits of the New York Cotton Exchange. In 1991, he founded Northern Lights Trading, a proprietary options firm based in New York. From 1997 to 2001, partially overlapping his time at Northern Lights, he was a founder and the managing partner of West End Capital, a New York-based money management firm that specialized in privately negotiated structured debt financing for small and mid-cap publicly traded companies. He also served as the Chairman and Director of Optionable Inc. from 2000 to 2007. Nordlicht earned a B.A. in Philosophy from Yeshiva University.

Huberfeld, the 55-year old son of a kosher restaurant owner in Brooklyn, traded penny stocks, and had a long history of legal troubles since 1992 according to court filings. Huberfeld took more of a back-seat role in the fund — connecting friends and community acquaintances, but was not the public face of the company.

In 2003, Huberfeld, David Bodner and their other friends helped Nordlicht to start Platinum Partners with $25 mm. Two years later, Huberfeld also started his own hedge fund called Centurion, whose name was later changed to Platinum Partners Credit Opportunities Master Fund.

Platinum Partners’ success made Nordlicht himself rich. According to the Form ADV filing with SEC, 23% of Platinum Partners’ total gross asset value, or $382 mm, belonged to the firm’s principals, majority of which was Nordlicht’s. Additionally, the most recent Department of Justice complaint against Platinum alleged that Platinum’s management had reaped over “$100 mm in fees alone” between 2011 to 2016 — the period in which the bulk of Platinum’s legal troubles stem from.

Source: SEC Form ADV


In June 2016, Huberfeld was arrested on charges of conspiracy and wire fraud. Prosecutors alleged he had bribed Norman Seabrook, the portfolio manager for a pension fund of a New York City correction officers’ union, with $60,000 — delivered “in a Salvatore Ferragamo bag” — in exchange for a $20 million investment in Platinum Partners’ hedge fund. Both Huberfeld and Seabrook pleaded not guilty to the scam, but in December, federal agents arrested Nordlicht and six others on counts related to a $1 billion “ponzi-like” scheme that started with over-inflating private assets, covering losses and eventually, covering redemptions with new inflows.

In particular, Platinum relied on capital from a network of wealthy Orthodox Jewish investors — including the Gindi family, owners of the Century 21 department-store chain, and real estate moguls Ruby Schron and Abraham Fruchthandler. As such, the collapse of Platinum Partners was a shock to the wealthy Jewish community in New York and Florida, which has not completely recovered from the damages stemming from the Madoff scandal less than a decade ago.

The problems of Platinum Partners emerged as early as 2012. On November 6th of that year in an email entitled “Current Redemptions Nov 5, 2012” regarding a $27 mm redemption, Nordlicht had stated that “If we don’t exceed this in subs from dec 1 and jan 1 we are probably going to have to put black elk in side pocket. i also need to pay back [loan from an individual] and an additional 4 million oct 31 and nov 30 so we are talking 40”. Replying, President of Platinum Uri Landesman said “we could sweep the table here, so far, think jan 1st is a possible for some, if not all”. In response, Nordlicht writes “it’s just very daunting. It seems like we make some progress and then reds are relentless almost. It’s tough to get ahead in subs if u have to replace 150–200 a year”. Landesman ended the email chain expressing “Didn’t take it as complaining, it is my job. Redemptions very daunting”.

Later on April 29,2014, Nordlicht sent an email to CFO Joseph SanFilippo stating: “Start paying down reds [redemptions] as u can. Between Blake and ppbe (additional 10million), should have decent short term infusion. Hopefully some may 1 subs [subscriptions] show up as well. Have a few more outflows to discuss but this is obviously the priority.” Things seemed to reach a crisis point in June 2014 when Nordlicht wrote “It can’t go on like this or practically we will need to wind down….this is code red,” Yet investors remained in the dark about the firm’s precarious liquidity position — even as the firm claimed quarterly liquidity with 90% of capital being able to be returned “in the first 30 days”. A month later, when an investor emailed to ask about the reliability of Platinum’s reported performance figures, Landesman wrote back, “The numbers are all kosher, they have had verbal input every month.”

A June 3, 2014 email from a Platinum employee to Nordlicht and others entitled “Cash Sheet” listed cash on hand of $96,000; “Pending Inflows” totaling $20,000,000; “Pending Outflows” totaling $16.75 mm and Redemptions of $500,000 for May and $9.5 mm for June, which thus resulted in a “Projected Cash” of negative $6.14 mm. Nordlicht forwarded this message to another staff member asking him to: “Take June reds off the list,” inferring that Platinum was unable to meet its June redemptions of $9.5 mm.

