The U.S. Department of Justice has hit Marble Ridge Capital hedge fund founder Daniel Kamensky with criminal charges that include securities fraud and extortion.
Other charges include wire fraud and obstruction of justice, according to the criminal complaint filed Thursday by Audrey Strauss, Acting U.S. Attorney for the Southern District of New York, in Manhattan. The alleged criminal acts occurred in connection with a scheme to pressure a rival bidder to abandon its higher bid for assets in Neiman Marcus’ bankruptcy case.
“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. 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 said.
Neiman’s MyTheresa Series B Shares are the assets referred to in the complaint. According to the U.S. Attorney’s Office, Kamensky was negotiating with the retailer’s unsecured creditors committee to offer 20 cents a share from any unsecured creditor that preferred to receive cash, rather than MyTheresa securities, as part of a settlement. Meanwhile, an investment bank reached out to the committee indicating that it was interested in bidding 30 cents to 40 cents under the same terms.
Kamensky, who was a named member of the committee, allegedly then reached out to a trader at the investment bank telling this person not to place a bid. In a subsequent call to employees of the investment bank, Kamensky is alleged to have asserted that the hedge fund should have the exclusive right to purchase the securities, in addition to allegedly threatening to use his role as committee co-chair to bar the investment bank from acquiring the MyTheresa shares, according to the U.S. Attorney’s Office. Kamensky allegedly stated that he would cease doing business with the investment bank should it proceed with its bid, it added.
Marble Ridge subsequently resigned from the committee and is currently in the process of winding down operations. A confirmation hearing on Neiman’s reorganization plan is set for Friday morning, the final step that paves the way for the luxury retailer’s exit from bankruptcy proceedings.
The statement of facts issued by the U.S. Attorney’s Office are allegations and still need to be proven, and Kamensky is innocent until proven guilty.
Kamensky did not return a request for comment by press time. A spokesman for Marble Ridge declined comment.
Kamensky, 47, a resident of Roslyn, N.Y., is charged with one count of fraud in the offer or sale of securities, which carries a maximum sentence of five years in prison, one count of wire fraud, which has a maximum sentence of 20 years, one count of extortion and bribery in connection with a bankruptcy, which has a maximum sentence of five years and one count of obstruction of justice, which carries a maximum sentence of 20 years.
Separately, in a matter connected to the same set of facts, the Securities and Exchange Commission on Thursday filed civil charges against Kamensky, charging him with violating an antifraud provision of the federal securities laws. The complaint was filed in a Manhattan federal court. The SEC is also seeking a permanent injunction and civil penalties.