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Marble Ridge Founder Dan Kamensky Arrested and Charged With Fraud
The U.S. Department of Justice accused the former Paulson & Co. partner of fraud and other charges in connection with the Neiman Marcus bankruptcy proceedings.
Daniel Kamensky, the founder of distressed debt hedge fund Marble Ridge Capital, was arrested and charged with fraud, extortion, and obstruction of justice in connection with the bankruptcy proceedings of retailer Neiman Marcus, the U.S. Department of Justice announced Thursday.
Kamensky, a member of the retailer’s unsecured creditors’ committee, had earlier landed in hot water over his alleged attempts to suppress a rival bid for Neiman Marcus’s MyTheresa e-commerce business so that Marble Ridge could buy the asset at a lower 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. Kamensky then attempted to persuade the rival bidder to cover up the scheme, according to an announcement from the DoJ’s Southern District of New York.
“As alleged, Daniel Kamensky disregarded his fiduciary responsibility to unsecured creditors of Neiman Marcus — and broke the law — when he attempted to coerce a competitor to withdraw a higher bid for assets of the bankruptcy estate,” said acting Manhattan U.S. Attorney Audrey Strauss in a statement Thursday. “As further alleged, acknowledging the illegality of his actions, Kamensky then attempted to obstruct an investigation by trying to persuade the competitor to change his account of the coercion, telling the competitor that otherwise ‘this is going to the U.S. Attorney’s Office.’ As today’s charges show, Kamensky was right about that.”
Strauss appeared to be referring to a phone call Kamensky made to an employee at Jefferies — the rival bidder, of which Kamensky was a client — after Kamensky had sent a chat message to the employee saying, “DO NOT SEND IN A BID.” (Jefferies was not named in Thursday’s complaint.)
After learning that the employee had notified others about the message, he called the employee and said, “[I]f you’re going to continue to tell them what you just told me, I’m going to jail, OK? 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,” according to court documents.
“Today, we’ve removed the ‘maybe,’ and forced him to answer for his conduct,” said FBI assistant director-in-charge William Sweeney in the announcement.
A spokesperson for Marble Ridge said the firm declined to comment on the charges. The Securities and Exchange Commission filed civil charges in the matter on Thursday.
“Kamensky further said that he would use his official role as co-chair of the committee to prevent the investment bank from acquiring the [MyTheresa] securities,” according to the complaint. “Kamensky also stated that Marble Ridge had been a good partner to the investment bank, but that if the investment bank moved forward with its bid for the [MyTheresa] securities, Marble Ridge would cease doing business with the investment bank.”
During a subsequent interview with the Office of the United States Trustee, Kamensky said his calls to the Jefferies employee were a “terrible mistake” and “profound errors in lapses of judgment [that] violated the personal and professional belief I tried my best to live by,” according to the complaint.
Kamensky, a former partner at hedge fund Paulson & Co., founded Marble Ridge in 2015. Marble Ridge managed more than $1 billion, according to the complaint.
Kamensky has been charged with one count of fraud in the offer or sale of securities, one count of wire fraud, one count of extortion and bribery in connection with a bankruptcy, and one count of obstruction of justice. Each of the charges carries maximum sentences ranging from five to 20 years in prison.
After news of Kamensky’s actions on the MyTheresa bid broke last month, 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.
Last week Neiman Marcus filed a complaint against Marble Ridge 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.