Platinum Partners’ hunt for cash eventually led to Norman Seabrook. Seabrook was a Portfolio Manager for the pension fund of the Correction Officers’ Benevolent Association (“COBA”), the largest NYC corrections officers’ union. Seabrook was noted in filings to be “frustrated with working hard to invest the pension money and receiving no reward”. In late December 2013, Platinum Partners formerly arranged for a meeting between New York’s Correction Officers’ Benevolent Association (COBA) and Platinum Partners. By January 2014, Seabrook was able to convince his Annuity Fund Board to invest in Platinum Partners. The first investment was made in March 2014 when COBA made an initial $10 mm subscription. In June another $5 mm was added. In return, Seabrook ended up taking $60,000 in payment. A further $10,000 was donated to charity Seabrook was involved and was honored at.

Platinum Partners was involved with several suspicious transactions, which probably caused significant losses over the history of the firm. However, the biggest problem was the mismatch of liquidity and the lack of oversight for independent valuation of assets. While Platinum Partners promised investors that they could redeem their investments every month with 60 or 90 days’ notice and receive payment of 90% of their redemption request within 30 days thereafter, they started investing a significant amount of assets in illiquid investments — namely Asset Based Finance. As discussed previously, almost 43% of the PPVA’s portfolio was invested in this illiquid investment opportunities. The most notable illiquid investments were (1) Golden Gate Oil LLC, valued at around $170 mm, or 19% of PPVA’s total assets at the end of 2013, and (2) Black Elk Energy Offshore Operations LLC, representing 24% of PPVA’s total assets at the end of 2012. These two assets represented at least 20–30% of the portfolio between 2012 and 2014. At the end of 2014, almost 80% of fund assets at the end of 2014 was classified as “Level 3” assets. In late November 2015, Platinum Partners placed a majority of PPVA’s assets, all highly illiquid, in a “side pocket”, from which no redemptions were possible for three years.

PPVA’s Estimated Exposures to Golden Gate and Black Elk

Source: SEC v. Platinum Management (NY) LLC, et al

In addition to these two investments, Platinum Partners most likely experienced significant losses from exotic investments in so-called life insurance settlements, medical receivable financing and litigation financing. This is not completely confirmed as there is no overwhelmingly clear evidence in the public domain

  • Life insurance settlement: BDL Group, subsidiary of Platinum Partners was accused by SEC in 2014 for collecting personal information of terminally ill patients to benefit from investing in variable annuities. BDL raised approximately $56 mm for the scheme. It is not clear whether Platinum Partners lost money from this investment.
  • Medical receivable financing: Platinum Partners was reported as a victim of $287 million medical receivable financing Ponzi scheme orchestrated by Robert Feldman and Douglas Kuber in Florida. The scheme was operated from 2008 to 2010. The total amount of losses is not disclosed.
  • Litigation financing: Platinum Partners participated in Scott Rothstein’s $1.2 billion litigation financing Ponzi scheme through Banyon Capital, which essentially functioned as the scheme’s feeder fund. It is reported that Platinum Partners’ transactions totaled more than $400 mm. At the cost of other investors, Platinum Partners recovered some assets before the scheme collapsed, but eventually settled to pay $32 mm to the bankruptcy estate. The total amount of losses is not disclosed.

Platinum Partners increased its valuation of Golden Gate sharply while in actuality, the company’s performance was falling far below initial projections, with deeply disappointing oil production figures and heavy operating losses. On a process level, the company’s first development stage involved the drilling of seven wells, but such efforts bore heavy cost overruns and led the firm to consume the $18 million borrowed from Platinum Partners by the end of 2013. Golden Gate also faced heavy delays in obtaining needed permits — worsening problems further. Moreover, of the wells that were producing, such produced mostly water and many were shut down. The only consistently-producing well provided revenue representing less than 10% of initial projections. Resultantly, far from producing projected millions, Golden Gate netted $6 million losses in 2013.

