Corporate & Securities Law

SEC Charges Chicago Firm Wextrust Capital With Fraud

By James Eccleston

Two owners of a private equity firm that claimed to be profiting from investments ranging from real estate to diamond mines were arrested and charged with robbing more than $100 million from investors, many of them Orthodox Jews.

In a lawsuit filed in U.S. District Court in New York, the SEC alleged that Wextrust Capital owners Steven Byers and Joseph Shereshevsky diverted the funds into operating their business and paying off previous investors, essentially a classic Ponzi scheme.

The SEC froze the assets of the Chicago firm, and the U.S. Attorney in the Southern District of New York filed a criminal complaint against Messrs. Byers and Shereshevsky, triggering the arrests.  Mr. Byers, of Oakbrook, and Mr. Shereshevsky, of Norfolk, VA couldn't be reached for comment.

An outside spokesman for Wextrust said he had no information.  "This is one of the biggest affinity cases I have ever seen," said Andrew Calamari, an SEC associate director in New York.

According to the SEC's suit, Mr. Shereshevsky used extensive connections in the Orthodox Jewish community to raise more than $250 million from almost 1200 investors. 

SNSFE continues to investigate the Wextrust fraud.

Source:  Wall Street Journal

Full post as published by FinancialCounsel on August 14, 2008 (boomark / email).