New York – The U.S. Securities and Exchange Commission sued Chicago-based Wextrust Capital LLC and two of its owners, saying they used a Ponzi scheme to cheat investors, many in the orthodox Jewish community, of more than $100 million.
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The co-owners, Steven Byers, of Oakbrook, Illinois, and Joseph Shereshevsky, of Norfolk, Virginia, [aka Yossi Heller] were arrested today by the FBI on charges of defrauding investors by stealing funds they raised through private placements.
“Defendants have been fraudulently raising money in the various offerings, each of which purportedly is for a particular investment, without disclosing that funds raised were actually being used to pay prior investors in unrelated offerings,” the SEC said in a complaint that sought to freeze the fund’s assets.
WexTrust has raised at least $255 million from at least 1,196 investors in the U.S. and abroad, the SEC said. WexTrust said in a January press release that it is a private-equity company specialized in real estate and investment banking, with offices in New York, Atlanta, Tel Aviv, and Johannesburg.
“One of the defendants used his extensive connections in the Orthodox Jewish community to solicit more than $250 million from unsuspecting investors,” Andrew Calamari, the SEC’s associate director of enforcement, said in a statement. “Our complaint alleges an affinity fraud of very large scale.”
The SEC also sued Byers, the firm’s chairman, and Shereshevsky, who until recently was chief operating officer. Shereshevsky pleaded guilty in 2003 to bank fraud, the SEC said.
A WexTrust spokesman, David Gutierrez, didn’t have an immediate comment. A lawyer for the company, Jeff Brooke, didn’t immediately return a call.
Operators of so-called Ponzi schemes use money from new investors to pay off old ones.
Mr. Shereshevsky has donated millions of dollars to many Jewish organizations around the U.S. in the past few years.
in Oct of 2007 Mr. Shereshevsky was profiled in a TV interview for his generosity for a local team in norfolk. see below
i almost invested in this trust
I hope this not a case of an over zealous prosecutor, and that they truly have a case.
If it’s true what they did, let them rot in jail!
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20678 / August 11, 2008
Securities and Exchange Commission v. Steven Byers, Joseph Shereshevsky (a/k/a Joseph Heller and “Josie”), Wextrust Capital, LLC, Wextrust Equity Partners, LLC, Wextrust Development Group, LLC, Wextrust Securities, LLC and Axela Hospitality, LLC, 08 Civ. 07104 (SWK) (S.D.N.Y.)
SEC Charges Defendants in $255 Million Ponzi-Type Scheme Involving Wextrust Capital, LLC and Other Wextrust Entities
The United States Securities and Exchange Commission today filed charges against Wextrust Capital, LLC (Wextrust), its principals, and four affiliated Wextrust entities, alleging that defendants conducted a massive Ponzi-type scheme from 2005 or earlier that raised approximately $255 million from approximately 1,200 investors. The targets of the fraudulent offerings are primarily members of the Orthodox Jewish community. Simultaneously with the filing of the action, the Commission is seeking emergency relief from the Court to freeze the defendants’ assets and place the Wextrust entities under the control of a receiver to safeguard assets. The Commission is also seeking a temporary restraining order to stop the ongoing offerings and other immediate relief.
The Commission’s complaint, filed in federal court in Manhattan, charges that Wextrust, its principals Steven Byers and Joseph Shereshevsky, and its affiliated entities Wextrust Equity Partners, LLC (WEP), Wextrust Development Group, LLC (WDG), Wextrust Securities, LLC (Wextrust Securities) and Axela Hospitality, LLC (Axela) conducted at least 60 securities offerings through private placements and created approximately 150 entities in the form of limited liability companies or similar vehicles to act as issuers or facilitators of the offerings, purportedly to fund the acquisition of specified assets, the majority of which were commercial real estate ventures. Contrary to representations in the offering memoranda that proceeds would be used for specific projects, the defendants allegedly diverted funds to pay returns to investors in prior offerings, or to fund expenses of the defendants.
