In Rothstein Fiasco, Fraud Begets Fraud

When Scott Rothstein was spending millions in his bid to take over Fort Lauderdale, his many doubters strongly suspected that the money couldn't possibly be legitimate. And the question heard 'round the city was: Where is this guy getting his money?

money.jpg
There was talk of Russian Mob connections and computer porn. Some suspected the Italian Mafia. Now we know a whole lot of it came from a similarly dubious source, New York hedge funds.

Hedge fund owner George Levin was the key money source, with his Banyon fund pumping hundreds of millions into Rothstein's scheme. When Rothstein's Ponzi scheme imploded and he fled to Morocco, Levin held a major meeting of investors at his office across from the Galleria Mall on Sunrise Boulevard. 

Many of them, we have since learned, have dubious histories. Levin himself ran a model car company that was hit with a federal fraud conviction. His right-hand man at Banyon, Frank Preve, is a convicted felon. Mel Lifshitz is a disbarred attorney and convicted tax evader. Then you have hedge fund owner Murray Huberfeld, a serial SEC violator whom I wrote about last week.

Now let me introduce you to the reported $50 million man, Meir "Mark" Nordlicht, who has business ties to Huberfeld and who has also been alleged to have been involved in a previous fraud. A big one. Nordlicht, remember, was reportedly present at that meeting of panicked Rothstein investors on November 1.

Nordlicht runs a $500 million New York hedge fund called Platinum Management and, like Huberfeld, put his money into Rothstein's scheme via loans to Levin's Banyon fund. Levin told me earlier this week that he was introduced to both

Nordlicht and Huberfeld through a broker and had never done business with them in the past. Levin wouldn't elaborate further.

To understand Mark Nordlicht, you must first know his father, Jules Nordlicht. Back in 1978, Jules Nordlicht pleaded guilty on a federal charge of conspiracy to create $27 million in fraudulent tax losses through manipulation of market for crude oil futures. It's not clear what sentence he served, but it is crystal-clear that his criminal conviction didn't keep him out of the high-flying commodity trading business.

Jules Nordlicht went on to become a major shareholder at the New York Mercantile Exchange (NYMEX), the largest commodity futures exchange in the world. His son, Mark, followed in his footsteps, becoming a wheeler-dealer in the dicey energy futures market.

Mark Nordlicht became chairman of Optionable Inc., a company he founded that had a rather Rothstein-like implosion in 2007 amid allegations of fraud and insider trading. While the company was still flying high in January 2007, Nordlicht and two other executives, including Optionable CEO Kevin Cassidy, sold 10.2 million shares of the company to NYMEX for $29 million. Mark Nordlicht personally accounted for seven million of those shares, which he sold for a whopping $18,830,000.

In May, the wheels fell off of Optionable. It was learned at that time that CEO Cassidy had felony credit card and tax evasion convictions in his past that he didn't disclose. On top of that, Optionable had a series of dubious dealings with a broker named David Lee at the Bank of Montreal that caused huge losses for the bank. Lee and Cassidy were close friends.

So what happens? NYMEX announced that it would compete with Optionable rather than join it and declared an almost total writedown on its Optionable investment. Optionable stock plunged, and the company was hit with SEC actions and class action lawsuits.

One lawsuit filed against Mark Nordlicht explains the "bogus" relationship NYMEX and Optionable this way: "[A] key reason the unusual NYMEX transaction went forward was the influence of Jules Nordlicht, a NYMEX shareholder with significant holdings and -- lo and behold -- also an ex-con and the father of Mark Nordlicht. Nordlicht Senior, who had liquidated 2.19 million shares in Optionable's IPO and therefore had no vested interest in the future of his son's Company, (except to see thathis son made as much illegal profits as possible), also pleaded guilty to price rigging the crude oil market in 1978."

Needless to say, Optionable was a major business scandal, and the stock plummeted to a few cents, where it remains today. But Nordlicht has never been named personally in SEC actions, despite the fact that he was chairman of the company when the apparent fraudulent activity occurred. Today, he remains in charge of his $500 million hedge fund that apparently sank $50 million into Rothstein's scheme.

dwekapp.jpg
Dwek
The Nordlicht family's connection to fellow Levin/Rothstein investor Huberfeld is clear. They share a New York address, run similar hedge funds, and have invested in the same businesses. In fact, when Huberfeld was subpoenaed in the infamous Solomon Dwek case, it was in connection with his activities with Nordlicht's Platinum fund. Another interesting observation: The hedge funds of Nordlicht and Huberfeld -- which together reportedly control nearly $1 billion -- both share names with types of American Express cards. 

The question hanging in the air is where have Nordlicht and Huberfeld gotten all that money to invest? Considering their histories, it would seem any sane and rational investor wouldn't get near either of them. What is the original source of all this crazy money that found its way into Rothstein's Ponzi and enabled the lawyer to turn Fort Lauderdale on its head?

I'll close with an observation: The Securities and Exchange Commission is an abject failure of a regulatory agency on par with the Florida Ethics Commission. Unfortunately, the SEC is a whole lot more important to America and the world.

My Voice Nation Help
1 comments
Sort: Newest | Oldest
richard.eworc
richard.eworc

Note to Bob Norman and anyone else interested. Came to this site because Platinum are among the backers for a claim by a little outfit called Excaliber whose case is being heard now ( Nov 2012) in the UK London Commercial court against GKP a oil exploration company. These backers were secret until a couple of days ago but the lawyers and judge forced disclosure. They had had to put up over £9 million to cover costs of what many allege  is a dubious claim.

GKP is defending itself against a claim for 30% of the company. GKP have found a huge oil field in Iraqi Kurdistan and is listed on the London AIM market with many UK private investors taking a keen interest in this case and its potential to seriously affect the share price.

Some think this is the real reason the claim by the Wempen brothers ( Excaliber) has been backed.

Now Trending

From the Vault

 

General

Loading...