Jury to decide six-year old case against ex-Platinum Partners fund manager

A view of the jury box (front), where jurors would sit in and look towards the judge's chair (C), the witness stand (R) and stenographer's desk (L). February 3, 2012. REUTERS/Chip East
  • Daniel Small is final defendant in case over defunct hedge fund
  • He is accused of defrauding bondholders in a portfolio company
  • Defense argued he and others made mistakes in bond transaction

(Reuters) - Prosecutors urged jurors in Brooklyn federal court to convict Platinum Partners portfolio manager Daniel Small as his fraud trial drew to a close on Wednesday, saying he helped rig a bondholder vote to divert assets from a troubled portfolio company.

Prosecutors say Small schemed with other executives at the now-defunct New York hedge fund to defraud bondholders of Black Elk, a Platinum-controlled oil exploration company, by diverting $70 million from asset sales to Platinum ahead of Black Elk’s 2015 bankruptcy. Small was charged alongside others in 2016 with concealing that Platinum affiliates were voting on the issue.

Small's attorney Seth Levine said during closing arguments that there was no evidence showing that one major bondholder was an affiliate rather than a "friendly" who would vote with Platinum, and that none of the attorneys who advised on the deal flagged a problem.

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"He was with a lot of lawyers and he didn't hear from any of them. Ask yourself why," he said.

Prosecutor David Pitluck said the attorneys assumed they were getting accurate information, but that Small and his colleagues lied.

"You can't blame everybody else for his actions, you can't chalk this up to a mistake," he said.

Small has asked U.S. District Judge Brian Cogan to find that no reasonable juror could convict based on the evidence in the trial, which began on Aug. 1. The jury is scheduled to begin deliberations on Thursday.

Small is the last defendant in the case over Platinum, which once managed more than $1.7 billion in assets.

Platinum co-founder Mark Nordlicht and co-chief investment officer David Levy were convicted of defrauding bondholders in July 2019.

Cogan reversed the guilty verdicts in a ruling after the trial, finding that prosecutors had not offered sufficient evidence. The 2nd U.S. Circuit Court of Appeals reinstated the verdicts in November, saying the judge had erred.

Nordlicht and Levy are scheduled to be sentenced in November.

The case is United States v. Nordlicht, U.S. District Court for the Eastern District of New York, No. 16-cr-00640

For the government: Nicholas Axelrod, Lauren Elbert, David Pitluck of United States Attorney's​ Office for the Eastern District of New York

For Small: Seth Levine, Alison Bonelli, Paul Murphy of Levine Lee

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Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com