WexTrust’s Shereshevsky Gets 21-Year Prison Term for Fraud
By Bob Van Voris - Jul 19, 2011 10:34 AM GMT+1000
WexTrust Capital LLC co-founder Joseph Shereshevsky was sentenced to 21 years and 10 months in prison after pleading guilty to defrauding victims of at least $9.2 million as part of a Ponzi scheme.
Shereshevsky, 54, and WexTrust co-founder Steven Byers were charged in 2008 with lying to investors in their now-collapsed real estate fund. Many of their victims were members of the Orthodox Jewish community. The penalty was at the top of the range suggested by federal guidelines. Byers was sentenced to more than 13 years in April.
“Mr. Shereshevsky very much had a controlling role in this criminal enterprise,” U.S. Circuit Judge Denny Chin said in a hearing today in Manhattan. “Although he purports to be a religious man, he preyed on his own community.”
Shereshevsky, the former chief operating officer of Chicago-based WexTrust, pleaded guilty to mail fraud, conspiracy and securities fraud in February. Chin said today that victims may have lost more than $20 million.
Prosecutors claimed Byers and Shereshevsky told investors they planned to buy residential and commercial properties in Illinois, North Carolina, Wisconsin, New York and elsewhere. Instead, they paid investor returns and financed unrelated projects, the government said.
WexTrust had at least 1,100 investors in the U.S. and abroad, the U.S. Securities and Exchange Commission said in a related lawsuit. WexTrust owned at least 120 entities formed to acquire real-estate interests and conducted at least 60 private placements since 2005, the SEC said. Earlier in the case the government valued the fraud at $255 million.
A private placement is a negotiated sale in which securities are sold directly to investors rather than through a public offering. In a Ponzi scheme, money from new investors is used to pay existing ones.
Mark Harris, a lawyer for Shereshevsky, argued for a 10-year sentence, telling Chin about his client’s charitable activities and poor health. Prosecutors urged Chin to sentence Shereshevsky within the guideline range of 210 to 262 months cited by both sides in a plea agreement.
During the hearing, Chin read from some of the 80 letters the court received from victims of the WexTrust fraud, which told of lost retirement nest eggs and college funds.
“I destroyed you and I am sorry,” Shereshevsky said, addressing the victims in a statement to the court.
Chin continues to preside over the criminal case and a related civil case, after being confirmed last year to the federal appeals court in New York. In 2009, Chin sentenced Bernard Madoff to 150 years in prison for orchestrating the biggest Ponzi scheme in history.
The criminal case is U.S. v. Byers, 08-cr-1092, U.S. District Court, Southern District of New York (Manhattan).