Hearing Ordered On Leak Claims In Platinum Partners Case

Apr 10 2017 | 10:37pm ET

By Brendan Pierson (Reuters) - A U.S. judge on Monday ordered a hearing to look into possible leaks about a criminal investigation of New York hedge fund management firm Platinum Partners, whose top executives are charged with running a $1 billion fraud.

William Burck, a lawyer for Platinum founder Mark Nordlicht, said at a hearing last month, and again in a letter filed in court on Friday, that an FBI agent may have leaked to the press about the investigation before it became public.

U.S. District Judge Dora Irizarry in Brooklyn set a hearing on the issue for May 12.

Nordlicht and six other Platinum executives were charged by federal prosecutors in December with running a $1 billion "Ponzi-like" fraud in which they over-valued assets and selectively paid some investors ahead of others. All have pleaded not guilty.

Platinum was known for producing exceptionally high returns - about 17 percent annually in its largest fund. Platinum and its executives are also facing civil fraud charges from the U.S. Securities and Exchange Commission, and Platinum's funds have been placed under the control of a court-appointed receiver.

In Friday's letter, Burck cited news articles in Bloomberg, the Wall Street Journal and the New York Post last summer reporting that Platinum was under investigation, all citing unnamed people familiar with the matter.

Burck noted in the letter that an FBI agent who supervised securities fraud investigations in the agency's New York office, David Chaves, had admitted to leaking about another investigation, that of sports gambler William "Billy" Walters, who was convicted last week of insider trading.

Walters had moved unsuccessfully to dismiss the charges against him because of Chaves' leaks.

Burck said leaks themselves could have hurt the value of Platinum's funds, causing much of the harm to investors that prosecutors are blaming on Platinum's executives.

Prosecutors filed their own letter on Monday, calling Burck's letter "inflammatory" and saying he should file a formal motion.

But Irizarry on Monday said that was "no response at all." She ordered Burck to file another letter explaining in more detail what action he sought by the court, and for prosecutors to respond, in advance of the May 12 hearing.

Prosecutors are investigating Chaves in connection with the leaks in the Walters case. Sean Casey, a lawyer for Chaves, could not immediately be reached. Nor could a spokeswoman for the FBI.


In Depth

Q&A: Old Hill's Stone On Private Debt, P2P And Credit Bubbles

Jun 6 2017 | 7:52pm ET

While institutional capital continues to flow into the broader private debt sector...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Steinbrugge: Asia-Focused Hedge Funds Offer Great Opportunities

Jun 23 2017 | 3:33pm ET

Emerging market strategies have outperformed their developed-market peers for five...

 
Error

From the current issue of