Platinum Partners even tried to have Black Elk to purchase their stake in Golden Gate, but this potential transaction created a problem as Black Elk’s engineers who appraised Golden Gate’s oil reserves said preliminary estimates of Golden Gate’s reserve was merely 10% of Platinum’s prior valuation. In Sep 2014, Platinum Partners paid $3.2 million for the remaining 52% stake in the company and valued the entire stake in the company at $140 million. This transaction instantly generated $134 million paper profit, or a 16% return (in 2014, PPVA was up 10%).

Valuation of Golden Gate

Source: SEC v. Platinum Management (NY) LLC, et al

The relationship between Platinum Partners and Black Elk was even murkier and complicated, but Platinum Partners essentially controlled Black Elk and used it to manage its liquidity and inflated asset values. While holding substantial amount in Black Elk-related assets, Platinum Partners unlawfully extracted nearly $100 million out of Black Elk after Back Elk sold some of its core assets.

So murky was the relationship that a separate law-suit, a civil one, is also underway between third-party Black Elk bondholders and Platinum Partners. In this, creditors accuse Platinum Partners of using a “Trojan Horse” associated entity to bypass fair treatment of bondholder rules (that excuses Platinum from voting as a bondholder) to save Platinum’s preferred shares positioning and subordinate more senior, secured debt.


Formed in November 2007 as a limited liability company, Black Elk was an oil and gas company headquartered in Houston with all its producing assets located offshore in US federal, Louisiana and Texas state waters in the Gulf of Mexico. John Hoffman was Black Elk’s founder and CEO.

In 2009, Platinum invested in Black Elk across the capital structure through Series E Preferred shares, vote holding equity rights, and secured notes.

That investment initially seemed successful. In 2011, the Wall Street Journal reported that, helped in part by the ban on drilling in the Gulf of Mexico after the BP Macondo explosion and oil spill, Platinum’s Black Elk investment “was Platinum’s most successful last year, having contributed a significant portion of its high-teens return.”

From 2008 to 2011, Black Elk employed a buy-and-build strategy to develop its business.

To finance this, Black Elk issued $150 mm of senior secured notes on November 23, 2010. Simultaneously, the company entered into a Security Agreement in favor of The Bank of New York Mellon Trust Company, N.A. (“BNY”) as Trustee and Collateral Agent for the 13.75% Coupon Senior Secured Notes. Pursuant to such an agreement, the Senior Secured Noteholders were granted a first priority lien on substantially all of Black Elk’s assets.

At its peak of operations, Black Elk had approximately 457,065 gross (223,852 net) acres under lease in the Gulf of Mexico, 935 gross (444 net) wells and 58 production platforms.

PPVA was Black Elk’s principal lender and considered its position as one of its most profitable. At the end of 2012, Black Elk represented 24% of PPVA’s total assets. However, On November 16, 2012, though, an explosion occurred on an offshore Black Elk platform — killing three workers. The explosion caused huge legal headaches, which eventually led to spiraling legal costs, and suspensions of operations.

Black Elk was effectively insolvent by early 2014 — some trade creditors were paid, if at all, more than a year past their due dates.

Also by early 2014, Nordlicht and his associates dominated Black Elk’s management as its majority largest investor. The firm controlled its credit facility, controlling the majority of the Senior Secured Notes and also junior Series E preferred equity, and appointing and controlling the Black Elk Board and CFO. In early 2014, Platinum confronted the prospect of losing more than $100 mm if the company could not meet its debt schedule. In response, Platinum Partners looked towards selling of Black Elk’s assets and returning to the proceeds to itself, and not its senior noteholders.

This came about through the sale of Black Elk’s prime assets to Renaissance Offshore, LLC. Proceeds from that sale was to Platinum by redeeming its junior Series E preferred equity instead of the Senior Secured Notes, including those held by Platinum, which were in fact entitled to first call on those proceeds.

Thus, as Black Elk negotiated the sale of its prime assets to Renaissance, Platinum devised a method to seek noteholder approval to waive their rights to the sale through an amendment to the indenture. Understanding that it would be difficult to persuade truly unaffiliated and disinterested Secured Senior Note Holders to renounce their rights and that Platinum itself as an equity holder of Black Elk could not use its noteholder votes, Platinum had to find a way to rig the vote.

Taking into account Platinum’s ownership of most of the $150 mm in notes, $37 mm of said notes comprised a majority needed to waive the rights of the indenture.

