Pair Sentenced in Manhattan Court to Prison Over $2.7 Million Securities Fraud Scheme – American Law News –
PREET BHARARA, the United States Attorney for the
Southern District of New York, and JOSEPH M. DEMAREST, JR., the
Assistant Director-in-Charge of the New York Field Office of the
Federal Bureau of Investigation (“FBI”), announced that FELIX
STRASHNOV was sentenced today to 63 months in prison in
connection with his participation in a fraudulent investment
scheme through which STRASHNOV and co-defendant MICHAEL AYNGORN
defrauded over 100 investors of over $2.7 million. The sentence
was imposed by United States District Judge BARBARA S. JONES. On
November 12, 2009, Judge JONES sentenced MICHAEL AYNGORN to 51
months in prison.

According to the charging documents and statements made
at court proceedings in the case:

Between November 2004 and June 2007, STRASHNOV and
AYNGORN sold unregistered securities in Empire Development Group
LLC (“EDG”) and Empire Development Group Fund I LLC (“EDGF”)
based on material misrepresentations and omissions. STRASHNOV
and AYNGORN collected over $2.7 million from more than 100
investors in EDG and EDGF. Instead of using investors’ money to
purchase real estate for the benefit of EDG and EDGF, STRASHNOV
and AYNGORN spent most of the investors’ money on STRASHNOV and
AYNGORN’s personal residences, cars, meals, gambling, and other
items for themselves and their families.

For example, STRASHNOV and AYNGORN represented to
investors that EDG and EDGF were investing in real estate.
However, in interviews and depositions with the United States
Securities and Exchange Commission (the “SEC”), STRASHNOV and
AYNGORN identified as EDG and EDGF investments only two
properties: (1) AYNGORN’s personal residence in Brooklyn, New
York, which public records show was purchased in the names of
AYNGORN and his wife in July 2005, and (2) a Fair Lawn, New
Jersey, property which was held in STRASHNOV’s name. According
to SEC personnel, STRASHNOV showed them blueprints for the Fair
Lawn, New Jersey, property that were labeled “Strashnov

Further, STRASHNOV and AYNGORN paid themselves and
their wives hundreds of thousands of dollars from Empire
accounts, withdrew hundreds of thousands of dollars of funds from
Empire accounts, and used Empire funds to purchase and lease
personal automobiles and other items.

On March 23, and 27, 2009, AYNGORN and STRASHNOV,
respectively, pleaded guilty to one count of conspiracy to commit
securities fraud and one count of securities fraud in connection
with the scheme.

STRASHNOV, 38, and AYNGORN, 37, are both from Brooklyn,
New York.

In addition to his prison term, Judge JONES ordered
STRASHNOV to pay $2,791,593 in restitution to the fraud victims
and to forfeit $2,791,593, reflecting the proceeds of the fraud
scheme. Judge JONES also ordered AYNGORN to pay $2,791,593 in
restitution to the fraud victims and to forfeit $2,791,593 in
connection with the fraud scheme.
Mr. BHARARA praised the work of the Federal Bureau of
Investigation and thanked the SEC for its assistance in the
Assistant United States Attorney ANDREW L. FISH is in
charge of the prosecution.
09-401 ###

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