In Five Hours, Daniel Kamensky Destroyed His Career. Why?

Daniel Kamensky (Art by Eglè Plytnikaitè)

Daniel Kamensky

(Art by Eglè Plytnikaitè)

The inside story of hedge fund Marble Ridge’s disastrous day.

On July 31, Daniel Kamensky composed a six-word Bloomberg chat message that ruined his life.

What drove him to do so — and then pushed him to make the string of decisions, each more reckless than the last, that exponentially compounded his troubles over the next few hours — remains a mystery. But one thing is now clear: Those decisions, made between 3:20 and 8:08 p.m. on a single late-summer day, amounted to four criminal fraud charges and the apparent end of a brilliant Wall Street career.

This was not how Dan Kamensky’s story was supposed to turn out. The son of a corporate lawyer who had founded his own firm outside Chicago, Kamensky graduated with bachelor’s and law degrees from Georgetown. He started his career as a bankruptcy attorney at a white-shoe law firm before becoming a major player on the distressed-debt team at Lehman Brothers. He then jumped to Paulson & Co., once one of the most prominent hedge funds in the industry. In 2016, Kamensky founded his own distressed-debt hedge fund firm, Marble Ridge Capital, and grew assets from $17 million on day one to $1 billion at the peak. His wedding made The New York Times, and he lived a life of suburban comfort on Long Island with his wife and daughter. In the hard-knuckle world of bankruptcy and restructurings, he minted a reputation as a talented, aggressive negotiator who sometimes rubbed people the wrong way but was ultimately fair.

That changed at 6:00 a.m. on September 3, when federal agents stormed into his Roslyn home and arrested Kamensky on four counts of criminal fraud: securities fraud, wire fraud, extortion and bribery, and obstruction of justice. The U.S. Department of Justice accused him of abusing his fiduciary duty as a member of the unsecured creditors’ committee serving in the bankruptcy proceedings of upscale department store chain Neiman Marcus.

Kamensky, the government alleged in its complaint, tried to use his position as a member of that committee and as a client of Wall Street investment bank Jefferies to keep the bank from making a rival offer for shares of a Neiman Marcus entity that Marble Ridge — which held Neiman Marcus bonds and term loans — wanted to buy. Then, the government alleges, he attempted to cover up what he’d done.

For some who knew Kamensky, the news was stunning.

“I believed he was one of the best distressed-debt investors in the business. He’s very smart, he’s extremely rigorous in doing his due diligence, he works very hard, and he used his legal background and general knowledge of bankruptcy to his tremendous advantage and success,” says one person who has discussed bankruptcy and restructuring matters with Kamensky in the past. “I was shocked beyond belief, extremely upset; I am still now. It’s inexplicable to me, what I read in the press. Inexplicable and completely out of character.”

But others who knew Kamensky in the past say that even in the bankruptcy world — one in which creditors must be willing to fight for every dollar of assets that remains to be recovered — Kamensky stood out.

“I think he was a little more aggressive than most,” says someone who has worked with him. “At the time that he joined Paulson, he was at the top of the investing world. He had a lot of clout and heft and credibility behind him, and he used it — to the point where he would even upset other people who were on his side.”

Says someone else who once worked with Kamensky, “When I heard this news, I wasn’t shocked. Not that I ever thought that he was the kind of guy who was going to break the law, but he was a bulldog, like other players in the distressed space. I felt bad that he crossed the line and it blew up like this, but it definitely was not out of left field.”

A spokesperson for Marble Ridge refutes this characterization. “Dan as a professional is somebody who would be aggressive in trying to assert his investment interests. If you look at the world of hedge funds and distressed investing, it’s replete with examples of people you could argue are more aggressive,” says Robert Siegfried, vice chairman of public relations firm Kekst.

Others agree with that perspective, saying they do not see Kamensky as being any more brutal than what is typical for distressed-debt investors.

But all of Kamensky’s professional contacts who were interviewed for this story say he is a smart and talented investor. And, to a person, they expressed regret for how his story turned out.