As Platinum controlled Black Elk, this statement meant that the sum of all Notes held by Platinum, Platinum-affiliated entities and entities controlled by Platinum were to be subtracted from the $150 million Notes entitled to vote. Of the remainder, a majority had to consent.

Since it was blatantly obvious that truly unaffiliated and disinterested Senior Secured Note Holders would consent to writing-off their secured notes, Platinum this created a Trojan horse “friendly” consenter: secure the votes of a company or companies holding a substantial number of Notes that looked independent, but were in fact controlled by Platinum.

The ‘Trojan Horse’ was a group of Beechwood entities named in filings as B Asset Manager Fund and B Asset Manager Fund II. In addition to 68.9% ownership, Platinum assigned a number of Platinum employees to Beechwood, and installled a Platinum executive, David Levy, as the Chief Investment Officer of B Asset Manager. Levy still continued to use his Platinum Partners email address while “CIO” of Beachwood. Levy soon thereafter directed the Beechwood entities in early 2014 to purchase $37 mm of the Black Elk Senior Secured Notes. The Beachwood entities thus then voted to consent their Notes in favor of the Platinum proposal.

Only a few weeks after Beechwood’s vote, Levy left his position at Beechwood, and returned full time to Platinum. This manipulation of the Indenture vote secured $98 mm of the proceeds of the Renaissance sale to Platinum Partners.

Platinum’s approach was not entirely opaque. Black Elk Chief Executive Officer John Hoffman emailed Black Elk’s General Counsel and one of its retained counsel on June 26, 2014 that described his take on what was unfolding:

John Hoffman and the General Counsel eventually jumped ship from the company in August 2014.

Hoffman was also right about Black Elk’s eventual plan. In August 2015, Black Elks creditors had placed the company into involuntary Chapter 7 bankruptcy. The company had 20 days to respond, and it was successful in its motion to convert the case to a voluntary Chapter 11 case, according to court documents.

Later on in the year, the offshore energy driller filed for Chapter 11 bankruptcy.

At about the same time as creditors filed to put Black Elk in bankruptcy, federal prosecutors filed criminal charges against Black Elk related to a 2012 rig explosion in the Gulf of Mexico. The charges stemmed from an investigation conducted by the Bureau of Safety and Environmental Enforcement which ended with 41 citations relating to the fatal explosion. A year after the explosion, Black Elk had spent $12.4 mm trying to clear up the remains and deal with the blast’s legal aftermath.

The Black Elk senior debt in question in the Schmidt vs. Platinum October 2016 case. Source: Bloomberg

But the $98 mm transfer was not enough. Indeed, taking into account Platinum’s own bondholding position in Black Elk totaling $111 mm at face value, with $74 mm held by Platinum, and another $37 mm held through the Beachwood Entities — it is clear that even Platinum lost out from its own transfers. While perhaps the scheme with Black Elk helped shoulder losses and pass them disproportionately to bondholders, Platinum nonetheless suffered a great deal.


Platinum Partners’ external auditor, BDO, in early 2015 reported to it that “a material weakness exists in the Master Fund’s investment valuation process related to its Level 3 investments.” But, Platinum Partners did not disclose to its investors this important information. The auditor also identified a “very material” misstatement that required a large markdown of the valuation of one large, illiquid position, triggering a restatement of the fund’s year-end 2013 AUM. Platinum Partners, however, terminated that auditor. Still, the replacement auditor, CohnReznick, included in its 2014 opinion, which it did not issue until September 2015, an “emphasis-of-matter” stating that management’s estimated values for investment representing over $800 million rested on unobservable inputs, and that the amounts that might be realized in the near-term could differ materially from management’s valuations.

Platinum Partners used at least three valuation agents: Alvarez & Marsal Valuation Services, LLC, Sterling Valuation Group Inc. and DeGolyer and MacNaughton. There valuation agents were chosen by Platinum Partners and provided their valuation assessments based on the data provided by Platinum Partners. For example, they did not conduct onsite checks on the assets held by Golden Gate and Black Elk as they were not commissioned to do so.

SS&C Technologies, Inc. was a fund administrator for all three funds managed by Platinum Partners. For a portfolio of highly illiquid investments, a fund administrator’s ability to evaluate the value of the portfolio is limited since they rely on the inputs from the auditor and valuation agents.

It is difficult to conclude whether Platinum Partners started as an outright fraud from the very beginning, however, they could not keep up with their promises to investors and covered up problems with lies after lies. The scheme’s collapse was triggered by the bribery case, but Platinum Partners would eventually run out of cash.


