Woodmere Man Pleads Guilty to $50M Ponzi Scheme

A Woodmere man admitted in court Thursday that he defrauded investors out of more than $50 million in a real estate Ponzi scheme.

Gershon Barkany pleaded guilty to wire fraud at the federal courthouse in Central Islip and faces up to 20 years in prison. As part of his plea agreement with the government, Barkany agreed to a $62 million money judgment payable to the United States.

“Barkany has admitted to a multi-million-dollar real estate swindle where he convinced wealthy investors they were buying no-risk properties,” said FBI Assistant Director in Charge George Venizelos. “Unbeknownst to his victims, what they were really buying were not brick-and-mortar buildings, but the smoke-and-mirror fantasy of Barkany’s fraudulent sales pitch.”

According to the court proceedings, between December 2009 and March 2013, Barkany convinced seven investors to give him approximately $62 million by “promising to use their money in ‘risk-free’ deals to purchase and then immediately re-sell at a profit commercial real estate properties located in New York City and New Jersey. However, no such deals existed and the investors lost their entire investments,” according to a press release.

In one instance, Barkany approached an investor he knew from the community and convinced him to invest $46.5 million as a down payment to purchase an office building in Manhattan, a hotel in Atlantic City, and properties in the Bronx and Queens. Barkany told the investor he would find a buyer for those properties who would pay a higher price before the actual closing, resulting in a profit for Barkany and the investor. If a buyer was not found before the closing, the owner of the properties would refund their money.

These real estate deals did not exist and the investment was not refunded.

FBI special agents arrested Barkany on March 28. Shortly after, two additional victims contacted the FBI and said that they too had been defrauded by Barkany. As he had done with the other victims, Barkany convinced those investors to give him about $7.5 million for a “risk-free” deal to purchase and then immediately re-sell at a profit an office building located on 53rd Street in Manhattan. That deal did not exist.

To deceive the victims, Barkany created fictitious documents, including a purchase agreement purportedly signed by the seller of the office building and an escrow agreement allegedly signed by a third-party escrow agent. Neither the seller of the property nor the third-party escrow agent signed or entered into those agreements.

As part of his Ponzi scheme, Barkany diverted some of the funds he received to pay investors whom he had defrauded earlier. He also lost some of the funds in gambling and otherwise used the money for his own benefit.

“The defendant bilked investors out of funds that he led them to believe were to be invested in safe real estate deals. Instead, he was paying investors to keep his Ponzi scheme afloat and to gamble,” said United States Attorney Loretta E. Lynch. “Barkany rolled the dice that his brazen greed and dishonesty would go unnoticed. That gamble did not pay off.”