David Saks: Man Guilty of Defrauding Investors in $62M Real Estate Ponzi Scheme

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Man Guilty of Defrauding Investors in $62M Real Estate Ponzi Scheme

Woodmere Man Pleads Guilty to Defrauding Investors of $62 Million in a Real Estate Ponzi Scheme

U.S. Attorney’s Office June 26, 2013
  • Eastern District of New York (718) 254-7000
 

Earlier today, Gershon Barkany pleaded guilty at the federal courthouse in Central Islip, New York, to wire fraud. The proceeding took place before United States Magistrate Judge Arlene R. Lindsay.

When sentenced, Barkany faces up to 20 years in prison.

As part of his plea agreement with the government, Barkany agreed to a $62 million money judgment payable to the United States.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office.

According to court filings and facts presented during the plea proceeding, between December 2009 and March 2013, Barkany induced seven investors to give him approximately $62 million by promising to use their money in “risk-free” deals to purchase and then immediately re-sell at a profit commercial real estate properties located in New York City and New Jersey.

However, no such deals existed and the investors lost their entire investments.

In one instance, Barkany approached an investor he knew from the community and who placed his trust in the defendant. Barkany preyed on that trust to convince the investor to invest $46.5 million that was supposed to be used as a down payment to purchase an office building in Manhattan, a hotel in Atlantic City, and properties in the Bronx and Queens. Barkany explained that he would find a buyer for those properties who would pay a higher price before the actual closing, resulting in a profit for Barkany and the investor. Barkany assured the investor that the real estate deals were risk free because if Barkany was unable to find a buyer before the closing, the owner of the properties would refund their money. In fact, those real estate deals did not exist and the investment was not refunded.

On March 28, 2013, FBI special agents arrested Barkany. Shortly thereafter, two additional victims contacted the FBI and advised that they too had been defrauded by Barkany. As he had done with the other victims, Barkany induced those investors to give him approximately $7.5 million by promising to use their money in a “risk-free” deal to purchase and then immediately re-sell at a profit an office building located on 53rd Street in Manhattan. That deal also did not exist. In furtherance of that scheme, Barkany created fictitious documents, including a purchase agreement purportedly signed by the seller of the office building and an escrow agreement allegedly signed by a third-party escrow agent. Neither the seller of the property nor the third-party escrow agent signed or entered into those agreements. Barkany created those documents to deceive the victims.

As part of his Ponzi scheme, Barkany diverted some of the funds he received to pay investors whom he had defrauded earlier. The defendant also lost some of the funds in gambling and otherwise used the money for his own benefit.

“The defendant bilked investors out of funds that he led them to believe were to be invested in safe real estate deals. Instead, he was paying investors to keep his Ponzi scheme afloat and to gamble,” stated United States Attorney Lynch. “Barkany rolled the dice that his brazen greed and dishonesty would go unnoticed. That gamble did not pay off. Today’s conviction sends a clear message that this office is committed to vigorously investigating and prosecuting individuals who are responsible for committing financial crimes.”

FBI Assistant Director in Charge Venizelos stated, “Barkany has admitted to a multi-million-dollar real estate swindle where he convinced wealthy investors they were buying no-risk properties. Unbeknownst to his victims, what they were really buying were not brick-and-mortar buildings, but the smoke-and-mirror fantasy of Barkany’s fraudulent sales pitch.”

The government’s case is being prosecuted by Assistant United States Attorneys Christopher Caffarone and Diane Beckmann.

 

Defendant:

Gershon Barkany
Age: 29
Residence: Woodmere, New York

source: FBI



David Saks



Time&Temp Memphis

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Comment balloon 0 commentsDavid Saks • June 27 2013 08:08AM

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