July 7 (Reuters) - A U.S. judge has appointed a new receiver to oversee the unwinding of assets held by hedge fund firm Platinum Partners, after the first receiver resigned over disagreements with federal securities regulators.
In a written order on Thursday, U.S. District Judge Dora Irizarry in Brooklyn accepted the resignation of Bart Schwartz, chairman of professional monitoring firm Guidepost Solutions LLC. Schwartz had been appointed receiver after prosecutors in December accused Platinum leaders of running a more than $1 billion fraud. The six men have pleaded not guilty.
At the suggestion of the U.S. Securities and Exchange Commission, Irizarry appointed former bankruptcy judge Melanie Cyganowski, now head of law firm Otterbourg's bankruptcy group, as Schwartz's replacement. The agency is pursuing civil claims against the Platinum leaders.
However, Irizarry stopped short of approving changes the SEC proposed to the court order describing the receiver's duties, saying she would rule on that later. Some Platinum investors have criticized the changes as an attempt by the SEC to exercise control over the receiver, which they say could harm the value of their investments.
Schwartz asked to resign in a June 23 letter. He said he believed investors would benefit from sinking more capital into some of Platinum's investments to increase their value, while the SEC favored a quick liquidation.
The SEC's new proposed order on the receiver's role removes language about realizing Platinum assets' "true and proper value," while adding more language about an "orderly liquidation."
In a June 30 letter to the court, a group of Platinum investors said the new proposed order "handcuffs" the receiver. The investors said they believed they stood to gain more than $100 million from Schwartz's plan to make additional investments, calling his early removal a "nightmare scenario."
The SEC had called for Schwartz to be removed because he once did work for an unnamed law firm that is now a debtor to the Platinum estate. But in his letter, Schwartz said that did not present any conflict of interest.
Platinum was the subject of a Reuters investigation published in April 2016 that highlighted its many complicated and illiquid investments in controversial companies. (reut.rs/2sJ4OPU)
Platinum's largest group of funds, Platinum Partners Value Arbitrage, is being wound down under the supervision of a Cayman Islands-based liquidator. Platinum represented the gross value of its funds to be $1.7 billion at the time of the criminal charges. (Reporting by Brendan Pierson in New York)