Founder Of New York Litigation Finance Firm Pleads Guilty To Multimillion-Dollar Securities Fraud Scheme
Audrey Strauss, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Division of the U.S. Postal Inspection Service (“USPIS”), announced that JAESON BIRNBAUM, an attorney and the founder of Cash4Cases, Inc., a bankrupt litigation funding firm that was headquartered in New York, New York, pled guilty to securities fraud today before U.S. District Judge Paul A. Crotty. BIRNBAUM admitted as part of his plea that he used investor funds for his own purposes and double-pledged the same case recoveries as collateral to multiple parties.
U.S. Attorney Audrey Strauss said: “Jaeson Birnbaum conned investors through a series of lies about his litigation finance business, Cash4Cases. He used Cash4Cases to steal cash for himself and then tried to cover up his scheme by directing a subordinate to falsify books and records. Now Birnbaum awaits sentencing for his fraudulent conduct.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Everything Mr. Birnbaum told his investors was a lie framed around the idea of a good investment. Postal Inspectors see these cases all the time and remind investors to thoroughly check the fine print on any investment offer, and if the return seems too lucrative or unreal, pass it by to make sure your money goes to fund your lifestyle and not the criminal’s.”
According to the Information and statements made in Court:
From at least in or about 2017 through in or about 2019, BIRNBUAM obtained more than $3 million in investments for Cash4Cases based on fraudulent misrepresentations. These investments were in the form of promissory notes, titled “Investor Security Agreements” (“ISAs”), which purported to provide the relevant investors with a security interest in the recoveries associated with certain specified lawsuits that were ostensibly purchased by Cash4Cases. In fact, in some instances, the lawsuits that were either never funded by Cash4Cases or BIRNBAUM had previously pledged their recoveries to other parties.
To help carry out his fraud, BIRNBAUM directed an employee to falsify his company’s books and records to make it appear that the recoveries from lawsuits that had already been paid out were still available to be pledged as collateral to new investors.
BIRNBAUM also misappropriated a substantial portion of investors’ funds for his personal use and to make promised payments to earlier investors. As one example, BIRNBAUM obtained a $1 million investment for Cash4Cases in September 2019. Prior to this investment, BIRNBAUM told the investor that Cash4Cases would use the money exclusively for advances to litigants. However, contrary to this representation, on the same date that Cash4Cases received the $1 million investment, BIRNBAUM used the money to send a $530,000 wire toward the purchase of a house in New Jersey.
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BIRNBAUM, 47, of Boca Raton, Florida, faces a maximum sentence of 20 years in prison.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. BIRNBAUM is scheduled to be sentenced before Judge Crotty on January 6, 2022, at 12:00 p.m.
Ms. Strauss praised the investigative work of the USPIS. Ms. Strauss also thanked the Securities & Exchange Commission, which brought a civil action today against BIRNBAUM in Manhattan federal court.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Daniel Loss is in charge of the prosecution.