billion $$$ fraud 6 months jail time
Marble Ridge Founder
Daniel Kamensky Sentenced
to Six Months in Prison
Kamensky was sentenced Friday after pleading guilty to one count of bankruptcy fraud in February.
May 07, 2021
Daniel Kamensky, founder and former manager of New York-based hedge fund Marble Ridge Capital, has been sentenced to six months in prison for bankruptcy fraud, according to a statement from the United States Attorney’s Office in the southern district of New York.
The sentence, which came on Friday in a Manhattan federal court, comes after Kamensky was charged 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,” according to the statement.
Kamenksy was arrested for his role in the alleged scheme in September 2020 and pled guilty to the charge in February. In addition to his prison time, Kamensky was sentenced to six months of supervised release on home confinement and ordered to pay a fine of $55,000.
“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,” Audrey Strauss, U.S. district attorney, said in the statement. “As he himself predicted, this fraud has now landed Daniel Kamensky in prison.”
The Neiman Marcus Bidding War
In May 2020, the luxury retail chain Nieman Marcus filed for bankruptcy in the United States Bankruptcy Court for the Southern District of Texas. Kamensky, a former bankruptcy attorney who worked at Lehman Brothers and Paulson & Co. before starting Marble Ridge in 2016, applied and was appointed to be a member of the retailer’s unsecured creditors’ committee at the onset of the bankruptcy.
During the bankruptcy process, the creditors’ committee negotiated with the owners of Neiman Marcus to obtain certain securities, known as MyTheresa Series B Shares, according to the district attorney’s statement. The committee was eventually able to come to a settlement to obtain 140 million shares of MYT securities “for the benefit of certain unsecured creditors of the bankruptcy estate.”
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In July 2020, Kamenksy negotiated with the committee to offer 20 cents per share — on behalf of Marble Ridge — to purchase MYT securities from “any unsecured creditor who preferred to receive cash, rather than MYT securities,” according to the statement. Then, on July 21, 2020, Kamensky “composed a six-word Bloomberg chat message that ruined his life.”
That morning, Kamensky learned that a “diversified financial services company headquartered in New York, New York,” which Institutional Investor has previously identified as Jefferies, told the committee that it would offer its bidding price at 30 to 40 cents per share, much higher than Marble Ridge’s offer. In the time period between 3:20 p.m. and 8:08 p.m., Kamensky sent a series of messages to a senior trader at the investment bank, instructing him not to place the bid. Kamenksy then called another employee at the bank, a senior analyst, and “asserted that Marble Ridge should have the exclusive right to purchase MYT securities.”
“He threatened to use his official role as co-chair of the committee to prevent the investment bank from acquiring the MYT securities,” the district attorney’s office said. “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.”
Jefferies ultimately backed out of the bid, telling the Neiman Marcus committee’s legal advisor that it made its decision because “Kamensky – a client of the investment bank – had asked them… to,” the district attorney’s office said. According to the statement, the committee then contacted Marble Ridge’s counsel, who then “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 night, Kamensky reportedly contacted the senior trader again and attempted to influence the employee’s story. The district attorney’s office said that during the call, Kamensky told the employee that “this conversation never happened,” and suggested the trader tell law enforcement that he had been mistaken about Kamenksy’s intention in his initial messages.
“I pray you tell them that it was a huge misunderstanding,” Kaminsky said in the call, according to the district attorney’s statement. “And I’m going to invite you to bid and be part of the process. [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.”
After these events, Marble Ridge resigned from the bankruptcy committee and told its investors that it intended to begin “winding down operations and returning investor capital,” according to the district attorney’s statement.