USAO, SEC Charge Big Law Attorney with Fraud

Deteriorating economic conditions in the retail market, which began before the current difficult business environment, have only been amplified by the pandemic. As with most situations, the difficulties created for some become opportunities for others. There are always some, unfortunately, who want to make whatever opportunity is available just a bit better for themselves – and often at the expense of others. That is the case for a hedge fund operator who is a former partner at a blue chip New York City law firm. U.S. v. Kamensky, No. 1:20-mj-09381 (S.D.N.Y. Filed Sept. 3, 2020); SEC v. Kamensky, Civil Action No. 1:20-cv-07193 (S.D.N.Y. Filed Sept. 3, 2020).

Daniel Kamensky is the founder and manager of New York based hedge Fund Marble Ridge Capital. Mr. Kamensky became a member of the Official Committee of Unsecured Creditors in the bankruptcy proceedings for Neiman Markus, once a top tier department store chain. As a member of the Committee Mr. Kamensky had a fiduciary duty to act in the best interest of all the unsecured creditors. Eventually he became co-chair of the Committee. The hedge fund founder was very familiar with his obligations as a committee member, having practiced law in the area while an associate at a major New York City law firm.

The Committee negotiated with the owners of the department store chain during the course of the proceedings to obtain securities known as MyTheresa Series B Shares. Ultimately, the Committee was successful in coming to a settlement on the point, obtaining 140 million shares of MYT Securities for the benefit of certain unsecured creditors of the bankruptcy estate.

In July 2020 Mr. Kamensky negotiated with the Committee for Marble Ridge to purchase a portion of the securities. He offered 20 cents per share for the MYT Securities from an unsecured creditor who preferred cash rather that the securities as part of the settlement.

At the end of July Mr. Kamensky learned that a New York City financial services company had informed the Committee it would bid between 30 and 40 cents per share for the securities. Later the same day Mr. Kamensky sent a message to a senior trader for the financial services company telling him not to place the bid. During a subsequent telephone conversation, held on the same day, Mr. Kamensky told the trader that his hedge firm should have the exclusive right to purchase the securities. After noting that Marble Ridge had been a client of the financial services firm the attorney stated that if the firm moved forward with its bid for the securities, the client relationship would end. Mr. Kamensky also stated that as co-chair of the Committee he would use his influence to block the bid.

The financial services company dropped its bid, but only after informing counsel for the Committee of his discussions with attorney Kamensky. Later the same evening Mr. Kamensky called an employee of the financial services firm and tried to convince him to falsely state that the person had been mistaken about the intent of attorney. At one point the attorney told the employee he could go to jail if the conversation was revealed.

Later, during an under oath interview with the Office of the U.S. Trustee Mr. Kamensky stated he made a “horrible” mistake. Mr. Kamensky resigned his positions and told investors in the fund to begin winding matters up. He has been charged with securities fraud, wire fraud, extortion and obstruction of justice. The criminal case and the SEC’s civil case are both pending.

Tagged with: , ,