U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23704 / December 20, 2016
Securities and Exchange Commission v. Platinum Management (NY) LLC et al., Civil Action No. 16-cv-06848 (E.D.N.Y.)
SEC Charges Platinum Funds and Founder with Defrauding Investors
The Securities and Exchange Commission announced today that on December 19, 2016, it charged the founder of Platinum Partners and the investment managers of two of its flagship hedge funds with conducting a fraudulent scheme to inflate asset values and illicitly move investor money to cover losses and liquidity problems.
According to the SEC's complaint, filed in federal court in the Eastern District of New York, Mark Nordlicht, Platinum Management (NY) LLC (Platinum Management), and Platinum Credit Management LP (Platinum Credit) overstated the value of an oil company that was among the firm's largest assets, concealed a growing liquidity crisis by transferring money between the funds, making preferential redemptions to favored investors, and using misrepresentations to attract new investors to the struggling funds. The SEC's complaint further alleges that Nordlicht schemed with two colleagues and an executive at the Platinum funds' other major oil investment to rig a noteholder vote in order to divert almost $100 million from that company to help boost the Platinum funds.
In addition to Nordlicht, Platinum Management, and Platinum Credit, the SEC complaint charges several other individuals for their roles in the alleged schemes: David Levy, Daniel Small, Uri Landesman, Joseph Mann, Joseph SanFilippo, and Jeffrey Shulse.
The SEC's complaint charges the defendants with various direct and/or aiding and abetting violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-8 thereunder. Platinum Management is also charged with violating Rule Advisers Act Rule 206(4)-2. The complaint seeks disgorgement of ill-gotten gains plus interest and penalties as well as permanent injunctive relief. The SEC also obtained a TRO appointing a receiver over certain Platinum advisers and funds, together with other preliminary relief.
The SEC's continuing investigation is being conducted by Jess Velona, Danielle Sallah, Kenneth Byrne, Janna Berke, Kerri Palen, Thomas Feretic, and Adam Grace in the New York office. The litigation will be led by Kevin McGrath, Alistaire Bambach, and Neal Jacobson. The case is being supervised by Sanjay Wadhwa. The examination that led to the investigation was conducted by George DeAngelis, Michael Paolo, Syed Husain, Jaclyn Karakaya, and Rachel Lavery. The SEC appreciates the assistance of the U.S. Attorney's Office for the Eastern District of New York, the Federal Bureau of Investigation, and the U.S. Postal Inspection Service.