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Hedge Fund to Return Assets After NYC Corruption Scandal Becomes Public

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The development comes after the arrest last week of longtime Platinum associate Murray Huberfeld, who was accused of bribing Correction Officers’ Benevolent Association President Norman Seabrook in return for an investment in Platinum.

Platinum Partners, the hedge fund firm linked to a New York City corruption scandal, is returning a majority of its assets to clients, according to a person familiar with the situation.

New York-based Platinum told investors on a conference call on Tuesday that recent negative media attention and requests for the return of capital had forced it begin the liquidation of its main Platinum Partners Value Arbitrage Fund, the person said, who requested anonymity because the information is private.

The firm is also considering shutting its Platinum Partners Credit Opportunities Fund which controls the balance of Platinum’s more than $1 billion in overall assets.

The development comes after the arrest last week of longtime Platinum associate Murray Huberfeld, who was accused of bribing Correction Officers’ Benevolent Association President Norman Seabrook in return for an investment in Platinum.

Platinum head Mark Nordlicht said on the conference call that the charges against Huberfeld were unfounded, the person said.

Huberfeld, through an attorney, declined to comment on the charges against him and the Platinum news.

According to an article in the New York Post, Murray Huberfeld runs his own charity, the Huberfeld Family Foundation,  that has doled out millions of dollars to Orthodox Jewish causes, including synagogues tied to the Chabad-Lubavitch movement.

He’s also a board member of the Simon Wiesenthal Center, which runs the Museum of Tolerance in Midtown, and was part of a 40-person delegation that met with Pope Benedict XVI in 2005.

During his Vatican visit, Huberfeld told the pontiff that the trip “was particularly meaningful because his mother was hidden and spared extermination by a righteous Christian family during the Holocaust,” according to a post on the Wiesenthal Center’s Web site.

Huberfeld’s personal history also includes a 1992 misdemeanor conviction for having a stand-in take his Series 7 broker-licensing exam, for which he got two years’ probation and a $5,000 fine.

According to the complaint against him, cooperating witness Jona Rechnitz told the feds that Huberfeld secretly runs the Platinum Partners hedge fund that he founded, but is “not publicly acknowledged as playing any significant role” due to “a prior lawsuit or investigation relating to a fund Huberfeld previously ran.”

An external spokesman for Platinum did not respond to a request for comment. News of the liquidation was first reported by the Wall Street Journal.

Founded in 2003, Platinum has racked up profits that are the envy of the hedge fund industry. But its winning strategy of lending to troubled companies carries risks that many institutional investors would just as soon not take.

Wilma Freeyansky

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