A prominent hedge fund manager has pleaded guilty to a single count of federal bankruptcy fraud over an alleged attempt to short-change creditors out of proceeds from the 2020 bankruptcy of luxury retailer Neiman Marcus.
Daniel Kamensky, 48, founder of Marble Ridge Capital, had been arrested in September by the FBI on charges of securities fraud, wire fraud, extortion and obstruction of justice.
The charges came after an investigation into the retailer’s Chapter 11 proceedings found that he had pressured a rival financial services group, Jefferies, to back off bidding for securities meant for Neiman’s unsecured creditors.
Mr Kamensky had waged a longstanding battle with Neiman’s private equity owners — Ares Management and CPPIB, the Canadian pension fund — over allegations that the company had stripped its valuable MyTheresa online unit away from creditors.
The bankruptcy court ordered an investigation into those claims, which resulted in Ares and CPPIB ceding $172m in MyTheresa preferred stock to unsecured creditors, including Mr Kamensky — which was seen as a vindication for him and Marble Ridge.
Mr Kamenksy then sought to buy up MyTheresa preferred stock cheaply from other creditors who wanted to cash out immediately. Mr Kamensky, who was a member of an official committee of unsecured creditors, then sought to pressure Jefferies to back off from making another bid for the securities, prosecutors said.
Mr Kamensky sent a Bloomberg chat message to a Jefferies executive, “DO NOT SEND IN A BID”.
Following his initial effort to influence the bank, Jefferies executives recorded a conversation with Mr Kamensky in which he appeared to acknowledge his wrongdoing and plead for them to cover it up: “[I]f you’re going to continue to tell them what you just told me, I’m going to jail, okay?” Mr Kamensky said on the recordings.
“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.”
Weeks later in August, a report from the US trustees office revealed text messages and the recorded conversation between Mr Kamensky and the Jefferies executives.
Mr Kamensky would later tell the US trustee overseeing the bankruptcy proceedings that he had “made a grave mistake”.
“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,” Audrey Strauss, the US attorney for the southern district of New York, said in a statement.
The guilty plea punctuates a remarkable fall for Mr Kamensky, a former corporate attorney who had carved out a successful career as a distressed debt specialist.
Mr Kamensky had previously settled with the bankruptcy court agreeing to, among other things, donate $100,000 to charity, not serve on any bankruptcy committees and perform community service. Marble Ridge Capital wound down its operations.
The bankruptcy fraud charge carries a maximum prison sentence of five years. As a part of the plea, federal prosecutors agreed to recommend a jail sentence between 12 to 18 months. Mr Kamensky will be sentenced on May 7.
His lawyer, Joon Kim of Cleary Gottlieb Steen & Hamilton, stated: “Mr Kamensky has admitted what he did was wrong. He deeply regrets his conduct on July 31, 2020, and the great pain it has caused his family, colleagues and others.”
Neiman emerged from bankruptcy in September. MyTheresa listed its shares in January and its market capitalisation now exceeds $2bn, well ahead of valuation estimates made in the bankruptcy process.