Echo Therapeutics Inc. – Platinum’s Modus Operandi, Beechwood, Black Elk, and the List
Goes On and On, Saving Echo, Case Dismissed?
Taking Echo Therapeutics, Inc. Out of the Vacuum and Placing it Into the Continuum of Platinum’s Piracy
Notes From Schwarzman, Sternlicht, Robert Smith, Mary Callahan Erdoes, Joseph Tsai And Much More From The 2020 Delivering Alpha Conference
The following are rough notes of Stephen Schwarzman, Steve Mnuchin, and Barry Sternlicht's interview from our coverage of the 2020 CNBC Institutional Investor Delivering Alpha Conference. We are posting much more over the next few hours stay tuned. Q2 2020 hedge fund letters, conferences and more One of the most influential investor conferences every year, Read More
Our goal in that article was to tell the Platinum story as it is told by some of its victims. While the case cited was indeed dismissed, the narrative encapsulates an algorithm of sorts for serial fraud. We feel the Platinum Partners’ many frauds mirror Madoff’s uncanny ability to remain under the radar or escape attention. We contend that when taken as a whole, the amount of money funneled through the Platinum funds, the charities that have received money and laundered the reputations of Platinum’s partners, and the friends and family still defending people like Mark Nordlicht, Bernard Fuchs and Murray Huberfeld, the fraud is comparable to that of Madoff.
Unlike Madoff, Platinum’s schematic and far-reaching history is simply spread out over years and years, across continents, hedged among a multitude of investments, divestments and corporate raids, hidden under what appeared and continues to appear to be legitimate enterprises and cleansed by very public and theoretically “philanthropic” charitable endeavors. In the Mark Nordlicht case, we would argue that the Westchester Torah Academy is one such charitable endeavor.
When carefully scrutinized, the Platinum story has resulted in family, friends, and investors receiving extraordinary profit, “too good to be true,” but enticing. It has also resulted in loss and despair for the visionaries who believed in the companies in which Platinum invested. Nearly all of the Platinum schemes have inevitably lead to corporate decimation for the companies involved.
While the profit and loss side may for many readers feel like a clouded review of the nature of the investment beast, it may very well be. The corresponding fraud is not. The pattern followed by Platinum in its corporate savagery is laced with a certain elegance, joie de vivre, that is hard to miss. Platinum Partners has destroyed tens if not hundreds of small companies over the years. They have profited in “investment situations” based upon the death of patients in healthcare and nursing centers, facilitated by information provided by the owners of those centers. They have profited from insolvency of sports figures using a system of nearly impossible to repay loans on future earnings. They have called promissory notes and shamed payments out of people vulnerable to enticement. In our view such is true of Mark Nordlicht’s current actions with regard to the Westchester Torah Academy. They have created alternative classes of stock to funnel assets and then destroyed the corresponding remaining class value. In sum, Platinum Partners’ partners have profited on death, whether it means corporate decimation, human mortality or football players’ inability to return their loans.
For the purposes of the information that follows, Mark Nordlicht, Bernard Fuchs, Platinum Montaur, Platinum Partners and their related funds and the various people and affiliates involved will be referred to as “Platinum Affiliates.” For the purposes of Echo in particular, Medical Technologies Innovation Asia, Ltd. will be referred to as “MTIA” or the “Strategic Partner”. Echo Therapeutics, Inc. will be referred to as “Echo,” or the “Target.”
For the purposes of legal disclosures, the information found and the resulting opinions and conclusions are based upon publicly available documents and sources. We did nothing more than piece together a puzzle, conduct interviews with people, review Court documents and submissions, review public information related to companies like Black Elk, Echo, Cellceutix and others. If we have uncovered non-public information it is by accident and we do not offer any advice nor do we seek to profit from that information.
As an investment matter, we make no statements herein about the validity or viability of investments, though it is obvious that we take the position that any investor who invests in Platinum Partners or any of its related funds is, at this point in time either unskilled or ultra-savvy, depending upon the nature of the investment. The Platinum Affiliates on the corporate side, in our view, are insolvent and will ultimately bleed every investor dry through multiple bankruptcy proceedings. The Platinum Affiliates on the partners’ side are in our view extraordinarily wealthy holding assets in the many millions, if not billions, hidden in family trusts, endowments, charitable donations (which are then miraculously converted into loans), other collateral investments or trusts for children. The Platinum affiliates, bar none, are pirates. They will ultimately bring financial ruin to each and every company, investment, strategy and fund with which they come in contact, at great financial profit, leaving destruction in their wake.
