Two New York hedge funders have been charged with a US$1 billion fraud

Several employees of a troubled New York hedge fund, Platinum Partners, were arrested earlier on Monday on charges of participating in an approximately $1 billion fraud.

Here are some of the key allegations against the Platinum employees who were charged, according to the government’s indictment. We’re publishing a full copy of the 49-page indictment below.

  • “Platinum reported that PPVA had returned profits of more than eight per cent in 2015 and more than seven per cent for the period from January 2016 through April 2016.”
  • “In or about and between 2011 and 2016, the defendants Mark Nordlicht and David Levy, together with others, engaged in two separate schemes: (i) a scheme to defraud investors and prospective investors in funds managed by Platinum; and (ii) a scheme to defraud third-party holders of the BE Bonds.” BE Bonds refers to bonds issued by Black Elk, a energy company that was controlled by Platinum from 2010 to 2015.
  • “In or about and between November 2012 and December 2016, the defendants Mark Nordlicht, David Levy, Uri Landesman, Joseph Sanfilippo and Joseph Mann, together with others, engaged in a scheme to defraud investors and prospective investors in Platinum through material representations and omissions relating to, among other things: (i) the performance of some of PPVA’s Level 3 assets; (ii) PPVA’s liquidity; (iii) the purpose of PPNE and the use of PPNE’s proceeds; (iv) PPVA’s preferential redemption process; and (v) related party transactions involving PPVA and PPCO.”
  • “Specifically, Platinum fraudulently overvalued some of PPVA’s Level 3 assets in order to, among other things, boost performance numbers, attract new investors, retain exiting investors and extract high management and incentive fees.”
  • “Platinum’s overvaluation of some of its Level 3 assets precipitated a severe liquidity crisis, which Platinum initially attempted to mitigate through high-interest loans between its hedge funds… When the…loans proved insufficient to resolve PPVA’s liquidity problems, Platinum began selectively paying some investors ahead of others, contrary to the terms of its governing documents.”

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

Indictment – Signed and Stamped (BW) by Rachael Levy on Scribd

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