New York man gets 56 months in jail for running $62 million real estate Ponzi scheme

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A New York man will spend more than the next four years in jail after admitting to running a real estate Ponzi scheme that defrauded investors out of approximately $62 million by promising “risk-free” investments in commercial real estate.

According to the U.S. Attorney’s Office for the Eastern District of New York, Gerson Barkany pleaded guilty to wire fraud charges stemming from the scheme way back in 2013. And last week, Barkany was sentenced to 56 months in prison.

Court documents showed that between December 2009 and March 2013, Barkany convinced more than 10 victims to invest approximately $62 million by committing to use the money in “risk-free” deals to purchase, and then immediately sell at a profit, commercial real estate located in New York City and New Jersey.

But much to the investors’ dismay, the deals in question did not actually exist, leaving the investors with total losses on their investments.

In one case, Barkany convinced one investor to put up $46.5 million as a down payment on an office building in Manhattan, a hotel in Atlantic City and properties in the Bronx and Queens, but the deals did not exist and the investor was out their entire investment.

Barkany was arrested in March 2013, and shortly after his arrest, two additional victims came forward to say that they too had been defrauded by Barkany.

Barkany persuaded those investors to give him approximately $7.5 million by promising to use their money in a “risk-free” deal to purchase, and then immediately sell at a profit, an office building in Manhattan.

As part of that scheme, Barkany created fake real estate documents, including a fraudulent agreement with the property’s owners. But, as with the other schemes, the investment did not actually exist and the investors lost everything.

As for what Barkany did with the money, some of the money went to pay back his earlier investors, a hallmark of a Ponzi scheme. Additionally, Barkany used approximately $7.8 million of his investors’ money for “personal expenses and gambling,” the U.S. Attorney’s Office said.

In addition to his 56-month sentence, Barkany was also ordered to forfeit $62 million and ordered to pay restitution in an amount that will be determined at a later date.

“Today’s sentence is the very real consequence for all the lies, forgeries and fabrications that Barkany used to steal from investors who thought they were putting their money into safe real estate deals,” United States Attorney Richard Donoghue said. “This Office will vigorously prosecute those who betray their clients’ trust for their own financial self-interest.”

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