Platinum Partners Receiver Hints At Asset Recovery

Feb 13 2017 | 5:35pm ET

By Lawrence Delevingne (Reuters) - A federal court-appointed receiver for troubled U.S. hedge fund manager Platinum Partners has hinted that some clients may yet recover much of their assets.

"Though we have just initiated our review, thus far we have not observed a major shift in overall portfolio value," Bart Schwartz, chairman of Guidepost Solutions, wrote in a message posted to last week.

Guidepost is working to liquidate Platinum's investments in hard-to-sell private energy, mining and other companies after six top executives of the firm, including founder Mark Nordlicht and President Uri Landesman, were charged in December with running a $1 billion fraud. All six have pleaded not guilty.

Platinum executives reported to Guidepost in September that two funds, Platinum Partners Credit Opportunities funds and the Platinum Partners Liquid Opportunity funds, had assets of $520 million and $16 million respectively, according to Schwartz's note.

The new message from Schwartz said that Guidepost continues to work with a valuation expert to assess those assets, a process that will continue for several months.

"We intend to purposefully and prudently liquidate the Funds’ investments and generate cash whenever possible," Schwartz wrote. "However, we do not intend to engage in a fire sale and are not interested in impairing value for the sake of generating cash."

A spokesman for Platinum declined to comment.

Investors in Platinum's credit and liquid strategies may fare better than those in the firm's largest group of funds, Platinum Partners Value Arbitrage (PPVA). They are also being wound down under the supervision of a Cayman Islands-based liquidator per the mandate of a local court and received bankruptcy protection from a U.S. court to avoid an asset fire-sale.

The PPVA funds were the focus of the U.S. government's December charges. The Department of Justice and the Securities and Exchange Commission alleged that Platinum dramatically inflated the value of the companies in the PPVA portfolio and favored some investors over others who wanted to take their money out, among other issues.

Reuters previously reported that clients of PPVA were not likely to recover the full value of their investments in the hedge funds that were once known for reported average annual returns of 17 percent.

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