LawFuel – Legal Announcements – MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, and MARK J. MERSHON, the Assistant
Director-in-Charge of the New York Office of the Federal Bureau
of Investigation (“FBI”), announced today that STEVEN BYERS, the
President and Chief Executive Officer of WexTrust Capital, LLC,
and JOSEPH SHERESHEVSKY, a principal and the former Chief
Operating Officer of WexTrust Capital, LLC, were arrested today
and charged in a criminal Complaint with defrauding investors by
diverting funds that they raised through private placement
offerings. According to the Complaint unsealed today in
Manhattan federal court:
WexTrust Capital, LLC (“WexTrust”) is a globally
diversified private equity company specializing in investments in
real estate and specialty finance opportunities. WexTrust is
headquartered in Chicago, Illinois and has offices in New York,
New York; Norfolk, Virginia; Atlanta, Georgia; Boca Raton,
Florida; Nashville, Tennessee; Tel Aviv, Israel; and
Johannesburg, South Africa. WexTrust was founded in 2003 and is
affiliated with several companies of a similar name, including
WexTrust Securities, LLC, a broker-dealer registered with the
Securities and Exchange Commission.
From at least 2005, BYERS and SHERESHEVSKY raised money
from investors pursuant to private placement offerings, used
material amounts of that money for other purposes, and did not
disclose their diversion of funds to investors.
In one such private placement, BYERS and SHERESHEVSKY
raised money by representing that the funds would be used to
purchase and operate seven commercial properties that were leased
to the United States General Services Administration (“GSA”).
According to the GSA private placement memorandum, the $9.2
million raised from investors, together with a mortgage of
approximately $21 million, would be used to purchase the seven
GSA properties and cover related acquisition expenses. The seven
GSA properties, however, were never purchased, the monies raised
to purchase the properties were used for some other purpose, and
investors were not informed that the monies were used for any
purpose other than to purchase and operate the seven GSA
properties. BYERS and SHERESHEVSKY agreed to fabricate a story
for the GSA investors regarding what went wrong.
Through another private placement offering made by
WexTrust involving a Crowne Plaza Hotel in Phoenix, Arizona,
BYERS and SHERESHEVSKY raised millions of dollars that they then
used for purposes other than those stated in the offering
memorandum. While the offering memorandum specified that the
$9.3 million raised would be used for the purchase and
improvement of the hotel property, in fact, BYERS and
SHERESHEVSKY used over $3 million of the raised funds to make
“loans” to WexTrust, used for, among other things, payroll;
deposits for investment properties unrelated to the Crowne Plaza
private placement; and distributions to investors of other
WexTrust investments.
BYERS, 46, of Oak Brook, Illinois and SHERESHEVSKY, 51,
of Norfolk, Virginia, are each charged with one count of
conspiracy to commit securities fraud. If convicted, they face a
maximum of 5 years in prison and a fine of the greater of
$250,000 or twice the gross gain or loss caused by their crime.
BYERS was arrested this morning in Illinois and
SHERESHEVSKY was arrested this morning in Virginia. Both are
expected to appear before a magistrate judge on the charges later
today.
Mr. GARCIA, a member of the President’s Corporate Fraud
Task Force, praised the work of the Federal Bureau of
Investigation and thanked the Securities and Exchange Commission
for its assistance in the investigation of this case. He said
the investigation is continuing.
Assistant United States Attorneys CHRISTOPHER L.
GARCIA, VIRGINIA CHAVEZ ROMANO, and AMY LESTER are in charge of
the prosecution.
The charges contained in the Complaint are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.
08-202 ###
