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October 16, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Obex Group of Larchmont fails to produce documents in $550M fraud case

Randall Katzenstein was supposed to bring documents to an Oct. 15 arbitration hearing, in a $550 million fraud case, but failed to show up.

His company, Obex Group LLC of Larchmont, is in the middle of a dispute that traces back to the $1 billion Platinum Partners hedge fund scandal.

So on Monday, Washington National Insurance Co. of Carmel, Indiana, petitioned U.S. District Court in White Plains to compel Katzenstein and Obex Group to comply with summonses in the arbitration case.

Katzenstein did not respond to an email request for comment. He has objected to the summonses as burdensome, according to Washington National’s petition.

Katzenstein, of New Rochelle, founded Obex Group in 2001 to serve institutional and high-net-worth individuals. He also has interests in a Romanian stock brokerage company and a Taiwan internet hardware trading firm, according to his Obex Group profile. He is a founding member of the International Association of Financial Engineers, a co-founder of a business school in Istanbul, Turkey, and is an active member of the American-Turkish Council.

The underlying dispute goes back to a 2016 lawsuit. Bankers Conseco Life Insurance Co., an affiliate of Washington National, sued Beechwood Capital Group for fraud and racketeering. Bankers Conseco Life Insurance had assigned $550 million in assets to Beechwood Re, a reinsurance company, in 2014 to invest and manage.

Bankers Conseco claims that Beechwood Re and its principals misrepresented its financial situation and corporate structure, according to a court order in that case, and used the assets for personal enrichment.

Beechwood Re principals Moshe M. Feuer and Scott Taylor, for instance, allegedly represented that Beechwood Re had at least $100 million in assets when it had virtually no capital.

The Bankers Conseco lawsuit also alleges that Feuer and Taylor represented that they controlled Beechwood Re when the assets were actually being used by Platinum Partners.

The lawsuit was moved to arbitration in March.

Washington National claims that Platinum Partners retained Obex to secure brokerage services for Beechwood Re. The insurance company wants Obex’s records, in part, because of an email it obtained from another financial services firm in which Katzenstein allegedly “exposed the co-conspirators scheme.”

“It is important to note that the trusts will be managed by Platinum related persons,” Katzenstein wrote in the 2013 email, “but not have any legal relationship to the various Platinum funds.”

He also proposed setting up a meeting with Platinum Partners’ founder, Mark Nordlicht, also of New Rochelle, who “is the one who is recommending this happen.”

Katzenstein and Obex have produced some records in the arbitration case, according to the petition, but failed to produce crucial documents by refusing to search for records “using any term such as Platinum.”

On Aug. 24, the American Arbitration Association issued summonses to Katzenstein and Obex, for all documents and communications concerning Beechwood Re and its affiliates and Platinum Partners LP and its affiliates, from 2013 through 2016. The summonses single out 29 individuals associated with Beechwood Re and Platinum Partners.

Katzenstein and Obex objected, the petition states, because using the search term “Platinum” “would yield too many hits.” But they have allegedly rejected proposals to narrow the timeframe of the request or outsource the work to a vendor at no costs to them.

Washington National says it needs the documents for a hearing scheduled on March 11, 2019.

Platinum Partners and its principals have been enmeshed in several criminal and civil proceedings.

The hedge fund had stood out for years for its double-digit investment returns. But two years ago, the U.S. Attorney’s Office in Brooklyn charged seven associates of the firm with securities fraud in an alleged $1 billion Ponzi-like scheme. The Securities and Exchange Commission filed a parallel civil case.

The alleged fraud was said to be the biggest such scheme since the Bernie Madoff fraud in 2008.

Platinum Partners was accused of persuading prominent families and institutions in the Orthodox Jewish Community to invest in risky bets on an oil company, payday lenders and insurance payouts on terminally ill patients.

They were accused of inflating asset values and illicitly moving investors’ funds to cover losses and liquidity problems. The hedge fund fell short of funds when clients tried to redeem their investments.

One scheme to find cash involved the New York City Correction Officers’ Benevolent Association. Norman Seabrook, the powerful head of the union, invested $20 million in members’ retirement money with Platinum Partners, in exchange for a $60,000 bribe. A federal jury found him guilty in August of accepting a bribe and conspiracy to take a bribe.

Nordlicht’s trial date has been set for Jan. 7.