United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY’S OFFICE
JULY 18, 2011 ELLEN DAVIS, CARLY SULLIVAN,
PREET BHARARA, the United States Attorney for the
Southern District of New York, announced that JOSEPH
SHERESHEVSKY, a former Chief Operating Officer of the private
equity firm WexTrust Capital, LLC (“WexTrust Capital”), was
sentenced today to 262 months in prison on charges stemming from
a fraud that raised more than $9 million from investors in
private placement real estate offerings. SHERESHEVSKY, 54, was
sentenced in Manhattan federal court by U.S. Court of Appeals
Judge DENNY CHIN.
Manhattan U.S. Attorney PREET BHARARA said: “Joseph
Shereshevsky executed an intricate Ponzi scheme designed to
swindle hundreds of investors out of millions of dollars. He was
ultimately exposed for the con artist he is. Now he will pay for
his fraud and join his co-defendant Steven Byers behind bars.”
According to the Indictment and other documents
previously filed in Manhattan federal court:
From 2003 to 2008, WexTrust Capital was a globally
diversified private equity company specializing in real estate
investments and specialty finance opportunities. It was
affiliated with several companies that had similar names,
including WexTrust Securities, LLC, a broker-dealer registered
with the United States Securities and Exchange Commission.
Beginning in 2003, JOSEPH SHERESHEVSKY, along with codefendant
STEVEN BYERS and others, raised money from investors
pursuant to private placement offerings, and then used material
amounts of that money for other purposes without disclosing the
diversion of funds to investors. Additionally, SHERESHEVSKY
failed to disclose to investors that he had a criminal history
that included a prior conviction for fraud.
In one such private placement, SHERESHEVSKY and others
raised approximately $9.2 million in investor funds by
representing that the funds would be used to purchase and operate
seven commercial properties that were leased to the United States
General Services Administration (“GSA”). According to the GSA
private placement memorandum issued to investors by WexTrust
Capital, the $9.2 million raised from investors, together with a
mortgage of approximately $21 million, would be used to purchase
the seven GSA properties and cover related acquisition expenses.
However, none of the seven GSA properties were ever purchased.
Instead, funds raised from investors were diverted for other
purposes, none of which were disclosed to investors.
SHERESHEVSKY and BYERS later agreed to fabricate a story that
they would then tell the GSA investors regarding what happened to
The constant use of money from one offering to cover
the expenses of another offering allowed SHERESHEVSKY and BYERS
to maintain the false appearance that WexTrust Capital was a safe
company in which to invest for years. As a result of the misuse
of investor funds, they were able to purchase properties that
could not otherwise have been purchased by the designated closing
date, pay distributions to investors in non-performing
properties, and, most importantly, attract new investor money by
creating the false impression that WexTrust was a profitable
* * *
SHERESHEVSKY, of Brooklyn, New York and Norfolk,
Virginia, previously pled guilty to conspiracy to commit
securities fraud, securities fraud, and mail fraud on February 3,
2011. He was sentenced to 22 months in prison for the conspiracy
charge, to run consecutive to the 240 months he received on both
the securities fraud and mail fraud charges, which were imposed
to run concurrent to each other.
In addition to his prison term, Judge CHIN sentenced
SHERESHEVSKY to three years of supervised release and ordered him
to pay $7,87,533.41 in restitution and to forfeit $9.2 million
in proceeds from his crimes.
SHERESHEVSKY’s co-defendant, STEVEN BYERS, 49, of Oak
Brook, Illinois, pled guilty to the same charges on April 13,
2010, and was sentenced to 160 months in prison on April 11,
2011, before Judge CHIN.
Mr. BHARARA praised the work of the Federal Bureau of
Investigation in this case. He also thanked the U.S. Securities
and Exchange Commission for its assistance in the investigation.
This case was brought in coordination with President
BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which
Mr. BHARARA serves as a Co-Chair of the Securities and
Commodities Fraud Working Group. President OBAMA established the
interagency Financial Fraud Enforcement Task Force to wage an
aggressive, coordinated, and proactive effort to investigate and
prosecute financial crimes. The task force includes
representatives from a broad range of federal agencies,
regulatory authorities, inspectors general, and state and local
law enforcement who, working together, bring to bear a powerful
array of criminal and civil enforcement resources. The task
force is working to improve efforts across the federal executive
branch, and with state and local partners, to investigate and
prosecute significant financial crimes, ensure just and effective
punishment for those who perpetrate financial crimes, combat
discrimination in the lending and financial markets, and recover
proceeds for victims of financial crimes.
Assistant United States Attorneys VIRGINIA CHAVEZ
ROMANO and JILLIAN B. BERMAN are in charge of the prosecution.