Very specifically, we make no recommendations about the investments related to Echo Therapeutics; though this article will illustrate that there are those hoping to save the company. We make no judgment on that count. We are only providing information as it was provided to us through an anonymous party.
The only thing we believe without a doubt as to certainty, is that the dismissal of the case cited in our earlier article exemplifies the savvy of the players. As we see it, the dismissal is in its very essence another elegantly staged road an pony show aimed at giving the Platinum Affiliates legitimacy, case dismissed. We are hoping those readers who have followed us on our Platinum undertaking, get a clear picture of the Platinum Affiliates for what they are, serial corporate raiders, savage fraudsters and elegantly connected profiteers. We hope to help those who have lost money see some returns.
In essence, we are attempting to clear the smoke and the mirrors to encourage law enforcement to stay alert, pay attention, the patterns are staring you in the face.
We will begin with the following premise: The Patterns for each example of the Platinum Affiliates’ strategy are exactly and precisely the same; and Platinum Partners, through Principles Mark Nordlicht, Bernard Fuchs and related Platinum Affiliates, have hollowed out the same path as they always follow when targeting a public company:
Employing deception and questionable trading practices to take categorical control of Company operations and decision-making, misleading shareholders into believing that their interests are aligned, and strategically divesting Target Company of its assets, moving those assets into remarkably well concealed Platinum related entities, and walking away with Target Company assets, leaving all remaining shareholders with nothing but the shell of a company that once represented and strived to achieve what these shareholders envisioned.
Here’s how it all works:
Platinum Affiliates’ (“Corporate Raiders”) invest in Target, demand a Board Seat and subsequently – either outrightly deceive public shareholders while leveraging their existing investment in Target.
They dump blocks of stock into the market while simultaneously making public statements about the existing Board and Management members whom they want to remove or whom they ultimately hope will take the fall for their own practices.
Once completed, Corporate Raiders claim to save Target from an impending liquidity crisis, either by investing more equity (think Black Elk tender offer) or by creating a new tranche of shares, all contingent upon obtaining additional Platinum-imposed Board Seats and/or a Platinum-imposed strategic partner (usually in China).
Platinum simultaneously takes effective ownership of the Board and over time hires Executives who take direct orders from Mark Nordlicht. Little by little they weed out those persons whom they believe are not Nordlicht/Platinum loyalists.
In the meantime, Corporate Raiders plunder the Target’s trade secrets, Intellectual Property and any underlying assets of value (“Assets”) by selling them to other related funds, either in the form of outright sales or by way of leases, loans or other collateral debt obligations or instruments. In the Black Elk case, they issued another tranche of shares which were backed by all of the assets and then voted one tranche against the other to remove the assets.
To conceal remarkably questionable business practices in apparently legitimate business maneuvers, the Corporate Raiders partner with some form of special purpose vehicle, generally a Platinum-friendly Strategic Partner that is a seemingly unrelated entity, but in reality is another Platinum Affiliate or managed by and through Platinum or Platinums’ partners. The Strategic Partner then makes financial investments (usually in exchange for a financial stake either by way of equity or debt convertible to equity), which then further clinches control of all aspects of Target Company.
To tie up loose ends, Platinum Partners then get installed as an agent for the protection of the collateral interests “Collateral Agent” which allows them to manipulate existing shareholders, creditors and other debt or lien-holders.
This is accomplished in the same general format:
Without disclosure to Target’s shareholders or to the general public (the public pool of investors), Platinum attends Target meetings in undisclosed locations (in the Echo case in China) with Strategic Partner, where they begin the process of divesting Target of its Assets either by coercion of employees critical to the functioning of the IP involved or outright transfer to Strategic Partner to back its investment.
The Corporate Raiders manipulate every single detail of each transaction.
They have been known to coerce otherwise ethical employees with veiled threats of dismissal, who are either fired or forced to resign, depending on their compliance with the Platinum Strategy. Otherwise honest employees are generally bribed with handsome severance packages to resign. Those who continue to act in good faith to shareholders are fired. And, Platinum loyalists remain.
