Mark Nordlicht, Securities Fraud, New York 2023

Nordlicht Convicted of Securities Fraud in $150 Million Scheme

Mark Nordlicht, the founder and Chief Investment Officer of Platinum Partners L.P., and David Levy, the co-Chief Investment Officer of Platinum, were convicted today by a federal jury in the Eastern District of New York of securities fraud, securities fraud conspiracy, and wire fraud conspiracy for their roles in defrauding the bondholders of Black Elk Energy (Black Elk), an oil company that was one of Platinum’s largest assets.

The verdict followed a two-month trial before United States District Judge Brian M. Cogan. 

According to the evidence presented during the trial, between approximately November 2011 and December 2016, Nordlicht and Levy, together with their co-conspirators, orchestrated a fraudulent scheme to defraud third-party holders of Black Elk’s publicly traded bonds by diverting to Platinum the proceeds from the sale of the vast majority of Black Elk’s most lucrative oil fields even though the bondholders had priority over Platinum’s equity interests.

To execute this scheme, in early 2014, Nordlicht, Levy and others caused Platinum to secretly purchase Black Elk bonds on the open market and gain control of $98 million of the $150 million of outstanding bonds. The bonds were then transferred through a number of related entities to conceal their ownership and control by Platinum. Nordlicht, Levy and their co-conspirators then rigged a consent solicitation vote to amend the Black Elk indenture so that the proceeds from the sale of Black Elk’s best assets would be paid to the preferred equity – which was held by Platinum and Platinum insiders – ahead of the other bondholders.

Notably, non-Platinum related bondholders overwhelmingly voted against changing the indenture; one bondholder explained that to do so would constitute “giv[ing] up my rights and not get[ting] anything back for it,” which he characterized as “kind of stupid.”

After the rigged vote was complete, Nordlicht, Levy and their co-conspirators took millions of dollars from the asset sale for themselves, family members and friends, including approximately $7 million to Nordlicht’s father, approximately $250,000 to Levy and approximately $2 million to the brother of a co-conspirator.

United States Attorney Richard P. Donoghue stated, “With today’s verdict, Nordlicht and Levy have been held accountable for deceiving bondholders to gain control of the remaining assets of a failing oil company to line their own pockets and those of close family and friends.”

The case was investigated by the Federal Bureau of Investigation, New York Field Office (FBI) and the United States Postal Inspection Service, New York Division (USPIS). The Securities and Exchange Commission, New York Regional Office (SEC), provided significant cooperation and assistance during the investigation.

Nordlicht and Levy will face sentencing at a later date.

Platinum Partners was a New York City-based hedge fund founded in 2003. The company was known for its aggressive investment strategies and high returns, but it also faced allegations of hedge fund fraud and securities fraud in the past.

This verdict is a significant blow to the hedge fund industry, which has faced increasing scrutiny in recent years over issues of transparency and market manipulation.

The case serves as a reminder that those who engage in fraudulent activities will be held accountable for their actions.

Mark Nordlicht and David Levy will face sentencing at a later date.

The court has not yet set a date for sentencing.

Source: https://www.justice.gov/usao-edny/pr/platinum-partners-founder-and-cio-mark-nordlicht-and-co-cio-david-levy-convicted