New Charges Filed In Alleged $8.5 Million Ponzi Scheme

NEWARK – The Office of the Attorney General, through the New Jersey Bureau of Securities within the Division of Consumer Affairs, has filed new charges in a lawsuit pending in State Superior Court, alleging that several individuals defrauded dozens of investors after raising approximately $8.5 million.

“We allege that these investors sought secure investments but instead, fell victims to a scam by individuals looking to unjustly enrich themselves,” Attorney General Paula T. Dow said. “We’re working to obtain restitution for the defrauded investors, plus assessment of civil penalties against the defendants.”

According to the amended complaint, the fraudulent scheme involved the sale of allegedly secure three-year notes, promising 12 percent annual rates of return, to 73 investors, many of whom were elderly and retired. The state alleges that none of the defendants or the securities were registered with the bureau, as required by New Jersey’s Uniform Securities Law, and the investor funds that were raised were misused, in part, to pay other existing investors.

Additionally, approximately $5 million in investor funds was allegedly “improperly transferred,” in whole or in part, to certain defendants, members of their families, and a law firm controlled by one of the defendants.

In March, the bureau filed suit against Liberty State Financial Holdings Corporation (LSFHC) and a wholly-owned subsidiary, Liberty State Benefits of Pennsylvania, Inc. (LSBPA). LSFHC is based in Cherry Hill. The amended complaint, filed in Essex County, adds the following individuals as defendants: Michael William Kwasnik, Esq.of Philadelphia, 42; William Kwasnik of Marlton, 70; Joseph Anthony Schifano of Brick, 45; Daniel Francis McCorry, of Ventnor, 55; and William P. Leonard of Cherry Hill, 83.

“We allege that the defendants betrayed the trust placed in them by their clients, and that greed motivated their actions to defraud these elderly investors of the nest eggs they had built up over their lifetimes,” said Thomas R. Calcagni, Director of the State Division of Consumer Affairs “We’re taking action to hold the defendants accountable and to help the victims of this alleged fraud.”

At the bureau’s request, and with the consent of LSFHC and LSBPA, the court appointed a fiscal agent to oversee LSFHC and LSBPA this March. In July, the two defendant companies filed for Chapter 11 bankruptcy, and the court appointed a bankruptcy trustee in September.

“I cannot overstate the importance of performing due diligence before investing any money. Investors should contact us to check whether the person offering the security, and the security itself, are registered,” said Abbe R. Tiger, Chief of the N.J. Bureau of Securities.

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