Federal authorities indicted a New Jersey man on charges that he operated a $200 million Ponzi scheme through bogus real estate investments. In a 45-count indictment unsealed last week, authorities charged Eliyahu Weinstein, 36, with one count of conspiracy to commit wire fraud, 29 counts of wire fraud, two counts of wire fraud while on pretrial release, one count of bank fraud and 12 counts of money laundering. Weinstein was originally arrested in August 2010 and had been free on $10 million bail. According to the United States Department of Justice, Weinstein continued to defraud investors even while out on bail.
According to the indictment, Weinstein operated a multitude of corporate entities (the "Weinstein Entities") along with co-defendant Vladimir Siforov. Starting in at least June 2004 and continuing through August 2011, Weinstein solicited funds from potential investors by representing that he was investing in specific real estate transactions. Investors were told that Weinstein had unique access to certain real estate opportunities due to his connections at a bank in the Orthodox Jewish community, which allowed him to purchase certain properties at below-market prices. Investor funds would be used to "flip" these properties, and would be safely held in escrow during the pendency of the transaction. In order to convince investors of the legitimacy of the scheme, Weinstein and others created numerous fictitious documents including forged checks, operating agreements, leases, and mortgages.
In a transaction described in the indictment, a victim denoted as S.W. was informed by Weinstein that he could purchase an interest in a particular parcel of property for $630,000. S.W. was also told that Weinstein had a buyer and contract in place for an immediate "flip" of the property for $1.5 million which could only be accomplished by providing the money immediately. However, as alleged in the indictment, Weinstein never had a contract lined up to purchase the property, nor did he arrange for S.W. to obtain an ownership interest. Another investor, H.D.W., committed $70 million to buy property through Weinstein, including $5.4 million to purchase property in Trotwood, Georgia. However, there is no town of Trotwood in the state of Georgia. Instead, investor funds were misappropriated by Weinstein and the Weinstein Entities, and were used for a variety of purposes including the payment of prior victims and to fund his own lavish spending.
In an increasingly common theme, Weinstein used his standing and knowledge in the Orthodox Jewish community to both meet new victims and elevate his reputation with existing victims. Among the tactics used by Weinstein include using a portion of investor funds to donate to charitable and religious causes, and asking rabbies and community members to introduce him and serve as references to new victims. After the scheme imploded in mid-2010 and Weinstein's reputation in the community was tarnished, Weinstein and others went outside of the Orthodox Jewish community to solicit victims who were unaware of the scheme's fraudulent nature.
Weinstein faces hundreds of years in federal prison if convicted of all charges, along with millions of dollars in criminal monetary penalties. He may also be ordered to pay restitution to victims. According to his attorney, he intends to plead not guilty.
A Copy of the Indictment is here.