(Bloomberg News) U.S. prosecutors asked a federal judge to revoke the $10 million bail for Eliyahu Weinstein, a New Jersey man charged with leading a $200 million Ponzi scheme that targeted fellow Orthodox Jews.
Weinstein, 36, was arrested in August 2010 on charges of running a real-estate investment fraud that duped victims in New Jersey, New York, Florida, California and abroad. Two weeks later, a federal judge in Newark, New Jersey, released him on $10 million bail under house arrest after a prosecutor said he posed a "profound" risk of fleeing before trial.
Prosecutors this week asked a judge to order Weinstein's detention because they claim he committed additional crimes since his arrest, contacted victims in his case, and lied to U.S. court officials. A hearing scheduled today on the request led to a closed-door meeting with prosecutors, a defense lawyer and a magistrate judge, who adjourned the matter until Oct. 6.
"There is probable cause to believe that Weinstein has committed new federal crimes while on release," Assistant U.S. Attorney Gurbir Grewal said in a Sept. 20 court filing.
Weinstein attorney Henry Klingeman said in a telephone interview that the government's request was "groundless."
In a court filing yesterday, Klingeman said the government can't show that Weinstein committed any crimes while on release, that he only met with "potential victim/witnesses" in the presence of his lawyer, and that he never made any misstatements to the U.S. Pretrial Services office.
He wrote that judges normally order bail revocations after "conclusive evidence of wrongdoing," like a new arrest or failed drug test. Prosecutors "presented nothing close to these examples," Klingeman wrote.
"Instead, it has strung together a series of misleading allegations, overlaid them with critical rhetoric, and asked this court to play along with what is essentially a strategic gambit to deny Mr. Weinstein the ability to defend himself," he wrote.
Weinstein's ties to the Orthodox community in Lakewood, New Jersey, where he lives with his wife and six children, are "strong and deep," Klingeman wrote.
In his filing, Grewel said prosecutors expect an indictment in the next several weeks, charging Weinstein and others with "orchestrating a real estate investment fraud Ponzi scheme."
An arrest complaint charged Weinstein with committing bank fraud and wire fraud from 2005 to this month. Vladimir Siforov, 44, who also was charged with wire fraud, remains at large.
By using "lies, threats, deliberate misrepresentations and even counterfeit checks," Weinstein and Siforov "exploited the close community ties of the Orthodox Jewish community for one goal: to steal money through an elaborate real estate and Ponzi scheme," Michael B. Ward, special agent in charge of the Federal Bureau of Investigation's office in Newark, said in a statement in August 2010.
The FBI arrest complaint said Weinstein falsely represented that he owned or could buy property and that victims could make "a healthy profit in a short time period." He sold his real or fake interest in property multiple times, fraudulently altered checks, drew up phony leases and hid zoning changes from his victims, according to the FBI.
When investors tried to collect their earnings, he ignored them, promised payments that never came, and paid smaller amounts than he owed, according to the complaint.
Weinstein used proceeds of the fraud to amass manuscripts and antique Judaica worth $6.2 million, a jewelry and clock collection that he bought for $7.6 million, and another jewelry and watch collection valued at $6.2 million.
He also charged $1.7 million to an American Express account, according to the complaint.
In a letter to the court last year, former Weinstein attorney Ephraim Savitt said his client was close to settling an $80 million lawsuit against him in Trenton, New Jersey, and that judgments had been entered against him of $35 million in Philadelphia and $6 million in New York.
At a bail hearing last year, Assistant U.S. Attorney Zach Intrater said Weinstein had a motive to flee and flew out of the country 40 times since 2007, including to Israel, Russia and Ukraine.
Of the four properties Weinstein was posting to secure his bond, one was owned by a man who was convicted of failing to file a currency transaction report, Intrater said. When authorities searched Weinstein's house, the prosecutor said, his wife, Rivka, "attempted to sneak jewelry out of the house in the undergarments of a housekeeper."
The case is United States of America v. Weinstein, 10-mj- 7115, U.S. District Court, District of New Jersey (Newark).