Murray Huberfeld’s Hedge-Fund Firm Has History of Big Risks
The firm is known for an unusual investing style and superlative performance
The arrest of financier Murray Huberfeld focuses attention on a New York hedge-fund firm long known for an unusual investing style and superlative performance.
Mr. Huberfeld used to run the credit hedge fund at Platinum Partners and remains a part-owner of the firm, according to a criminal complaint filed by federal prosecutors.
Mr. Huberfeld was taken into custody Wednesday for his involvement in an alleged kickback scheme where the president of New York City’s correction officers’ union received $60,000 in exchange for a $20 million investment in Platinum. The union head, Norman Seabrook, expected to be paid more than $100,000 a year, the complaint alleged.
Mr. Seabrook, who also was arrested Wednesday for his alleged involvement in the scheme, denied taking money and his attorney said he would fight the charges. Mr. Huberfeld left the courthouse Wednesday without commenting.
Platinum’s two main funds, whose holdings include investments such as loans secured by life-insurance policies, haven’t reported a down year in their history, investor documents show. The fund formerly led by Mr. Huberfeld has reported only one down month in nine years, the documents show.
Mr. Huberfeld is acquainted through Jewish philanthropic circles with Jona Rechnitz, a Brooklyn real-estate investor who helped arrange the union’s investment in Platinum, The Wall Street Journal has reported. Mr. Rechnitz allegedly paid a kickback to Mr. Seabrook before accompanying him to a Torah dedication ceremony, the complaint said.
Mr. Rechnitz has pleaded guilty to conspiracy in the case and is cooperating with federal investigators.
Platinum’s leaders include several religious Jews and the firm’s founder, Mark Nordlicht, lives part-time in Israel, people familiar with the matter said. A secretary at the firm’s New York headquarters said he was out of the office Wednesday. Platinum, which has more than $1 billion under management, didn’t respond to requests for comment.
When the correction officers’ union made its initial investment in March 2014, Platinum the same day transferred $4.5 million from its bank account to pay others who had asked for money back, according to the complaint. Later that fall, Platinum was in an increasingly desperate position for the union’s money, and firm executives began writing each other emails about pressing Mr. Seabrook to increase the investment, the complaint alleged.
Platinum’s managing partner, who wasn’t named in the complaint, “stressed the importance of bringing in more COBA money because of $44 million in looming redemptions from [the Value Arbitrage Fund] at year end 2014,” according to the complaint.
The Value Arbitrage Fund, where prosecutors say the union’s money was invested, had hundreds of millions of dollars scattered among investments including oil platform operator Black Elk Energy, electric company Glacial Energy and Infinity Augmented Reality, which under a previous name specialized in insurance policies that allow investors to make money when a person dies sooner than expected, according to a 2014 valuation report reviewed by the Journal.
Black Elk was charged criminally in 2015 in connection with an off-coast explosion that left three workers dead, and filed for bankruptcy. Black Elk pleaded not guilty to the criminal charges, and litigation is ongoing. Glacial Energy also went bankrupt.
Platinum continued to pitch the union on further investments until May 2015, when prosecutors subpoenaed the union and the hedge fund for information on their relationship, the complaint said.
In December, Platinum blocked investors from immediately withdrawing some of their money, citing hard-to-sell assets, said people familiar with the firm.