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CIO of billion-dollar hedge fund cleared on charges that he defrauded investors out of “billions of dollars” in a “ponzi-esque” scheme

This past July, Mark Nordlicht, former CIO of “Platinum Partners” was exonerated of what the United States Attorney for the Eastern District of New York called – “one of the largest and most brazen investment frauds perpetrated on the investing public.” The former CIO was charged with Conspiracy to Commit Securities Fraud and Investment Adviser Fraud; Conspiracy to Commit Wire Fraud; Investment Adviser Fraud; and two counts of Securities Fraud, in relation to what the government called “The Fraudulent Investment Scheme.”

The government argued that Mr. Nordlicht fraudulently overvalued the fund’s Level 3 assets to attract new investors and retain existing investors. Prosecutors alleged that this overvaluation led to a “severe liquidity crisis,” which Platinum tried to solve through high-interest loans between its feeder funds, and by paying redemptions to some investors but not to others. The government sought to convince the jury that Mr. Nordlicht committed fraud by making material misrepresentations and/or omissions to Platinum’s investors about valuation, liquidity, redemptions, and inter-fund loans.

The Governments’s Case

The government’s case consisted of thousands of documents and the testimony of countless witnesses. Among the government’s evidence was:

  • Testimony by Government Cooperators, all of whom were former Platinum executives, who testified that Mr. Nordlicht instructed employees to lie to investors, and that Mr. Nordlicht assured Platinum’s CFO that “mutually assured destruction” would prevent investors from complaining to regulators even though Platinum could not timely pay redemptions.
  • Secret Recordings where Mr. Nordlicht says – “We we’re lying.”; and, “For anyone to invest with us would be a breach of fiduciary duty right now until we straighten this out.”

Emails including conversations where Mr. Nordlicht tells his co-defendants – “this liquidity crunch was caused by our mismanagement,” and “this is code red…[w]e can’t pay out 25 million in [redemptions] per quarter and have 5 [million] come in.”

The government also presented testimony concerning late and unpaid redemptions, new subscriptions and deferred redemptions, poor performance of Platinum’s investments, and complaints by disgruntled Platinum investors. It also entered into evidence thousands of pages of bank records, financial audits, and other financial documents.

The Defense

In response to this seemingly damning evidence, the Defense was able to narrow the issues for the jury and Mr. Nordlicht was found not guilty on all counts related to “The Fraudulent Investment Scheme.” The Baez Law Firm demonstrated:

(1) The Motive: the real reason Platinum Partners and Mr. Nordlicht were targeted by the government boiled down to greed. Bringing down one of the largest hedge funds in one of the largest fraud cases in recent history, is the quickest way to being promoted from government attorney, to, law partner at a million-dollar law firm.

(2) The Misconduct: Egregious conduct committed by prosecutors throughout the process was exposed to the jury over and over again during the trial. The Baez Law Firm was able to show the jury that the only “fraud” in the courtroom, was the prosecution’s case against Mr. Nordlicht.

(3) What Really Happened: Perhaps the most challenging aspect of the defense, The Baez Law Firm was able to break down the evidence in a way that was relatable and understandable for the jury. By meticulously piecing together key points from the trial, the defense demonstrated that Platinum’s investors were sophisticated individuals who knew the risks associated with investing in a high-risk hedge fund — and agreed to accept those risks in exchange for higher returns. The fund hit a difficult time due to outside market influences. During this time, Mr. Nordlicht did everything he could to keep the fund afloat while they weathered out the storm, as he had successfully done in the past. The reason Platinum did not bounce back this time was not because it was too deep into a “fraudulent scheme.” The truth was that the government guaranteed the end of the fund when it raided Platinum’s offices in broad daylight, and somehow tipped off The Wall Street Journal and Bloomberg News that it was investigating Platinum in connection with a “Ponzi-esque” scheme.

The case against Mark Nordlicht is the perfect example of how the government can misconstrue a complex set of facts, whether intentional or not. Having an attorney who is capable of analyzing these complex issues, and committed to helping the jury understand them, may be the difference between a life inside, or outside or prison. While we cannot guarantee you the same results, Jose Baez deeply understands the intricacies of the law and can use them in your favor when defending you against the criminal charges brought against you.

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