“I like Dan; I think he’s a smart guy,” says someone else who has worked with him on bankruptcy and restructuring situations. “He can be a pain in the ass in terms of being demanding and aggressive, but with me he was utterly and always respectful. What happened is the furthest thing that I ever, ever, ever would have expected.”

Although those actions on July 31 undid Kamensky’s career in a matter of hours, they were ultimately the culmination of a bitter dispute between Marble Ridge and Neiman Marcus that had been dragging on since 2018. That’s when Marble Ridge accused Neiman Marcus and its owners — private equity firm Ares and the Canada Pension Plan Investment Board — of fraudulently transferring the store chain’s MyTheresa subsidiary, a German luxury online retailer valued at an estimated $1 billion, out of the reach of creditors and back to an entity they controlled. A person familiar with the situation says the transfer was permitted by Neiman Marcus’s debt documents. (CPPIB and Ares both declined to comment for this story, and Neiman Marcus did not respond to requests for comment.)

The parties went back and forth in various courts. Then, in May 2020, Neiman Marcus filed for Chapter 11 bankruptcy protection. As part of those proceedings, the company’s owners reached a settlement this summer with the unsecured creditors, including Marble Ridge, allocating 140 million Series B shares of MyTheresa to them. But the shares were highly illiquid, and some of the unsecured creditors, particularly vendors that had supplied Neiman Marcus with merchandise they had yet to be paid for, needed cash. Marble Ridge submitted a proposal to fellow members of the committee in which it would offer to buy up to 60 million of the shares at 20 cents on the dollar from any creditors that wanted instant liquidity. The committee voted to support the settlement and agreed to continue negotiating the cash-out proposal with Marble Ridge.

The catalyst for Kamensky’s unraveling came on July 30. That’s when a senior analyst for Jefferies’ distressed and special-situations group, Eric Geller, found out about the MyTheresa shares being distributed to unsecured creditors. That day a Jefferies client contacted him to express an interest in buying the shares, according to a report from the U.S. Trustee, filed in a Texas bankruptcy court in August. (A person familiar with the bankruptcy proceedings says that up to this point, Jefferies had not been involved in the Neiman Marcus bankruptcy at all — and only learned that the MyTheresa shares were for sale from another hedge fund that had previously been bidding with Marble Ridge. A related SEC complaint says Jefferies learned of the sale from an industry newsletter and the bankruptcy docket. The bank declined to comment.)

Geller then sent texts to two other Jefferies employees — one of whom is identified in the report as Jefferies Employee 1 but was later reported by Bloomberg to be Joe Femenia, a former Navy SEAL who headed distressed-debt trading at the bank — to discuss making an offer for the shares. Femenia woke up to those texts on the morning of July 31 and talked to Geller at 8:00 a.m. Femenia had heard from two separate clients that morning who were interested in purchasing the MyTheresa shares. Femenia thought there was enough interest for Jefferies to move forward with its own proposal.

Sometime between 9:00 and 10:00 a.m., Geller called the unsecured creditors’ committee’s financial adviser, turnaround veteran Mohsin Meghji, and told him Jefferies wanted to make an offer for the shares “in the 30s” — substantially higher than the offer that Marble Ridge had submitted. Geller sent the adviser a follow-up email confirming the offer and asking that it be kept confidential. At about a quarter after noon, Femenia began putting together a formal bid to buy the shares from any unsecured creditor that wanted to sell.

Meghji and Richard Pachulski, the committee’s lawyer, then decided they needed to halt work on finalizing the Marble Ridge proposal — and that they needed to tell Kamensky why. (Pachulski later said he did not remember being told that Jefferies wanted the bid to be confidential.) They called Kamensky at 3:15 to tell him about the Jefferies offer.

According to the Trustee’s report, “Mr. Kamensky received this news calmly, without apparent anger or surprise.” He believed Jefferies’ offer “was not serious and nothing would come of it; he stated that Jefferies was likely just fishing for information.”

In reality, Kamensky was seething. As soon as he got off the phone, he fired off an urgent message to Marble Ridge’s head trader.

