Bergen County, New Jersey, Man Sentenced To 46 Months In Prison For $1.5 Million Ponzi Scheme
NEWARK, N.J. – A Lyndhurst, New Jersey, man was sentenced today to 46 months in prison for fraudulently obtaining over $1.5 million from approximately 100 victims prior to high-profile initial public offerings (IPOs), Acting U.S. Attorney William E. Fitzpatrick announced.
Omar Hafez, 25, previously pleaded guilty before U.S. District Judge William H. Walls to an information charging him one count of wire fraud. Judge Walls imposed the sentence today in Newark federal court.
According to documents filed in this case and statements made in court:
From July 2014 through December 2015, Hafez operated an investment fraud scheme in which he and others created a number of entities, including Lotus Global. Several of these entities had websites and social media pages listing Hafez as the CEO and advertising themselves as successful wealth management companies.
In order to deceive victim investors, Hafez represented that he had access to shares of various companies prior to their initial public offerings and could use that access to provide significant profits to investors. However, bank records for accounts controlled by Hafez and certain Lotus Global entities revealed that none of the money provided by victim investors was used to purchase shares or invest in any of the pre-IPO companies.
Instead, Hafez used the funds for his own benefit, including several large purchases at luxury car dealerships, including an approximately $87,000 purchase at Prestige Motors, an approximately $24,160 purchase at Signature Car Collections, and an approximately $8,690 purchase at Dream Cars National LLC. In addition, Hafez purchased numerous luxury goods, including an approximately $17,250 purchase at Tourneau Inc., an approximately $5,613 purchase at Louis Vuitton, and an approximately $3,000 purchase at Tiffany & Co., as well as airplane tickets and hotel stays for a single trip to Chicago totaling approximately $10,000.
Hafez employed numerous strategies to maintain the victims’ confidence and induce further investments. For example, bank records showed that Hafez occasionally used money from earlier victim investors in order to pay future victims “lulling” payments. In classic Ponzi scheme fashion, Hafez lied to investors and told them that these payments were returns on their investments.
As funds began to run out and investors demanded their money with increasing frequency, Hafez provided certain victim investors with checks for thousands of dollars, claiming that they represented investment returns or a refund of initial investments. When victim investors attempted to deposit or cash these checks, the checks were rejected due to insufficient funds because Hafez and others had already spent the victims’ money.
In addition to the prison term, Judge Walls sentenced Hafez to three years of supervised release. Hafez must also pay restitution of $1.5 million.
Acting U.S. Attorney Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher, and postal inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge James V. Buthorn, with the investigation leading to today’s sentence.
The government is represented by Assistant U.S. Attorney Courtney A. Howard of the U.S. Attorney’s Office Criminal Division in Newark.
Defense counsel: Joseph D. Rotella Esq., Newark