Dan Kamensky's legal crisis deepened as U.S. prosecutors accused the Marble Ridge Capital founder of coercing Jefferies Financial Group into abandoning an offer for shares in bankrupt retailer Neiman Marcus Group so his hedge fund could obtain them at a lower price.
Mr. Kamensky was arrested Thursday and charged with criminal violations including securities fraud, extortion and obstruction of justice for pressuring an investment bank to drop its bid, the U.S. Attorney's Office for the Southern District of New York said in a statement. Mr. Kamensky was sued over the same allegations by the Securities and Exchange Commission, which identified the bank as Jefferies.
Mr. Kamensky, after learning July 31 that Jefferies submitted an offer for Neiman shares that was higher than his, contacted the investment bank to urge it to withdraw its bid, the SEC said. Mr. Kamensky said he would use his position on Neiman's creditors committee to ensure that Jefferies' bid was rejected. He added that if Jefferies still submitted a bid and drove the price up, Marble Ridge would cease doing business with the firm, the SEC said.
Jefferies pulled its bid in response but then reported Mr. Kamensky's actions to the creditors committee. When Mr. Kamensky learned of the action, he again reached out to Jefferies to have it cover-up that he tried to prevent the bank from participating in Neiman's securities offering, according to the SEC. Mr. Kamensky admitted to Jefferies that he could go to jail if the bank didn't help obscure his conduct. Jefferies refused to do so, according to the SEC, which is seeking civil monetary penalties.
Mr. Kamensky declined to comment, a representative for him said in a statement.
The saga has already forced Mr. Kamensky, a former Paulson & Co. partner who started his career as a bankruptcy attorney, to wind down Marble Ridge, which he started in 2015. The New York-based firm specializes in distressed debt investments and the restructuring of troubled issuers.
Neiman filed for bankruptcy in May and is seeking to cut its debt load by handing control to senior lenders. The retailer's confirmation hearing is scheduled for Friday before Judge David R. Jones, who is overseeing the reorganization of the company.
Jones suggested during a Wednesday hearing that any settlement of the issues Mr. Kamensky faces in bankruptcy court would require, among other things, that he be barred from ever sitting on an official creditor's committee in a Chapter 11 case.