A Roslyn resident has been sentenced to six months of supervised release on home confinement and a five-figure fine after pleading guilty to bankruptcy fraud in connection with the bankruptcy of retailer Neiman Marcus.
Daniel Kamensky, the founder and former principal of the hedge fund Marble Ridge Capital, was charged last September by the Manhattan-based U.S. attorney’s office of the Southern District of New York, according to a statement from the office. He entered a guilty plea to one count of bankruptcy fraud before U.S. District Judge Denise Cote in February.
In addition to the six months of home confinement, Kamensky has been ordered to pay a $55,000 fine.
“Kamensky’s alleged criminal acts occurred in connection with his scheme to pressure a rival bidder to abandon its higher bid for assets in connection with Neiman Marcus’s bankruptcy proceedings so that Marble Ridge could obtain those assets for a lower price,” the statement read. “Kamensky then attempted to persuade the rival bidder to cover up the scheme.”
The U.S. attorney’s office said that Kamensky’s fund Marble Ridge, which specializes in investments in distressed situations, including bankruptcies, and had assets under management of more than $1 billion as of early 2020, was appointed to a committee on unsecured creditors for Neiman Marcus shortly after the retailer declared bankruptcy in May 2020.
“During the bankruptcy process, the committee had negotiated with the owners of Neiman Marcus to obtain certain securities, known as MyTheresa Series B Shares (the ‘MYT Securities’), and ultimately, the committee was successful in coming to a settlement to obtain 140 million shares of MYT Securities for the benefit of certain unsecured creditors of the bankruptcy estate,” the U.S. attorney’s office said. “In July 2020, Kamensky was negotiating with the Committee for Marble Ridge to offer 20 cents per share to purchase the MYT Securities from any unsecured creditor who preferred to receive cash, rather than MYT Securities, as part of that settlement.”
Attorneys said that on July 31, Kamensky learned that a diversified financial services company, identified in court proceedings as “the investment bank” and headquartered in New York City, had informed the committee that it was interested in bidding a price between 30 and 40 cents per share, higher than Kamensky’s bid, to purchase MYT Securities from any unsecured creditor who was interested in receiving cash.
“That afternoon, Kamensky sent messages to a senior trader at the investment bank telling him not to place a bid, and followed those messages up with a phone call with IB Employee-1 and a senior analyst of the investment bank,” the office said. “During that call, Kamensky asserted that Marble Ridge should have the exclusive right to purchase MYT Securities, and threatened to use his official role as co-chair of the committee to prevent the investment bank from acquiring the MYT Securities. Kamensky also stated that Marble Ridge had been a client of the investment bank in the past but that if the investment bank moved forward with its bid, then Marble Ridge would cease doing business with the investment bank.”
The unnamed bank then decided to not make a bid to purchase the MYT securities, and informed the legal adviser to the committee of its decision, and would tell a legal adviser that the bank made that decision because Kamensky, a client of the bank, had asked it not to, according to federal attorneys.
“Later that evening, Kamensky contacted [the employee of the bank] and attempted to influence what [the employee] would tell others, including the committee and law enforcement, about Kamensky’s attempt to block the Investment Bank’s bid for MYT Securities,” federal prosecutors said. “Kamensky said at the outset of the call, in substance, “this conversation never happened.”
Federal prosecutors said that during the call, Kamensky allegedly asked the bank employee to falsely say that the employee had been mistaken and that Kamensky had actually suggested that the bank bid only if it were serious.
“Do you understand … I can go to jail?” Kamensky is quoted as saying. “I pray you tell them that it was a huge misunderstanding, okay, and I’m going to invite you to bid and be part of the process … But I’m telling you; this is going to the U.S. Attorney’s Office. This is going to go to the court …[I]f you’re going to continue to tell them what you just told me, I’m going to jail, okay? Because they’re going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I’m asking you not to put me in jail.”
During a subsequent interview with the Office of the United States Trustee, which the U.S. attorney’s office said was conducted under oath and in the presence of counsel, Kamensky stated that his calls to the banker were a “terrible mistake” and “profound errors in lapses of judgment.”
Acting Manhattan U.S. Attorney Audrey Strauss said in a statement that Kamensky had abused his position.
“Daniel Kamensky abused his position as a committee member in the Neiman Marcus Bankruptcy to corrupt the process for distributing assets and take extra profits for himself and his hedge fund,” Strauss said. “Kamensky predicted in his own words to a colleague: ‘Do you understand … I can go to jail?’… ‘this is going to the U.S. Attorney’s Office.’ His fraud has indeed come to the U.S. Attorney’s Office and now has been revealed in open court.”
The attorney’s office said Marble Ridge resigned from the committee handling the Neiman Marcus bankruptcy and has advised its investors that it intends to begin winding down operations and returning investor capital.
Before sentencing, Cotes said that Kamensky was a “good man, but one who lost his moorings” and succumbed to the pressure of running his own firm. “He came undone,” Cote said. “He tried to control what he could not control.”
“It is particularly unfortunate – in many ways tragic – that the recovery Dan achieved on behalf of all the unsecured creditors is what led to the conviction based on a breach of fiduciary duty to the very same unsecured creditors,” Joon Kim, Kamensky’s attorney, said in court prior to sentencing.
Neither Kim nor Kamensky had any further comment when reached, a press representative said. .
Kamensky was previously a partner at Paulson & Company, and prior to that held roles at Lehman Brothers and Barclays Capital, and was an associate at Simpson Thacher & Bartlett. He received the Jewish National Fund’s Theodore Herzl Leadership Award in 2017, having helped to found the organization’s Finance for Israel group, and is a former member of the board of trustees for the Schechter School of Long Island, which in 2019 named him a guest of honor at its annual gala.