Once the Target assets have been transitioned to the Strategic Partner (in the Echo Therapeutics case a seemingly ‘unaffiliated’ Chinese entity in breach of an existing Licensing Agreement), Platinum Affiliates intentionally begin the takeover of the internal workings of Target Company operations, hire Platinum insiders that play the part of acting in good faith but, in fact, have no intentions of fulfilling any fiduciary duties required by their corporate titles.
When all is said and done, Platinums’ partners control the assets and the remaining corporate shell eventually falls apart.
In the case of Echo, Platinum insiders played their roles by the Corporate Raiders’ playbook.
According to those familiar with Echo Therapeutics, the company was founded on visionary technology that had the power to transform. The Intellectual Property of the company was highly valuable. Yet, the installation of Platinum’s loyalists facilitated a slow and painstakingly detailed process of destroying the company.
As the Echo story logically goes, although in real -time, time is on Platinum Affiliates’ side, Echo is in yet another liquidity crisis in which Platinum Affiliates impose debt on once debt-free Echo, serve as lender, as concealed lender, as strategic partner, as Collateral Agent and follow the schematic as listed above.
Platinum’s strategy where Echo Therapeutics is concerned is intended to retain all assets relating to a public company bankruptcy.
Effectively, this strategy, consistent with others, is one of taking ownership of Target assets without taking ownership of their liabilities. By signing away the Target Company’s Intellectual Property (the major valuable asset) to their own self-installed and related entities, the Platinum Affiliates walk away holding valuable technology in hand, leaving a company with defrauded investors.
The Echo case is in form and function no different than the Black Elk case.
The bankruptcy courts take the reins from the point at which the company claims solvency problems and bankruptcy protection which initiated by the Platinum Affiliates or one of the related entities and creditors. Meanwhile we believe the Platinum Affiliates acquire whatever remains in the bankruptcy context during the workout.
With Echo, the Bankruptcy is in the hands of the receivers.
As we stated in our previous article: In our view, judges dismiss cases not because the cases lack merit when taken as a sum of their parts and in a bigger picture context’ but because these judges very reasonably see each case in a vacuum.
The historical and serially patterned relationships Platinum Affiliates build with Target and Target-related entities are creatively and intentionally undisclosed to shareholders, the public, the SEC and any other regulators. This was the case with Black Elk and is the case with Echo.
In the Echo case, it is our understanding that the assets relating to Echo are now in the hands of a receiver who is responsible for liquidating these assets to provide sought relief from Platinum fund victims.
We believe each and every aggrieved party should be reaching out to the receiver in the hopes of a just result.
In the Echo case, the Corporate Raiders should be liquidating assets per United States Bankruptcy Court order. It is unclear whether or not, at this point, they are following that Order. This should be addressed with the Court appointed Receiver.
History reflects that there is precious little investigation into the companies that acquire the assets relating to corporate bankruptcies. People familiar with Echo have advised us that there are interested parties who are NOT Platinum related entities and who have the vision of saving the company. We have no way to know for certain.
However, when you take Echo in the contextual framework of Platinum Affiliates’ other adventures (Black Elk) one must consider the fine points:
For example, why were Echo’s assets – in violation of an existing Licensing Agreement ‘executed’ between MTIA and Echo – plundered; and the Licensing Agreement breached by former Echo insiders and members of the Board, Platinum Affiliates, and MTIA?
The chronology of disclosures and events follow a strategic and intricately structured pattern of Platinum Affiliates’ ventures but when taken in context simply do not add up from a logical perspective. Was the Licensing Agreement adjusted and revised to meet past actions and future goals of the Affiliates that controlled Echo?
Those connected with Echo Therapeutics have implored upon us to help save the company. In so doing, we would need to make a judgment regarding its value, whether it is worth saving, a financial analysis, etc. etc. We are not in a position to do so. We therefore make no recommendations one way or the other. We are only penning our understanding of events on paper.
We can only implore upon law enforcement, the SEC, regulators, the Receiver and the Investors to do your homework. Take Echo in the global framework of the Platinum Affiliates’ series corporate savagery strategy. Review the documents, the numbers, the chain of events and do not dismiss this case in a vacuum even if it is the path of least resistance.
See the full PDF below.