Hedge funders were arrested and charged with fraud in New York. Officers of Platinum Partners including its founder are now facing a $1 billion fraud case.
Mark Nordlicht, Platinum's founding partner, and chief investment officer was taken into custody at his home in New York. Platinum's co-chief investment officer David Levy and the former president of the company's signature fund were also arrested.
According to Business Insider, Platinum is liquidating its hedge funds. Two of the funds have filed for bankruptcy.
The court records state that since 2012, Levy, Nordlicht, Levy, and Landesman planned a scheme to fool Platinum investors by putting an excess value to illiquid assets held by the fund.
It has resulted in a liquidity crisis. Platinum tried to remedy by availing of high-interest loans between its funds. They used the proceeds of the loans to pay off some investors ahead of others. In this way, investors will not panic.
Nordlicht and Levy defrauded the Texas energy company's bondholders. Jeffrey Shulse, the former chief executive officer of Platinum's majority-owned Black Elk Energy Offshore Operations LLC was one with Levy and Nordlicht.
This year, Platinum funds were liquidated in August because a Cayman Islands courts found the company to have committed fraud.
Murray Huberfeld, a Platinum associate but was known as another founder was charged with bribery. He was arrested for bribing the New York City prison guards' union's head Norman Seabrook, to secure a $20 million investment. FBI raided Platinum's Manhattan offices for another fraud investigation.
Aside from the above-mentioned hedge funders, Joseph Sanfilippo, Daniel Small and Joseph Mann were also indicted. Sanfilippo used to be the Chief Financial officer of Platinum Partners Value Arbitrage Fund LP. Mann is an employee in charge of Marketing and Small is a Managing Director.
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