Dan Kamensky, founder of the hedge fund Marble Ridge Capital, has been sentenced to six months in prison for fraud related to the bankruptcy of retailer Neiman Marcus. The sentence, which adds six months of home detention after prison, was handed down in federal court in New York.
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Kamensky admitted to prosecutors that he had used his pull with investment bank Jefferies Financial Group to coerce it into giving up its bid on behalf of a client for shares of Mytheresa, a valuable e-commerce business owned by Neiman Marcus at the time of the retailer's bankruptcy.
Jefferies dropped its bid, but it also told the Neiman Marcus creditors committee about the incident. Kamensky contacted the investment bank again, demanding that it cover up what he had done, which Jefferies refused to do.
Kamensky had wanted to buy the interest in the e-commerce platform himself, and so his actions violated his fiduciary duty as a member of the creditors committee in the Neiman Marcus Chapter 11 case, The Wall Street Journal reports.
Kamensky pleaded guilty in February to bankruptcy fraud, which has a maximum penalty of five years in prison. Prosecutors had sought a 12-to-18-month sentence, while his lawyers had asked that he be put on probation with a community service requirement.
Marble Ridge, founded by Kamensky in 2015, was a hedge fund with more than $1B in assets under management. Soon after Kamensky's arrest, the fund started winding down.
The bankruptcy judge in the Neiman Marcus case approved a plan that handed ownership of the retailer to its creditors. About $4B of the retailer’s $5.5B in debt was also voided.
Kamensky, whose firm was a major Neiman Marcus creditor, long objected to the way the retailer and its management handled the business.
Spinning off the Mytheresa platform was a particular bone of contention. Kamensky said it was a strategy to deprive Neiman Marcus creditors of a valuable part of the business. Eventually, Neiman’s owners agreed to return some of their shares of Mytheresa to the bankrupt retailer.
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