Joe Femenia, the head of distressed-debt trading at
Jefferies Financial Group Inc., set in motion one of the most astonishing
falls-from-grace to captivate the world of hedge funds. The 43-year-old is the
unidentified executive outlined in court filings last week, whose taped
conversation led to the swift downfall of Dan Kamensky’s Marble Ridge Capital,
according to people with knowledge of the matter.
The saga has laid bare the rough-and-tumble ways of
distressed investing, where investors look to pull every lever in their favor.
In the industry’s social hierarchy, a client who can offer
or withhold significant business is usually king. Kamensky allegedly pressed
that advantage by pushing Femenia to abstain from submitting a rival bid for
part of bankrupt retailer Neiman Marcus. But instead, Femenia raised alarms,
providing enough details on the incident to a U.S. trustee to threaten
Kamensky’s standing in the industry.
“I have known Joe and always found him to be an honest,
upstanding guy and a straight shooter,” said Eric Rosen, a veteran trader and
hedge fund executive. “He risked his life for our country and he seems to have
done the honorable thing here.”
By the end of last week, Kamensky had acknowledged he
committed a “grave mistake” and his firm told investors it’s shutting down.
Kamensky told the U.S. Trustee that his messages were “motivated by panic” that
the Jefferies bid would interfere with his own proposal for the shares.
A representative for Jefferies declined to comment.
Femenia graduated from the U.S. Naval Academy before
becoming a SEAL and spent much of his 20s in war zones from Afghanistan to Iraq
and beyond. On Wall Street, he made his mark in the elite trading group at
Goldman Sachs Group Inc., where he spent nearly a decade. He jumped to
Jefferies in 2016, at a time of tumult on the distressed-trading desks of both
As the head of distressed and special situations at Jefferies,
Femenia has been involved in trading several high-profile credits that have
been picked over by vulture funds and battled over on their way through
A standoff between Jefferies and hedge fund Marble Ridge
surfaced in the bankruptcy case of Neiman Marcus. Both firms were vying for a
piece of the luxury retailer’s valuable online business, MyTheresa.
Legal filings accuse Marble Ridge founder Kamensky of trying
to dissuade Jefferies from submitting a bid on behalf of another client. “Stand
DOWN,” Kamensky wrote to Femenia, according to the report submitted by U.S.
Trustee Henry Hobbs. “DO NOT SEND IN A BID.” He pressed the matter further on a
confrontational phone call.
Femenia flagged the conversation to Jefferies’ general
counsel, and they disclosed the discussion to an official creditor committee,
which was supervising the sale and where Kamensky was a member.
The panicked money manager called back Femenia a second
time, asking him to treat the conversation off the books, and pushed Femenia to
change his recollection of their initial chat, according to the report.
Unbeknownst to him, Femenia had started recording the call.
“[I]f you’re going to continue to tell them what you just
told me, I’m going to jail, OK?” Kamensky said on the call, according to the
document. “Because they’re going to say that I abused my position as a
fiduciary, which I probably did, right? Maybe I should go to jail. But I’m
asking you not to put me in jail.”
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