A New Jersey man pleaded guilty in federal court to defrauding nearly 100 investors of $47 million in a scheme that predominantly preyed on the Orthodox Jewish community.
Last week, the Department of Justice announced Leor Moshe would plead to wire fraud charges, with sentencing scheduled for December. Also, the Securities and Exchange Commission unveiled charges against Moshe and two alleged co-conspirators.
In a statement, U.S. Attorney Robert Frazier accused Moshe of turning “the trust of his own religious community into a tool for fraud, exploiting personal relationships to fuel a massive Ponzi scheme.”
According to court documents and the SEC filing, Moshe was an active member of the Orthodox Jewish community in Toms River, N.J. However, neither he nor his alleged accomplices were ever registered as broker/dealers, or affiliated with any b/d firm.
Moshe ran Capital Funding, which he claimed made short-term business loans, while soliciting investments from contacts primarily in Orthodox Jewish religious communities in New Jersey and New York (though he placed no restrictions on who could invest and attracted clients from Ohio, Arizona and Florida, among other states).
According to the SEC, Moshe told clients their funds would be used to make those short-term business loans, and the firm promised fixed return rates plus return of the principal; some clients were promised returns as high as 22% and 53%, annually (with most investors making one-year investments).
In time, Moshe allegedly brought Isaac Odes and Jacob Goldman (his SEC co-defendants) into the scheme (both acted as investment salespeople). They allegedly told some investors their funds were secured by collateral, including “valuable sports cards,” real estate liens or Moshe’s property ownership stakes (for the most part, the collateral didn’t exist).
Some investors received agreements, promissory notes or Heter Iska agreements; according to the SEC, a Heter Iska agreement is rooted in Jewish law and “restructures a transaction that would otherwise constitute an impermissible interest-bearing loan under Jewish law into a permissible business partnership in which profits are shared.”
Instead of using the money as promised, Moshe stole more than $11 million for his personal use, “including transfers to his personal bank accounts, transfers to a personal account at a cryptocurrency exchange, payments on credit cards held in his or his wife’s name, gambling expenses, home renovations, and mortgage and car payments.”
According to the SEC, Moshe also made over $850,000 in Ponzi-like payments, using new investors’ funds to pay earlier investors.
Through about May 2023, the scheme continued uninterrupted, but the firm’s lending activity generated only a “small fraction” of the returns investors received. But by June, most investors stopped receiving promised returns, and investors lost over $25 million when it collapsed.
Moshe’s wire fraud charge carries a maximum penalty of 20 years in prison and the greater of a $250,000 fine or twice the gross loss to the victim or the gain to the defendant. As of yet, there has been no response to the SEC complaint.
Odes and Goldman could not be reached for comment.
An attorney for Moshe did not respond to a request for comment prior to publication.
