The Manhattan hedge fund at the center of a federal probe into kickbacks to a New York City correction officers’ union is shutting down its biggest fund and returning money to investors.
The move, outlined in a conference call with investors on Tuesday, comes a week after the FBI arrested the executive who ran a second fund at Platinum Partners, according to a report.
Platinum founder Mark Nordlicht told investors the firm’s main fund, Platinum Partners Value Arbitrage, was hit with a wave of redemptions after the troubling allegations created a stench around Wall Street.
The malodorous aroma spread after former Platinum fund manager Murray Huberfeld was arrested last week and accused of passing $60,000 in bribes to Norman Seabrook, president of the Correction Officers’ Benevolent Association, in return for a $20 million investment in Platinum in 2014.
The investment represented roughly 15 percent of the union’s annuity.
Platinum’s two hedge funds have never had a down year in their nine-year history, the Wall Street Journal reported, citing company documents that it had obtained.
Nordlicht told investors on the call that the allegations were untrue.
Platinum, which claims on its Web site to have $1.3 billion under management, is also considering shutting Huberfeld’s smaller Platinum Partners Credit Opportunities Fund.
COBA declined comment on whether it has asked for a redemption on its returns with Platinum.
Platinum declined to comment on the closing of the fund, which was first reported by the Wall Street Journal.
Meanwhile, the New York state Department of Financial Services may take a closer look at the books of the 11,000-member union.
“We are in the process of opening a new examination into COBA,” a DFS spokesperson told The Post.
“We will be looking at their practices and systems to see whether they followed proper protocols,” said the DFS spokesperson, whose agency has oversight over the union.
“We do have the authority to remove trustees” and possibly to take actions including seeking a redemption from an investment that is harming the fund, the spokesperson said.
Platinum needed COBA’s 2014 investment because it was hit with a spate of redemptions, court papers say.
Its struggles were more widespread than COBA could paper over, separate court papers show.
Also in 2014, Platinum took out a $30 million loan at 15 percent interest.
It was sued a year later for failing to repay the loan.
Additionally, in a separate federal court action, a Platinum fund is accused by a shareholder of Navidea Biopharmaceuticals — a cancer-drug company it is invested in — with making nearly $330,000 in illegal, “short-swing” profits by purchasing and selling shares within six months at the same time it held a stake of more than 10 percent in the company and had a director on its board.
