United States District Court, E.D. New York
MEMORANDUM & ORDER
L. IRIZARRY Chief United States District Judge.
civil action, commenced on December 19, 2016, the Securities
and Exchange Commission (“SEC”) alleges that
defendants Platinum Management (NY) LLC (“PMNY”)
and Platinum Credit Management, L.P. (“PCM”), as
well as individual defendants Mark Nordlicht, David Levy,
Daniel Small, Uri Landesman, Joseph Mann, Joseph SanFilippo,
and Jeffrey Schulse (the “Individual Defendants”)
(collectively, the “Civil Defendants”),
participated in multiple fraudulent schemes in violation of
various securities laws. See SEC Compl., Dkt. Entry.
No. 1 at ¶¶ 2-4, 38-43, 50-75.
prior to the filing of this action, on December 14, 2016, an
indictment was filed in this district charging each of the
defendants with various counts of conspiracy to commit
securities fraud and wire fraud, securities fraud, and
investment advisor fraud.
January 23, 2017, the United States, through the United
States Attorney for the Eastern District of New York (the
“Government”), moved to intervene and stay
discovery pending the outcome of the associated criminal
proceeding. See generally, Gov't's Mem. of
Law in Supp. of Appl. to Intervene and to Stay Civil
Proceedings, Dkt. Entry No. 42 (“Gov't
Mem.”). For the reasons stated herein, the
Government's motion is granted.
December 14, 2016, the Government filed an indictment
charging all seven of the Individual Defendants with
conspiracy to commit securities and wire fraud, securities
fraud, and investment advisor fraud. (See Dkt. Entry
No. 1, No. 16-cr-640) Specifically, the indictment charges
defendants Nordlicht, Levy, Landesman, SanFilippo, and Mann
together, with one count of conspiracy to commit securities
fraud and investment advisor fraud, one count of conspiracy
to commit wire fraud, two counts of securities fraud, and one
count of investment adviser fraud. Id. at
¶¶ 88-90, 91-92, 93-94, 95-96, 97-98. Defendants
Nordlicht, Levy, Small, and Schulse also were charged
together with one count of conspiracy to commit securities
fraud, one count of conspiracy to commit wire fraud, and one
count of securities fraud. Id. at ¶¶
99-101, 102-03, 104-05. Five days later, the SEC filed a
civil complaint (“Complaint”) in this action
alleging violations of the securities laws by the Civil
civil and criminal actions address essentially the same two
allegedly fraudulent schemes. First, the indictment and civil
complaint allege that, between November 2012 and December
2016, the Civil Defendants concealed a growing liquidity
crisis at Platinum Partners' flagship hedge fund,
Platinum Partners Value Arbitrage Fund L.P.
(“PPVA”), overvalued the performance of
PPVA's assets, liquidity, and investments, and concealed
the purpose of various transactions in violation of
PPVA's governing documents. See SEC Compl. at
¶¶ 2-4, 38-43, 50-75; Indictment ¶ 42. The
indictment and complaint also allege that select investors
were paid requested redemptions of their investments in PPVA
ahead of and/or in lieu of other investors, contrary to
PPVA's governing documents. SEC Compl. at ¶¶ 9,
127-37; Indictment at ¶ 42.
the indictment and complaint allege that, between November
2011 and December 2016, certain of the Individual Defendants
defrauded third-party holders of Black Elk bonds and deprived
these bondholders of the proceeds of a Black Elk asset sale
through misrepresentations regarding PMNY's ownership and
control over the bonds. SEC Compl. at ¶¶ 5, 77-102;
Indictment at ¶ 73.
the SEC action was filed and the criminal indictment was
unsealed, on January 23, 2017, the Government moved to
intervene in the SEC's civil action and sought a stay of
the civil proceedings pending the resolution of the parallel
criminal action and an ongoing grand jury investigation.
See generally, Gov't Mem. Defendants Small,
Levy, SanFilippo, and Schulse opposed the motion, arguing
that certain discovery should proceed in this action.
See Defs. Small's, Levy's, SanFilippo's,
and Schulse's Partial Opp. to App. of the U.S. to
Intervene and to Stay Civil Proceedings, (“Small Opp.
Br.”) Dkt. Entry No. 79; Letter from Jeffrey Schulse,
(“Schulse Opp. Letter”) Dkt. Entry No. 80.
Defendants Nordlicht, PMNY, and PCM joined. See Ltr.
from Government, Dkt. Entry No. 81, at 1; Gov't Reply
Mem. of Law in Supp. of Application to Intervene and to Stay
Civil Proceedings, Dkt. Entry No. 84, at 1 fn 2. Defendants
Landesman and Mann did not oppose the motion. See
Gov't Mem. at 1; Ltr. from Joseph Mann, Dkt. Entry No.
78. The Government replied to Small, Levy, SanFilippo,
Schulse, Nordlicht, PMNY, and PCM on February 13, 2017.
Government moved to intervene in this action, arguing that it
may do so as a matter of right or alternatively on a
permissive basis. (See Gov't Mem. at 4-8.) This
request is unopposed by the Civil Defendants. (See
Small Opp. Br. at 2.).
Rule 24 of the Federal Rules of Civil Procedure, a party may
intervene in a civil action either as a matter of right or on
a permissive basis. Rule 24 provides that intervention as of
right is appropriate when, upon a timely motion, a party
seeking to intervene:
claims an interest relating to the property or transaction
that is the subject of the action, and is so situated that
disposing of the action may as a practical matter impair or
impede the movant's ability to protect its interest,