Rosyln Hedge Fund Manager Charged In Nieman Marcus Fraud Scheme

ROSLYN, NY — The Roslyn founder and manager of a hedge fund has been charged in federal court with fraud and extortion after prosecutors said he schemed to buy the assets of the bankrupt Neiman Marcus at a lower price by pressuring a rival to abandon its bid.

Daniel Kamensky of Marble Ridge Capital was arrested Thursday and charged in Manhattan federal court with securities fraud, wire fraud, extortion, and obstruction of justice, federal prosecutors said.

Kamensky was the principal of Marble Ridge, which manages more than $1 billion in assets and invests in distressed securities, including bankruptcies. Before founding the hedge fund, Kamensky worked for years as a bankruptcy lawyer at a well-known international law firm, and as a distressed debt investor at prominent financial institutions.

Neiman Marcus, an American chain of luxury department stores with locations across the United States, filed for Chapter 11 bankruptcy protection in federal bankruptcy court in May. At the outset of the bankruptcy, Marble Ridge applied to be on the Official Committee of Unsecured Creditors and was subsequently appointed to be a committee member. As a committee member, Kamensky had a fiduciary duty to represent the interests of all unsecured creditors as a group, prosecutors said.

The committee negotiated with Neiman Marcus' owners to obtain certain securities and ultimately the committee reached a settlement to obtain 140 million shares for the benefit of certain unsecured creditors of the bankruptcy estate. In July, Kamensky negotiated with the committee for Marble Ridge to offer 20 cents a share to buy the securities from any unsecured creditor who preferred to receive cash instead of securities as part of the deal, prosecutors said.

On July 31, authorities said he learned that a diversified financial services company informed the committee it was interested in bidding a price between 30 and 40 cents per share — far more than Kamensky's offer.

That afternoon, Kamensky sent messages to a senior trader at the bank instructing him not to bid, and followed up with a phone call to the worker and a senior analyst at the bank, authorities said. He said Marble Ridge should have the exclusive right to buy the securities, and even threatened to use his position as committee co-chair to prevent the bank from acquiring the securities, prosecutors said. Kamensky said his firm was a client at the bank and threatened to cut ties if it moved forward with its bid, authorities said.

The bank ultimately decided not to bid, and informed the committee's legal adviser of its decision, specifically saying its client Kamensky asked it not to.

Committee advisers told Marble Ridge lawyers of their call with the workers, and after speaking with Kamensky, the lawyers lied to the advisers and said Kamensky had not asked the employees not to bid, but instead told them only to bid if they were serious, authorities said. Kamensky later contacted one of the employees and tried to influence what that worker would tell others, including the committee and law enforcement, about Kamensky's attempt to block the bid, prosecutors said. At the outset of the call, Kamensky said in substance, "this conversation never happened," prosecutors said. During that call, he also asked the employee lie and say the employee was mistaken; that Kamensky had actually suggested that the bank bid only if it was serious, prosecutors said.

Kamensky said during the call: "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.”

He added: “But I’m telling you…this is going to the U.S. Attorney’s Office. This is going to go to the court. If 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.”

Kamensky later told the Office of the United States Trustee that his calls to the employee were a "terrible mistake" and "profound errors in lapses of judgment," prosecutors said.

Marble Ridge then resigned from the committee and told investors it planned to wind down operations and return investor capital.

Kamensky, 47, faces charges of fraud in the offer or sale of securities, wire fraud, extortion and bribery in connection with a bankruptcy, and obstruction of justice.

Neiman Marcus has sued Marble Ridge for over $60 million in damages, The Wall Street Journal reported.