On a summer season Friday afternoon final yr, hedge-fund supervisor
broke chapter legal guidelines. That night on a recorded line, he pleaded with a banker to say the entire thing was a misunderstanding.
“Perhaps I ought to go to jail,” Mr. Kamensky stated on the decision.
Mr. Kamensky experiences to federal jail on June 18. His hedge fund is within the strategy of closing, and a profession that included stints at white-shoe legislation agency Simpson Thacher & Bartlett and storied hedge fund Paulson & Co. has been wrecked.
“He got here undone,” U.S. District Decide
stated throughout a court docket listening to on Could 7.
Mr. Kamensky, 48 years outdated, labored within the high-stakes, high-conflict world of distressed investing, which goals to revenue from corporations teetering on the point of or in chapter. He launched his hedge fund, Marble Ridge, in 2015 with $20 million and was managing practically $1 billion a number of years later.
Working his personal agency turned hectic for Mr. Kamensky. He was anxious, had issue sleeping, misplaced weight and had hassle concentrating on the workplace or at residence, he says. His fund, whereas it grew rapidly, was nonetheless a comparatively small participant within the distressed market, which is dominated by big private-equity corporations, hedge funds and main legislation companies.
In 2017, Mr. Kamensky started working with a psychologist and a sleep specialist. He additionally consulted an government coach, whereas in the course of the day he would head to a meditation studio. He started to really feel more healthy and extra relaxed, he says. He loved household time once more, taking part in video games like Scrabble and doing crossword puzzles.
His efforts to regulate his feelings started to unravel in a bitter struggle over struggling luxury-goods retailer Neiman Marcus Group Ltd. Issues bought worse within the coronavirus pandemic, which eliminated the help system of coaches and therapists that Mr. Kamensky had erected to assist take care of his pressures.
Mr. Kamensky started shopping for bonds of the department-store chain in 2018 for about 60 cents on the greenback. Neiman was owned by private-equity agency
Ares Management Corp.
, which made an ill-fated wager that the chain may thrive regardless of an onslaught from on-line opponents. Neiman had one hidden gem; beneath Ares possession it had acquired a thriving German on-line website referred to as MyTheresa.
Interviews with Mr. Kamensky and court docket paperwork and transcripts present how the struggle over MyTheresa led to Mr. Kamensky’s downfall.
Seeing the worth of MyTheresa, Ares determined to separate it from Neiman, giving itself full management of the web website and leaving the bondholders with simply the corporate’s bricks-and-mortar shops. The transfer borrowed from traditional private-equity ways, however nonetheless got here as a shock to Mr. Kamensky, who stated he thought Ares had gone too far by taking an organization’s crown-jewel asset for nothing in return.
“It’s like somebody takes your pockets out of your again pocket on the subway and stares you proper within the face whereas doing it,” he stated. A spokesperson for Ares declined to remark.
In press releases that exposed his non-public letters to Ares’s board, Mr. Kamensky accused the private-equity agency of “lining its pockets” and “looting” Neiman. He stated Ares broke the legislation by shifting property out of an bancrupt firm and had conflicts of curiosity. Phrase bought out that he would sue to cease the deal.
Then Ares and Neiman fought again.
a lawyer representing Neiman, warned that if Mr. Kamensky sued, “we’re going to return down on you want a pile of bricks,” Mr. Kamensky later testified. Mr. Sprayregen, a chapter lawyer at Kirkland & Ellis LLP, didn’t return calls in search of remark.
Mr. Kamensky’s fund did file swimsuit in 2019. Neiman responded, stepping up the struggle by suing Marble Ridge for defamation, alleging that Mr. Kamensky’s lawsuit damage the retailer’s enterprise place. “A defamation swimsuit is unparalleled,” he says. Whereas litigation is frequent on the earth of distressed debt and restructuring, a defamation swimsuit is uncommon.
Neiman ultimately agreed to revive practically half of MyTheresa to its collectors. Nearly the entire collectors went alongside, however Mr. Kamensky thought it was a foul deal and continued to push Ares to offer extra of MyTheresa to Neiman’s collectors. “It felt like I used to be tilting at windmills,” says Mr. Kamensky, a reference to the novel “Don Quixote,” which he liked as a youth.
