Long Island Man Sentenced to 56 Months’ Imprisonment for Defrauding Investors of $62 Million in a Real Estate Ponzi Scheme
Earlier today, at the federal courthouse in Central Islip, Gershon Barkany was sentenced by United States District Judge Joseph F. Bianco to 56 months’ imprisonment to be followed by three years’ supervised release for orchestrating a Ponzi scheme over four years that caused investors to lose approximately $62 million. Barkany was also ordered to pay restitution in an amount to be determined later and forfeiture of $62 million. Barkany pled guilty to wire fraud on June 26, 2013.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the sentence.
“Today’s sentence is the very real consequence for all the lies, forgeries and fabrications that Barkany used to steal from investors who thought they were putting their money into safe real estate deals,” stated United States Attorney Donoghue. “This Office will vigorously prosecute those who betray their clients’ trust for their own financial self-interest.” Mr. Donoghue expressed his appreciation to the Federal Bureau of Investigation, New York Field Office for its outstanding investigative work during the investigation.
Between December 2009 and March 2013, Barkany induced more than 10 victims to invest approximately $62 million by promising to use their money in “risk-free” deals to purchase, and then immediately re-sell at a profit, commercial real estate properties located in New York City and New Jersey. No such deals existed, and the investors lost their entire investments. Relying on Barkany’s representations, one victim invested $46.5 million as a down payment on an office building in Manhattan, a hotel in Atlantic City and properties in the Bronx and Queens. In fact, those real estate deals did not exist, and the investments were lost.
Shortly after Barkany’s arrest on March 28, 2013, two additional victims contacted the FBI and reported that they had been defrauded by Barkany. Barkany induced those investors to give him approximately $7.5 million by promising to use their money in a “risk-free” deal to purchase, and then immediately re-sell at a profit, an office building in Manhattan. In furtherance of the scheme, Barkany created fraudulent documents, including a purchase agreement purportedly signed by the seller of the office building and an escrow agreement allegedly signed by a third-party escrow agent. Once again, the promised deal did not exist, and the investment was lost.
Barkany diverted some of the funds he received to pay victims whom he had earlier defrauded, and used approximately $7.8 million of investors’ monies for personal expenses and gambling.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Christopher Caffarone and Diane Leonardo are in charge of the prosecution.
Woodmere, New York
E.D.N.Y. Docket No. 13-CR-362 (JFB)