By Virginia Lascara
virginia.lascara@insidebiz.com
It's been over six years since WexTrust and related entities went under receivership and victims have received hardly any of the $238 million that was lost. The court-appointed receiver has restored $5 million back to the investors, only a 2 percent return on their allowed losses.
Now, the Securities and Exchange Commission is fighting on behalf of the investors to get money back into their pockets.
According to court documents, the SEC staff states that to date estate professionals, including foreign, ordinary course and litigation support professionals, have been paid approximately $21.7 million while investors have been paid their pro rata share of $5 million.
In a hearing set for Dec. 18, the SEC requests that the court deny all requests for payment of holdbacks by all professionals, stating that "if the court were to grant the holdback requests, then professionals will be paid substantially more than defrauded investors."
The SEC is requesting the remaining estate funds of approximately $21.3 million in cash be distributed in a way that ensures investors will be paid at least as much as professionals.
More than 1,400 investors were deceived by the WexTrust investment firm in a Ponzi scheme before it was shut down by the SEC in 2008. Owners Joseph Shereshevsky of Norfolk and Steven Byers of Chicago operated the scheme by promising high returns to early investors and paying them with money raised from later investors.
The Orthodox Jewish community, particularly in Norfolk and New York City, were victims of the investment scam, which promised to invest money into real estate and South African gold and diamond mines.
The SEC filed the case in federal court in Manhattan, New York, claiming that Shereshevsky and Byers defrauded investors by diverting at least $100 million in unauthorized uses.
Both Shereshevsky and Byers pleaded guilty and are serving 21 and 13-year sentences, respectively.
In August of 2008 the court appointed Timothy J. Coleman to act as receiver for the WexTrust group of companies. As receiver, he is charged with managing the WexTrust companies and with taking actions required by law and by court orders.
