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Three arrested, charged in new jersey for multimillion-Dollar Fraud offering phony “pre-ipo” facebook shares



FOR IMMEDIATE RELEASE
May 14, 2013


 

One Conspirator Allegedly Committed Crimes While Federally Indicted in Unrelated Scam

NEWARK, N.J. – Federal law enforcement officers with the FBI and IRS-Criminal Investigation arrested three men at their homes this morning on charges they stole approximately $6.7 million from an investor, in part by claiming special access to shares in the social media company Facebook Inc., prior to the company’s initial public offering, New Jersey U.S. Attorney Paul J. Fishman announced.

One of the men, Eliyahu Weinstein, 37, of Lakewood, N.J., faces additional charges for allegedly committing the fraud while under federal indictment in New Jersey for a separate real estate investment scheme.

Weinstein, Alex Schleider, 47, of Lakewood, and Aaron Muschel, 63, of Brooklyn, N.Y., are expected to appear on the charges this afternoon before U.S. Magistrate Judge Madeline Cox Arleo in Newark federal court.

“According to the charges, the defendants took advantage of the buzz around the Facebook IPO to fleece unsuspecting investors,” said U.S. Attorney Fishman. “Shamelessly, Eliyahu Weinstein allegedly committed these crimes while under federal indictment for another investment scheme, even using stolen money to pay his legal fees. Today’s arrest should put an end to his brazen conduct.”   

“Today’s charged conduct is another example of the cautionary tale that if an opportunity seems to be too good to be true, it probably isn’t,” said FBI Special Agent in Charge Aaron T. Ford. “More than ever, the investing public must exercise the appropriate amount of due diligence before investing with new or unknown entities. This is highlighted by the fact that one of today’s charged individuals is currently awaiting sentencing on a previous fraud conviction.”

According to the complaint in this case and other documents filed in court:

In February of 2012, Weinstein and his fellow conspirators offered investors the opportunity to purchase large blocks of Facebook shares prior to the company’s 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, Schleider and Muschel did not actually have access to the shares.

Based on misrepresentations by Weinstein, Schleider, Muschel and another conspirator, an investor victim – described in the complaint as “G.C.” – wired millions of dollars between February and March of 2012 to an account Weinstein and a conspirator controlled. Weinstein and Schleider convinced G.C. to send the money by, among other things, providing the victim with false documents showing companies owned by various conspirators held assets which would secure G.C.’s investment.
 
The conspirators did not use any of G.C.’s 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 pending criminal case and in pending civil matters. Weinstein, Schleider and Muschel also used G.C.’s money to make investments in a number of different businesses unrelated to Facebook, and to make loans for their own benefit.

Throughout the scheme, Weinstein was 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 in January 2013, before U.S. District Judge Joel A. Pisano in Trenton, N.J., to two counts of that indictment, admitting he ran a real estate investment fraud scheme that caused $200 million in losses and then laundered the proceeds of the scheme.

Weinstein, Schleider and Muschel are variously charged in the 13-count complaint unsealed today. The charges against each and the maximum potential penalty per count are as follows:

Count(s)

Charge

Charged Defendants

Maximum Potential Penalty/Count

1

wire fraud conspiracy

Weinstein, Schleider, Muschel

20 years in prison; $250,000 fine, or twice the gain or loss from the offense

2 – 6

wire fraud while on pretrial release

Weinstein

30 years in prison (10 years consecutive to 20 years for wire fraud);
$250,000 fine, or twice the gain or loss from the offense

7 – 13

transacting in criminal proceeds

Weinstein, Muschel

10 years in prison; $250,000 fine, or twice the gain or loss from the offense

Additionally, the government is seeking the seizure and forfeiture of all funds fraudulently obtained by the defendants, including three pieces of real property allegedly maintained with the proceeds of the scheme.

U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Ford in Newark, for their work leading the investigation of this case. He also credited special agents of IRS–Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, for their important contributions.

The government is represented by Counsel to the U.S. Attorney Rachael A. Honig; Assistant U.S. Attorneys Gurbir S. Grewal and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit; and Evan S. Weitz of the Office’s 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.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ 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 nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.                     

13-196                                                         

Defense counsel:

Eliyahu Weinstein: Henry E. Klingeman Esq., Newark; Mark D. Harris Esq., New York

Alex Schleider: Andrew Citron Esq., Forest Hills, N.Y.

Aaron Muschel: James T. Moriarty Esq., New York

Weinstein, Eliyahu et al. Complaint

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