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Thursday, August 26, 2010

Weinstein Gets Bail in $200 Million Ponzi Scheme

Aug. 26 - Eliyahu Weinstein, a New Jersey man charged with leading a $200 million Ponzi scheme that targeted fellow Orthodox Jews, was granted $10 million bail today by a U.S. judge.

Weinstein, 35, was accused Aug. 12 of running a real-estate investment fraud that duped victims in New Jersey, New York, Florida, California and abroad.

Weinstein, who faces as many as 50 years in prison, has been in custody since his arrest. A prosecutor opposed bail for Weinstein, saying he poses a “profound” risk of fleeing if released before trial.

The bond must be secured by four properties with $4.2 million in equity. Weinstein must live under 24-hour house arrest in Lakewood, New Jersey, and undergo electronic monitoring with a global positioning system, said U.S. Magistrate Judge Mark Falk. Weinstein also can’t go near any airports.

“There’s no question that given the circumstances here, there is a risk of flight,” Falk said in federal court in Newark, New Jersey. “While none of this is foolproof, it certainly is the best that is available and would impose a serious obstacle to someone trying to fly out of the country.”

Weinstein was charged with committing bank fraud and wire fraud from 2005 to this month. Vladimir Siforov, 43, who was charged with wire fraud, remains at large.

Community Ties

By using “lies, threats, deliberate misrepresentations and even counterfeit checks,” Weinstein and Siforov “exploited the close community ties of the Orthodox Jewish community for one goal: to steal money through an elaborate real estate and Ponzi scheme,” Michael B. Ward, special agent in charge of the Federal Bureau of Investigation’s office in Newark, said in a statement on Aug. 12.

New victims come forward daily, and the fraud caused “at least a $200 million loss,” Assistant U.S. Attorney Zach Intrater said today at the bail hearing. “The vast bulk of this money is missing, and the number keeps climbing.”

Weinstein, a bearded, bespectacled man with a wife and five young children, appeared at the hearing in a green shirt from the Hudson County Detention Center. About 40 members of the Orthodox Jewish community supported him in the courtroom.

His attorney, Ephraim Savitt, asked Falk for a $5 million bail package secured by the four properties. He also proposed home confinement and electronic monitoring, saying Weinstein posed no risk of flight and is “eminently bailable.”

Savitt assailed the investors who went to the FBI, saying one perjured himself in a civil deposition.

‘Unregulated Money Lending Machine’

“These victims are really an unregulated money lending machine,” Savitt said.

In a letter to the judge, Savitt said Weinstein was close to settling an $80 million lawsuit against him in Trenton, New Jersey, and that judgments had been entered against him of $35 million in Philadelphia and $6 million in New York.

After Weinstein’s arrest, Savitt said, he was the victim of extortion attempt at the jail, when he was “approached by a gang member who said he would provide for Mr. Weinstein’s protection within the facility.” The alleged extortionist was released on bail, and he called Weinstein’s wife to demand a down payment, Savitt told Falk.

Intrater argued that Weinstein has “a profound motive to flee,” saying that he has flown out of the country 40 times since 2007, including to Israel, Russia and Ukraine.

Of the four properties Weinstein was posting to secure his bond, one was owned by a man who was convicted of failing to file a currency transaction report, Intrater said. When authorities searched Weinstein’s house, the prosecutor said, his wife, Rivka, “attempted to sneak jewelry out of the house in the undergarments of a housekeeper.”

‘Very Relieved’

After the judge granted bail, Savitt said in an interview: “I’m very relieved. It was the right result.”

The FBI arrest complaint said Weinstein falsely represented that he owned or could buy property and that victims could make “a healthy profit in a short time period.” He sold his real or fake interest in property multiple times, fraudulently altered checks, drew up phony leases and hid zoning changes from his victims, according to the FBI.

When investors tried to collect their earnings, he ignored them, promised payments that never came, and paid smaller amounts than he owed, according to the complaint.

Weinstein used proceeds of the fraud to amass manuscripts and antique Judaica worth $6.2 million, a jewelry and clock collection that he bought for $7.6 million, and another jewelry and watch collection valued at $6.2 million.

He also charged $1.7 million to an American Express account, according to the complaint.

The case is United States of America v. Weinstein, 10-mj- 7115, U.S. District Court, District of New Jersey (Newark).

1 comment:

  1. Alleged Ponzi-Schemer Still in Jail for Shabbat

    Lakewood, NJ - Accused Ponzi-schemer Eliyahu Weinstein will remain in a Hudson County jail at least for the weekend even though a federal judge granted him bail, his attorney said Friday.

    Weinstein, who is accused by the government of bank fraud and wire fraud in the amount of at least $200 million, was the victim of “clerical errors, traffic and a manpower shortage,” said his attorney, Ephraim Savitt.

    U.S. Magistrate Judge Mark Falk on Thursday ordered Weinstein, 35, of Lakewood released on a $10 million property bond and a number of restrictions.

    Savitt said that four of the properties being put up for that bond are in New York state. He said the process of filing necessary paperwork in New York county clerks’ offices did not go smoothly Friday.

    Savitt said that the clerks’ offices “on a summer Friday, do not seem to work with greased lightning, and all sorts of clerical errors took place to conspire to keep Mr. Weinstein in jail unnecessarily until Monday morning.”

    On top of that, he said, there were no U.S. Marshals available to pick him up from the Hudson County Correctional Center in Kearny when the paperwork problems were finally resolved.

    “It was already 4 p.m.,” he said. “Given the fact that the marshals’ manpower wasn’t as ample as it normally is in the summer, there’s nobody to pick him up.”

    Savitt said his client should be released Monday morning.”

    “We’ll start the week fresh,” he said.

    One of the conditions of his release is that Weinstein must wear an electronic monitoring device which is equipped with a GPS unit. Savitt said Weinstein will receive the device on Monday, at the federal courthouse in Newark.

    He’ll then be responsible for his own transportation back to his home in Lakewood, Savitt said.

    The situation, Savitt said, is “extremely frustrating, especially for someone who’s never been in this situation before.

    “Everything you read or hear about jail actually comes true for him, including (encountering) an extortionist. All in all, he’d much prefer to be with his family than exposed to these kind of elements.”