A Greenwich hedge fund is behind the mysterious buyer of the NYC 'Taxi King's' medallions

A Greenwich, Connecticut-based hedge fund that focuses on distressed credit and special situations is behind the purchase of a block of 46 taxi medallions that were snapped up in a foreclosure auction this week.Themedallionsthe metal plates on yellow cab hoods allowing them to legally pick up street-hailshave plunged in value since the arrival of Uber and other ride-sharing services in the city. They once fetched as much as $1 million but were sold for$186,000 each at the auction, an industry source told Business Insider. They once belonged toEvgeny "Gene" Freidmana man known as the 'Taxi King'who is now in legal and financial trouble as the value of his assets plunged.The buyer, identified in bankruptcy court documents as MGPE Inc., wasincorporated in 2010 byMark Zoldan, who ischief financial officer ofMarblegate Asset Management, legal filings show. We called Marblegate to ask about its strategy with the medallions andhow MGPE fits in, but the firm declined to comment.Hedge funds are closed to most public investors so they only have to disclose a very limited amount of information.Marblegate manages about $627 million, which could include borrowed money, according toa regulatory filing. Marblegate describes itsinvestment strategy as seeking "to purchase high yield and leveraged corporate credits and claims at a discount to intrinsic value and to realize the value of investments through a combination of restructuring, recovery and refinancing."Andrew Milgramand Paul Arrouet are the firm's managingpartners with Milgram serving as the chief investment officermeaning they're the ones making investment strategy decisions.Of course, we can't say what MGPE's strategy with the medallions isbut there are more ways than one to make a profit off this purchase. For one, because they were bought in a foreclosure auction and in a large block, the medallions probably went for below what they might fetch in the open market. Also, the medallion owners can generate income by leasing them out to taxi companies or individual driverswho can't ply their trade without one.The $186,000 medallion price is not expected to become the new normal for future medallion auctions, according to Matthew Daus, who served as head of the Taxi & Limousine Commission for more than eight years."These medallions were foreclosed upon as a part of Freidmans bankruptcy,"said Daus, who currently works for the law firm Windels Marx. "These bulk bargain bids are not indicative of a medallions true market value."He says hedge funds are a rare sight in the taxi industry.Then, of course, there's the potential thatthis reflects a view that the hit that the taxi industry has taken from Uber is coming to an end, and the medallions will start to regain value.SEE ALSO:A mysterious hedge fund just scooped up the foreclosed medallions from New York City's 'Taxi King'Join the conversation about this storyNOW WATCH: THE BOTTOM LINE: Gary Shilling on expensive stocks and Alibaba vs. Amazon
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