Daniel Kamensky Jailed for Bankruptcy Fraud
Hedge Fund Founder Jailed for Bankruptcy Fraud in Connection With Neiman Marcus Bankruptcy 7
Audrey Strauss, the United States Attorney for the Southern
District of New York, announced that DANIEL KAMENSKY, the founder and former
manager of New York-based hedge fund Marble Ridge Capital (“Marble Ridge”), was
sentenced today in Manhattan federal court to six months in prison for engaging
in fraud and extortion to pressure a rival bidder to abandon its higher bid for
assets in connection with Neiman Marcus’s bankruptcy proceedings so that Marble
Ridge could obtain those assets for a lower price. KAMENSKY pled guilty on February 3, 2021,
before United States District Judge Denise L. Cote, who imposed today’s
sentence.
U.S. Attorney Audrey Strauss said: “Daniel Kamensky committed bankruptcy fraud –
undermining the integrity of bankruptcy proceedings and violating his fiduciary
responsibility – in an effort to take extra profits for himself and his hedge
fund. As he himself predicted, this
fraud has now landed Daniel Kamensky in prison.”
As alleged in the Complaint, the Information, and statements
made in court:
DANIEL KAMENSKY was the principal of Marble Ridge, a hedge
fund with 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.
The Neiman Marcus Bankruptcy
Neiman Marcus, an American chain of luxury department stores
with stores located across the United States, filed for Chapter 11 bankruptcy
protection in the United States Bankruptcy Court for the Southern District of
Texas (the “Bankruptcy Court”) in May 2020. At the outset of the bankruptcy, Marble Ridge,
through KAMENSKY, applied to be on the Official Committee of Unsecured
Creditors (the “Committee”) and was thereafter appointed to be a member of the
Committee. As a member of the Committee,
KAMENSKY had a fiduciary duty to represent the interests of all unsecured
creditors as a group.
During the bankruptcy process, the Committee had negotiated
with the owners of Neiman Marcus to obtain certain securities, known as
MyTheresa Series B Shares (the “MYT Securities”), and ultimately, the Committee
was successful in coming to a settlement to obtain 140 million shares of MYT
Securities for the benefit of certain unsecured creditors of the bankruptcy
estate. In July 2020, KAMENSKY was
negotiating with the Committee for Marble Ridge to offer 20 cents per share to
purchase MYT Securities from any unsecured creditor who preferred to receive
cash, rather than MYT Securities, as part of that settlement.
Kamensky’s Fraudulent Scheme
On July 31, 2020, KAMENSKY learned that a diversified
financial services company headquartered in New York, New York (the “Investment
Bank”), had informed the Committee that it was interested in bidding a price
between 30 and 40 cents per share – substantially higher than KAMENSKY’s bid –
to purchase the MYT Securities from any unsecured creditor who was interested
in receiving cash.
That afternoon, KAMENSKY sent messages to a senior trader at
the Investment Bank (“IB Employee-1”) telling him not to place a bid, and
followed those messages up with a phone call with IB Employee-1 and a senior
analyst of the Investment Bank (“IB Employee-2,” and collectively the
“Employees”). During that call, KAMENSKY
asserted that Marble Ridge should have the exclusive right to purchase MYT
Securities, and he threatened to use his official role as co-chair of the
Committee to prevent the Investment Bank from acquiring the MYT
Securities. KAMENSKY also stated that
Marble Ridge had been a client of the Investment Bank in the past but that if
the Investment Bank moved forward with its bid, then Marble Ridge would cease
doing business with the Investment Bank.
The Investment Bank thereafter decided to not make a bid to
purchase MYT Securities and informed the legal adviser to the Committee of its
decision. The Investment Bank further
told the legal adviser they made that decision because KAMENSKY – a client of
the Investment Bank – had asked them not to.
Advisers to the Committee informed counsel for Marble Ridge
of their call with the Employees, and after speaking with KAMENSKY, counsel for
Marble Ridge falsely informed the advisers that KAMENSKY had not asked the
Employees not to bid, but instead had told them to place a bid only if they
were serious. Later that evening, KAMENSKY
contacted IB Employee-1 and attempted to influence what IB Employee-1 would
tell others, including the Committee and law enforcement, about KAMENSKY’s
attempt to block the Investment Bank’s bid for the MYT Securities. KAMENSKY said at the outset of the call, in
substance, “this conversation never happened.”
During the call, KAMENSKY asked IB Employee-1 to say falsely that IB
Employee-1 had been mistaken and KAMENSKY had actually suggested that the
Investment Bank bid only if it were serious, and made comments including the
following: “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.” “[I]f 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.”
During a subsequent interview with the Office of the United
States Trustee, which was conducted under oath and in the presence of counsel,
KAMENSKY stated that his calls to IB Employee-1 were a “terrible mistake” and
“profound errors in lapses of judgment.”
After this series of events, Marble Ridge resigned from the
Committee and advised its investors that it intended to begin winding down
operations and returning investor capital.
In addition to his prison term, KAMENSKY, 48, of Roslyn, New
York, was sentenced to six months of supervised release on home confinement and
ordered to pay a fine of $55,000.
Ms. Strauss praised the work of the FBI. Ms. Strauss further thanked the Office of
United States Trustee and the Securities and Exchange Commission for their
cooperation and assistance in this investigation.
This case is being handled by the Office’s Securities and
Commodities Fraud Task Force. Assistant
U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the
prosecution.
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