June 26, 2017 / 4:38 PM / 2 years ago

Platinum receiver asks to resign over disagreements with SEC

NEW YORK (Reuters) - The man in charge of unwinding a large portion of the assets held by hedge fund firm Platinum Partners wants to resign after disagreements with U.S. securities regulators about its liquidation, according to a court filing.

Bart Schwartz, chairman of professional monitoring firm Guidepost Solutions LLC, was appointed by the government as a receiver for two of Platinum’s three hedge funds after prosecutors in December accused leaders of the firm of running a more than $1 billion fraud. The six men pleaded not guilty to criminal and civil charges.

However, Schwartz and U.S. Securities and Exchange Commission staff working on the case have “differing views” on how best to liquidate Platinum’s portfolio, according to a letter he sent on Friday to Brooklyn federal court Chief Judge Dora Irizarry, announcing his intention to resign as Platinum’s receiver.

Irizarry would need to approve his resignation.

Schwartz has been trying to unwind roughly 100 complicated and difficult-to-sell investments, aiming to potentially return hundreds of millions of dollars to investors and creditors. Putting more money into some of the investments could boost their value over the long term, allowing for higher redemptions, Schwartz wrote.

However, SEC employees believe the underlying companies are too risky to put more money into, and want to sell the assets as quickly as possible to minimize costs, he said.

SEC staffers are concerned about Schwartz’s relationship with an unnamed law firm that is now a debtor to the Platinum estate, according to the letter. However, Schwartz, a former federal prosecutor, said it was not an issue.

“My prior involvement with this firm did not have any effect on my actions as receiver nor did it negatively affect my ability to attempt to recover assets,” he wrote.

Spokesmen for Schwartz and the SEC declined to comment.

The SEC has already consented to his resignation and plans to suggest a new receiver if Irizarry approves the change.

Platinum was the subject of a Reuters investigation published in April 2016 that highlighted its many complicated and illiquid investments in controversial companies. (reut.rs/2sJ4OPU)

An April status report said that the assets under Schwartz’s purview were worth more than $600 million. That number, however, was based on calculations by Platinum’s own staff and the December charges involved inflating asset values.

The receiver, with the help of an outside expert, has been independently assessing the value of the Platinum Partners Credit Opportunities Fund and the Platinum Partners Liquid Opportunity Fund. In February, Schwartz found there had not been a “major shift” from Platinum’s estimates of the portfolio’s value since an initial review following his appointment in December.

Platinum’s largest group of funds, Platinum Partners Value Arbitrage, is being wound down under the supervision of a Cayman Islands-based liquidator. Platinum represented the gross value of its funds to be $1.7 billion at the time of the criminal charges.

Reporting by Lawrence Delevingne; Editing by Lauren Tara LaCapra and Tom Brown

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