Abbe Edelman, 50, Livingston, New Jersey, was arrested at his home by federal law enforcement officers on charges that he allegedly ran a real estate investment scheme that bilked victims out of $4 million.
The defendant is charged by complaint with six counts of wire fraud. He is scheduled to make his initial court appearance before U.S. Magistrate Judge Mark Falk in Newark federal court.
According to the complaint:
Beginning in 2004, Edelman operated through several companies alleged to be in the business of buying and selling real estate. He allegedly engaged in a real estate investment fraud in which he obtained millions of dollars from victims who invested in his scheme. Edelman told investors that he had significant past real estate experience, including a purported history of successfully buying and selling numerous bank foreclosed properties, and an MBA degree from NYU in real estate finance. Edelman claimed that he had long standing relationships with banks that provided him with unique access to purchase foreclosed properties below market prices and, in fact, already had negotiated with the banks to purchase certain properties at agreed-upon prices that would guarantee an easy resale and profit for investors.
Edelman promised investors that any investment would be used solely for the purchase and renovation of specific investment properties in, among other places, New York, New Jersey, California, and Florida. Edelman represented to his investors that he could obtain extraordinary returns – as much as 25 percent – in as little as eight to 12 months. Edelman allegedly told some victims he had received from other investors, including professional athletes and celebrities, the majority of the capital needed to purchase the investment properties. He also said he provided cash deposits to the financial institutions to secure the right to purchase the investment properties and invested his own money in the deals.
In reality, neither Edelman nor any of his real estate companies had a history of purchasing any bank foreclosed properties. Edelman also did not possess even an undergraduate degree. He did not have any deals lined up involving any investment properties, did not have his own money invested in any such deals, and did not have any money from celebrity investors. Edelman induced investors to give him $4 million and used little, if any, of it to fund any real estate acquisitions or renovations, instead diverting the funds for his own use.
He allegedly used the funds for his home mortgage and day-to-day living expenses, such as restaurants, telephone, and gas bills, purchased merchandise from high-end retailers, such as Gucci and Neiman Marcus, repaid existing investors in Ponzi-scheme fashion and paid his legal expenses in connection with victims seeking repayment of their investment.
When investors later inquired about the status of their investments, Edelman offered additional misrepresentations, including emails sent from a fake email account he had created, falsely assuring investors that he and his company had closed on the foreclosed properties, sometimes telling them buyers for the properties already had been identified.
In some cases, to allow the scheme to continue undetected, Edelman made “lulling” payments to investors, ranging from $100 to tens of thousands of dollars, to permit the scheme to continue. When payments were made to any investors, Edelman generally represented that the money was from the sale of investment properties, when, in fact, it came from a new investor.
The wire fraud counts with which he is charged each carry a maximum potential penalty of 20 years in prison and a $250,000 fine.
U.S. Attorney Paul J. Fishman announced the charges.
U.S. Attorney Fishman credited criminal investigators with the U.S. Attorney’s Office and postal inspectors of the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge Maria L. Kelokates, with the investigation leading to the arrest.
The government is represented by Assistant U.S. Attorneys Joseph B. Shumofsky of the Economic Crimes Unit and Evan S. Weitz of the Asset Forfeiture and Money Laundering Unit.