Leader Of Multi-Million Dollar Real Estate Fraud Scheme Pleads Guilty To Fraud And Money Laundering
Defrauded Investors in Multiple States and Abroad; Defendant Faces
Up to 25 Years in Prison
TRENTON, N.J. – An Ocean County, N.J., man today admitted that he ran a real estate investment fraud scheme that caused $200 million in losses and then laundered the proceeds of the scheme, U.S. Attorney Paul J. Fishman announced.
Eliyahu Weinstein, a/k/a “Eli Weinstein,” a/k/a “Edward Weinstein,” a/k/a “Eddie Weinstein,” 37, of Lakewood, N.J., pleaded guilty before U.S. District Judge Joel A. Pisano in Trenton federal court to two counts of the Indictment pending against him: one count of conspiracy to commit wire fraud, and one count of money laundering. Weinstein’s trial on these charges was scheduled to start Jan. 7, 2013. Weinstein’s co-defendant, Vladimir Siforov, is charged in the Indictment with three counts of wire fraud and remains a fugitive.
Under the terms of the plea agreement, which Judge Pisano accepted today, Weinstein may be sentenced to up to 25 years in prison and up to three years of supervised release. He must also provide a full accounting of all monies paid to him during the period covered by the Indictment. Weinstein has also agreed to forfeit $2 million in seized property and pay restitution to the victims of his offenses. Sentencing is scheduled for April 2, 2013.
“Weinstein shamelessly exploited investors’ trust, using doctored documents for properties he didn’t own – including in a town that doesn’t exist – and continued to commit crimes while out on bail,” U.S. Attorney Fishman said. “With false promises of sound investments and charitable donations, he stole $200 million, spending freely on fancy cars, jewelry and gambling trips. And in using victims’ money to collect Judaica, Weinstein robbed from his own community’s present to stockpile artifacts of its past.”
FBI Acting Special Agent in Charge David Velazquez said: “Mr. Weinstein came to the wrong conclusion when he assumed he would never be held accountable for his criminal activity. His greed got the best of him and he will pay a heavy price before the law for the frauds he committed.”
According to documents filed in this case and statements made in court:
From June 2004 through August 2011, Weinstein orchestrated – with the help of Siforov and others – a real estate investment fraud scheme, headquartered in Lakewood, that has resulted in multi-million dollar losses to victim investors.
To induce victims to invest, Weinstein and others made various types of materially false and misleading statements and omissions. Weinstein and others told victims that Weinstein’s inside access to certain real estate opportunities allowed him to buy a particular piece of property at a below-market price. Weinstein and others also told victims that their money would be used to purchase a specific property, and the property would be quickly resold – or “flipped” – to a third-party purchaser that Weinstein had lined up. Victims were also told that the victims’ money would be held in escrow until the closing of a purported real estate transaction.
Weinstein bolstered his lies by creating, and causing to be created, various types of fraudulent documents, including “show checks,” which Weinstein led victims to believe represented Weinstein’s investments in specific transactions, but which in fact were never deposited; forged checks, which had actually been negotiated for small amounts, but which Weinstein altered so as to appear worth millions of dollars; and various kinds of phony legal documents, including mortgages, and deeds.
Weinstein and others initially targeted victims from the Orthodox Jewish community to which Weinstein belonged, exploiting his standing in, and knowledge of, the customs and practices of this community to further the scheme. This type of illegal activity is commonly referred to as “affinity fraud,” and refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The perpetrators of affinity fraud scams frequently are, or pretend to be, members of the group, and they exploit the trust and friendship that exist in groups of people who have something in common.
Weinstein abused the Orthodox community’s practice of engaging in transactions based on trust, and without paperwork, to obtain money from his victims without substantial written records. He would then falsely represent that specific real estate transactions existed, that the victims’ monies were used to fund those transactions, or that the victims’ profits from those transactions were being “rolled” into new investments. Weinstein also used a portion of the fraud’s proceeds to fund “charitable and religious contributions,” which he used to elevate his reputation within the Orthodox Jewish community.
By 2010, Weinstein had tarnished his reputation in the Orthodox Jewish community due to the massive losses caused by his fraud scheme and found it difficult to obtain more money to further the scheme from within the Orthodox Jewish community. In April 2010, Weinstein and others began soliciting victims from outside of the Orthodox Jewish community, whom they defrauded out of additional millions of dollars.
Weinstein also used millions of dollars fraudulently obtained from his victims to fund his own lavish spending, including millions of dollars worth of antique Judaica and other artwork; a multi-million dollar collection of jewelry and watches; gambling in Las Vegas and elsewhere; and Weinstein’s personal expenses, including millions of dollars in credit card bills, millions of dollars in legal bills, and luxury car-lease payments.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, for the investigation leading to today’s guilty plea. He also credited agents of the IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, for their important contributions to the investigation.
The government is represented by Assistant U.S. Attorneys Zach Intrater and Gurbir S. Grewal of the U.S. Attorney’s Office Economic Crimes Unit and by Rachael A. Honig, Deputy Chief of the Office’s Criminal Division.
The charges and allegations against Siforov are merely accusations, and he is considered innocent unless and until proven guilty.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crime.
Defense counsel: Robert J. Cleary Esq., New York