Convicted Ponzi Schemer Indicted on New Fraud and Other Charges
|U.S. Attorney’s Office April 17, 2014|
NEWARK—An Ocean County, New Jersey man who was sentenced less than two months ago to 22 years in prison for running a Ponzi-style real estate scheme was indicted by a federal grand jury today on new charges of conspiracy, wire fraud, and transacting criminal proceeds while on pretrial release, U.S. Attorney Paul J. Fishman announced.
Eliyahu Weinstein, 38, of Lakewood, New Jersey, was indicted on one count of conspiracy to commit wire fraud, five counts of wire fraud committed while on pretrial release, and seven counts of transacting in criminal proceeds. The government is seeking the seizure and forfeiture of all funds fraudulently obtained by Weinstein as a result of the scheme.
According the indictment and documents filed in this and other cases:
Weinstein allegedly defrauded victims through three investment schemes:
(1) pre-IPO shares of Facebook stock;
(2) the purchase of an apartment complex in Florida;
(3) the purchase of the mortgage notes on seven Florida condominiums.
Weinstein and co-defendants Alex Schleider and Aaron Muschel were originally charged by criminal complaint with the Facebook fraud in May 2013.
In February 2012, Weinstein and his fellow conspirators allegedly offered a pair of investors (referred to in the indictment as the “Facebook victims”) the opportunity to purchase large blocks of Facebook shares prior to the company’s initial public offering, or IPO, in May 2012.
The offer was particularly attractive because large blocks of the shares were extremely difficult to get, and they were expected to increase in value at the time of the IPO. Weinstein and his conspirators did not actually have access to the shares.
Based on alleged misrepresentations by Weinstein and his conspirators, the Facebook victims wired millions of dollars between February and March 2012 to an account Weinstein and a conspirator controlled.
Weinstein and another conspirator convinced the Facebook victims to send the money by, among other things, providing them with false documents showing companies owned by various conspirators held assets which would secure the Facebook victims’ investment.
The conspirators did not use any of the Facebook victims’ money to purchase Facebook shares, instead misappropriating it for their own use and benefit by moving it through various accounts.
Weinstein used some of the money to pay lawyers and experts representing him in his earlier—and at that time, still pending—criminal case and in related civil matters.
Weinstein and his conspirators also used the Facebook victims’ money to make investments in a number of different businesses unrelated to Facebook and to make loans for their own benefit.
Around the same time, Weinstein and his conspirators also persuaded the Facebook victims to invest in the purported purchase of an apartment complex, Belle Glade Gardens, in Florida.
They falsely told the Facebook victims that Weinstein had the opportunity to purchase Belle Glade Gardens at a discounted price and immediately flip it at a substantial profit.
Weinstein and his conspirators further told the Facebook victims that Weinstein had already placed $2.5 million in the trust account of a Miami law firm for the transaction; that if the Facebook victims contributed another $2.5 million toward the transaction, those funds would remain in escrow at the Miami law firm until the deal closed; and that the Facebook victims would be repaid within 60 days.
In reliance on these representations, the Facebook victims wired approximately $2.83 million to the Miami law firm in order to complete the Belle Glades Gardens transaction. Weinstein and his conspirators, however, did not use the money to purchase Belle Glades Gardens. Instead, they allegedly redirected the money from the law firm to accounts that they controlled, returned $1.8 million to the Facebook victims as a purported return on their Facebook investment, and used the remaining money for their own purposes.
In July 2012, Weinstein allegedly approached another group of investor victims (referred to in the indictment as the “Florida condominium victims”) and told them that he had the opportunity to purchase the notes on seven condominiums in Florida at a discounted price of $3 million. Weinstein and his conspirators falsely represented that they had already paid $1.5 million toward the deal and that they needed only $1.5 million to complete the transaction. They claimed that the properties had an annual rental income of approximately $780,000 and provided to the Florida condominium victims fraudulent documentation purporting to verify this fact. The Florida condominium victims transferred approximately $1.5 million to Weinstein and his conspirators between August 2012 and December 2012. Weinstein did not use this money to purchase the notes on the Florida condominiums—many of which he himself had previously owned and lost to foreclosure. Instead, Weinstein and his conspirators converted the money to their own use and benefit.
Throughout the scheme, Weinstein was already under indictment and on pretrial release and was prohibited from engaging in any monetary transaction for more than $1,000 without the approval of court-appointed special counsel. Weinstein pleaded guilty on January 3, 2013, before U.S. District Judge Joel A. Pisano in Trenton, New Jersey, to two counts of that indictment, admitting he ran a Ponzi-style real estate investment fraud scheme that caused $200 million in losses and then laundered the proceeds of the scheme. Judge Pisano sentenced Weinstein on February 25, 2014, to 264 months in prison and ordered him to pay more than $200 million in restitution and forfeiture to the victims of his scheme.
The conspiracy count with which Weinstein is charged carries a maximum potential penalty of 20 years in prison; the wire fraud counts carry a maximum potential penalty of 30 years in prison (20 years on the wire fraud plus 10 years for commission while on pretrial release); and the transacting in criminal proceeds counts carry a maximum potential penalty of 10 years in prison. All the counts are also punishable by a $250,000 fine.
Charges against Muschel and Schleider, who were charged in the criminal complaint filed against Weinstein in May 2013, remain pending.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for the investigation leading to today’s indictment. He also credited special agents of IRS–Criminal Investigation, under the direction of Acting Special Agent in Charge Jonathan D. Larsen, for role in the case.
The government is represented by Counsel to the U.S. Attorney Rachael A. Honig; Gurbir S. Grewal, Chief of the U.S. Attorney’s Office Economic Crimes Unit; and Assistant U.S. Attorneys Zach Intrater of the Economic Crimes Unit and Evan S. Weitz of the Asset Forfeiture and Money Laundering Unit.
The charges and allegations against the defendants are merely accusations, and they are considered innocent unless and until proven guilty.
Today’s indictment is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorney’s offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.