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As reported on December 19, 2016 in the Wall Street Journal, top executives of hedge fund Platinum Partners were arrested Monday morning and will be charged with defrauding investors in one of the biggest such cases since Bernard L. Madoff’s Ponzi scheme. The level of fraud is anticipated to approach or top $1 billion.
Platinum previously reported more than $1 billion in assets under management. This includes holdings scattered in eclectic investments like loans to bankrupt companies and thinly-traded pharmaceutical stocks. In form of a true Ponzi-type operation, Platinum boasted a performance track record with no down years for its funds.
The scheme targeted members of the Jewish community in New York, New Jersey, Florida and Texas.
The indictment unsealed Monday in federal court in Brooklyn charges Platinum founder and Chief Investment Officer Mark Nordlicht, co-chief investment officer David Levy, and former president Uri Landesman with counts of securities fraud, investment adviser fraud and conspiracy.
Authorities in New York said these Platinum executives and others falsely inflated the value of Platinum’s assets, allowing the firm to collect a hefty cut of all investment gains and project a veneer of financial stability. In actuality, the firm’s investments were worth far less, and Platinum’s executives knowingly faked the performance figures, authorities said.