Convicted Ponzi Schemer Eliyahu Weinstein Arraigned On New Charges; Two Conspirators Admit Defrauding Investors With Him
TRENTON, N.J. - Convicted Ponzi schemer Eliyahu Weinstein, 38, of Lakewood, N.J., was arraigned today in federal court in Trenton on new charges relating to an alleged scheme to defraud victims regarding purported investments in Facebook stock and Florida real estate, U.S. Attorney Paul J. Fishman announced.
Two co-defendants, Alex Schleider, 48, of Lakewood, and Aaron Glucksman, 41, of Brooklyn, N.Y., also appeared in court today and admitted participating in the fraudulent scheme with Weinstein.
Weinstein was arraigned before U.S. District Judge Joel A. Pisano, in Trenton federal court on an indictment returned April 17, 2014, by a federal grand jury sitting in Newark and entered a plea of not guilty. That indictment charges Weinstein with defrauding victims through three investment schemes: (1) pre-IPO shares of Facebook stock; (2) the purchase of an apartment complex in Florida; and (3) the purchase of the mortgage notes on seven Florida condominiums. Weinstein, Schleider, and a third defendant, Aaron Muschel, 64, were originally charged by criminal complaint with the Facebook fraud in May 2013.
Schleider pleaded guilty today before Judge Pisano to an information charging him with one count of wire fraud. He admitted to participating with Weinstein in a scheme in which victims referred to as “Victim G.C.” and “Victim J.C.” lost more than $2.8 million that the victims had invested to purchase the Florida apartment complex. Schleider also agreed to restitution and forfeiture of $612,300. The charge to which Schleider pleaded guilty carries a maximum penalty of 20 years in prison and a $250,000 fine. His sentencing is scheduled for Sept. 18, 2014.
Glucksman pleaded guilty today before Judge Pisano to an information charging him with one count of conspiracy to commit wire fraud and one count of transacting in criminal proceeds. He admitted during his plea hearing that, together with Weinstein and others, he defrauded victim-investors referred to as “the Florida condominium victims” out of $1.5 million. Glucksman admitted that, in concert with Weinstein, he duped these victims by using fraudulent e-mails to pretend to be an attorney named “Arthur Golden,” who purportedly was handling the closing of the transaction, and to pose as the supposed property manager of the condominiums. Glucksman also admitted to helping Weinstein conduct financial transactions with the proceeds of the fraud.
The charges to which Glucksman pleaded guilty carry maximum penalties of 20 years in prison and a $250,000 fine (conspiracy) and 10 years in prison and a $250,000 fine (transacting in criminal proceeds).
Judge Pisano sentenced Glucksman today to 52 months in prison, three years of supervised release, and ordered him to forfeit $1.2 million. Judge Pisano ordered Glucksman’s sentence to run partially concurrently with a 36-month sentence recently imposed on Glucksman by U.S. District Judge Raymond J. Dearie of the Eastern District of New York in an unrelated case. Glucksman remains on release pending his designation to a federal institution by the U.S. Department of Justice, Bureau of Prisons.
According to the charging documents in these cases and statements made in court:
In February of 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 of 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 Jan. 3, 2013, before U.S. District Judge Joel A. Pisano in Trenton, N.J., 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 Feb. 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, who was charged in the criminal complaint filed against Weinstein and Schleider in May 2013, remain pending.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for their investigation of this case. He also credited special agents of IRS–Criminal Investigation, under the direction of Acting Special Agent in Charge Jonathan D. Larsen, for their important contributions.
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 defendants Weinstein and Muschel are merely accusations, and they are considered innocent unless and until proven guilty.
Today’s proceedings are 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’s 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.
Weinstein: Eric Creizman Esq., New York
Glucksman: Alexei Schacht Esq., New York
Schleider: Marc Agnifilo Esq., New York