The president of New York’s correctional officers union was arrested on Wednesday for steering pension money into a hedge fund in exchange for a percentage of the profit – all while circumventing the other trustees.
His partner in crime, a Platinum Partners hedge fund manager, was also arrested.
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Seabrook controlled an $81 million member retirement fund, according to the complaint. Despite board opposition, Seabrook allegedly signed over $20 million to Platinum in exchange for a 2% profit share—roughly $100,00 to $150,000 per year.
He is accused of receiving one payment in a luxury bag, along with extensive free travel.
“For a Ferragamo bag stuffed with $60,000 in cash, Seabrook allegedly sold himself and his duty to safeguard the retirement funds of his fellow correction officers,” said Manhattan US Attorney Preet Bharara at a press conference Wednesday.
Platinum reportedly specializes in assets others won’t touch: Payday loans, insurance products targeting the terminally ill, oil companies facing criminal charges, and—twice—Ponzi schemes.
The strategy has delivered substantial alpha for years, according to figures obtained by Reuters. One of Platinum’s two funds returned an average 17% annually since 2003, and the flagship 13.4% since 2005.
Platinum co-founder Murray Huberfeld offered Seabrook additional payouts if he could lead fellow institutions into the fund, the complaint stated.
Federal agents arrested Huberfeld at his home Wednesday.
Both men face up to 40 years in prison on fraud charges, the Department of Justice said.