New York landlord ordered to pay back “Ponzi scheme” investors

On Behalf of | Feb 10, 2020 | White Collar Crimes |

A prominent New York City landlord has been ordered to pay at least $63 million to investors he is accused of defrauding with what has been described by prosecutors as a Ponzi scheme. The Securities and Exchange Commission announced news of the court order on Jan. 30. When details of the man’s alleged activities were revealed by the SEC and federal prosecutors in May 2019, his company owned about 34,000 apartments in 140 buildings spread across 14 states.

The money the man has been ordered to pay back would make full restitution to his approximately 200 investors. The man is said to have promised returns of up to 11%, but he did not use the money to improve his rental properties as promised. Instead, he allegedly used the funds pay former investors. He has been indicted along with three other individuals on charges of conspiracy to commit wire fraud and conspiracy to commit bank fraud. The man also faces money laundering charges and has been sued in civil court by angry investors.

In addition to allegedly defrauding his investors, the SEC claims that the man ordered his employees to falsify financial disclosures in order to secure mortgage financing for apartment building acquisitions. This could lead to an even wider investigation as many of these allegedly fraudulent mortgages were subsequently purchased and then sold by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

Cases like this one are often resolved when the defendant enters into a negotiated plea agreement with federal prosecutors. Experienced criminal defense lawyers may also have good reasons to avoid court as U.S. attorneys generally rely on documents and financial records that speak for themselves to prove guilt in cases involving complex white-collar crimes. However, attorneys might encourage federal prosecutors to make sentencing concessions by pointing out that proof beyond reasonable doubt can be difficult to establish when juries find cases difficult to understand.

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