The founder of the New York hedge fund who was accused of committing fraud in the bankruptcy of Neiman Marcus last year has been sentenced to six months in prison.
Marble Ridge Capital founder Dan Kamensky, 48, has pleaded guilty to bankruptcy fraud and extortion while serving on an unsecured creditors committee in Neiman Marcus’ bankruptcy.
The sentence, handed down Friday by US District Court judge Denise L. Côté in New York City, includes six months of house arrest after the prison sentence.
Kamensky admitted to pressuring a rival bidder to drop a higher bid for Mytheresa, an asset owned by Neiman Marcus at the time, so that his hedge fund could buy it at a lower price. Kamensky had a legal obligation to represent the interests of all unsecured creditors and obtain the best deal.
“Daniel Kamensky committed bankruptcy fraud – undermining the integrity of the bankruptcy proceedings and violating his fiduciary responsibility – with the aim of taking additional profits for himself and his hedge fund,” said the American lawyer Audrey Strauss in a statement. “As he himself predicted, this fraud has now put Daniel Kamensky in jail.”
Kamensky, who was a successful bankruptcy lawyer before setting up his hedge fund, admitted he tried to cover up his actions by telling a Jeffries LLC investment banker to lie on his behalf. According to an FBI investigation and prosecutor’s court documents, Kamensky told the banker “This conversation never happened” and “Do you understand… I can go to jail?”
“[I]If you’re gonna keep telling them what you just told me, I’m going to jail, okay? Because they’re going to say that I abused my fiduciary position, which I probably did, right? Maybe I should go to jail. But I ask you not to put me in jail.
In an interview with the Office of the United States Trustee, which took place under oath and in the presence of Kamensky’s lawyer, Kamensky said his appeals to the investment banker were a “terrible mistake” and ” profound errors in the errors of judgment “.
Charges from the Securities and Exchange Commission, the United States Attorney’s Office for the Southern District of New York, and the FBI were brought in for the first time in September.
The Wall Street Journal reported that during Friday’s hearing, the judge described Kamensky as a “good man, but one who lost his moorings” under the pressure. Kamensky’s lawyers argued that he should not be sent to jail because his actions were not premeditated and did not harm Neiman Marcus’ other creditors, according to the Newspaper report.
Prosecutors said jail time was needed to deter such misconduct. The bankruptcy fraud charge carried a maximum penalty of five years in prison.
US bankruptcy judge David Jones, who presided over Neiman Marcus’ reorganization in Houston, was not so sympathetic. Jones called Kamensky a ‘thief’ and a ‘liar’ at a hearing in December approve a settlement agreement that required Kamensky to pay $ 1.4 million in fees and other damages, including $ 100,000 to charities and the public service.
For two years before Neiman Marcus’ bankruptcy, Kamensky fought the Dallas-based retailer in court over the transfer of Germany-based luxury e-commerce business Mytheresa to private equity owners of Neiman Marcus.
Unsecured creditors ended up with a minority stake in Mytheresa, which went public in January with a valuation of $ 2.2 billion. Neiman Marcus walked out of Chapter 11 last year with $ 4 billion in less debt and fewer stores.