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| Platinum Hedge Fund Executives Charged With $1 Billion Fraud | |
| (about 4 hours later) | |
| A founder of the New York hedge fund Platinum Partners and six others were arrested on Monday morning on charges relating to a $1 billion fraud. | A founder of the New York hedge fund Platinum Partners and six others were arrested on Monday morning on charges relating to a $1 billion fraud. |
| The men were charged with securities fraud and investment adviser fraud in a $1 billion scheme in which executives used new investor money to pay older investors, according to an unsealed indictment filed in Federal District Court in Brooklyn. | The men were charged with securities fraud and investment adviser fraud in a $1 billion scheme in which executives used new investor money to pay older investors, according to an unsealed indictment filed in Federal District Court in Brooklyn. |
| Mark Nordlicht, a founder and chief investment officer, and David Levy, co-chief investment officer, were among those arrested. | Mark Nordlicht, a founder and chief investment officer, and David Levy, co-chief investment officer, were among those arrested. |
| Federal prosecutors in Brooklyn contend that since 2012, executives overvalued the assets that Platinum invested in and misrepresented the performance of certain funds, at times inflating the value significantly. | Federal prosecutors in Brooklyn contend that since 2012, executives overvalued the assets that Platinum invested in and misrepresented the performance of certain funds, at times inflating the value significantly. |
| In 2012, for example, executives misrepresented to auditors the value of Black Elk, an oil and gas company controlled by Platinum, valuing it at $283 million, prosecutors contend. In fact, there had been an explosion on a Black Elk platform in the Gulf of Mexico just one month earlier that had caused the deaths of three workers, injuries of other employees and an oil spill. | In 2012, for example, executives misrepresented to auditors the value of Black Elk, an oil and gas company controlled by Platinum, valuing it at $283 million, prosecutors contend. In fact, there had been an explosion on a Black Elk platform in the Gulf of Mexico just one month earlier that had caused the deaths of three workers, injuries of other employees and an oil spill. |
| Ultimately, when the firm was unable to pay all of its investors back, executives decided to pay some ahead of others, prosecutors said. | Ultimately, when the firm was unable to pay all of its investors back, executives decided to pay some ahead of others, prosecutors said. |
| Founded in 2003, at its peak Platinum managed nearly $2 billion of investor money. For years it reported a strong performance — with its flagship fund reporting double-digit returns for investors. Platinum executives were known to tap money from prominent families and foundations within the Orthodox Jewish community in New York. | Founded in 2003, at its peak Platinum managed nearly $2 billion of investor money. For years it reported a strong performance — with its flagship fund reporting double-digit returns for investors. Platinum executives were known to tap money from prominent families and foundations within the Orthodox Jewish community in New York. |
| The arrests on Monday were part of an investigation among several government agencies, including the Federal Bureau of Investigation and the United States Postal Inspection Service. In June, Murray Huberfeld, a former Platinum executive, was arrested. He has pleaded not guilty to conspiracy and wire fraud. | The arrests on Monday were part of an investigation among several government agencies, including the Federal Bureau of Investigation and the United States Postal Inspection Service. In June, Murray Huberfeld, a former Platinum executive, was arrested. He has pleaded not guilty to conspiracy and wire fraud. |
| Soon after Mr. Huberfeld’s arrest this summer, agents from the F.B.I. and the United States Postal Inspection Service raided the New York City offices of Platinum, located just a few blocks from Central Park. Faced with mounting pressure from federal investigators — as well as an investigation by the Securities and Exchange Commission — Platinum liquidated its main hedge fund. | Soon after Mr. Huberfeld’s arrest this summer, agents from the F.B.I. and the United States Postal Inspection Service raided the New York City offices of Platinum, located just a few blocks from Central Park. Faced with mounting pressure from federal investigators — as well as an investigation by the Securities and Exchange Commission — Platinum liquidated its main hedge fund. |
| The United States attorney in Brooklyn, Robert Capers, and Andrew Ceresney, director of enforcement at the Securities and Exchange Commission, are expected to discuss the charges at a news conference later on Monday. | The United States attorney in Brooklyn, Robert Capers, and Andrew Ceresney, director of enforcement at the Securities and Exchange Commission, are expected to discuss the charges at a news conference later on Monday. |