January 28, 2020

LA Jury Indicts Man for Allegedly Scamming Members of Jewish Community

Photo from Pixabay.

A Los Angeles grand jury indicted a man on July 18 for allegedly defrauding more than $3 million from more than 40 people in Los Angeles, New York and Israel since June 2012.

According to an Aug. 26 Securities and Exchange Commission (SEC) litigation release, 46-year-old Motty Mizrahi, allegedly lured people — primarily from his unidentified Los Angeles synagogue and members of the Israeli-American community — to invest in his MBIG Company, run out of his parents’ Encino apartment.

Mizrahi allegedly told investors he was a certified public accountant (CPA) and broker, despite not having a CPA license or a broker registration. He also guaranteed his investors a return of 2% to 3% a month with the investments being risk-free, and that his compensation would be only 25% of the generated profits.

“According to the indictment, Mizrahi transferred millions of investor monies to his personal trading accounts, where he accumulated persistent, extensive losses; he converted investor monies to personal use, and he converted certain of the monies deployed in his investment scheme from his employer,” the SEC’s litigation release states. 

A March 29 SEC complaint states Mizrahi told clients that cash reserves backed their funds. However, those cash reserves did not exist. Mizrahi also allegedly pledged to provide various payments to clients in 2018 that never materialized and fabricated E*Trade statements purportedly showing a balance of $9.4 million for MBIG, even though MBIG never had an E*Trade account. Additionally, the complaint states, Mizrahi encouraged clients to falsely tell the SEC that their investments to MBIG were loans.

Financial Advisor News reported that Mizrahi used his clients’ money toward “high-risk options trading” from his personal account resulting in more than $2.2 million in losses, and that he transferred $1.4 million of his clients’ money into his personal account.

Some of the clients that Mizrahi allegedly scammed spoke to the Journal on condition of anonymity. One client said he invested in MBIG in 2012 and didn’t suspect anything was amiss until 2018, when he asked Mizrahi to withdraw his money. Mizrahi told him that he could view the account once a month. When he did so in October 2018, he realized the numbers were fake.

“You have to understand, it’s not like I had met them on a street corner next to Home Depot. I met them at the synagogue,” he said. “Those were people I know. Their father, the cantor, was working as a councilman at the Israeli Consulate. Our children go to the same school. He never gave me a reason to suspect that something was amiss.”

A second client invested his and his mother’s savings, despite protestations from his wife. They never received their money back from Mizrahi.

“I called Motty and left messages but he didn’t answer,” the wife said. “[Mizrahi’s brother] Sassi did call me back because we were good friends. I told him, ‘My husband is in a bad state, he started drinking, I’m at the hospital with my son. We don’t have any money.’ I begged him, ‘Please, give me at least $5,000 so I can pay the medical bills and my rent,’ but he declined. He said that it’s impossible to withdraw the money. He told me, ‘You’ll get every dollar back and more, but for now, it’s impossible.’ Can you believe it that I had to beg to receive my own money?”

The brothers were arrested in March under similar charges. If convicted, both could face up to 20 years in federal prison.