Do Not Believe in the Unusually Stable Returns

It is almost impossible to run a hedge fund for over a decade without having a substantial draw-down. All investors should know this simple fact and avoid investing in any investment scheme showing a straight line. Platinum Partners’ investment scheme was also heavily involved with the energy-related investments and the falling oil price should have had material impact on the underlying investments even though they were structured as a secured lending. Instead, the fund only had superficial down periods lasting no more than two months. Indeed, out of 155 months of operation, only three months endured a loss of more than 2%,

Source: The Corporate Prof., Bloomberg

Be aware of risks involved with hard-to-value assets

Secured lending and private equity investments can deliver “stable” returns if operated properly, but the return stream is stable only on the surface. The lack of a market price makes it very difficult for an auditor and an administrator to assess valuation of a portfolio. Investors are exposed to this unobservable risk.

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Cayman Islands Liquidator, Another Platinum Colored Liquidation -Following the Money and Level 3 Assets

Liquidators sue Platinum fund founder

Liquidators of two feeder funds of Platinum Partners Value Arbitrage Fund are suing the group’s founder Mark Nordlicht and others in the Cayman Islands for overstating the value of the fund’s assets.

Nordlicht, Platinum’s founder and former chief investment officer, is facing a criminal trial in New York for allegedly defrauding investors. US federal prosecutors accuse Nordlicht and others of falsifying the firm’s performance figures for personal gain. Nordlicht has pleaded not guilty.

Platinum Partners Value Arbitrage Fund (International) Limited and Platinum Partners Value Arbitrage Intermediate Fund Ltd., which are both in liquidation, filed a suit against Nordlicht, the Estate of Uri Landesman, David Levy, Platinum Management (NY) LLC and Platinum Partners Value Arbitrage LP at the Grand Court on 7 May.

Landesman, the president and managing partner of Platinum, died in September 2018. Levy was a portfolio manager of the fund.

The plaintiffs allege that the defendants breached their fiduciary duties through their “knowing or reckless overstatement” of the fund’s illiquid and difficult to measure assets, and as a result, the net asset value of the fund. If the performance of the fund was overstated, the management and incentive fees that the defendants received would have been inflated.

By reporting the overstated figures to boards and investors, Nordlicht, Landesman and Levy improperly received fees, bonuses, compensation and other payments, the writ states.

Platinum’s illiquid and hard to measure assets, so-called Level 3 assets, were crucial to the management and operation of the plaintiffs, the suit argues. “By their conduct, the Defendants acted in breach of their duties, made deliberate and/or negligent misstatements and/or engaged in willful misconduct by failing to act in accordance with their duties and by contributing directly or indirectly to the over-valuation of assets and provision of misleading financial information which caused loss to the Plaintiffs.”

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Platinum Investor Conference Call – Landesman and Nordlicht – Distancing from Murray… and “Tickets”?


Platinum Investor Conference Call

June 14, 2016

Participants: Uri Landesman
Mark Nordlicht (“MN”)

Length of Recording: Approximately 23 minutes and 21 seconds

MN: But let me talk right at the get-go about the events that created a firestorm
for us last week. It’s uh obviously very, very painful uh for us to talk about
it. You know, the lawyers and the PR people would tell us to–we should
distance ourselves from Murray and uh, uh, just, you know, say we had
nothing to do with it. At the end of the day, that’s just not our nature.
That’s not the way I was brought up, and that’s not the way I think uh the
majority of Platinum um behaves and carries themselves. While it is true it
was specifically um, pretty much focused on Murray in this particular case–
there weren’t a lot of other people involved–we do feel very strongly that
uh that the allegations are false, will be proven false, hopefully. And you
know um, and we very much feel that–that none of that probably ever
happened. Um that having been said from my perspective, you know, I tell
my kids life isn’t fair, you have to deal with the repercussions. It is what
is, and you have to deal with it. And um, and so we have to deal with the
outgrowth, both with this terrible headline and and what’s come subsequent
to that. I would just make one point, by the way, even on the allegations
against Murray, we should just make, be very, very clear that this was
related to funds that were forwarded from the management company,
essentially personal funds, um, at the time. And, so no investor funds and
and that’s a good segue to just make the point that in terms of, of the
positions at Platinum, this has no direct effect on any of the positions, and
we feel very, very good about the positioning um of both funds, and in terms
of the outlook of them being successful and being successfully liquidated
over time. Um in terms of the outgrowth, I would say, the issue is it’s not
related—I think this headline in itself was one headline too far maybe? Um,
in and of itself, but, the problem that you have is, and you know what we
think is unfair, but what we have to deal with, is it doesn’t stop right there.
Based on that, on the same day, we started to receive a lot of questions from
1 The transcript contained herein is in draft form and is subject to revision.

