Authorities have arrested a New York man and charged him with operating a real estate Ponzi scheme that may have bilked investors out of $50 million. Gershon Barkany, 29, was arrested by FBI agents earlier today and charged with wire fraud, which carries a maximum potential sentence of twenty years in prison. Barkany was scheduled to make an initial appearance earlier this afternoon.
According to authorities, Barkany solicited at least five investors to entrust large sums of money with him, which he represented would be used to make real estate purchases in Manhattan, Queens, the Bronx, and Atlantic City, New Jersey. Barkany assured potential investors that the real estate purchases would be "risk-free," since under the arrangement he had with the sellers of these properties, the purchases would only be made once Barkany had secured a buyer at a slightly-higher purchase price. Based on these representations, Barkany was able to raise more than $50 million from at least five investors.
However, authorities allege that there were no such 'risk-free' real estate deals. Rather, Barkany is accused of perpetrating the classic Ponzi scheme, using new investor funds to pay off older investors. Additionally, Barkany misappropriated investor funds to support a lavish lifestyle that included gambling trips. While further details have not yet emerged, it remains to be seen whether any investor funds remain.
While criminal charges were just filed today, civil litigation appears to have been ongoing for nearly two years by several individuals/entities that claim to have invested substantial sums with Barkany, who are identified as Mr. San LLC, Jordan Most, Gerad Pinsky, Botnick Trust, Motti Hellmans, and Cortland Realty Investments. Those plaintiffs originally filed suit against a law firm, Zucker & Kwestel LLP, alleging that the firm aided and abetted Barkany's fraud by accepting the investors' funds in a firm escrow account. The law firm then added Barkany as a third-party defendant, and the lawsuit remains ongoing.