By Peter Franceschina
Two New York hedge funds that invested with Ponzi schemer Scott Rothstein are fighting back in the largest fraud suit ever filed in Broward circuit court.
The suit was brought in the fall of 2009 by a group of Rothstein investors, headed by wealthy Fort Lauderdale entrepreneur Doug Von Allmen, that alleges losses of more than $100 million. The suit has been amended three times and is more than a thousand pages long.
The hedge funds, Platinum Partners Arbitrage Fund and Centurion Structured Growth, are related and named as defendants. They are already contesting some of the settlement agreements a trustee for Rothstein’s bankrupt law firm, Rothstein Rosenfeldt Adler, has reached in federal clawback suits. They also are suing one of Rothstein’s banks, TD Bank, and Rothstein’s largest feeder, Fort Lauderdale businessman George Levin.
Last week, Platinum Partners filed a counterclaim in the state case, alleging that the funds lost more than $20 million investing with Rothstein. The counterclaim alleges that Von Allmen and the group of investors have overstated their losses because they did not account for returns received from Rothstein.
Fort Lauderdale attorney Bill Scherer, who represents the investors, said Von Allmen had no idea Rothstein was running a Ponzi scheme and put money in until the very end.
While the investors are seeking $280 million in damages, they have overstated their loses by $120 million, according to the counterclaim. Scherer said the investors he represents lost roughly $165 million.
“The damages are higher than at,” he said.
Platinum and Centurion assert that allegations that they solicited investments for Rothstein are false, and that instead Von Allmen played that role just before the $1.4 billion fraud scheme imploded.
“By thus joining Rothstein's conspiracy, it is Von Allmen and those who conspired with him who have rendered themselves liable under Florida law to all victims of Rothstein's scheme, including the Fund Defendants and those Plaintiffs who did not join in Von Allmen's conspiracy,” the counterclaim alleges.
Scherer denied that.
“They essentially took the allegations that we have made against them for aiding and abetting the Rothstein Ponzi and flipped it around, and said our victims did what we accused them of doing,” he said. “The only problem is, they got back all of their money, all but $20 million out of R440 million. That is a pretty good return.”
The high-stakes litigation involves dozens of plaintiffs and defendants. Boxes and boxes of documents in the case are stored at the clerk of court’s office. More than 78 volumes of pleadings have already been created.
Rothstein, 48, is serving a 50-year prison sentence after pleading guilty to racketeering, money laundering and fraud.