New York Hedge Fund Founder Pleads Guilty to Neiman Marcus Bankruptcy Fraud | USAO-SDNY
Audrey Strauss, United States Attorney for the Southern District of New York, today announced that DANIEL KAMENSKY, founder and manager of New York hedge fund Marble Ridge Capital (“Marble Ridge”), has pleaded guilty to a chief bankruptcy fraud charge in as part of his scheme to pressure a rival bidder to drop his higher bid of assets in the Neiman Marcus bankruptcy proceeding so that Marble Ridge can obtain these assets at a lower price. KAMENSKY pleaded guilty before United States District Judge Denise Côté.
US lawyer Audrey Strauss said: “Daniel Kamensky abused his position as a member of the Neiman Marcus bankruptcy committee to corrupt the asset distribution process and take additional profits for himself and his hedge fund. Kamensky predicted in his own words to a colleague: “Do you understand… can I go to jail?” “…” It’s okay with the United States attorney’s office.“His fraud did indeed reach the US attorney’s office and has now been exposed in open court. “
As alleged in the complaint, the information and statements made in court:
DANIEL KAMENSKY was the director of Marble Ridge, a hedge fund with over $ 1 billion in assets under management that invested in distressed stocks, including bankruptcies. Prior to opening Marble Ridge, KAMENSKY worked for many years as a bankruptcy lawyer at a well-known international law firm, and as a troubled debt investor in major financial institutions.
The bankruptcy of Neiman Marcus
Neiman Marcus, an American luxury department store chain with stores located across the United States, has filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) in May 2020. At the onset of bankruptcy, Marble Ridge, through KAMENSKY, applied to serve on the Official Unsecured Creditors Committee (the “Committee”) and by was subsequently appointed 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 negotiated with the owners of Neiman Marcus for certain securities, known as the Series B shares of MyTheresa (the “MYT securities”), and ultimately the committee was successful in reach 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 Marble Ridge Committee to offer twenty cents per share to purchase MYT securities to any unsecured creditor who preferred to receive cash rather than MYT securities as part of this settlement.
KAMENSKY’s fraudulent scheme
On July 31, 2020, KAMENSKY learned that a diversified financial services company headquartered in Manhattan, New York (the “Investment Bank”) had informed the Committee that it was interested in a price-inclusive offer. between thirty and forty cents per share, significantly higher than KAMENSKY’s offer – to buy MYT Securities from any unsecured creditor who wished to receive cash.
This afternoon, KAMENSKY sent messages to a senior investment bank trader (“IB Employee-1”) telling him not to make an offer, and followed up with a phone call with IB Employee-1 and an Investment Bank analyst (“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 threatened to use its official role as committee co-chair 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 went ahead with its offer, then Marble Ridge would cease doing business with the Investment Bank.
The investment bank then decided not to make an offer to buy MYT Securities and informed the committee’s legal counsel of its decision. The investment bank further told legal counsel that it made this decision because KAMENSKY, a client of the investment bank, asked it not to do so.
Committee advisers informed Marble Ridge’s attorney of their appeal with the employees, and after speaking with KAMENSKY, the Marble Ridge attorney falsely informed the advisers that KAMENSKY had not instructed the employees not to bid , but instead 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 say to others, including the Committee and law enforcement, about KAMENSKY’s attempt to block the Investment Bank offer for MYT securities. KAMENSKY said at the start of the call, in essence, “this conversation never took place.” During the call, KAMENSKY asked IB Employee-1 to falsely say that IB Employee-1 was wrong and KAMENSKY actually suggested that the investment bank only offer if it was serious, and made comments including the following: can go to jail? “Please tell them that was a huge misunderstanding, okay, and I’m going to invite you to bid and be a part of the process.” “But I’m telling you… it’s okay with the United States attorney’s office.” It will go to court. “”[I]If you’re gonna keep telling them what you just told me, I’m going to jail, okay? Because they’re going to say that I abused my fiduciary position, which I probably did, right? Maybe I should go to jail. But I ask you not to put me in jail.
In a subsequent interview with the Office of the United States Trustee, which was conducted under oath and in the presence of a lawyer, KAMENSKY said his calls to IB Employee-1 were a “terrible mistake” and ” serious errors in judgment. “
After this series of events, Marble Ridge resigned from the Committee and informed its investors that it intended to start downsizing and returning investor capital.
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KAMENSKY, 48, of Roslyn, New York, pleaded guilty to one count of bankruptcy fraud, carrying a maximum sentence of five years in prison. Sentencing is scheduled for May 7, 2021.
US Attorney Strauss praised the work of the FBI. Ms. Strauss further thanked the United States Office of the 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 Working Group. US Deputy Prosecutors Richard Cooper and Daniel Tracer are in charge of the prosecution.