The spat between hedge fund Marble Ridge Capital and bankrupt luxury retailer Neiman Marcus Group is heating up. 

Earlier this week, Neiman Marcus filed a complaint against the hedge fund and a temporary restraining order to block the fund from winding down its operations until it pays the retailer $55 million it alleges it is owed in damages. 

The lawsuit stems from revelations arising from Neiman Marcus’s bankruptcy proceedings that Marble Ridge’s founder, Dan Kamensky, tried to suppress a rival bid for the retailer’s e-commerce business, MyTheresa, deemed to be its crown jewel. 

Kamensky allegedly used his influence as a client of investment bank Jefferies Financial Group to try to get the bank to withdraw its bid, because Marble Ridge wanted to buy the shares at a discount and didn’t want a rival bidder driving up the share price, according to a preliminary report submitted as part of the bankruptcy proceedings by the U.S. Department of Justice’s Office of the United States Trustee. 

“DO NOT SEND IN A BID,” Kamensky wrote July 31 in a chat message to a Jefferies employee, according to that report and the Neiman Marcus complaint. When Kamensky learned that the employee told other advisers what had happened, he called the employee and pleaded, “[I]f you’re going to continue to tell them what you just told me, I’m going to jail, OK?” according to the complaint. “They’re going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I’m asking you not to put me in jail.” The exchange was first revealed in a Wall Street Journal report, citing the DoJ report.

In its complaint filed August 26, Neiman Marcus alleged that because of Kamensky’s actions, Marble Ridge “violated its fiduciary duties, acted in bad faith and abused the bankruptcy process” and then “attempted to cover-up its illegal activities by pressuring the competing bidder to change its story and misleading the Committee, the United States Trustee, the Debtors, the Court, and the public about its actions.” 

The retailer alleged in the complaint that its creditors lost out on between $42 million and $55 million as a result of Marble Ridge’s pressure on Jefferies. 

“Marble Ridge believes this attempt to discredit Marble Ridge and interfere with its operations by concocting damages is vindictive retaliation and motivated by Marble Ridge having previously exposed wrongdoing of Neiman Marcus and its equity sponsors over the past 2 years,” a spokesperson for Marble Ridge said in an e-mailed statement to Institutional Investor. The firm alleged in the statement that the transfer of the MyTheresa asset to two other firms was “fraudulent,” adding, “Marble Ridge believes this action is meritless and will vigorously oppose the relief sought in the complaint.”

In its complaint, Neiman Marcus said Marble Ridge’s allegation that the retailer defaulted on its bonds was “false” and damaged its business. 

After news of Kamensky’s actions on the MyTheresa bid broke, Marble Ridge sent a letter to its investors informing them that it planned to wind down. 

“After much consideration, and in light of the operating environment, we have made the difficult decision to commence an orderly wind-down of the Marble Ridge funds,” Marble Ridge told clients in a letter, according to a Reuters report on August 20. “Marble Ridge will manage the liquidation in the best interests of our investors and with the objective of protecting and enhancing the value of the funds’ assets.”

Marble Ridge agreed to escrow the $55 million until at least next month, when it is due to appear in court again in another hearing, according to a Bloomberg report. 

The saga marks a shocking fall from grace for Kamensky, who had been credited with helping John Paulson identify shorting opportunities in the subprime mortgage market during the global financial crisis of 2008, eventually making Paulson a multibillionaire. Kamensky told the trustee in the Neiman Marcus bankruptcy that his messages were “a grave mistake” and “motivated by panic.”

Kamensky founded Marble Ridge in February 2015. II reported earlier this week that the fund has produced a compound return of just 6 percent since its inception.