UPDATE 3-U.S. Supreme Court rejects Platinum Partners executives' appeal of fraud convictions

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By Jody Godoy

Oct 3 (Reuters) - The U.S. Supreme Court on Monday declined to hear an appeal by two former Platinum Partners executives of their conviction on charges that they defrauded bondholders of one of the defunct hedge fund's portfolio companies as they seek a new trial.

The justices, on the first day of their new term, turned away an appeal by Platinum co-founder Mark Nordlicht and co-chief investment officer David Levy of a lower court ruling that reversed the trial judge's decision to overturn their convictions after jurors found them guilty.

Nordlicht and Levy were convicted in 2019 of securities fraud and conspiracy for cheating bondholders at the Platinum-controlled Black Elk Energy Offshore Operations LLC to limit Platinum's losses if Black Elk went bankrupt. They are scheduled to be sentenced in November.

Prosecutors said the scheme involved diverting tens of millions of dollars from sales in 2014 of Black Elk oil fields after rigging a bondholder vote to ensure that Platinum and not bondholders would be paid first. Black Elk creditors filed an involuntary bankruptcy petition against that company in August 2015.

In 2019, U.S. District Judge Brian Cogan overturned the convictions.

The judge ordered a new trial for Nordlicht, saying it would be "manifest injustice" to uphold his conviction after Nordlicht went to "great lengths" during the vote to follow rules governing a Platinum affiliate. Cogan granted Levy acquittal or alternatively a new trial, saying prosecutors had not proven he had criminal intent.

The New York-based 2nd U.S. Circuit Court of Appeals in 2021 reversed the rulings, finding that jurors had seen sufficient evidence to convict the two men. Nordlicht and Levy have argued that the 2nd Circuit's decision set too high a bar for courts to review verdicts.

Nordlicht and Levy petitioned the Supreme Court to undo the 2nd Circuit decision, arguing that it deepened a disagreement among U.S. appeals courts over whether a judge considering a request for a new trial may "reweigh" evidence heard by a jury.

Prosecutors said the appeal mischaracterized the 2nd Circuit ruling, which they said did not conflict with other courts.

A Justice Department spokesperson declined to comment while defense lawyers did not respond to requests for comment.

(Reporting by Jody Godoy in New York; Editing by Will Dunham)