In one offering, conducted in 2005, the SEC complaint alleges that defendants falsely represented to investors that the more than $9 million raised would be used to purchase seven specifically identified real estate properties that were leased by federal government agencies, such as the General Services Administration. In fact, according to the complaint, the defendants never purchased the seven properties. Moreover, at the time the offering occurred, they knew or were reckless in not knowing that the seven properties would not be acquired. Significantly, while the offering was ongoing, the Wextrust entities “borrowed” more than $6 million from the funds raised in the GSA offering and used these funds for purposes unrelated to the GSA offering.
Overall, the complaint alleges, defendants diverted at least $100 million dollars to unauthorized purposes. The complaint alleges that the defendants are conducting at least four ongoing offering frauds intended to raise money to pay back investors from prior offerings.
In addition to the emergency relief sought today, the Commission’s complaint seeks disgorgement of the defendants’ ill-gotten gains, civil penalties, and permanent injunctions barring future violations of the antifraud and other provisions of the federal securities laws.
The complaint names the following defendants.
*
Byers, age 46, is a resident of Oakbrook, Ill., and owns sixty percent of Wextrust. He is the Chairman of Wextrust and President and Chief Operating Officer of WEP, the arm of Wextrust focusing on income-producing properties, and is also an owner or controlling person of Wextrust Securities. Together with Shereshevsky and others not named in the complaint, Byers controls the Wextrust affiliated entities.
*
Shereshevsky, age 51, is a resident of Norfolk, Va., and owns twenty percent of Wextrust through a partnership interest held in the name of his wife. Shereshevsky was, until recently, Wextrust’s Chief Operating Officer, was instrumental in founding Wextrust Securities, and was responsible for Wextrust’s expansion into purported diamond mining investments in Africa. Shershevsky pled guilty to one felony count of bank fraud in June 2003, U.S. v. Shereshevsky, 94 Cr. 248 (CSH).
*
WexTrust, an Illinois limited liability company, was formed by Byers in 2003. According to the company’s website, Wextrust is a globally diversified private equity and specialty finance company, specializing in investment opportunities ranging from real estate to specialty finance and investment banking. Wextrust is headquartered in Chicago and maintains offices in New York, N.Y., Norfolk, V., Atlanta, Ga., Boca Raton, Fla., Nashville, Tenn., Tel Aviv, Israel; and Johannesburg, South Africa.
*
WEP is an Illinois limited liability company headquartered in Chicago, engaged in the business of buying real estate assets, generally though its partially-owned subsidiaries. According to WEP documents, WEP is the beneficial owner of approximately 120 entities formed for the purpose of owning equity interests in commercial and multi-family real estate assets.
*
WDG is an Illinois limited liability company headquartered in Chicago, in the business of developing real estate assets.
*
Wextrust Securities is a broker-dealer registered with the Commission and a Virginia limited liability company headquartered in Norfolk, Va. It employs thirty-six registered representatives and maintains branch offices in New York, N.Y., Norfolk, Chicago, Southfield, Mich., and Ramat Gan, Israel. It was formed in March 2005, registered with the Commission in March 2006, and has been a licensed broker dealer since that time.
*
Axela is an affiliate of WexTrust Capital. Axela, through its LLC subsidiaries, owns and operates Wextrust’s hotel properties, including the Axela Baltimore Hotel and the Park View Hotel in Chicago, and provides asset management services to other Wextrust affiliated LLCs, such as Crowne-Phoenix Investors LLC.
Pled guilty to bank fraud in “03–doesn’t sound like he did much or any jail time? Does anyone know if he went to prison , or probation?
Hmm… allegedly steals a bunch of money. But gives to Tzedakah. Why is the Tzedekah important to mention? It was allegedly with stolen money.
Anon. 1:30PM. …I hope this is not a case of an overzealous prosecutor, I hope they truly have a case… …There’s one way [for you] to find out for sure….. Hope to hear from you sooooon….!!!
re; bigwheel-what exactly does your “crptic” message really imply?
