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In the years before Mark Nordlicht was arrested for what’s alleged to be one of the biggest investment frauds since Bernie Madoff’s, U.S. authorities had plenty of reasons to suspect something might have been fishy about his hedge fund, Platinum Partners, according to a Bloomberg News analysis yesterday. As far back as 2007, Bank of Montreal accused Nordlicht of helping a rogue trader, costing it more than $500 million. Three years later, when the Securities and Exchange Commission was investigating what it called a “scheme to profit from the imminent deaths of terminally ill patients,” the agency discovered that Platinum had funded the deals. And in 2011, a Florida lawyer who confessed to running a $1.2 billion Ponzi scheme testified that Nordlicht, his biggest funder, lied to help him lure new investors. And then there were the remarkable profits: 17 percent annually on average from 2003 through 2015, with no down years. The returns were almost as smooth as the fake gains that Madoff claimed year after year. But until Murray Huberfeld, who founded Platinum with Nordlicht, was caught up in a New York City municipal-corruption probe in June, no one at the fund had been charged with wrongdoing. Within weeks of Huberfeld’s arrest, federal agents raided Platinum’s midtown Manhattan office. On Dec. 19, Nordlicht and six others were arrested in what the government called a $1 billion fraud. Nordlicht and Huberfeld have pleaded not guilty, and Platinum’s main fund is being wound down after filing for bankruptcy. Read more. 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

In the eight years since Madoff’s arrest, a series of recent court decisions have favored investors who profited from the scam, dashing the hopes of trustee Irving Picard to return more to Madoff’s victims who lost $17.5 billion in principal, legal experts say, Bloomberg News reported today. At the core of the disputes is how far Picard can go to make the Ponzi scheme’s investors whole. “The rulings all lower the risk associated with investing in something that might be a Ponzi scheme,” said Anthony Casey, a University of Chicago law school professor. “The courts weren’t necessarily being lenient to the big institutions. It just happens to help the wealthier investors.” While Picard and his team of New York-based lawyers have recovered about 65 cents on the dollar — more than anticipated after the collapse of the biggest Ponzi scheme in U.S. history — the rulings took billions of dollars off the table and now make a 100 percent return seem impossible. Madoff customers who invested through offshore-feeder funds — and whose profits were transferred to an overseas account before the scam collapsed — didn’t need to return them, U.S. Bankruptcy Judge Stuart Bernstein in Manhattan ruled in November. Their cash should stay out of reach in deference to local jurisdictions, Judge Bernstein ruled, meaning victims must turn to non-U.S. courts to recover funds. The ruling, which may be appealed, rejected the trustee’s claim that investors, including many American citizens, should be subject to U.S. law because they knew their money was going to be invested with Madoff’s New York-based company. Read more. 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

Federal prosecutors in Manhattan have charged three Chinese citizens with making more than $4 million by trading on information they got by hacking into some of the top merger-advising law firms in New York, the New York Times reported today. The three men targeted at least seven New York law firms to try to obtain information about deals in the works, according to an indictment unsealed yesterday. The men were successful in hacking two firms, stealing emails of partners who work on mergers, prosecutors said. The three then bought shares of target companies, selling them after the deals were announced, prosecutors said. The law firms were not identified in the indictment or in a parallel civil complaint brought by the Securities and Exchange Commission.

Two former executives of the failed GulfSouth Private Bank in Destin, Fla., and another man have been indicted on federal charges of defrauding the Troubled Asset Relief Program of $7.5 million, National Mortgage News reported yesterday. Anthony J. Atkins, the bank's former president, and Samuel D. Cobb, a former vice president, and Bruce A. Houle, a customer from Inlet Beach, Fla., were hit with a seven-count indictment by a U.S. grand jury last week. The charges include conspiracy to commit bank fraud, false statements to a federally insured institution and bank and mail fraud, according to a news release from the Office of the Special Inspector General for TARP. Atkins and Cobb schemed in 2008 to conceal that the bank had mortgage loans in default, the inspector general's news release said. The executives are accused of having Houle and three others — Mark W. Shoemaker, Michael Bradley Bowen and William Blake Cody — take out $3.8 million of loans that the men were told they would not have to repay. A trial is scheduled for Feb. 6.