A prominent hedge fund founder from Long Island, N.Y., pleaded guilty to abusing his position on a Neiman Marcus Group bankruptcy committee in a scheme to allow his hedge fund to purchase the store’s distressed assets at a at a discounted price.

Daniel Kamensky, 48, the founder of the New York-based hedge fund Marble Ridge Capital, pled guilty to one count of bankruptcy fraud in the Southern District of the U.S. District Court of New York after being charged by federal prosecutors in September with pressuring a rival bidder to abandon its higher bid for assets for Neiman Marcus assets so his hedge fund could get them cheaper,  U.S. Attorney Audrey Strauss said in a statement.

Kamensky faces up to five years in prison when he is sentenced on May 7. However, after pleading guilty, federal prosecutors have agreed to recommend a 12-to-18-month sentence, according to a spokesperson for Kamensky.

“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.”

Kamensky was the principal of Marble Ridge, which had assets under management of more than $1 billion and invested in securities in distressed situations, including bankruptcies.

Prior to opening Marble Ridge, Kamensky worked for “many years as a bankruptcy attorney at a well-known international law firm and as a distressed debt investor at several prominent financial institutions,” Strauss said.

Neiman Marcus is a luxury retail chain that filed for bankruptcy in May of last year. Kamensky was appointed to sit on its unsecured creditors’ committee.

Kamensky landed in hot water over his attempts to suppress a rival bid for 140 million shares of Neiman Marcus’s MyTheresa (MYT) e-commerce business so that Marble Ridge could purchase the securities at a lower price. Kamensky then attempted to persuade the rival bidder to cover up the scheme, according to evidence from the investment bank employee he contacted.

Kamensky was negotiating with the committee in July 2020 to allow Marble Ridge to offer 20 cents per share to purchase MYT Securities from any unsecured creditor who preferred to receive cash rather than MYT Securities as part of the settlement, according to Strauss.

In late July, however, Kamensky learned that a Manhattan-based investment bank had announced they were interested in offering a better price of between 30 cents and 40 cents per share—substantially higher than Kamensky’s bid—for the MYT shares.

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