You are here

Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Thursday, December 12, 2019

Executive Of Purported Caffeinated Snack Company Sentenced To 4 Years In Prison For Defrauding Investors Of More Than $2.3 Million

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that BARRY SCHWARTZ was sentenced to four years in prison today by U.S. District Judge Jed S. Rakoff for participating in a conspiracy to defraud more than 50 investors in the Starship Snacks Corporation of more than $2.3 million, by making false and fraudulent representations about, among other things, the status of the company’s products, guarantees that purportedly backed the investments, and the interest of large multi-national corporations in acquiring the companies.

U.S. Attorney Geoffrey Berman said:  “Barry Schwartz participated in a conspiracy to defraud investors, telling them their investments were safe and guaranteed when, in fact, he and his co-conspirators had misappropriated investor funds to support their lavish lifestyles.  Schwartz lied about the readiness of his company’s products and about the claim that two large multi-national companies were vying to buy the company.  Schwartz’s house of lies eventually collapsed, bringing financial devastation to many of its victims.  Today Schwartz was held accountable for the criminal conduct that defrauded more than 50 investors of more than $2.3 million.”

According to the allegations contained in the Indictment filed against SCHWARTZ and statements made in related court filings and proceedings, including the trial of co-defendant Joel Margulies:

The Starship Snack Corporation Fraud Scheme

From approximately August 2015 through August 2017, SCHWARTZ, Margulies, and a co-conspirator, Lisa Bershan, raised more than $2.3 million from investors in a company originally called the Awake Company and later renamed Starship Snacks Corporation (“Starship”), which purported to be in the business of developing and manufacturing caffeinated snack products, based on the following misrepresentations, among others: (a) that investments in Starship were guaranteed against losses by Bershan; (b) that Starship was going to be acquired by Monster Beverage (“Monster”) in a one-for-one stock exchange; (c) that Starship was engaged in actual product development and had procured samples of candies infused with caffeine; (d) that SCHWARTZ and others at Starship had entered into non-disclosure agreements with Monster that prohibited them from discussing Starship’s purported acquisition by Monster and its purported product development.  SCHWARTZ held himself out as Starship’s corporate secretary.   

After receiving funds from Starship investors, SCHWARTZ and his co-conspirators used those funds to maintain their own extravagant lifestyles, spending hundreds of thousands of dollars on things like luxury clothing, plastic surgery, interior decorating, the rental of a high-end apartment in New York City, and the down payment for a multimillion-dollar house in Florida. 

In addition to the prison term, SCHWARTZ, 73, was sentenced to two years of supervised release.  SCHWARTZ was also ordered to forfeit $2,163,214.  A restitution order will be entered within 90 days.

Lisa Bershan was convicted upon a guilty plea, and sentenced by Judge Rakoff on November 22, 2019, principally to a term of seven years in prison.  Joel Margulies was convicted following a seven-day jury trial before Judge Rakoff and is scheduled to be sentenced on December 16, 2019. 

Mr. Berman praised the work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Christine Magdo and Negar Tekeei are in charge of the prosecution.

Topic(s): 
Securities, Commodities, & Investment Fraud
Contact: 
Jim Margolin, Nicholas Biase (212) 637-2600
Press Release Number: 
19-427
Updated December 12, 2019