Dan Kamensky’s legal crisis deepened Thursday as U.S. prosecutors said the Marble Ridge Capital founder coerced Jefferies Financial Group Inc. into abandoning an offer for shares in bankrupt retailer Neiman Marcus Group Inc. so his hedge fund could obtain them at a lower price.
Kamensky, 47, was arrested and charged with crimes including securities fraud, extortion and obstruction of justice for pressuring an unnamed investment bank to drop its bid, the U.S. Attorney’s Office for the Southern District of New York said in a statement. Kamensky was sued over the same allegations by the Securities and Exchange Commission, which identified the bank as Jefferies.
Kamensky, after learning July 31 that Jefferies submitted a higher bid than Marble Ridge for Neiman shares, contacted the investment bank and threatened to use his position on the luxury retailer’s creditors committee to block the offer if it wasn’t withdrawn, the SEC said. He added that if Jefferies went ahead with its bid, Marble Ridge would cease doing business with the firm.
The allegations offer a rare glimpse into the bare-knuckled tactics sometimes deployed in distressed-debt investing. Even more unusual is the prospect of a fund manager facing criminal charges for actions they take in serving on special panels that are meant to protect creditors in bankruptcy cases.
Kamensky declined to comment, a representative for him said in a statement.
Kamensky’s Pleas
After Kamensky pressured Jefferies, it did pull its bid. But the bank also reported his conduct to the creditors committee, prompting Kamensky to reach out to Jefferies to urge it to aid him in covering-up what he had done. Kamensky admitted to Jefferies that he was at risk of going to jail. Jefferies declined to help him, according to the SEC, which is seeking sanctions including civil monetary penalties
Creditor representatives like Kamensky who serve on official, court-supervised committees have a fiduciary duty to look out for the interests of the panel. Kamensky told the U.S. Trustee’s office -- the Justice Department’s bankruptcy watchdog -- that he understood he was required to act “in the best interest of unsecured creditors generally and put those interests above your own personal interests,” according to the criminal complaint.
Kamensky’s fall was prompted by Joe Femenia, an ex-Navy SEAL who’s now Jefferies’ head of distressed-debt investing, Bloomberg News has reported. Femenia was the recipient of Kamensky’s initial threat as both Marble Ridge and Jefferies were vying for a piece of Neiman’s valuable online business, Mytheresa. Femenia flagged their conversation to Jefferies’ general counsel, and the bank disclosed the discussion to the creditor committee.
The panicked money manager then called Femenia back a second time, asking the Jefferies banker to treat the conversation as off the books, while pushing Femenia to change his recollection of their earlier chat, according to the criminal complaint. Unbeknownst to Kamensky, Femenia had started recording the call.
“[I]f you’re going to continue to tell them what you just told me, I’m going to jail, OK?” Kamensky said on the call, according to the complaint. “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.”