Platinum Partners hedge fund is beginning to look like a Ponzi scheme. A very large Ponzi scheme. The New York Times says it could be one of the largest since Bernie Madoff. As much as $1 billion may be missing. On the heels of so many losses, the FBI moved in this week and arrested 7 people they say are behind the scheme.
Included in the arrests are Mark Nordlicht, a founder and chief investment officer of the fund. Others arrested include:
- David Levy, the co-Chief Investment Officer of Platinum;
- Uri Landesman, the former Managing Partner and President of Platinum;
- Joseph SanFilippo, the Chief Financial Officer of Platinum’s signature hedge fund;
- Joseph Mann, a member of Platinum’s Investor Relations and Finance Departments;
- Daniel Small, a former Managing Director and co-Portfolio Manager of Platinum; and
- Jeffrey Shulse, the former Chief Executive Officer and Chief Financial Officer of Black Elk Energy Offshore Operations, LLC
According to the U.S. Attorney’s Office, Nordlicht, Levy, Landesman, SanFilippo and Mann are charged with securities fraud, investment adviser fraud, securities fraud conspiracy, investment adviser fraud conspiracy and wire fraud conspiracy. They say the defendants defrauded investors through the overvaluation of the fund’s assets, the concealment of severe cash flow problems at Platinum’s signature fund, and the preferential payment of redemptions.
He criminal charges follow closely a companion civil case already filed by the U.S. Securities and Exchange Commission
In announcing the indictments and arrests, Brooklyn’s U.S. Attorney Robert Capers said,
“As alleged, Nordlicht and his cohorts engaged in one of the largest and most brazen investment frauds perpetrated on the investing public, earning Platinum more than $100 million in fees during the charged conspiracy. Platinum Partners purported to be a standard bearer in the hedge fund industry, reporting annual average returns of more than 17 percent since inception in 2003. In reality, their returns were the result of the overvaluation of their largest assets, which eventually led to Nordlicht and his co-conspirators operating Platinum like a Ponzi scheme, where they used loans and new investor funds to pay off existing investors. The charges and arrests announced today reflect our steadfast commitment to holding accountable hedge funds on Wall Street who rip off investors for personal gain.”
“Holding Wall Street Accountable” Third Parties and Platinum Partners Losses
The government has charged the primary players in the alleged scheme. The SEC has done their part too.(We remind everyone that an indictment is only a finding of probable cause. All suspects are presumed innocent. In fact, two of the suspects have already denied all charges.)
But how do the victims who apparently lost $1 billion get back their money?
We imagine there will be the usual round of lawsuits against the wrongdoers. The SEC and Justice Department will do their part too and seek restitution and disgorgement. Typically, those efforts will only recover a small percentage of the losses, however.
So who else is responsible?
Our guess is the banks. In most large Ponzi schemes there are one or more banks who aided and abetted the fraud by turning a blind eye to multiple clues of wrongdoing.
We don’t suggest that the banks actually stole investor money but if they violated reporting requirements under the Bank Secrecy Act or turned a blind eye to suspicious transactions, they can be held liable for losses.
Banks make money when they hold large balances in their accounts. Having money on hand means they can make loans and earn interest.
They also profit from fees and other charges. For some greedy bankers, that means common sense flies out the window. Suddenly the bank is more interested in keeping the Ponzi schemers money than warning authorities and protecting the public.
MahanyLaw Current Investigation – Platinum Partners Lender Liability
We are currently investigating whether any banks, audit firms or other third parties may have had a role in perpetrating the wrongdoing at Platinum Partners. We are seeking both potential clients and especially former employees of Platinum Partners, bank insiders with knowledge of the fraud and other potential witnesses.
The sad reality of these schemes is that many innocent people have lost their money. We want to insure that victims are made whole and those that aided these schemes are held responsible.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). Please visit our investor fraud recovery page too. All inquiries kept strictly confidential.
MahanyLaw – America’s Fraud Recovery Lawyers