WexTrust Sued by SEC for Ponzi Scheme

The Securities and Exchange Commission on Monday sued WexTrust Capital in federal court, accusing the private investment firm of running a Ponzi scheme that has defrauded nearly 1,200 investors since 2005.

According to a complaint filed by the regulator, the Chicago-based WexTrust and its founders, Steven Byers and Joseph Shereshevsky, created scores of entities through 60 private placements. While marketed as investment entities earmarked for specific investments, similar to the funds raised by private equity firms, these funds were used to pay off prior investors in the scheme, the S.E.C. said.

Among the alleged schemes disclosed by the S.E.C. was a 2005 offering to raise funds to buy seven properties leased by federal agencies — despite the fact that the properties could not be bought.

Wextrust Entities have conducted at least 60 securities offerings and raised at least $255 million from at least 1,196 investors. Most of these offerings occurred between 2005 and 2008, although at least four offerings occurred as early as 2002. Many of the securities offerings involved the sale of “preferred membership interests” in the LLC Entities, which were limited liability corporations created by Wextrust as the investment vehicle for the specific offering. These investments are securities in the form of investment contracts, notes or other evidence of indebtedness.

SEC information can be found by clicking here.

Information on the WexTrust receiver can be found by clicking here.