“Eric Geller from Jefferies called the [unsecured creditors’ committee] counsel and offered to buy the units at 30 cents, that is a monumental mistake,” he wrote. “I’m getting [Femenia] now, he needs to talk to me. Let me know. They are threatening to put a bid in.” The trader responded, “Those guys man I hope they were just ignorant to our interests.”

At 3:20, Kamensky sent an urgent Bloomberg chat to Femenia. “Need you NOW,” he wrote. The two exchanged messages, with Femenia telling Kamensky he was on a call and asking if he could get back to him in ten minutes. “Do I need to reach out to Geller,” wrote Kamensky. At 3:28 a clearly agitated Kamensky typed, “DO NOT SEND IN A BID.”

Seventeen minutes later, Kamensky got on the phone with Femenia and Geller. Femenia later reported that Kamensky was “very upset” and told them they did not understand the depth of his interest in the MyTheresa shares. He had racked up $3.5 million in legal fees for his efforts, which ultimately made the MyTheresa settlement possible, he insisted. In his own words — later recounted in an interview with the Trustee — Kamensky admitted that, in his fury, he began to “shout, curse, and demand that Jefferies stand down.” In his mind, he was going to have the MyTheresa shares come hell or high water; all the Jefferies bid would do is drive up his final price.

And then he made a threat. He told Femenia that Marble Ridge had been a good partner to him and Jefferies, but that if Jefferies moved forward with its bid for the MyTheresa shares, “they would not be partners going forward,” according to the Trustee’s report.

In other words, Marble Ridge was a valued Jefferies client — and Kamensky had just threatened to pull its business if the bank didn’t withdraw its bid for the MyTheresa shares.

Kamensky later recalled in the Trustee interview that Femenia had then asked him why he was so angry. At this point, Kamensky began to regain his composure. The rest of the call was much less tense, with Kamensky laying out his long history with Neiman Marcus and the complexity of the negotiations for the MyTheresa shares. He told the Trustee that by the end of the call, he was convinced that Geller and Femenia would consider their next steps in light of the information he had provided in the “‘calm’ latter half of the call, not the coercive statements he made in the ‘angry’ first half of the call,” the report said. Kamensky said he was trying to tell them that Jefferies should make a bid only if it was a serious bidder, but should back out if it wasn’t so that it wouldn’t disrupt the bankruptcy process.

But that’s not what he actually said, according to Femenia. After they hung up with Kamensky, Femenia told Geller he was uncomfortable with what had just happened — in his view, Kamensky was abusing his position as a fiduciary in the bankruptcy case. So at 3:55 p.m., he called Jefferies’ general counsel and told him about the conversation.

Based on that conversation, the Jefferies professionals made a two-part decision: First, they would withdraw their bid to buy the MyTheresa shares. Second, they would tell all parties involved why they were withdrawing the bid — a move, it seemingly went without saying, that would sink Kamensky.

At a few minutes after 4:00, Femenia and Geller called Kamensky. They explained that he was an important client and that they intended to withdraw from making any bid for the shares. And then they told him they would “be transparent about why” — with both the client who had wanted to buy the shares and with the committee’s advisers, according to the Trustee’s report. Kamensky thanked the two men and told them he would always be grateful to them.

After they hung up, Geller observed that Kamensky “appeared not to hear or understand” the part about how they were going to tell the committee why they were withdrawing their bid.

He was right. Kamensky sent Bloomberg chat messages to Marble Ridge’s head trader after the call, telling him, “They are standing down,” and that Jefferies “took the high road.”

In the meantime, Femenia and Geller told their client they were pulling the bid. Then Geller emailed Pachulski and Meghji at the creditors’ committee, asking them to call him. Pachulski spoke with Geller at about 5:00 p.m.; Geller told him that Jefferies was withdrawing its bid and explained why. After the call, Pachulski told Meghji what Geller had said and set up a conference call for 6:00 that evening with the committee members to decide what to do about Kamensky’s actions.