Wow, anybody remember the Schick episode. People, when will you learn that there are no get rich quick programs. If something sounds too good to be true, then it probably is. “Who is the rich man? He who is satisfied with his lot.” I hate to laugh, but this is too funny. People just don’t learn. This will also open a huge can of worms with the IRS and others, as they will look into the reported income of the so called investors.
His giving Tzedaka was “Mitzvah Haba Beaverah’!
shutup you idiots. keep your comments to yourself, you just fasted. Think about people’s families, have some senitivity
Wasn’t this the guy who lent a private plane for the Jamaica Tranquility Bay rescue?
Maybe he’ll also end up there!
Not likely he would go to Jamaica to avoid prosecution, as they have an extradition treaty with the US. More likely would go to Vanuatu (no formal treaties with the US), anyway he has done Charles Ponzi (1882-1949) proud!
LOL i meant that they might sentence him there!
Isn’t Ponzi the guy who always said “AYYYYY”?
I know 5 Chasidisha guys that invested over 5 million dollars, those guys were real professinal did it all by the book, the investors were all represnted by normal attorney’s
Go Figure!
Nope the guy who always said Ayyyy was Crazy Eddie another federal kollel yungermann.
it hurts me to say this but alot of frum people have the guilibility of a golem
Yiddisheman, I think you’re talking about Arthur Ponzerrelli fin “Happy Teg” (a yid, agav)
I think this guy’s going to become the latest talmid in the Yeshiva of Otisville.
this is a big case, if the allegations are true. but, rabbosai, do we not all know of cases in our own shuls, our own neighborhoods, where frum Jews have stolen from others? Whether it is money, business ideas, real estate etc., we all know of this type of gonaiva which is unfortunately a part of life in the Orthodox world. Just because a yingerman has payos or learns daf yomi doesn’t mean he is not a crook. Unfortunately we have all kinds.
i thing this is a problem with a over zealous news reporting web site to capture attention and not to think about what we just ended
1.03 today . for th ose who don’t get it that is till when the bais hamikdosh was on fire, i thing it was irresponsible to go ahead and drag some ones name threw the mud just for the sake of reporting
Anonymous 2:52,
The only families I’m thinking about are the ones whose breadwinners fell victim to this crook.
What happend to Don L’kaf Zchus? What happened to wait until they are convicted? You know how the government is – always bringing false charges and always having them fall apart!!
Mark my words – all charges will drop and they will walk free men.
I know families who will suffer because of this guys actions. Very sad. Not disclosing your felony record to investors, not being section24/7 certified, and illegally redirecting funds so that you can swindle millions of dollars from our communities is a terrible thing. Have fun in the federal pen, Yossi. You have again, totally destroyed your family.
Mark my words – all charges will drop and they will walk free men.
———
Plan on putting money in escrow to back it up?
byers and shereshevsky are liars and ganovim as any unfortunate wextrust investor can testify.
Sad really…. another destroyed family, financially hurt or destroyed people. What comes over people to do things like this?
Stam to point out… I know people that invested with Shereshevsky and several months after the initial investement it became pretty clear that ‘all wasn’t straight’.
Another note. This man used his “money” to support many groups and individuals that would deliberately do things to hurt other Jewish organizations and individuals. Fitting that this kind of ‘money’ went to that type of tzedaka. While he did do some commendable things (although i should probably refrain from using the word ‘commendable’ when it comes to tzedaka with stolen) with ‘his’ money, he also hurt other people.
Yup, you and me both (Know people involved).
isnt he the one who gave his private jet to help that young boy in the nazi style boot camp ???
How about some Ahavas Yisroel .,,,We do not have to invest with them , but speak about them it such away??????
I just don’t understand how people can invest thousands or even millions of dollars with people like this without being 100% sure of what and who they are. Just go to show how greed can afffect anyone. Even haimishe chevra…
to 4.59
hsh”y should help you should never know they take one guy and he gets big return on his money so if you see a big guy making money everybody jumps in
if u invest at this point, will it be considered Tzedaka?
to 5:05
That’s exactly why I would be suspicious. If they try to convince you like that, then you should be suspicious…
suppose the money was for a mikva, will he have ALL the investors name on it?
its funny how dan lekaf zchus only applies to big names swindling millions-would u say the same for any crook off the street?
