Thursday, 29 September 2016
Last updated 6 hours ago
Nov 8 2011 | 9:22am ET
A prominent Philadelphia lawyer was arrested and charged with running a $1.1 million fraud that included an undisclosed loan from a hedge fund.
Michael Kwasnik faces four counts, including theft. He and four others, including his father, were also sued by the New Jersey State Attorney General.
The heart of the New Jersey charges is that Kwasnik ripped off an elderly Cherry Hill woman to the tune of $1.1 million. But the lawsuit alleges that $5 million of the $13.5 million raised by Kwasnik's Liberty State Benefits was stolen, and that its life settlement policies were pledged as collateral for a $2.3 million loan from a Canadian hedge fund, Westdale Construction Co.
Liberty State never told investors about the loan, or the fact that it defaulted on it.
"Investor funds were partly used in a Ponzi scheme to pay existing investors and for other improper purposes, including the fraudulent and unjust enrichment of individual defendants and members of their families," the lawsuit alleges.
"Just as we allege in our lawsuit that Kwasnik preyed on elderly investors, we charge in the indictment that he took advantage of the frailty of this client and the trust she placed in him in order to deceive and steal," Paula Dow, the New Jersey attorney general, said.
Kwasnik denies any wrongdoing. He has been released on $1 million bail.