On that call, the committee members decided to reach out to an attorney for Marble Ridge, to find out if what Jefferies had told them was accurate. The attorney for Marble Ridge said he hadn’t heard anything about it but that he would call them back after he spoke with Kamensky.

At 7:30 p.m. the attorney called Pachulski and other members of the committee and said that Kamensky had contacted Jefferies about the bid, but claimed that there was “a misunderstanding about his intention.” Pachulski said he would need to schedule an emergency meeting of the committee — without Marble Ridge or its attorneys — to figure out what to do next.

By then, Kamensky was in full panic mode. He sent Femenia a Bloomberg chat message at 7:42 p.m., asking to speak with him. Kamensky and Femenia had a phone conversation a few minutes after 8:00.

“This conversation never happened,” Kamensky said, according to the report. Femenia, alarmed by this declaration, began to record the call — and later provided a copy of it to the Trustee.

And then Kamensky began to dig an even deeper hole.

“Why would you tell committee counsel that I threatened you?” he asked. “Why would you tell them that? . . . This is going to the U.S. Attorney’s Office. This is going to go [to] the court. Like, do you want to be dragged into this? Like, bid all you want but don’t — don’t — don’t put me in jail.”

Kamensky said he informed the committee that he had simply told Jefferies not to bid if it wasn’t serious but to go ahead if it was, and that he planned to maintain that it was a “humongous misunderstanding.”

According to Femenia, there was no misunderstanding.

“Help me out here,” Kamensky pleaded. “I mean, like, talk to me here, talk to me. How do we salvage this?”

When it became clear that Femenia would not cover for him, Kamensky lost what was left of his cool.

“[I]f you’re going to continue to tell them what you just told me, I’m going to jail, okay?” he snapped. “Because 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.”

“Dan, I would never lie for anyone, okay, like 100 percent clear because that in and of itself is a crime and I have ethics,” Femenia shot back, according to the complaint.

“Just so you know, I’m not asking you to lie, okay, and all I’m saying is that if that’s what I said that’s not at all what I intended, and I apologize, okay?” Kamensky said. “I’m not asking you to lie. . . . Maybe you can see your way to saying that it was misconstrued . . . that’s all I’m saying . . . and this conversation could not have happened.”

The next morning, at 8:31 — ahead of an emergency committee meeting scheduled for 2:00 that afternoon — Marble Ridge’s attorney emailed the committee’s lawyer and advised him that Marble Ridge was resigning from the committee. At that emergency meeting the committee decided to tell the U.S. Trustee overseeing the bankruptcy proceedings what Kamensky had done. That same day, Jefferies determined it would go ahead with its bid for the MyTheresa shares. (Marble Ridge later submitted a revised proposal.)

Two days later the committee filed a letter to an attorney for the U.S. Trustee laying out the facts of the Kamensky saga. A month after that, Kamensky was arrested.

People who know Kamensky say he was tremendously invested in the Neiman Marcus situation — financially, professionally, and emotionally.

In Kamensky’s view, the transfer of the MyTheresa assets back to Neiman Marcus — jointly owned by Ares and CPPIB, the company’s equity sponsors and controlling shareholders — rendered Neiman Marcus insolvent, making it a clear-cut example of a fraudulent conveyance, done simply “to strip an important and valuable asset away from the creditors of the company and to gift that asset to Ares and CPPIB,” according to a letter Kamensky sent to the company in September 2018. At the time, Marble Ridge owned bonds and term loans in the retailer, and has described itself as the company’s largest unsecured creditor.

The dispute heated up in December 2018, when Marble Ridge filed a lawsuit against Neiman Marcus and related entities in Dallas County court; the suit was eventually dismissed on the grounds that Marble Ridge didn’t have legal standing to bring the claim.

