Platinum founder’s lawyers appeal order barring contact with witnesses
NEW YORK (Reuters) – Lawyers defending Platinum Partners founder Mark Nordlicht in a $1 billion fraud case have asked a U.S. appeals court to allow them to communicate with potential government witnesses, calling a judge’s order blocking them from doing so unconstitutional.
In a brief filed on Wednesday in the 2nd U.S. Circuit Court of Appeals, Nordlicht’s lawyer said U.S. District Judge Dora Irizarry’s ban on communicating with potential government witnesses was “unprecedented” and “inconsistent with the most basic principles of impartiality and fairness.”
Without being allowed to contact potential witnesses or their lawyers, the brief said, Nordlicht’s lawyers could not prepare an adequate defense for him.
Prosecutors in December charged Nordlicht and six other executives at the hedge fund firm with running a $1 billion “Ponzi-like” fraud in which they overvalued assets and selectively paid some investors ahead of others. All pleaded not guilty.
The company’s funds have been placed under the control of a court-appointed receiver. Platinum was known for producing exceptionally high returns – about 17 percent annually in its largest fund.
Irizarry ordered the ban on witness contact at a hearing in Brooklyn federal court last Friday, saying she believed Nordlicht’s lawyers had tried to intimidate a potential witness. William Burck, a lawyer for Nordlicht, denied that.
A spokesman for U.S. prosecutors in Brooklyn declined to comment on Friday.
Irizarry’s order stemmed from a letter in which Nordlicht’s lawyers expressed their understanding that a former Platinum employee was a key government witness, identified in other court papers only as “CW-1.”
In the letter, addressed to the former employee’s lawyer, Nordlicht’s lawyers said they doubted an FBI agent’s claim that the witness told him Platinum was engaged in fraud. The agent relied on that statement in seeking a warrant to search Platinum’s office last year.
Nordlicht’s lawyers said if the employee really made such a self-incriminating statement, he must have reached a deal with prosecutors. His new employer would have been required to disclose such a deal to investors but never did, Nordlicht’s lawyers said.
In an Aug. 9 court filing, prosecutors called the letter an attempt to confirm that the former Platinum employee was CW-1, and a “veiled threat” to contact his subsequent employer.
In a filing the following day, Nordlicht’s lawyers said they wanted only to find out what CW-1 really told the FBI agent, so they could move to suppress evidence from the search if the agent’s account was wrong.
August 17, 2017
VIA WEB POSTING
United States District Court for the Eastern District of New York
Case No.: 1:16-cv-06848-DLI-VMS
I am writing to you as the newly-appointed receiver of Platinum Credit Management, L.P.; Platinum Partners Credit Opportunities Master Fund LP; Platinum Partners Credit Opportunities Fund (TE) LLC; Platinum Partners Credit Opportunities Fund LLC; Platinum Partners Credit Opportunity Fund (BL) LLC; Platinum Liquid Opportunity Management (NY) LLC; and Platinum Partners Liquid Opportunity Fund (USA) L.P. (collectively, the “Receivership Entities” or “Platinum”) (collectively, “Platinum”). As Receiver, I am charged with, among other things, (i) taking control of and managing Platinum’s property and records (the “Receivership Assets”), (ii) taking actions as necessary and appropriate to preserve Receivership property, and (iii) taking actions as necessary and appropriate for the orderly liquidation of the Receivership Assets. The purpose of this letter is to advise you of the initial progress since my appointment and to explain how I intend to respond to your inquiries.
On June 23, 2017, the prior receiver, Bart M. Schwartz, resigned. As a result, by Order dated July 6, 2017, the Court appointed me as Receiver for the Receivership Entities. On July 21, 2017, the Court approved the retention of Otterbourg, P.C. as my legal counsel and Goldin Associates LLC as my financial advisor (collectively, the “Receivership Team”). Unless specifically modified, all previous court orders remain in place. A Second Amended Order Appointing Receiver, which sets forth the rights and responsibilities of the Receiver is expected to be entered in the near term. All documents, including a copy of the original Complaint for Injunctive and Other Relief against Platinum and its principals, Mark Nordlicht, David Levy, Daniel Small, Uri Landesman, Joseph Mann, Joseph Sanfilippo, and Jeffrey Shulse, filed by the Securities & Exchange Commission (“SEC”), Temporary Restraining Order, and Order Appointing Receiver can be viewed on this website.
