Market Overview

Hedge Fund Founder Indicted Over Manipulating Neiman Marcus' Bankruptcy-Related Assets Sale

Hedge Fund Founder Indicted Over Manipulating Neiman Marcus' Bankruptcy-Related Assets Sale

The United States Department of Justice announced Thursday it had charged Daniel Kamensky, founder and manager of New York-based hedge fund Marble Ridge Capital in connection with putting pressure on a rival not to bid for assets connected to the Ares Management Corporation (NYSE: ARES)-owned Neiman Marcus' bankruptcy.

What Happened: Prosecutors are charging Kamensky, a former bankruptcy attorney, with securities fraud, wire fraud, extortion, and obstruction of justice, according to a statement.

Kamensky allegedly broke the law by disregarding his fiduciary responsibility to unsecured creditors of Neiman Marcus as a member of the Official Committee of Unsecured Creditors.

An investment bank had informed the committee it was interested in bidding for the assets of the distressed retailer at 30 to 40 cents a piece for the shares of MyTheresa, a profitable online subsidiary of Neiman, as per the prosecutors.

Kamensky was said to be in negotiations with the committee and offered 20 cents per share to purchase the shares on behalf of Marble Ridge.

The hedge fund manager allegedly coerced the bank into withdrawing their higher bid and then went on to obstruct the investigation by persuading the rival bidder to change the account of the coercion by saying, “this is going to the U.S. Attorney’s Office.”

Why It Matters: Kamensky had campaigned for years to hold Neiman’s private equity owners responsible for allegedly moving MyTheresa out of creditor’s reach, the Financial Times reported.

The private owners reportedly settled the allegations by allocating preferred stock in the unit to the unsecured creditors including Marble Ridge.

The charges brought on by the federal prosecutors and also a civil lawsuit filed against the hedge fund manager are based on conversations he held with investment bankers at Jefferies at end-July, FT revealed.

Marble Ridge told investors last month it would wind up. Neiman’s bankruptcy is likely to be approved on Friday, FT noted. The luxury retailer filed for bankruptcy in May after being hit hard by the COVID-19 pandemic.

Price Action: Ares Management shares closed nearly 3.8% lower at $39.41 on Thursday.

Photo courtesy: BrokenSphere via Wikimedia


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Posted-In: Daniel Kamensky Marble Ridge CapitalGovernment News Regulations Hedge Funds Legal General Best of Benzinga

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