Case 1:16-cr-00640-DLI Document 122-7 Filed 04/26/17 Page 1 of 3 PageID #: 729


two separate regulatory agencies related to Platinum—related a lot to the
tickets and different, different things with Murray and Da– and uh, Murray,
but also some more general questions about Platinum. Primarily actually a
lot of questions that were already in the press and really just very, very
general questions which we’re very, very comfortable with. Um, you know
we are very comfortable with how we conduct Platinum, and we feel very,
very strongly that the likelihood is that nothing will come out of these
questions. But, it is a distraction, and uh we know from when we had just
a routine audit what kind of distraction that was in terms of the volume of
questions. This is actually less questions, but perhaps a little bit more
uncomfortable given the context that they’re being, that they’re being asked
right now.

MN: [M]y gut right now is to, certainly in regards to PPVA, is to unwind the fund
in an ordinary fashion.

MN: You know, to the extent that we’re winding down, certainly PPVA, we’re
winding down, we’re not closing down. . . . I want to not just get the money
back, I want to produce nice returns on the way out. . . . I really want to, you
know, do a bang-out job on the way out, certainly in terms of PPVA . . . .

MN: In terms of PPVA, um obviously the only thing I’m a little nervous about is
the energy positions because it’s a very, very wide delta in terms of what
the outcome could be.

MN: My initial inclination was also wind down that [the Platinum Partners Credit
Opportunities Fund (“PPCO”)], from a personal level I was thinking
actually that, you know what, maybe that’s um, certainly from a personal
level it’s probably better for me, um, but nevertheless we have gotten some
large investor feedback that, resisting, um, resisting taking the same
measures on PPCO. So I’m gonna hold back on making that decision . . . .
But really again that’s something that we’re gonna be looking at very, very
closely and by the end of next week, we’ll probably have made a, a
definitive decision . . . .

Case 1:16-cr-00640-DLI Document 122-7 Filed 04/26/17 Page 2 of 3 PageID #: 730


MN: So I think in terms of the the, um, positions going forward we’ll leave it at
that, because obviously I think most of the concern was was just, you know,
what’s the outlook going forward and what’s going on. . . . Again, from my
perspective if it was just the headline – we’re fighters here, so I fought
through a lot. I worked very, very hard to get PPVA where it is now,
whereby we were just in the midst of breaking through, so it is frustrating,
but sometimes um a message is sent to you from outside that maybe it just
wasn’t meant to be. Uh that’s the way I feel in PPVA certainly right now,
and PPCO we’re going to outlook, we’ll have some answers for you
certainly by the end of next week.

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.



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
 PPLO Unpaid Redemptions: PPLO owed $6.5 million to three (3) PPLO unpaid
 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

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.


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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 –


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.



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.

Platinum Receivership Information



Platinum Receivership

AUGUST 15, 2018 WEBINAR VIDEO – Investor & Creditor Forum

July 23, 2018


Platinum Partners Investors and Creditors
Melanie L. Cyganowski, as Receiver
Investor & Creditor Forum

I am pleased to announce that I will hold a virtual forum for Platinum Partners Investors and Creditors on August 15, 2018 from 12:00 P.M. to 1:00 P.M. Eastern. During the forum, I plan to provide an update on the Receivership, including the steps I have taken since the last forum and our plans moving forward. There will also be time for questions.

Instructions for registering and participating in the forum by computer or telephone are provided below. If you would like to submit questions in advance, or have any questions regarding the forum, please direct them to platinumreceiver@otterbourg.com. Those participating by computer will be able to submit questions during the event using the computer service, but those participating by phone will be on mute and will need to send questions through the platinumreceiver@otterbourg.com email address. Finally, please note that we will utilize a court reporter, as well as video, to record the session. Thank you and I look forward to speaking with you soon.

