"New York hedge fund charged with $1 billion fraud" by Renae Merle Washington Post December 20, 2016
NEW YORK — The founder of a New York hedge fund, Platinum Partners, was arrested on Monday and charged with orchestrating an $1 billion fraud upon his investors.
Mark Nordlicht founded the hedge fund in 2003 and bragged of having returns of 17 percent a year. But since at least 2012, federal prosecutors allege, Nordlicht and other company executives lied to investors about the profitability of the fund and took out high-interest loans to mask its dismal results.
Nordlicht and six other Platinum Partners executives were charged with several counts of securities fraud and conspiracy in Eastern District of Court on Monday. They were ‘‘engaged in one of the largest and most brazen investment frauds perpetrated on the investing public,’’ said Brooklyn US Attorney Robert Capers.
The scheme was ‘‘Ponzi-esque,’’ Capers said.
An attorney for Nordlicht could not be immediately be reached for comment. A person who answered the phone at Platinum Partners said no one was available to comment on the charges.
Platinum Partners took in billions from hundreds of investors with a promise that it would produce big profits. And for years Platinum, which was known for having a strong relationship with New York’s Orthodox Jewish community, built a reputation for strong, consistent profits. Nordlicht has more than 20 years of Wall Street experience, according to the company’s website, which also notes that at 22 years old he was the youngest trader in the history of the New York Cotton Exchange.
But starting in 2012, one of its largest funds, which was invested heavily in oil and gas companies, began to suffer as oil prices plummeted, according to court documents. Instead of acknowledging its losses, Platinum lied to its investors, prosecutors claim, including publicly overvaluing its assets and misrepresenting the performance of its funds.
When investors began to ask for the return of their money, the firm took out high-interest loans or used money raised from new investors to pay them back, prosecutors allege.
‘‘Investors were repeatedly presented a false picture of the performance of the Platinum funds and their overall liquidity situation,’’ said Andrew Ceresney, director of enforcement for the Securities and Exchange Commission. The SEC filed civil charges against Nordlicht and other current and former executives.
Platinum Partners is now being liquidated, but it is unclear whether its investors will be able to recover their money.
The fund also became entangled in a bribery scheme.
This year, a Platinum associate was charged with paying the head of the New York City correction officers’ union to move some of the group’s pension money to the hedge fund. The hedge fund was seeking to attract large institutional investors, such as pension funds, to broaden its client base beyond high net-worth individuals, prosecutors said. So the Platinum executive allegedly promised to pay the official $100,000 to $150,000 a year in return for an $20 million investment the group’s pension fund.
Ever see "The Other Guys?"
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They didn't handle the CHiPs money, too, did they?
