Breaking bad in B’klyn

Feds probing COBA scandal fund

Federal prosecutors in Brooklyn are investigating whether the hedge fund at the center of a New York City public-union kickback scandal was a Ponzi scheme, The Post has learned.

Part of the probe is focused on whether the value of some of the hedge fund’s hard-to-assets investments were inflated, sources familiar with the probe said.

In June, prosecutors raided Platinum Partners, the $1.3 billion hedge fund run by Murray Huberfeld and Mark Nordlicht, after Huberfeld was arrested and charged with giving the head of the city’s Correction Officers’ Benevolent Association, or COBA, a $60,000 kickback in exchange for a $20 million investment.

Investigators are probing whether the values of some of Platinum’s investments were known to be worth less than what the fund told investors — and if withdrawals requested were paid with cash coming in from new investors, a person briefed on the investigation told The Post.

“It is ridiculous and false to suggest that Platinum Partners is a Ponzi scheme,” Montieth Illingworth, a spokesman for Platinum, told The Post.

Nellin McIntosh, a spokeswoman for the US Attorney in Brooklyn, declined to comment.

Platinum is liquidating its three funds in the wake of the charges against Huberfeld and the raid of the funds’ offices by the FBI.

Neither Platinum nor Nordlicht has been charged with any wrongdoing. Huberfeld, denying the allegations, has pleaded not guilty.

Platinum came into the public eye when Manhattan US Attorney Preet Bharara brought charges against then-COBA boss Norman Seabrook, who allegedly took the $60,000 bribe in 2014.

Seabrook has pleaded not guilty.

The probe by Brooklyn US Attorney Robert Capers is focused on the integrity of Platinum’s assets, sources said, while Bharara is looking into municipal corruption.

The hedge fund, founded in 2003, has posted some eye-popping returns — at one point showing gains for its main fund in 119 out of 120 months, according to documents obtained by The Post.

Those returns apparently came not from traditional investments, like stocks and bonds, but from eso- teric assets, like life insurance policies of people who were on the brink of dying, and risky energy companies.

Those investments, officially classified as Level 3 assets, are by their nature difficult to value. Investors in hedge funds that own such assets rely on the opinions of the funds as to what they are worth.

Those hedge funds, in turn, typically rely on auditors and, in some cases, third-party valuation firms to sign off on how they value their assets.

Platinum has since hired Bart M. Schwartz, who was the head of the Manhattan US Attorney’s criminal prosecution division when Rudolph Giuliani headed the office, to liquidate its funds.

“Platinum Partners stands behind its performance record,” Illingworth said.

“Its ability to generate returns for investors derives in the effective management of the positions,” the spokesman said, adding that Platinum distributed $2.6 billion of cash to investors over the years.

“Approximately twothirds of the $1.25 billion it manages today are gains investors have kept in the funds,” he said. “The most recent valuation on the funds was conducted by a highly credible, outside expert valuation firm at the end of March 2016 and provided to us in early June of this year,” he said.