Tuesday, October 4, 2011
SEC Bans Former WexTrust Officer
A former officer of WexTrust Capital who cooperated with federal investigations into the company and two other officers has been barred from the securities industry for defrauding the firm's investors.
Amnon Cohen, who was responsible for making and managing loans for the investment company's high-yield debt funds, knew by mid-2007 that WexTrust's CEO and its chief operating officer were diverting money from the loan funds to pay expenses at other WexTrust funds, the SEC said in a cease-and-desist order. Cohen, however, continued to manage the company's high-yield funds and promoted them to investors, the SEC said.
Cohen learned by early 2007 that WexTrust's CEO, Steven W. Byers of Oak Brook, Ill., and Chief Operating Officer Joseph Shereshevsky of Norfolk planned to defraud investors, the SEC said. Cohen confronted Shereshevsky in late 2007 and accused him of commingling investors' funds but continued to manage and promote WexTrust's high-yield funds, the SEC said.
Cohen, it said, assured one hedge fund in late 2007 that investments in a particular WexTrust fund were sound while knowing that Byers and Shereshevsky were diverting money from the company's funds. The hedge fund, the SEC said, afterward invested $500,000 with one of the company's high-yield funds.
Cohen consented to the SEC's cease-and-desist order without admitting or denying its allegations, according to the Sept. 27 order. Cohen, who once worked in WexTrust's New York office, said Monday that he no longer worked in the securities industry and has no plans to return. "I wanted to get this thing behind me, and I'm glad it's over," he said.
WexTrust, which was based in Chicago and had an office in Norfolk, raised $270 million for investments in real estate, commodities and African diamond-mining ventures, the SEC said. Between 2004 and 2008, its high-yield funds brought in about $43 million from investors, including reinvestments, it said.
Cohen began cooperating with prosecutors and the SEC in mid-2008 and "provided substantial assistance" in obtaining the criminal convictions of Shereshevsky and Byers, it said. Parts of Cohen's conversations with the two were cited when the WexTrust officers were indicted for securities fraud in 2008.
Byers pleaded guilty in federal court in Manhattan last year to one count of securities fraud and a count of conspiracy to commit securities fraud. He was sentenced in April to 13 years and four months in prison.
Shereshevsky pleaded guilty in February to one count of securities fraud, one count of mail fraud and a count of conspiracy to commit securities fraud. He was sentenced in July to 21 years and 10 months in prison. Both also were ordered to make restitution of $7.7 million and to forfeit $9.2 million of proceeds from their crimes. In August, Shereshevsky filed an appeal of his conviction and sentence with the U.S. Court of Appeals for the 2nd Circuit.