US charges Platinum Partners hedge fund with US$1 billion fraud
NEW YORK: US prosecutors charged seven executives with the Platinum Partners hedge fund in an alleged US$1 billion fraud built on overvalued assets.
The Justice Department said Platinum defrauded investors by overvaluing its assets, earning more than US$100 million in fees between 2012 and 2016. Platinum Partners claimed US$1.7 billion in assets under management in a March 2016 securities filing.
The firm misrepresented key investments, including Black Elk Energy, a Texas oil company that maintained a US$283 million valuation on Platinum’s books despite the 2012 explosion in the Gulf of Mexico that killed three workers and badly dented the company’s finances.
Platinum’s investments in the oil business took a subsequent hit 2014 and 2015 when oil prices plummeted, prosecutors said.
When the overvalued assets precipitated a cash crunch, Platinum executives turned to high-interest loans from sister funds and fees from new investors, the Justice Department said.
US Attorney Robert Capers of the eastern district of New York likened the offenses to a Ponzi scheme, where Platinum executives boasted annual returns of 17 per cent but which were “the result of the overvaluation of the largest assets.”
FBI Assistant Director- inCharge William Sweeney said the executives “allegedly manipulated and lied to investors about the health of the investments they were making, and then plotted ways to cover up their actions.”
The Justice Department indictment covered eight counts, including charges tied to an allegedly fraudulent Black Elk Bond offering. The Securities and Exchange Commission filed charges in a parallel case. —AFP