Wednesday, 29 June 2016
Last updated 8 hours ago
Aug 13 2008 | 10:44am ET
A Chicago hedge fund has been charged with swindling the Orthodox Jewish community out of $255 million in a Ponzi scheme.
The Securities and Exchange Commission leveled the anti-mitzvah fraud charges against WexTrust Capital and its principals, asking a federal judge in Manhattan for emergency action. Steven Byers and Joseph Shereshevksy, the firm’s principals, were arrested Monday and charged with fraud.
“WexTrust purported to be ‘a globally diversified private equity and specialist finance company, specializing in investment opportunities ranging from real estate to specialty finance and investment banking,’” Scott Freistad, deputy director of enforcement at the SEC, said. “The reality, as alleged in our complaint, was very different.”
According to the SEC, WexTrust raised about $255 million from 1,200 investors, mostly Orthodox Jews. The firm, its principals and four affiliated entities allegedly conducted at least 60 securities offerings through private placements, creating some 150 limited liability corporations or similar vehicles to facilitate those offerings. The proceeds were diverted to pay the principals’ own expenses, or to pay off earlier investors. At least $100 million was used for unauthorized purposes, according to the complaint, with at least four frauds ongoing.
Among the bogus investment deals was a bid to buy seven properties leased by the federal government. None of the properties were purchased with the $9 million raised. Another alleged scam involved a Namibian diamond mine.
“We have faked it until we made it for long enough and now we must clean it up,” Shereshevsky wrote in an e-mail to Byers included in court documents.
Shereshevkshy was reportedly well-known in the Orthodox community.
“Our complaint alleges an affinity fraud of a very large scale,” Andrew Calamari, associate director of enforcement at the SEC, said. “In this case, one of the defendants used his extensive connections in the orthodox Jewish community to solicit more than $250 million from unsuspecting investors.”
An attorney for Shereshevsky says his client is innocent of the fraud charges.