U.S. Promoter of Foreign Cryptocurrency Companies Sentenced to 60 Months in Prison for His Role in Multi-Million Dollar Securities Fraud Scheme
Mark Nordlicht, the founder and Chief Investment Officer of Platinum Partners L.P. (Platinum), 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, by rigging a consent solicitation vote. The verdict followed a two-month trial before United States District Judge Brian M. Cogan.
Richard P. Donoghue, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Philip Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the verdict.
“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,” stated United States Attorney Donoghue. “This Office and our law enforcement partners remain unwavering in our commitment to unraveling complex fraud schemes and bringing perpetrators, like the defendants, to justice.” Mr. Donoghue thanked the Securities and Exchange Commission, New York Regional Office (SEC), for their significant cooperation and assistance during the investigation.
“The victims of this scheme paid the price for the crimes committed by Nordlicht and Levy,” stated FBI Assistant Director-in-Charge Sweeney. “Today, the tables have turned. The FBI is committed to working with our law enforcement partners to ensure this type of behavior ceases to exist, and that investors can continue to place their faith in our financial markets.”
“In this case the defendants devised a scheme to defraud bondholders and cheat them out of millions of dollars. Today’s verdict should be a warning for all the fraudsters out there: No matter how slick you think you are, liars, frauds and cheats never win,” stated USPIS Inspector-in-Charge Bartlett.
Platinum was a New York City-based hedge fund founded in 2003. The evidence at trial established that 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 (the bondholders) 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.
Nordlicht, Levy and Joseph SanFilippo were acquitted of counts related to a separately charged scheme involving investors in the Platinum funds.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Alicyn Cooley, David Pitluck, Lauren Elbert and Patrick Hein are in charge of the prosecution.
New Rochelle, New York
New York, New York
United States Attorney’s Office