Melanie L. Cyganowski

You are invited to a Platinum Receivership webinar.
When: August 15, 2018 12:00 PM (Eastern Time – US and Canada)

Topic: Investor & Creditor Forum


Please click the link below to join the webinar:

Please note: You must first download “Zoom” webinar software. Simply google “zoom.us” to download this free software.


+16699006833,,995380643# -OR- +16468769923,,995380643#


Dial(for higher quality, dial a number based on your current location):
US: +1 669 900 6833 -OR- +1 646 876 9923

Webinar ID: 995 380 643

International numbers available: https://zoom.us/u/eBFnaDFpk


The Receiver is in the process of directly notifying certain individuals whose personal information may have been exposed as a result of a recent security incident involving a single email account on a cloud-based service used by Platinum. Specifically, Platinum recently identified suspicious computer-related activity and as a result, the Receiver immediately engaged LMG Security, a leading independent cybersecurity firm, which has been working to further secure Platinum’s systems, as well as conducting a comprehensive forensic review to determine the scope of the incident, including the specific data which may have been impacted.

Based on the investigation thus far, there was limited unauthorized access to a single email account on a cloud-based service used by Platinum from March 19, 2018 to May 19, 2018. Platinum is not aware of any impact on Platinum’s bank accounts or other assets as a result of this incident, nor is Platinum aware of any attempt to misuse any individual personal information which may have been exposed as a result of this incident.

In addition to its forensic analysis, LMG Security and Platinum took steps to minimize and prevent any additional unauthorized access to Platinum’s electronic systems or data. LMG Security’s findings have been reported to law enforcement and the Receiver’s team and professionals continue to work with the appropriate authorities.

While there is no evidence to suggest that there has been any attempt to misuse any of the personal information which may have been contained in the impacted data, those individuals who may have been directly affected by this incident have, or will receive, individual letters apprising them of the incident and informing them of the services which the Receiver is providing to them in an abundance of caution. Specifically, the Receiver, working with the cyber response team at Garden City Group, has established a call center to respond to inquiries by those individuals receiving letters from the Receiver, and is offering complimentary identify theft protection services through ID Experts®. This service includes 12 months of credit monitoring, a $1,000,000 insurance reimbursement policy, and fully managed id theft recovery services. With this protection, MyIDCare will help affected individuals resolve issues if their identity is compromised.

If you would like further information regarding the foregoing, please call (888) 866-5172.

JUNE 6, 2018 WEBINAR VIDEO – Investor & Creditor Forum

May 15, 2018


Platinum Partners Investors and Creditors
Melanie L. Cyganowski, as Receiver
Investor & Creditor Forum

I am pleased to announce that I will hold a virtual forum for Platinum Partners Investors and Creditors on June 6, 2018 from 12:00 P.M. to 1:00 P.M. Eastern. During the forum, I plan to provide an update on the Receivership, including the steps I have taken since the last forum and our plans moving forward. There will also be time for questions.

Instructions for registering and participating in the forum by computer or telephone are provided below. If you would like to submit questions in advance, or have any questions regarding the forum, please direct them to platinumreceiver@otterbourg.com. Those participating by computer will be able to submit questions during the event using the computer service, but those participating by phone will be on mute and will need to send questions through the platinumreceiver@otterbourg.com email address. Finally, please note that we will utilize a court reporter, as well as video, to record the session. Thank you and I look forward to speaking with you soon.

Melanie L. Cyganowski

You are invited to a Platinum Receivership webinar.
When: June 6, 2018 12:00 PM (Eastern Time – US and Canada)

Topic: Investor & Creditor Forum


Please click the link below to join the webinar:

Please note: You must first download “Zoom” webinar software. Simply google “zoom.us” to download this free software.


+16699006833,,995380643# -OR- +16468769923,,995380643#


Dial(for higher quality, dial a number based on your current location):
US: +1 669 900 6833 -OR- +1 646 876 9923

Webinar ID: 995 380 643

International numbers available: https://zoom.us/u/eBFnaDFpk

DECEMBER 20, 2017 WEBINAR VIDEO – Investor & Creditor Forum

MELANIE L. CYGANOWSKI, RECEIVER c/o Otterbourg P.C. 230 Park Avenue, 30th Floor New York, NY 10169 E-mail: platinumreceiver@otterbourg.com Website: www.PlatinumReceivership.com

MARCH 1, 2018 WEBINAR VIDEO – Investor & Creditor Forum