Business Essentials for Professionals


Federal Agents Raid Platinum Partners Amid Dual Investigations

Federal Agents Raid Platinum Partners Amid Dual Investigations
The New York headquarters of hedge fund firm Platinum Partners was raided by agents from the Federal Bureau of Investigation and the U.S. Postal Inspection Service earlier this week.
Media reports quoting sources form the government agencies informed this.
“We are in receipt of a search warrant from law enforcement and are fully cooperating. We look forward to resolving this on a timely basis,” Platinum said in a statement emailed by an external spokesman.
A “law enforcement action” was undertaken at the hedge fund firm’s Manhattan office, confirmed Kelly Langmesser, an FBI spokeswoman.
There were no further comments from Platinum and the FBI. There was no immediate official reaction from the U.S. Postal Inspection Service.
The sources that the media quoted having knowledge about the developments said that a subpoena from the U.S. Attorney's Office for the Eastern District of New York was previously imposed on Platinum which is led by Mark Nordlicht. However it is yet not clear what the exact nature of that subpoena was and if it is related to the action.
There is a wide-ranging corruption investigation by the U.S. Attorney's Office for the Southern District of New York and the raid was a separate action in relation to the other investigations, the media said.
For allegedly orchestrating a bribe to a union leader in exchange for an investment in Platinum, longtime Platinum associate Murray Huberfeld was arrested on June 8 as a result of a probe against the company.

The charges have been disputed by Huberfeld through his attorney. In the related case however, Platinum was not named as a defendant.
Despite these allegations and the arrest, with more than $1 billion under its management, Platinum continues to be in business. Platinum is likely to slowly wind down its largest hedge fund offering, Platinum Partners Value Arbitrage, the fund recently had informed its investors. The company is also considering doing the same for its other large strategy, Platinum Partners Credit Opportunities.

“Going forward, the plan contemplated for PPVA will be for it to operate as a close ended fund, whereby the fund will be closed to new subscriptions, and proceeds of the monetization of any of our investments will be used to either support other current investments in the portfolio or distributed to stakeholders,” Nordlicht wrote in a note to investors on June 15 that was earlier reported by the media.

The unwinding would be done gradually to avoid a “fire sale” of investments, he had added in he note.
Very few in the hedge fund industry can match the profits that have been racked by Platinum which was founded in 2003. But according to a Reuters investigation earlier this year, many large investors were turned off by the company due to the fund’s strategy of lending to troubled companies carries risks.
Platinum founder Mark Nordlicht has the ability to turn painful situations into profit. The increasingly popular strategy known as asset-based lending has been the linchpin of his success. Taking ownership of a company after it runs out of cash after providing high-interest loans to such companies that other lenders shun and ultimately flip it for a profit is the idea of the business strategy.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc