The founder and manager of a New York-based hedge fund with assets worth more than $1 billion was taken into custody by federal agents on Sept. 3 and charged with securities fraud, wire fraud and extortion. The charges were announced in a press release issued by the Federal Bureau of Investigation and the U.S. Attorney’s Office for the Southern District of New York. The 37-year-old Roslyn resident faces up to 50 years in a federal prison if he is convicted on all counts.
Neiman Marcus bankruptcy
The fraud charges are linked to an alleged scheme to obtain assets connected to the Neiman Marcus bankruptcy. The man was appointed co-chair of the bankruptcy’s unsecured creditors committee, and he is accused of violating his fiduciary duty by trying to purchase assets for less than their market value. According to U.S. prosecutors, he offered 20 cents per share for 140 million shares owned by Neiman Marcus and then convinced an investment bank to withdraw their offer of between 30 and 40 cents per share. The luxury department store chain filed for Chapter 11 bankruptcy in May 2020.
The man faces an extortion charge for allegedly pressuring the investment bank into withdrawing their bid. U.S. attorneys claim that the man called the bank and said that his hedge fund would no longer do business with them if they did not do as he wished. This alleged threat is said to have prompted the investment bank to cancel their bid. According to court papers, the man admitted to making the call when questioned by federal investigators.
Cases involving white-collar crimes
Criminal defense attorneys with experience in cases involving white-collar crimes would likely recommend against speaking with federal investigators without a lawyer present as admissions made during such interviews are unlikely to lead to more lenient treatment. When defendants remain silent even though their situations see