Platinum Partners Said to Probably Close Main Fund

  • Platinum’s Huberfeld was arrested for allegedly making bribe
  • Fund had reported some of the best returns in the industry

Platinum Partners will probably wind down its main hedge fund after a manager at the firm was charged last week for allegedly bribing the head of New York City’s correction officers’ union, according to a person with knowledge of the matter.

The fund, Platinum Partners Value Arbitrage, has reported some of the best returns in the industry despite investing in an oil company that went bankrupt after a deadly explosion, high-flying Singaporean penny stocks and what regulators called a “scheme to profit from the imminent deaths of terminally ill patients.” A final decision hasn’t been made about whether to close the fund because the situation is in flux, said the person, who asked for anonymity because the fund is private. The Wall Street Journal reported the news earlier Tuesday.

Murray Huberfeld, the manager who was arrested, allegedly directed an intermediary to pay off union chief Norman Seabrook for investing $20 million in the fund. The intermediary, who is cooperating, gave Seabrook a Ferragamo bag stuffed with $60,000 in cash, according to prosecutors. The union money came at a time when other Platinum investors were withdrawing funds, as much as $44 million by December 2014, according to prosecutors.

Huberfeld was a manager of Platinum, but his role wasn’t publicly disclosed in part because of his background, which includes two brushes with regulators, Manhattan U.S. Attorney Preet Bharara said last week.

Platinum believes that Huberfeld was charged unfairly, the person said. Huberfeld’s lawyer, Eliot Lauer, declined to comment. Seabrook’s lawyer has said the labor chief would fight the charges.

Platinum’s main fund has returned an average of 17 percent a year since its founding in 2003, with no down years, despite some investments that seemed to go poorly, Bloomberg News reported in October.

In the months since then, a Chinese joint venture that Platinum invested in sued its business partner for fraud, and a finance company sued Platinum to force payment on a put option, claiming the fund has "liquidity issues." Platinum said in a statement that the claims lack merit and will be dismissed. Reuters reported in April that Platinum put some of the fund in a "side pocket" -- meaning that investors can’t redeem their money normally.

Mark Nordlicht, the former commodities trader who founded Platinum, has attributed his good returns to diligent risk management and making sure his investments have solid collateral. The main fund gained 2.6 percent this year through March, according to a fact sheet sent to investors. He declined to comment.

(Corrects third paragraph of story originally published on June 14 to show that Huberfeld was alleged to have directed an intermediary to bribe the union chief, and not to have handed over the cash himself.)