With the battle over MyTheresa already joined, Covid-19 hit and Neiman filed for chapter. Mr. Kamensky’s fund fell 12%, including to his pressures.
‘There was a fuse exploding. I misplaced it.’
Staying at his Lengthy Island residence due to the pandemic, he labored in a cramped bed room that he had transformed into an workplace. A pet as soon as relieved himself on Mr. Kamensky’s foot throughout a enterprise name. Generally, after working late into the evening, Mr. Kamensky slept in the identical room.
It turned tough to work together with his coach and seek the advice of with colleagues. “All the things turned extra advert hoc,” he says.
As one of many few Neiman bondholders opposing the chain’s restructuring plan, Mr. Kamensky took a seat on Neiman’s collectors’ committee, which was tasked with advocating for the rights of buyers throughout chapter proceedings. He needed to act within the curiosity of all collectors, quite than push for issues that might profit solely his agency.
As soon as once more a deal was reached on MyTheresa however Mr. Kamensky rejected it. He had spent hundreds of thousands on the struggle and wished to have the fitting to purchase a much bigger stake in MyTheresa to probably increase his fund’s income. He would provide to purchase the popular shares in MyTheresa that might be issued to different collectors.
By July, he was near getting what he wished and his hedge fund had recouped about half of its losses. Mr. Kamensky was feeling optimistic. However on July 31, he was blindsided by phrase that one other bidder was additionally attempting to purchase the popular shares. The bidder, he discovered, was funding financial institution Jefferies LLC, one in every of his longtime brokers.
He feared Jefferies may scuttle a deal he had been pursuing for greater than two years, simply days earlier than completion.
“There was a fuse exploding,” Mr. Kamensky says. “I misplaced it.”
At 3:20 that summer season Friday afternoon, he texted
his contact at Jefferies, “DO NOT SEND IN A BID.” In a telephone name 20 minutes later with Mr. Femenia and
a Jefferies colleague, he yelled and cursed on the males, in accordance with a Justice Division probe.
Mr. Geller not lengthy after advised a lawyer for the Neiman collectors committee that Jefferies wouldn’t bid as a result of Mr. Kamensky advised the agency to again off.
Mr. Kamensky realized he had violated the legislation. As a member of the collectors committee, he shouldn’t attempt to cease the next bid that might profit different buyers.
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4 hours after he made his menace, Mr. Kamensky referred to as Mr. Femenia once more. On the decision, he pleaded with Mr. Femenia to inform a special story to authorities—that Mr. Kamensky wished Jefferies to bid provided that it was critical about going via with the deal. “I pray you inform them that this was an enormous misunderstanding,” Mr. Kamensky stated on the decision, which was recorded by Mr. Femenia. He stated he may go to jail with out Mr. Femenia’s assist.
The collectors committee lawyer filed a report on doable wrongdoing in chapter court docket. Mr. Kamensky apologized whereas admitting his wrongdoing to Justice Division attorneys.
In September, Mr. Kamensky was arrested in a shock raid at his residence, and in February pleaded responsible to at least one cost of extortion and bribery associated to the Neiman chapter.
Upon coming into jail on Friday, Mr. Kamensky faces weeks of solitary confinement in step with Covid-19 pointers. After finishing his six-month sentence, he may face a lifetime ban from serving as an funding adviser.
Whereas ready to go to jail, Mr. Kamensky has given lectures to enterprise and legislation college students in regards to the risks of intense stress and letting feelings undermine one’s judgment. He spoke at a number of graduate faculties, together with the NYU Stern College of Enterprise and the Duke College College of Legislation. He wonders, if he had been in his workplace with colleagues round, would he have reacted so rapidly and angrily.
Mr. Kamensky is a “good man, however one who misplaced his moorings,” Decide Cote stated at his sentencing. She stated it wasn’t clear to her whether or not his actions had brought on financial hurt to collectors. Prosecutors requested a sentence of 12 to 18 months. Mr. Kamensky will serve six months of probation after jail.
“I remorse letting anger get the very best of me,” Mr. Kamensky says.
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