NEWARK, N.J. (AP) — In early 2012, the three men were making an attractive offer: the opportunity to purchase Facebook Inc. stock just as the company was expected to go public.
The problem, prosecutors allege, is that the men had no connection to the stock or the company and defrauded a potential investor out of $6.7 million.
Federal prosecutors charged Aaron Muschel, 63, of Brooklyn; and Alex Schleider, 47, and Eliyahu Weinstein, 37, both of Lakewood, N.J., with wire fraud conspiracy. Muschel and Weinstein also were charged with transacting in criminal proceeds and Weinstein also faces an additional four counts of wire fraud while he was on pretrial release.
“According to the charges, the defendants took advantage of the buzz around the Facebook IPO to fleece unsuspecting investors,” U.S. Attorney Paul Fishman said in referring to Facebook’s initial public offering last year.
The three men appeared in federal court Tuesday. Weinstein, who has yet to be sentenced in another criminal case, was ordered held; Schleider was released on $1 million cash bond; and Muschel was released on bail secured by property. Their lawyers didn’t comment to news reporters.
Prosecutors allege the three men wired the money from their Facebook scheme among accounts and used it for personal gain, including extending loans to a rabbi and his Brooklyn congregation in exchange for interests in life insurance policies. They allegedly told the investor that the venture would be backed by assets, including a Park Avenue property worth $12 million that did not exist.
Prosecutors allege Weinstein used the money to make a gold deal in Africa and write a $75,000 check to a Newark law firm that was representing him in another case.
Facebook declined comment Tuesday.
Last year, Weinstein pleaded guilty to money laundering and wire fraud conspiracy. Authorities said he ran a $200 million real estate scheme, using bogus documents, to get people to invest in property, much of which he did not own. Weinstein used the proceeds to fund a lavish lifestyle. He faces up to 25 years in prison in that case.