RRA Trustee Settles With Hedge Funds But What Does That Really Mean?
By Kluger, Kaplan, Silverman, Katzen & Levine, P.L. July 20, 2012
RRA Trustee Settles with Hedge Funds but What does that Really Mean?
By Bruce A. Katzen
On Friday, the DBR announced that the trustee in the RRA bankruptcy settled with five New York hedge funds that were investors in Scott Rothstein’s Ponzi scheme. The five funds, Centurion Structured Growth LLC, Level 3 Capital Fund LP, Platinum Partners Credit Opportunities Fund LP, Platinum Partners Value Arbitrage Fund LP and Regent Capital Partners LLC, settled with the trustee for $32 million. As I mentioned in my post last week, settlement with these large New York funds would be key to the resolution of the RRA bankruptcy.
The total claims against these five funds rang in at $422 million so while $32 may seem like a lot of money, it is not a good deal for the creditors. The settlement allows for the hedge funds to receive a claim in the estate which reduces the net value of the settlement to less than 1% of the total claim. Further the settlement allows the Hedge funds beneficial treatment to pursue claims against third parties without reducing their claim but precludes similar treatment by any other creditor. Thus, it is seems like this “settlement” does not actually benefit any of the creditors who lost money in the $1.2 billion fraud.