The United States Securities and Exchange Commission charged Platinum Partners with defrauding investors. Bobbi Rebell reports.
Top execs of New York-based hedge fund Platinum Partners were arrested on Monday and charged with an approximately $1 billion fraud that federal prosecutors said became "like a Ponzi scheme". Robert Capers, US Attorney for the Eastern District of New York. (SOUNDBITE) ROBERT L. CAPERS, UNITED STATES ATTORNEY FOR THE EASTERN DISTRICT OF NEW YORK, (ENGLISH) SAYING: "These defendants defrauded Platinum's investors by falsely portraying that their flagship hedge fund, PPPA, was thriving, when, in fact, it was not. And, by overvaluing its assets, when in reality the assets were doomed." According to the indictment, since 2012, Platinum Partners executives schemed to defraud their investors by overvaluing illiquid assets held by its flagship fund. This caused a "severe liquidity crisis" that they tried to remedy through high-interest loans between its funds, before selectively paying some investors ahead of others. A Platinum spokesman declined to comment. Founded in 2003, Platinum Partners until this year had more than $1.7 billion under management. The flagship fund reported returning profits of more than eight percent in 2015 and seven percent from January to April 2016. But this year, a series of investigations tied to Platinum came to a head. It's now liquidating its hedge funds, two of which have received bankruptcy protection.