When Neiman Marcus ultimately filed for bankruptcy, a report commissioned by the unsecured creditors’ committee concluded that Neiman Marcus was insolvent at the time of the MyTheresa transfer. A counterreport from Ares and CPPIB disputed this assertion and others in the report. But the so-called disinterested manager appointed by Neiman Marcus, partly to investigate the transaction, concluded that “there is a strong possibility that the Company was insolvent at the time of the Distribution” — meaning at the time the MyTheresa asset was transferred. (A person familiar with the bankruptcy proceedings says that conclusion is not supported by analysis and notes that no courts have upheld any of Marble Ridge’s claims.)

“I think Dan was by and large vindicated,” says one of the people who has worked with him. “He was increasingly focused on proving that he was right, and he saw it as a great opportunity to establish a name for himself and his firm and to hold people accountable.”

But there was another reason, this person says. “There was an element, mentally, of entitlement because he had spent years chasing these guys.” The person notes that Kamensky had pointed to the $3.5 million he spent on fees. “It’s not easy to do what he did. There was an element of him thinking, ‘I did this, so I should be somehow compensated.’”

Of course, that’s not how unsecured creditors’ committees work. In bankruptcy proceedings the job of an unsecured creditors’ committee is to maximize the potential recovery of assets for the benefit of everyone on the committee. Indeed, it has a fiduciary duty to do so. For some committee members this may run headlong into their own interests.

“If you’re a bidder in a bankruptcy case, you have to understand the debtor is trying to maximize the value of the estate for the benefit of creditors, and that means getting an active auction process going,” explains Stephen Lubben, the Harvey Washington Wiley chair in corporate governance and business ethics at Seton Hall University. “Anything you do to discourage an active auction process is problematic, but to discourage it when you are on an unsecured creditors’ committee seems to be especially problematic.”

Kamensky, a bankruptcy lawyer by training, certainly knew this.

When the U.S. Trustee interviewed him after the fact, Kamensky came clean immediately. He told the Trustee that his Bloomberg messages to Geller and Femenia were “motivated by panic.” He was afraid that any potential Jefferies bid would disrupt the process of including a cash-out proposal in a plan that the committee had to file to the court by August 3, which he believed was a firm deadline.

When Jefferies told him that it was going to put in the bid, Kamensky told the Trustee, his panic turned to fury, because he thought that Jefferies was “shaking him down for half the available assets by barging into a situation they knew nothing about at a sensitive time.” Kamensky also conceded that contacting Jefferies and trying to keep the bank from submitting its own bid was “wholly inappropriate” and “a grave mistake.” But he denied asking Femenia to lie. Rather, he told the Trustee, he was trying to “manage the message” by talking with him, and that he hoped they could find “common ground.”

People who knew Kamensky may hold differing views about his approach — but until the Jefferies saga, he had a reputation for being a smart investor, a devoted family man, and a philanthropist who gave generously to Jewish causes. In addition to his philanthropic work, Kamensky was a leader in the UJA Federation’s Bankruptcy and Reorganization Group and has appeared as a speaker at the American Bankruptcy Institute’s annual conference.

“I’m not going to comment other than to say he’s a wonderful human being and a good person, and that’s all I’m going to tell you,” said Saul Burian, a managing director in Houlihan Lokey’s financial restructuring group, when reached by phone.

According to Siegfried, the Marble Ridge spokesperson, “He wasn’t thinking. He let his emotions and his panic get a hold of him, and that allowed him to cloud his judgment in making the calls to Jefferies. That really is what happened, and that is what he’s said has happened to the Trustee, and that is what he apologized to the court for. What you had is this series of very inappropriate and unfortunate conversations that occurred between Dan and Jefferies at the 11th hour and 59th minute. But no one knows whether creditors were actually harmed by that. They weren’t at the time the conversations occurred.” Marble Ridge argues that the real financial harm was done earlier, with the MyTheresa transfer, notes Siegfried.

One day after Kamensky’s arrest, a Houston bankruptcy judge approved Neiman Marcus’s reorganization plan.

As for Kamensky, he faces several years in prison, as well as civil charges from the Securities and Exchange Commission. Marble Ridge is in the process of winding down. And a once promising career has turned into a cautionary tale.

“There is a slippery slope,” warns an observer. “And the heat of the moment can be combustible.”