Philadelphia Lawyer Charged With $8.5 Million Ponzi Scheme

Authorities filed new charges against a New Jersey lawyer accused of operating a Ponzi scheme that took in more than $8 million from its victims.  In an amended complaint, the New Jersey Office of the Attorney General alleged that Michael W. Kwasnik, 42, along with several other individuals, defrauded dozens of investors out of millions of dollars through the sale of allegedly risk-free three-year notes.  In addition to civil penalties, the suit is also seeking the imposition of restitution for the benefit of defrauded investors.  

According to the complaint, Kwasnik, the former managing partner of Kwasnik, Rodio, Kanowitz & Buckley P.C. ("KRKB"), also served as counsel to Liberty State Financial Holdings Corp. (LSFHC") and its subsidiary Liberty State Benefits of Pennsylvania, Inc. ("LSBPA").  Through LSFHC and LSBPA, Kwasnik solicited potential investors to purchase unregistered three year notes (the "Notes") that paid an annual return of twelve percent.  Some investors were told that the funds raised from the Notes would be used to purchase life insurance policies and beneficial interests in Irrevocable Life Insurance Trusts in the life settlement market.  However, instead of making legitimate investments, the suit alleges that Kwasnik operated a typical Ponzi scheme that used new investor funds to make interest and principal payments to existing investors.  In addition, Kwasnik is said to have diverted over $5 million to himself and other family members and defendants.  The New Jersey Bureau of Securities (the "Bureau") also alleged that neither the defendant companies nor the Notes were registered with the Bureau.

In a separate proceeding, an indictment unsealed today made separate allegations that Kwasnik diverted more than $1 million from a former client.  In the indictment, Kwasnik was charged with theft by failure to make required disposition of property received, misapplication of entrusted property, theft by unlawful taking, and financial facilitation of criminal activity.  A warrant has been issued for Kwasnik's arrest.

A copy of the amended civil complaint is here.

A copy of the indictment is here.