Deal, NJ – Trustee files $129 million lawsuit against Dwek investor, lender.

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    Deal, NJ – Solomon Dwek’s bankruptcy trustee has filed a $129 million lawsuit against one of Dwek’s biggest investors and a major bank, saying they either knew or should have known that the real estate investor had conducted a major real estate and banking fraud.

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    The lawsuit, filed late Friday night, says Dwek operated a “massive Ponzi scheme” by using money from new investors to repay older ones, and that he was able to deliver false profits to early investors by “creating an illusion that he was a successful, philanthropic real estate mogul who delivered incomparable investment returns.”

    Dwek owns some 350 properties centered on Ocean and Monmouth counties. A state court judge froze his holdings in May 2006 after Dwek bounced a $25 million check at a PNC Bank branch in Eatontown. Dwek used $20 million of that to pay off an overdue loan he and investor Isaac S. Franco had taken out from HSBC Bank.

    Dwek deposited the check “in desperation and fear of bodily harm,” according to the lawsuit, when he was under pressure from Franco, HSBC and others to repay or shore up $78 million in loans from the London-based bank.

    Now the trustee, Charles A. Stanziale Jr., said in court papers that Dwek paid Franco $109 million in the 14 months before Dwek’s assets were frozen. But Franco only invested $39 million in Dwek, the suit says. Stanziale wants everything Franco was paid returned to Dwek’s bankrupt estate because, the lawsuit said, Franco “”was a direct participant in the Ponzi scheme without regard to the impact,” on any other of Dwek’s investors.

    HSBC should return the $20 million because it knew Dwek had defrauded the bank when it received that money, the lawsuit claims.


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