Shades Of Madoff? $200 Million Real Estate Scam Targeted Orthodox Jews, Feds Say

Eliyahu Weinstein, aka “Eli Weinstein,” has been charged with running an investment fraud scheme causing losses of at least $200 million. Weinstein, of Lakewood, N.J., was charged with one count of bank fraud and one count of wire fraud in connection with the alleged scheme. Vladimir Siforov, of Manalapan, N.J., also was charged with one count of wire fraud in connection with the alleged scheme (he remains at large). 

According to the criminal complaint:
 
From as early as September 2005 to the present, Weinstein orchestrated—with the help of Siforov and others—a real estate investment fraud scheme, headquartered in Lakewood, that resulted in losses to victim investors of at least $200 million. To perpetrate this scheme, Weinstein targeted fellow members of the Orthodox Jewish community in New Jersey, New York, Florida, California, and abroad using the social and business customs and practices of the community in furtherance of his scheme. To induce his victims’ investments, Weinstein, Siforov, and others lied to their victims, using a variety of fraudulent means.
 
For example, Weinstein did not own many of the properties he claimed to own. Instead, his asserted “third-party buyers” were often co-conspirators, such as Siforov, not bona fide arms-length purchasers and he sold his real or fake interest in a single property multiple times to different victims. Weinstein also fraudulently altered checks that had been negotiated for small amounts to make it appear that they were worth millions of dollars and presented copies of checks to his victims as having been negotiated that never were negotiated. Additionally, Weinstein drew up fraudulent leases to make it seem that a property had substantial rental income, when in fact there was no tenant and no income, and hid material information from his victims—such as profound zoning changes that would dramatically reduce the value of certain properties.
 
As an example of Weinstein’s scheme, Weinstein and another individual purported to enter into a contract to purchase 1209 DeKalb Avenue in Brooklyn, N.Y., through an LLC. The LLC then sought a $6 million purchase money mortgage loan from a victim bank, conditioned on Weinstein and his partner paying approximately 25 percent of the purchase price in cash. To induce the victim bank to close on and fund this loan, Weinstein caused a fax to be sent to the bank’s closing attorney, attaching copies of two fraudulent checks, purportedly written by a Weinstein entity, for approximately $2.1 million.
 
Weinstein also approached an individual victim investor based in the United Kingdom, claiming that “Siforov, Inc.,” headed by Siforov, was ready to buy 1209 DeKalb for approximately $16.2 million. As proof, Weinstein caused a fax of a “Share Sale Agreement” to be sent to the victim investor. The victim investor then had a telephone conversation with Siforov, during which Siforov falsely represented himself to be the intended purchaser of the property. The victim investor wired approximately $4.8 million to an account controlled by Weinstein.
 
The Share Sale Agreement falsely claimed that Siforov Inc. would fund its purchase of 1209 DeKalb partly through an approximately $1 million down payment. To further the fraud, Weinstein directed the transfer of approximately $1 million through a bank account in the name of an entity with which he was associated, then directed a transfer to make it appear as though Siforov had deposited the payment. A few days after the initial transfer, Weinstein and Siforov directed Weinstein’s attorney to withdraw the approximately $1 million and make the proceeds “payable to the discretion of Eli Weinstein.”
 
To defraud the victim investor out of even more money, Weinstein misrepresented the transaction with “Siforov, Inc.” had closed, showing a copy of an approximately $9.9 million cashier’s check which was counterfeit and never deposited. Based on this misrepresentation and others, the victim-investor provided Weinstein with approximately $1.7 million more. The real check Weinstein doctored was for a different amount, issued on a different date and payable to a different person.
 
Weinstein used some of his victims’ investments to amass a substantial collection of art, jewelry and Judaica. These items include manuscripts and antique Judaica worth approximately $6.2 million; a jewelry and clock collection, for which he paid approximately $7.6 million; a substantial collection of jewelry and watches valued at more than approximately $6.2 million, including items from such high-end jewelers and watchmakers as Breguet, Bulgari, Cartier, Omega, Patek Phillippe, and Harry Winston. Moreover, American Express records show that from Dec. 24, 2004, through the present, approximately $1.7 million was charged to Weinstein-related accounts for transactions with jewelers, art dealers, and Judaica dealers. The investigation has revealed that Weinstein has stored some of these items in New Jersey, Florida, Israel, and elsewhere.
 
If convicted of the wire fraud charge, Weinstein and Siforov each face a maximum potential penalty of 20 years in prison and a $250,000 fine. Weinstein also faces a maximum potential penalty of 30 years in prison and a $1 million fine on the bank fraud count with which he is charged.