Upon my appointment, the Receivership Team took immediate steps to secure and take control over Platinum’s accounts and books and records and implement cash management procedures. I also implemented procedures for the review and approval of all expenditures. The Receivership Team has prepared a 13-Week Cash Receipts and Disbursements Forecast, performed weekly actual vs. forecasted variance analyses, and is conducting daily and weekly reconciliations of Platinum’s cash and brokerage accounts.
The opening investment portfolio consisted of 90 investments in 69 entities. The assets of the Receivership Entities are diverse, but generally fall into three main asset categories: (i) life settlement investments (e.g., investments in life insurance policies), (ii) litigation finance investments, and (iii) “other” assets, which are primarily concentrated in the metals and mining and energy sectors, in companies that are mostly in the developmental stages. The nature of the Receivership Entities’ investments in the “other” assets varies. The Receivership Team is undertaking a thorough financial and legal analysis of the Receivership Entities’ position(s) in each investment, the rights of the Receivership Entity in the capital structure and pursuant to the operative documents, assessing the maintenance costs of the asset, and options available to the Receiver with respect to the monetization of the investment.
During the short time that I have been in control of the Receivership Assets, certain investments totaling approximately $8.6 million have been liquidated or are on the verge of liquidation. None of these assets has been liquidated in “fire sale” fashion. Indeed, one of them was monetized at par value. I believe that the life settlement and certain of the litigation finance investments are liquid and that there may be additional funds realized from their liquidation in the next several months.
As a general matter, however, I have not found support for the values reflected on Platinum’s books or for certain early indications of value in the Receivership. I look forward to working with Houlihan Lokey Financial Advisors, Inc., which I have retained to provide valuation services, and developing supportable valuation assessments.
I will report on our efforts by filing periodic reports with the Court. The reports will also be posted to this website set forth above. The most recent report: My Initial Status Report to the Court, which was filed on August 10, 2017, provides a more detailed review of the actions taken since my appointment and can be found on this website.
You can send general email inquiries to email@example.com. Although my staff and I will review all emails we receive, it is not practical for us to respond personally to all messages, not least because it would consume a significant amount of time. Accordingly, we will update the Frequently Asked Questions (“FAQ”)section on this website as needed to reflect your inquiries and our responses.
Thank you in advance for your cooperation and understanding.
Melanie L. Cyganowski
Learn more about the Settlement by downloading the documents below.
- Exhibits to the Complaint
- Order Appointing Receiver Schwartz
- The Receiver’s First Quarterly Status Report for the Period December 19, 2016 through March 31, 2017
- Securities and Exchange Commission’s Application for an Order to Show Cause for Entry of a Second Amended Order Appointing Receiver and Appointment of a Substitute Receiver
- Securities and Exchange Commission’s Memorandum in Support of Its Application for an Order to Show Cause for Entry of a Second Amended Order Appointing Receiver and Appointment of a Substitute Receiver
- Declaration of Melanie L. Cyganowski dated June 26, 2017
- Declaration of Neal Jacobson Pursuant to Local Rule 6.1(d) in Support of Application for an Order to Show Cause
- Facsimile Letter from Melanie L. Cyganowski to Judge Irizarry Regarding the Proposed Order Appointing Receiver
- Order Approving Retention of Otterbourg P.C.
- Order Approving Retention of Goldin Associates LLC
- The Receiver’s Initial Status Report to the Court
Platinum Partners Credit Opportunities Master Fund LP
Platinum Partners Credit Opportunities Fund (TE) LLC
Platinum Partners Credit Opportunities Fund LLC
Platinum Partners Credit Opportunity Fund (BL) LLC
Platinum Liquid Opportunity Management (NY) LLC
Platinum Partners Liquid Opportunity Fund (USA) L.P.
230 Park Avenue
New York, NY 10169
Attention: Adam C. Silverstein
Erik B. Weinick
350 Fifth Avenue
The Empire State Building
New York, NY 10118
Attention: Marc Kirschner
1:16-cr-00640-DLI-1 Mark Nordlicht
1:16-cr-00640-DLI-2 David Levy
1:16-cr-00640-DLI-3 Uri Landesman
1:16-cr-00640-DLI-4 Joseph Sanfilippo
1:16-cr-00640-DLI-5 Joseph Mann
1:16-cr-00640-DLI-6 Daniel Small
1:16-cr-00640-DLI-7 Jeffrey Shulse
Docket Items for the above cases can be located at the PACER portal for the Eastern District of New York, located here.
“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.
For further information:
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“
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.
Platinum Hedge Fund Executives Charged With $1 Billion Fraud