WexTrust Capital. Trust is their middle name. However, trust in this particular firm was misplaced. The co-owner of WexTrust Capital, Steven Byers, pled guilty yesterday to charges of conspiracy and securities fraud in U.S. District Court in New York. Byers, along his partner, Joseph Shereshevsky (who will be tried separately), conned investors by operating a Ponzi scheme which gave the illusion that their firm was profitable, when in fact it had been operating at a loss for years. Byer was also found guilty of misappropriating $9.2 million which was supposed to be used to buy investment property for “other purposes.”
The SEC alleges that the two men took in total nearly $255 million from investors in fraudulent deals, mostly targeting the Orthodox Jewish community.
While this is sad, thorough diligence on the part of the investors could have prevented them from being taken in. Among other irregularities, Joseph Shereshevsky has two prior felony convictions, including a guilty plea on a charge to commit bank fraud in 1994.
Thorough due diligence should include civil and criminal court records searches in all 50 states. Many basic due diligence or background searches only include the state in which the subject currently resides, which might not have pulled up the information about Mr. Shereshevsky from 16 years ago.