A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. However, in reality, instead of investing your money, the fraudsters misappropriate the money to pay off investors of previous non-existent "investments."
As previously reported here and here on FAA News, back in May and June 2024, a Brooklyn rabbi filed separate lawsuits in New York and New Jersey after falling victim to a $6 million scam perpetrated by a major Lakewood area ponzi scammer.
According to the complaints:
In 2022, the scammer contacted the rabbi to solicit a series of investments in real estate joint ventures. He promised, represented and agreed that any funds invested by the rabbi would be dedicated to the purposes of the joint ventures and would be used for no other purpose.
On the basis of these promises, representations and agreements, the rabbi invested an aggregate of $6.25 million through a series of installments.
The scammer gave the rabbi his solemn word that he would receive "half of any profit” the joint venture obtained. In addition, the scammer pledged to the rabbbi all of his assets - including both assets he currently owned and those he might acquire in the future - to guaranty the timely and full repayment of the amounts to be paid under the joint venture.
Even cooler, the scammer agreed that he would reimburse the rabbi all expenses and costs of collection incurred by the rabbi in case of the scammer's failure to timely pay.
Unfortunately, this get rich quick deal never materialized. The scammer diverted, converted and misappropriated the money or property for unauthorized purposes. The rabbi has not seen a single dime in return.
The scammer filed a motion in the New Jersey lawsuit, claiming that the shtar heter iska executed by the parties makes the business relationship “based on Jewish law," and enforcement of the shtar heter iska "requires enforcement of Jewish law before a rabbinical court," thereby requiring that the civil litigation be dismissed.
The rabbi opposed the motion, attesting that the shtar heter iska does not, by and of itself, require enforcement of Jewish law before a rabbinical court, and moreover, "the plain terms of the Iska expressly contemplates that Plaintiffs would be entitled to proceed “in any manner” they deem appropriate, “according to the laws of the state” in which Plaintiffs are located – just as Plaintiffs have done here."
Judge Valter Must was not at all persuaded by all the big talk of a "shtar heter iska requiring enforcement of Jewish law before a rabbinical court," and he permitted the litigation to proceed.
The scammer has proffered the very same claim in the New York lawsuit as a counterclaim. The rabbi has filed a motion to dismiss the counterclaims. The motion remains pending.
As first reported here on FAA News, this scammer was involved in purchasing nursing homes in Iowa and that purchase was the start of a massive domino affect on his scam of taking money from more and more people, which he needed to do in order to try to keep the nursing homes from crumbling completely.
In the new lawsuit, the rabbi alleges that as part of their joint venture, the scammer agreed that when he sold the nursing homes that he was purchasing, he would pay the rabbi an additional sum of $100,000, “which shall be included in the stipulated profit of the joint enterprise.”
As just recently reported here on FAA News, this very same scammer has just lost an apartment building after failing to pay the $9 million mortgage.
A number of ponzi scandals have recently come to light regarding Brooklyn and Lakewood community members.
These scandals highlight why it's important, not only to be very careful prior to investing money, but also, prior to agreeing whom to partner with.
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