A hedge fund founder admitted to bankruptcy fraud for abusing his position on a Neiman Marcus Group Inc. bankruptcy committee to purchase securities at a deflated price.
Nassau County resident Daniel Kamensky, of Roslyn, the founder of the New York-based hedge fund Marble Ridge Capital pleaded guilty to pressuring a rival bidder to abandon its higher bid for assets in connection with Neiman Marcus’s bankruptcy proceedings.
U.S. Attorney Audrey Strauss said that Kamensky was the principal of Marble Ridgewhich had assets under management of more than $1 billion that invested in securities in distressed situations, including bankruptcies. Prior to opening Marble Ridge, Kamensky worked for many years as a bankruptcy attorney at a well-known international law firm, and as a distressed debt investor at prominent financial institutions.
Naiman Marcus filed for bankruptcy in May last year, leaving an opportunity for Kamensky to attempt to take advantage of.
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 purchase at a lower price. Kamensky then attempted to persuade the rival bidder to cover up the scheme.
In July last year, Kamensky learned that a different financial services company in Manhattan intended to purchase the same business at a higher clip, and he then took steps instructing the rival bidder not to place a bid. He threatened to use his role as a co-chair of the' committee to prevent the investment bank from acquiring the assets.
Kamensky told the investment bankers that Marble Ridge had been a client there in the past, and if they moved forward with the bid then his hedge fund would cease doing business there.
The investment bank ultimately did not make a bid to purchase the MyTheresa Series B shares.
Kamensky knew what he was doing was illegal, at one point stating: “Do you understand…I can go to jail?” “I pray you tell them that it was a huge misunderstanding, okay, and I’m going to invite you to bid and be part of the process.”
“But I’m telling you…this is going to the U.S. Attorney’s Office. This is going to go to the court.” “If you’re going to continue to tell them what you just told me, I’m going to jail, okay? 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.”
Following that conversation, Marble Ridge resigned from the committee and advised its investors that it intended to begin winding down operations and returning investor capital.
Kamensky, 48, is scheduled to be sentenced on May 7, when he will face up to five years in prison.
"Daniel Kamensky abused his position as a committee member in the Neiman Marcus Bankruptcy to corrupt the process for distributing assets and take extra profits for himself and his hedge fund," Strauss said. "Kamensky predicted in his own words to a colleague: ‘Do you understand…I can go to jail?’… ‘this is going to the U.S. Attorney’s Office.’ His fraud has indeed come to the U.S. Attorney’s Office and now has been revealed in open court.”
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