“Hugh Hefner Says:
Anonymous 2:52,
The only families I’m thinking about are the ones whose breadwinners fell victim to this crook.”
You took the post right out of my keyboard. And to the person that said this….
“Anonymous Says:
What happend to Don L’kaf Zchus? What happened to wait until they are convicted? You know how the government is – always bringing false charges and always having them fall apart!!
Mark my words – all charges will drop and they will walk free men.”
..I have a great business opportunity for. A win win with no downsides. I have an in with the guy who is looking to unload various bridges… well I think you get my point.
MY GOD !!!
I ONCE SAT IN A MEETING WITH THIS COMPANY. EVERY THING SOUNDED GREAT. IT ACTULLY SOUND IT TOO GOOD. BH I DIDNT INVEST WITH THEM. BUT ALOT OF PPL IN BP DID. NEBECH!!!
You can’t sell the bridges. Bloomberg would not allow it.
those two never thought about the chillul hashem they caused when caught.its as if denying that there is a reboinoi shel oilam ,all for the holly dollar
easy money ?? go easy away but remember everthing is from HASHEM directly for everyone every cent were in when shuld go
Raboisai,
Joseph aka Yossi Shereshevsky did the same thing in Flatbush years ago, when he had to run for his life after defrauding many people of millions. He also refused to give his wife a get for over seven years despite the beis din’s order. He left her with five small children and no child support.
When he finally gave her the Get it was only for money because he was in dire straights. And they gladly paid an outrageous sum.
So much for Don l’kaf Zchus !
I wrote the Don l’kaf Zchus remark (4:06 PM)
Funny that in cases like Rubashkin, it is divided between those who support Rubashkin under any circumstances, and those that want Rubashkin to straighten up and stop being a Chillul Hashem.
In this case, however, almost all the people are willing to ignore a legal system and ‘string them up’, without the benefit of the legal or halachic system kicking in.
Why?
I can only hypothesize that those who see Rubashkin as an innocent lamb want all charges to go away and let him continue as he was before. He might be a fellow chabad’nik or another Lubavitcher that you have rachmanos for. In this case, who has rachmanos on someone that would steal from widows and orphans??
What would be the motivation of those that want Rubashkin to straighten up? Are they ‘mean spirited’ union organizers as Lubinsky would have us believe? Are they the competition who want a level playing field? Are they consumers who see too many problems with Rubashkin and feel that we can do better for out neshamas??
Time will tell and both stories will play out when the eibishter says it is time.
as the gemoreh in baiyah states, that the yearly
wages of a person, is established, on rosh hashonoh,
therefore, if you think you can outsmart hashem,
and steal, what’s not yours, not only will it be
taken from you, your children that you fed with
stolen money, will not understand torah, and
go off the derech ch”v.
so please return, what’s not yours,
because the money that you need, hashem has it ready for you, he is testing if you will not steal from someone else.
as history has tells us that if you really need it and have faith you will have it without the need to steal.
also, you are given a budget, as the gemoreh explains, therefore, if you splurge your money,
your account becomes empty, than you really need mercy…..
Anon, 08-11-2008 – 8:02 PM. Rubashkin also caused many kosher butcher shops to go out of business.
And we wonder why a reform clergyman says that religious jews swindle?!?
I met with someone from this company, young guy driving a $100,000 nazi mobile. I asked around and several smart business people told me to stay away and that was 3 years ago.
STOP! All of you just stop. No one understands or really knows what happened and why. It IS possible that neither of these men intended to hurt anyone. In this country we are supposed to be presumed innocent unless or until proven guilty. Maybe you should all go look in the mirror and scrutinize yourselves. You have appointed yourselves judge, jury and executioner.