Lawyer for Billion $$$ Hedge Fund Says Investors Knew They May Not Get Their Money Back - The Jewish Voice
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Thursday, September 28, 2023

Lawyer for Billion $$$ Hedge Fund Says Investors Knew They May Not Get Their Money Back

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An attorney for Platinum Partners told jury members yesterday that investors in the firm – which has now gone of business – were given plenty of notice that there was a chance they would never get back their money.

By Howard M. Riell

Attorney Jose Baez opened his remarks to the jury by saying that the multi-billion-dollar hedge fund firm’s founder, Mark Nordlicht, should be acquitted of the criminal fraud charges he is facing.

“This case is a fraud,” Baez said, summing up the criminal prosecution that began over two years ago with the arrest in December of 2016 of Nordlicht and some of his Platinum executive colleagues. The trial got underway early yesterday afternoon.

Standing trial together with Nordlicht are David Levy, who was Platinum’s co-chief investment officer; Joseph SanFilippo, who was chief financial officer of Platinum’s flagship Value Arbitrage fund; and Daniel Small, who was a Platinum managing director. Each has entered a plea of not guilty.

In court papers, Nordlicht claimed that he believed in good faith that Platinum would resolve its liquidity issues. He also felt the firm’s problems were brought about by media reporting in regard to the government’s investigation before the indictment.

In his opening statement, Assistant U.S. Attorney Patrick Hein said that Nordlicht and his co-defendants, Platinum’s co-chief investment officer David Levy and its Chief Financial Officer Joseph SanFilippo, cheated their investors out of “millions and millions of dollars” in two separate schemes.

In the first, Hein charged, Platinum Partners “overvalued the often-illiquid assets of its flagship hedge fund, reported false annualized returns topping 17 percent and selectively paid out cash to some investors over others,” reported Vos Iz Neias. “In the second scheme, Nordlicht and Levy defrauded bondholders in Black Elk, an oil exploration company Platinum owned, by diverting money from asset sales to Platinum ahead of Black Elk’s 2015 bankruptcy, Hein said.

Baez “countered by showing jurors numerous examples of documents given to investors warning that the investments were risky, that Platinum’s investments were not necessarily liquid and that redemptions of cash were at Nordlicht’s discretion. “The warnings and the notices to these investors are everywhere,” reports Reuters.

Baez, the news service continued, said Nordlicht and the other defendants “believed they could recover from a liquidity crunch in 2014 and 2015. He said they ultimately failed because of “leaks” to media about the federal investigation of Platinum, and that there could be something “sinister” behind those leaks. That drew a sharp rebuke from U.S. District Judge Brian Cogan after the jury left for a break. Cogan had previously ruled that defense lawyers could not suggest to the jury that the government engaged in misconduct.”

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