Two Platinum Partners hedge funds have sought
U.S. Chapter 15 bankruptcy protection as part of an ongoing
liquidation effort, according to court documents filed in New
York federal court Tuesday.
In August, a Cayman Islands court ordered that an outside
expert unwind the so-called offshore versions of its flagship
hedge fund, Platinum Partners Value Arbitrage, which, along with
the firm, is also being investigated by U.S. authorities.
That liquidator, RHSW Caribbean, filed the Chapter 15
bankruptcy petition which seeks to protect Platinum's U.S.
assets from creditors while an insolvency proceeding is underway
in the Cayman Islands.
An outside spokesman for Platinum declined to comment.
Mark Nordlicht founded Platinum more than a decade ago and
generated years of double-digit percentage returns by investing
in often controversial businesses, a Reuters special report
New York-based Platinum has been caught up in federal
investigation by the U.S. Securities and Exchange Commission and
the U.S. Attorney's offices in Manhattan and Brooklyn.
In June a longtime associate was arrested on charges of
bribing a union official to invest in Platinum, charges he has
RHSW notes it is in ongoing contact with the SEC and the
Department of Justice and that Platinum is the subject of
"allegations of asset overvaluation" of its investments in
mostly difficult-to-value fledgling companies.
Platinum reported assets of $1.09 billion for its flagship
funds as of June 30, according to RHSW. The same filing notes
potential liabilities of at least $468.7 million on May 31.
The Cayman liquidators have began examining allegations that
assets were overvalued and are examining the cause of the funds
failure, according to the Chapter 15 filing.
One of the liquidators' investigation involved the potential
sale of Implant Sciences Corp notes to Platinum insiders,
according the bankruptcy filing. The liquidators were also
probing an investment by Platinum's master fund into Northstar
Offshore Group LLC, according to the Chapter 15 filing.
Creditors of Northstar tried to force Northstar into an
involuntary bankruptcy in Texas and the liquidators are trying
to arrange financing for the company, according to Tuesday's
filing. Northstar had taken over the assets of another
Platinum-owned energy company, Black Elk Energy Offshore
Operations LLC, just before it went too went bankrupt.
Northstar investments account for 22 percent of the two
Platinum funds, according to the bankruptcy filing.
The liquidators said a Northstar bankruptcy would result in
a significant devaluation of Platinum's holdings.