Judge Approves Review of Payments George Weiss Got From Own Firm

(Bloomberg) -- A federal judge granted a request by Jefferies Financial Group for an outside review of payments Weiss Multi-Strategy Advisers made to its founder, George Weiss, and other executives before the hedge fund filed bankruptcy earlier this year.

Judge Martin Glenn said Tuesday he’ll authorize the review that is broader than an examination originally sought by Weiss. Jefferies, a major Weiss creditor, has said payments to George Weiss or other Weiss officers in the two years before the fund went bankrupt could be voidable under Chapter 11 powers that allow bankrupt companies to clawback payments to corporate insiders.

The hedge fund’s advisers sought a more limited review focused on Weiss’ decision to pay roughly $30 million in employee bonuses before announcing it would shut down and return cash. The bonus payments have been the subject of litigation with Jefferies.

Weiss said an expanded review wasn’t warranted and threatens to soak-up its limited funds needed to liquidate the firm. The hedge fund also said Jefferies has been receiving detailed financial statements since at least January 2022. Jefferies contends its owed roughly $100 million.

Glenn said the cost of the expanded examination will be constrained by a budget and any additional costs should be limited. The person who will conduct the examination will be selected by a Justice Department unit that monitors bankruptcy, according to court documents. 

Jefferies has previously raised concerns about Weiss spending. Leucadia Asset Management, a Jefferies affiliate, has previously alleged Weiss owned a Dassault Falcon private airplane that George Weiss used for personal trips, Bloomberg News has reported. Leucadia ultimately asked Weiss to sell the plane, which the hedge fund did last year for $941,000, according to an audited financial statement.

Jefferies lawyer Michael Jones said during a Tuesday court hearing that his client hasn’t done a full investigation but that there is public reporting indicating Weiss insiders used a company airplane “somewhat willy-nilly” and made additional executive bonus payments. Those payments, if substantiated through an independent review, could be voidable, Jones said.

Bankrupt companies or their creditors can request that a bankruptcy judge appoint an independent examiner to review disputes; such requests are usually granted. 

The case is Weiss Multi-Strategy Advisers LLC, 24-10743, US Bankruptcy Court for the Southern District of New York (Manhattan).

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