“You win some, you lose some,” said another investor, Gordon Diamond, a meat magnate who served on the board of a Holocaust charity with Huberfeld. “I guess I should have done more due diligence.”

Platinum Gains

Platinum’s first close call came in 2007, when Bank of Montreal discovered that a natural gas trader had been covering up huge bets, many of them with the hedge fund. The bank was forced to liquidate the trades, resulting in big gains for Platinum, among others, according to Vince Lanci, who handled some of the bets as an independent trader and managed money for the fund.

The problem was that Platinum’s Nordlicht was also chairman of Optionable Inc., a brokerage that, according to prosecutors, provided price quotes to the rogue trader. Bank of Montreal sued Nordlicht, saying he helped devise the trades. Nordlicht denied knowing anything about the fraud, and the case was settled out of court.

The FBI investigated, arrested the rogue trader and charged the chief executive officer of Optionable with aiding the scheme. Both men pleaded guilty. Nordlicht wasn’t accused of wrongdoing by the government. When the Optionable CEO was released from prison in 2014, he went to work for a company controlled by Platinum.

The trades with Bank of Montreal helped Platinum record a 53 percent gain in 2007. That attracted investors, and its main fund’s assets more than doubled to $567 million by the end of the year.

Ostrich Boots

Nordlicht needed to put that money to work. That’s when he found Scott Rothstein, a Florida lawyer who was promising huge returns to investors who would advance him funds against future payments from legal settlements. Rothstein’s wild spending had turned him into a Gatsby-like figure on the Fort Lauderdale charity circuit. Short and stocky, he wore pinstriped suits, loud hand-painted ties and orange ostrich boots.

Platinum and related funds advanced him more than $100 million through a feeder fund at an annual interest rate of 50 percent. Rothstein would later say that was so high his investors should have known something was wrong. In 2009, he missed a payment. Nordlicht flew to Florida for a meeting, which Rothstein described in a deposition two years later, after he pleaded guilty to the fraud.

The two men sat facing each other on a couch in his office. Rothstein said in his deposition that he wasn’t sure if Nordlicht knew that the lawsuits and settlements didn’t really exist. “If we go down, you go down,” Rothstein recalled saying. “We’re in this together.”