Four relatives of Gershon Barkany, who pleaded guilty last year in a $62 million Ponzi scheme involving fraudulent New York and New Jersey real estate deals, are themselves facing a suit from investors claiming the family participated in the fraudulent actions dating back to 2008.
In a March 5 lawsuit filed in Manhattan Supreme Court, an entity called Barkany Asset Recovery and a firm called Cortland Realty Investments filed suit against Barkany’s in-laws Joseph and Deborah Rosenberg, along with his uncle, Jonathan Zelinger and wife Gila, alleging fraudulent conveyance, unjust enrichment and conversion.
According to the lawsuit, Barkany, who was about 26 years old when he commenced the swindle, used various means to defraud investors of their money. In 2010, he allegedly induced Cortland, led by investor Abraham Grohman, to wire $7 million into an escrow account at the law firm of Zucker & Kewstel. In turn, the firm issued checks totaling $7 million to an outfit called Morgan 86 Inc., an entity that Barkany controlled, as well as various individuals, lawyers, charitable foundations. According to the complaint, at least $200,000 was also sent to Rosenberg, Barkany’s father-in-law.
Neither Cortland nor Grohman were connected to any of the people or entities that received the funds.
According to the suit, another sham involved a fraudulent Atlantic City deal in August 2010, where Barkany told Cortland that he needed a $75 million down payment to acquire a casino hotel. Cortland wired $4 million into the law firm’s escrow account. Minutes later, the suit alleges, the firm wired the funds to a Morgan 86 bank account. The following day Cortland wired another $14.5 million into that escrow fund, and again, the money was wired to the same bank account controlled by Barkany, according to the complaint.
In total, the suit alleges Barkany transferred at least $3.1 million to Rosenberg and his wife. It claims the Rosenbergs provided about $2.1 million to Barkany and his related companies. The suit also alleges that Zelinger and his wife received $230,000 from Barkany and provided him about $185,000 in funding.
“Our comment is that the allegations in the lawsuit are baseless and that the families will vigorously defend the lawsuit and expect to prevail,” said Gregory Wallance, attorney for the defendants.
Bruce Barket, attorney for Barkany in the criminal case, said his client has already helped recover more than $30 million for investors in the criminal case, and said he does not expect there to be any further criminal charges filed in the case.
He declined to comment on any specifics in the case. A spokesperson for U.S. Attorney Loretta Lynch also declined to comment.
Corltland and other victims of Barkany’s scheme filed suit in 2011 against Zucker & Kwestel, alleging the law firm committed legal malpractice and abetted fraud by allowing the ponzi schemer to access the escrow accounts. Lawyers for the law firm denied the allegations in court papers, and partner Steven Kwestel was not immediately available for comment. Lawyers representing the firm were not immediately available.
Barkany, a 29-year old from Woodmere, N.Y., pleaded guilty in June 2013 to wire fraud for inducing seven investors between 2009 and 2013 to invest the funds into what he said were “risk-free” property flips in Manhattan, the Bronx, Queens and Atlantic City.
He faces more than 20 years in prison.