LawFuel – US Legal Newswire – MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced that STEVEN BYERS, the
former President and Chief Executive Officer of private equity
firm WexTrust Capital, LLC, and JOSEPH SHERESHEVSKY, a former
principal and Chief Operating Officer of WexTrust Capital, LLC,
were indicted today on charges stemming from a scheme to defraud
WexTrust Capital investors by diverting funds that they raised
through private placement offerings. According to the two-count
Indictment filed in Manhattan federal court:
WexTrust Capital, LLC (“WexTrust”) is a globally
diversified private equity company specializing in investments in
real estate and specialty finance opportunities. WexTrust
Capital is headquartered in Chicago, Illinois and has offices in
New York, New York; Norfolk, Virginia; Atlanta, Georgia; Boca
Raton, Florida; Nashville, Tennessee; Ramat Gan, Israel; and
Johannesburg, South Africa. WexTrust Capital was founded in 2003
and is affiliated with several companies of a similar name,
including WexTrust Securities, LLC, a broker-dealer registered
with the United States Securities and Exchange Commission (the
“SEC”).
From at least May 2005, BYERS and SHERESHEVSKY raised
money from investors pursuant to private placement offerings,
used material amounts of that money for other purposes, and did
not disclose their diversion of funds to investors.
In one such private placement, BYERS and SHERESHEVSKY
raised money over $9 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.
The seven GSA properties, however, were never purchased.
Instead, virtually all of the funds raised from investors to
purchase the properties were diverted by BYERS, SHERESHEVSKY and
others to other purposes, but investors were never informed that
the funds were used for any purpose other than to purchase and
operate the seven GSA properties. BYERS and SHERESHEVSKY
subsequently agreed to fabricate a story that they would then
tell the GSA investors regarding what happened to their
investment. BYERS and SHERESHEVSKY also caused documents to be
distributed to investors that failed to disclose SHERESHEVSKY’s
criminal history, notwithstanding the fact that many of WexTrust
Capital’s offering documents touted SHERESHEVSKY’s role in
WexTrust Capital and his professional experience.
BYERS, 46, of Oak Brook, Illinois, and SHERESHEVSKY,
51, of Norfolk, Virginia, are each charged with one count of
securities fraud and one count of conspiracy to commit securities
fraud and to commit mail fraud. If convicted, they each face a
maximum of 25 years in prison and a fine of the greater of
$250,000 or twice the gross gain or loss caused by their crime.
The Indictment also seeks forfeiture of at least $9,200,000 from
the defendants.
BYERS and SHERESHEVSKY were arrested on August 11,
2008. Both are scheduled to be arraigned on the Indictment by
United States District Judge DENNY CHIN on November 14, 2008 at
3:00 p.m.
Mr. GARCIA, a member of the President’s Corporate Fraud
Task Force, praised the work of the Federal Bureau of
Investigation and thanked the SEC for its assistance in the
investigation of this case. He said the investigation is
continuing.
If you believe you were a victim of this crime,
including a victim entitled to restitution, and you wish to
provide information to law enforcement and/or receive notice of
future developments in the case or additional information, please
contact WENDY OLSEN-CLANCY, the Victim Witness Coordinator at the
United States Attorney’s Office for the Southern District of New
York, at (866) 874-8900 or Wendy.Olsen@usdoj.gov. For additional
information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html
on the Internet.
Assistant United States Attorneys VIRGINIA CHAVEZ
ROMANO, LISA A. BARONI and AMY LESTER are in charge of the
prosecution.
The charges contained in the Complaint and Indictment
are merely accusations, and the defendants are presumed innocent
unless and until proven guilty.
08-284 ###
