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Hedge Fund Boss Arrested For Fraud In Connection With Neiman Marcus Bankruptcy

Marble Ridge Capital founder Dan Kamensky has been arrested by the FBI on federal charges that include securities fraud, extortion and obstruction of justice. 

Kamensky allegedly pressured investment bank Jefferies Financial Group into dropping its bid for Neiman Marcus Group shares so that Marble Ridge could buy them at a lower price, according to the U.S. Attorney's Office for the Southern District of New York.

A Neiman Marcus store in Boston

"As alleged, Daniel Kamensky disregarded his fiduciary responsibility to unsecured creditors of Neiman Marcus — and broke the law — when he attempted to coerce a competitor to withdraw a higher bid for assets of the bankruptcy estate," acting Manhattan U.S. Attorney Audrey Strauss said in a statement

"As further alleged, acknowledging the illegality of his actions, Kamensky then attempted to obstruct an investigation by trying to persuade the competitor to change his account of the coercion," Strauss said.

Kamensky, who allegedly learned on July 31 that Jefferies planned to submit an offer for Neiman shares for a higher price than his, urged the investment bank to call off its bid, the SEC said. 

The lawsuit also alleges that Kamensky said he would use his position on Neiman's creditors committee to torpedo Jefferies' bid. He also allegedly told Jefferies that his firm would quit doing business with it if it didn't do what he asked.

Jefferies did indeed drop its bid, but it also told the Neiman Marcus creditors committee why, Pensions & Investments reports. Then, Kamensky allegedly contacted the investment bank again, demanding that it cover up what he had done. Jefferies allegedly refused.

Kamensky allegedly told a Jefferies employee on a phone call, which happened to be recorded, that he could face prosecution unless the bank lied for him, The Wall Street Journal reports.

“Maybe I should go to jail,” Kamensky said on the call. “But I’m asking you not to put me in jail.”

Besides facing criminal charges, he is being sued in a civil case by the Securities and Exchange Commission for the same alleged conduct.

"Misrepresentations and deceptive conduct have no place in securities offerings," Daniel Michael, chief of the SEC's Division of Enforcement's Complex Financial Instruments Unit, said in a statement. "As alleged, Kamensky abused his position as a fiduciary to the Neiman Marcus unsecured creditors by secretly working against them."

The SEC complaint, filed in federal district court in New York, alleges that Kamensky violated anti-fraud provisions of the federal securities laws. The agency is requesting a permanent injunction and civil penalties. If convicted in the criminal case, Kamensky could receive as much as 50 years in prison.

Marble Ridge is a hedge fund with assets under management of more than $1B that he founded in 2015. Recently the fund announced that it was shutting down.

Kamensky, whose firm is a major Neiman Marcus creditor, has long made his displeasure with the retailer and its management clear. 

Marble Ridge specialized in distressed securities, including those involved in bankruptcies. Before founding the fund, Kamensky was a partner at hedge fund Paulson & Co., a bankruptcy attorney and a distressed debt investor. Representatives of Kamensky could not be reached for comment by Bisnow.