Platinum Partners’ Executives Charged With $1 Billion Securities FraudFounder of the hedge fund and six others were arrested and charged Monday
 ENLARGE
Brooklyn U.S. Attorney Robert Capers arrives to speak to the media about the charges filed against executives from the hedge fund Platinum Partners. PHOTO: REUTERS
By ROB COPELAND and
ERICA ORDEN
Updated Dec. 19, 2016 2:28 p.m. ET
175 COMMENTS
Top executives of hedge fund Platinum Partners were arrested Monday morning and charged with defrauding investors in one of the biggest such cases since Bernard L. Madoff’s Ponzi scheme.
As recently as this fall, Platinum told investors it oversaw more than $1 billion scattered in eclectic investments like loans to bankrupt companies and thinly-traded pharmaceutical stocks. It boasted one of the steadiest performance track records in the hedge-fund industry, with no down years for its funds.
The indictment unsealed Monday in federal court in Brooklyn charges Platinum founder and Chief Investment Officer Mark Nordlicht, co-chief investment officer David Levy,and former president Uri Landesman with counts of securities fraud, investment adviser fraud and conspiracy.
 ENLARGE
Platinum Partners' Mark Nordlicht. PHOTO:PLATINUM PARTNERS/REUTERS
Separately, the Securities and Exchange Commission on Monday charged Messrs. Nordlicht, Landesman and Levy with “conducting a fraudulent scheme” that involved inflating asset values and improperly using investor money to cover over losses.
Authorities said they and others falsely reported the value of Platinum’s assets, allowing the firm to collect a hefty cut of all investment gains and project a veneer of financial stability. In actuality, the firm’s investments were worth far less, and Platinum’s executives knowingly faked the performance figures, authorities said.
At a news conference on Monday, Brooklyn U.S. Attorney Robert Capers described the scheme as “Ponzi-esque.”
“Platinum Partners held no more value than a tarnished piece of cheap metal,” Mr. Capers said.
A spokesman for Platinum declined to comment, and lawyers for those charged couldn’t immediately be reached for comment. The firm had earlier said it was cooperating with all investigations, following reports that it was being probed by the Securities and Exchange Commission and Justice Department.
RELATED Fraud Probe Ricochets Through Platinum Partners, a Hedge Fund With Ties to Jewish Community Adviser With Ties to Hedge Fund Platinum Put Client Funds in It Platinum Partners Plans to Unwind Main Hedge Fund Amid Kickback Probe Businessman Helped Steer $10 Million of Union Money to Hedge Fund
Platinum’s investors were focused in the observant Jewish community, people familiar with the matter said.
The fund told them and others earlier this year it planned to liquidate its hedge funds, but couldn’t immediately pay back their money because of a paucity of easy-to-sell assets. In October, its flagship fund filed for bankruptcy protection, and Cayman Island liquidators working to unwind the troubled fund said they were trying to stave off collapse.
At the time of the bankruptcy filing, a federal judge froze some $118 million belonging to the fund after a bankruptcy trustee sued the company.
Recently-filed court papers show the firm owes tens of millions of dollars to a mix of institutional and individual lenders, including Arkansas-based Heartland Bank.
Platinum co-founder Murray H. Huberfeld was arrested earlier this year by federal authorities in Manhattan in connection with an alleged scheme to bribe a union leader to funnel $20 million to Platinum, charges he denies.
Mr. Huberfeld wasn’t named in Monday’s indictment, but a person familiar with the matter said he was the anonymous “Co-Conspirator 1” in the document. His nephew, Mr. Levy, is one of the Platinum executives arrested Monday.
The son of a kosher restaurateur in the working-class Brooklyn neighborhood of Canarsie, Mr. Huberfeld traded penny stocks privately for years. In 2003, he and others helped stake Mr. Nordlicht with $25 million to start Platinum. Two years later, Mr. Huberfeld started his own hedge fund, initially called Centurion and owned mostly by Mr. Nordlicht, which specialized in making loans to companies that found it hard to borrow.
Ultimately, the firm began tapping a network of Jewish day schools and wealthy Jewish philanthropists with shared charitable interests. “We were raising a fund,” Mr. Huberfeld said this past summer in an interview with The Wall Street Journal. “These were the people we knew.”
Mr. Nordlicht, 48 years old, is a second-generation commodities-options trader who once had a seat on the New York Mercantile Exchange. Whereas Mr. Huberfeld is known for his wide collection of $1,200 navy suits, Mr. Nordlicht is more likely to be seen in a casual outfit of fleece and slacks, former and current Platinum employees told the Journal earlier this year.
In December 2015, Messrs. Huberfeld and Nordlicht discussed fleeing the U.S. for Israel, according to the indictment.
“Don’t forget books,” Mr. Huberfeld wrote to his partner in an email, the indictment says. “Assume we are not coming back to ny…Take passport.”
The two didn’t move permanently in the end, people familiar with the matter said. They remained in the U.S. and continued to tell investors they were sanguine about Platinum’s financial health.
Write to Rob Copeland at rob.copeland@wsj.com and Erica Orden at erica.orden@wsj.com |
