Liquidators of two feeder funds of Platinum Partners Value Arbitrage Fund are suing the group’s founder Mark Nordlicht and others in the Cayman Islands for overstating the value of the fund’s assets.
Nordlicht, Platinum’s founder and former chief investment officer, is facing a criminal trial in New York for allegedly defrauding investors. US federal prosecutors accuse Nordlicht and others of falsifying the firm’s performance figures for personal gain. Nordlicht has pleaded not guilty.
Platinum Partners Value Arbitrage Fund (International) Limited and Platinum Partners Value Arbitrage Intermediate Fund Ltd., which are both in liquidation, filed a suit against Nordlicht, the Estate of Uri Landesman, David Levy, Platinum Management (NY) LLC and Platinum Partners Value Arbitrage LP at the Grand Court on 7 May.
Landesman, the president and managing partner of Platinum, died in September 2018. Levy was a portfolio manager of the fund.
The plaintiffs allege that the defendants breached their fiduciary duties through their “knowing or reckless overstatement” of the fund’s illiquid and difficult to measure assets, and as a result, the net asset value of the fund. If the performance of the fund was overstated, the management and incentive fees that the defendants received would have been inflated.
By reporting the overstated figures to boards and investors, Nordlicht, Landesman and Levy improperly received fees, bonuses, compensation and other payments, the writ states.
Platinum’s illiquid and hard to measure assets, so-called Level 3 assets, were crucial to the management and operation of the plaintiffs, the suit argues. “By their conduct, the Defendants acted in breach of their duties, made deliberate and/or negligent misstatements and/or engaged in willful misconduct by failing to act in accordance with their duties and by contributing directly or indirectly to the over-valuation of assets and provision of misleading financial information which caused loss to the Plaintiffs.”
The writ was filed to preempt a possible expiry of the statute of limitations for certain claims in the case. The decision whether to pursue the claims will depend on the ongoing investigation by the joint official liquidators appointed by the court, the writ filed by HSM Chambers said.
The plaintiffs appeal the court to assess the damages for breach of fiduciary duty, contractual and tortious duties, fraudulent trading, unjust enrichment and accessorial liability. Alternatively, the plaintiffs seek compensation based on the wrongly calculated value of the investment in the master fund and as a result of the delay in the winding up of Platinum.
Earlier this month, Nordlicht spent a night behind bars, after he allegedly lunged at a federal prosecutor, Assistant US Attorney Lauren Elbert, during a break in his trial. The incident was caught by courthouse cameras. According to court papers, Nordlicht pursued the prosecutor for over 10 seconds, while his wife tried to restrain him.