Ponzi Scheme Allegedly Defrauds Investors of $50 Million

APR 1, 2013 12:08pm ET

FBI agents arrested a Far Rockaway, N.Y., man last week for allegedly defrauding investors of $50 million in a real estate Ponzi scheme.

According to a criminal complaint, Gershon Barkany promised investors to use their money in “risk free” deals to purchase and then immediately resell at a profit large real estate properties in New York and New Jersey. But the complaint says that no such deals ever existed and the defendant used approximately $50 million he obtained from the investors for his own benefit.

The FBI claims that Barkany induced at least five investors to wire transfer large sums of money which was supposed to be used to purchase real estate in Manhattan, Queens, Bronx and Atlantic City.

In the complaint, one of the victims from this scheme said Barkany told the investors that the sellers of these properties would only close on the real estate sales contracts after the defendant had located a purchaser who would be willing to buy that asset from him at a higher price. Based off of this statement, Barkany assured the investors that the real estate deals would be “risk free.”

“Barkany’s victims sought the security of investing in real estate. Instead, they were taken for millions by the defendant’s lies and deception,” said Loretta E. Lynch, U.S. attorney for the Eastern District of New York.

Meanwhile, the complaint says the real estate deals never happened. As part of Barkany’s Ponzi scheme, he diverted some of the funds he received to pay investors whom he had earlier defrauded. The defendant also lost some of the funds in gambling and otherwise used the money for his own benefit.

“As alleged, Barkany promised a get-rich-quick investment scheme that really had potential to enrich only him,” said George Venizelos, assistant director in charge of the Federal Bureau of Investigation’s New York field office. “There were no investment properties, just a house of cards built on a foundation of lies. There may be no truly risk-free investments, but investors are entitled to honesty.”

If convicted, the defendant faces a maximum sentence of 20 years’ imprisonment.

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