By Lawrence Delevingne and Tom Hals From Reuters

Two Platinum Partners hedge funds have sought U.S. Chapter 15 bankruptcy protection as part of an ongoing liquidation effort, according to court documents filed in New York federal court Tuesday.

In August, a Cayman Islands court ordered that an outside expert unwind the so-called offshore versions of its flagship hedge fund, Platinum Partners Value Arbitrage, which, along with the firm, is also being investigated by U.S. authorities.

That liquidator, RHSW Caribbean, filed the Chapter 15 bankruptcy petition which seeks to protect Platinum’s U.S. assets from creditors while an insolvency proceeding is underway in the Cayman Islands.

An outside spokesman for Platinum declined to comment.

Mark Nordlicht founded Platinum more than a decade ago and generated years of double-digit percentage returns by investing in often controversial businesses, a Reuters special report revealed.

New York-based Platinum has been caught up in federal investigation by the U.S. Securities and Exchange Commission and the U.S. Attorney’s offices in Manhattan and Brooklyn.

In June a longtime associate was arrested on charges of bribing a union official to invest in Platinum, charges he has denied.

RHSW notes it is in ongoing contact with the SEC and the Department of Justice and that Platinum is the subject of “allegations of asset overvaluation” of its investments in mostly difficult-to-value fledgling companies.

Platinum reported assets of $1.09 billion for its flagship funds as of June 30, according to RHSW. The same filing notes potential liabilities of at least $468.7 million on May 31.

The Cayman liquidators have began examining allegations that assets were overvalued and are examining the cause of the funds failure, according to the Chapter 15 filing.

One of the liquidators’ investigation involved the potential sale of Implant Sciences Corp notes to Platinum insiders, according the bankruptcy filing. The liquidators were also probing an investment by Platinum’s master fund into Northstar Offshore Group LLC, according to the Chapter 15 filing.

Northstar investments account for 22 percent of the two Platinum funds, according to the bankruptcy filing.

The liquidators said a Northstar bankruptcy would result in a significant devaluation of Platinum’s holdings.

(Reporting by Tom Hals in Wilmington, Delaware)

For more on this story go to: http://www.reuters.com/article/us-hedgefunds-platinum-bankruptcy-idUSKCN12J1ZH

IMAGE: Mark Nordlicht Wall Street Journal