Disbarred lawyer and Ponzi schemer, Scott Rothstein, “testified that four hedge funds failed to stop his $1.2 billion fraud,” reports FINAlternatives. Rothstein, who was deposed as part of civil litigation in the case, “testified that Platinum Partners, Centurion Credit and Level 3 Capital agreed to help prop up his failing scam, and that Banyon Investments’ George Levin knew that Rothstein was running it.”
Banyon had invested roughly $775 million in Rothstein’s scam. “The Ponzi scheme really got legs when I was introduced to George Levin,” Rothstein said. “Levin knew.”
“The funds were going to give us a positive credit rating,” he said. “We were going to use as much of the new money coming in to pay them off, and in fact that’s what we did.” Rothstein said the hedge funds lost only $18 million on the scam, but the funds say the figure is 10 times higher than that.
While Rothstein was clear that “he did not consider the funds to be co-conspirators”, he did say that those funds knew that he was not making the payments he promised and “they agreed not to tell investors about that in an effort to raise money that would be paid out to them.”
“My only concern was that, at the end of the day, they would lie for us,” Rothstein said. “That was my concern. They didn’t want this to blow. I didn’t want this to blow. I had been assured by [Platinum portfolio manager Jack] Simony and [Platinum chief investment officer Meir] Nordlicht that they would not let it blow up.” Neither Simony nor Nordlich have been criminally charged in the Rothstein case.
A spokesman for the funds told Bloomberg News that Rothstein’s claims “are absolutely false and are flatly inconsistent with his unequivocal statement that the funds were not his co-conspirators. He admits he has no knowledge that anyone at the funds lied for him, and not a single one of the dozens of investors in Rothstein’s scheme has said that the funds recommended the investment to them.”