Two brothers targeted fellow Orthodox Jews in a $7 million Ponzi scheme they ran out of their parents’ California house for nearly seven years, federal prosecutors said. Now, one brother is going to prison.
At least 42 members of the San Fernando Valley’s Orthodox Jewish Israeli community trusted Sassi Mizrahi, 58, and Motty Mizrahi, 51, with their money — then lost millions of dollars, according to court documents that say at least one person also lost their apartment due to the brothers’ scheme.
Most of the victims who invested with the Mizrahis’ investment company, which was based in the brothers’ parents’ Encino home, are “still owed substantial amounts of money,” prosecutors wrote in sentencing documents.
Many of these victims detailed in court how they trusted the brothers, according to a sentencing memorandum.
“(W)e are seeing each other, you know, throughout the community... throughout synagogue. I wouldn’t (have) even thought to remind (myself) that something like this could happen,” one person testified, the sentencing memo says. “A build of trust, that’s what happened here. A build of trust.”
After the brother’s scammed $7,301,075 from their investors — by falsely promised “guaranteed returns” — the investors lost $4,477,720 of it, according to prosecutors.
As for the remaining nearly $3 million, the brothers “either lost that money in disastrous trades, used it to repay other victims whose money they had lost, or simply transferred it to themselves,” prosecutors said.
Now, a judge has sentenced Sassi Mizrahi, of Sherman Oaks, to seven years and four months in prison, the U.S. Attorney’s Office for the Central District of California announced in a Nov. 27 news release.
U.S. District Judge Cormac J. Carney also ordered him to pay $4,477,720 in restitution, the release said.
In February, Sassi Mizrahi was found guilty of five counts of wire fraud after a six-day trial, according to prosecutors.
“When victims asked for their money back, (Sassi Mizrahi) gaslit them with lies about the safety of their investments, promises of repayment he knew could not be honored, threats of retaliation, and forged documents meant to corroborate his increasingly baroque excuses for why the money was unavailable,” prosecutors wrote in the sentencing memo.
Sassi Mizrahi’s defense attorney, George B. Newhouse Jr., told McClatchy News in a statement on Nov. 28 that his client’s conviction and sentencing will be appealed to the Ninth Circuit Court of Appeals.
“Sassi did not run or participate in a Ponzi Scheme which was, in fact, run by his brother Motty Mizrahi out of an office that the two brothers shared,” Newhouse said.
Motty Mizrahi, of Encino, will be sentenced in the case on Dec. 18, the release said.
In January, he pleaded guilty to six counts of wire fraud and one count of aggravated identity theft, according to the release.
Motty Mizrahi’s defense attorney, John Hanusz, told McClatchy News that “as demonstrated through his guilty pleas to all counts, (he) has taken responsibility for his actions” in a statement on Nov. 28.
“He is deeply remorseful for his crimes, and will apologize (to) all of those impacted by his actions at the time of sentencing,” Hanusz added.
‘Dire, real-world consequences’
As part of the brothers’ Ponzi scheme between June 2012 until March 2019, Motty Mizrahi held himself out as a “licensed broker, a certified public accountant and experienced trader” — but he wasn’t, according to prosecutors.
Motty Mizrahi established the brothers’ investment company, MBIG, and Sassi Mizrahi represented himself as the company’s partner, prosecutors wrote in Sassi Mizrahi’s sentencing memo.
Newhouse described MBIG as “Motty’s company” in his statement to McClatchy News.
Those who invested in the company were promised monthly returns between 2% and 3% in addition to yearly returns that could vary from 30% to 102%, according to prosecutors.
“Neither Mizrahi brother ever invested any victim-investor funds in an account under MBIG’s name…Sassi Mizrahi received hundreds of thousands of dollars of investor money, and helped his brother conceal the truth about the scheme from MBIG’s investors,” prosecutors said.
When victims confronted the brothers about their money and demanded it back, the brothers denied the losses and refused to return any funds, according to prosecutors.
Sassi Mizrahi is accused of coaching his brother on how to answer investors who wanted them to return their money, the sentencing memo says.
Before the scheme was discovered, one victim wrote “I have no air to breathe...I am scared. For a whole year I have been asking you to release (the) money,” according to the sentencing memo.
They said that they had to leave their apartment, where they lived for nine years, because they could no longer afford rent, the sentencing memo says.
“I work hard and don’t cover all my expenses. I’m 63 years old. I have no-one to ask help from,” the person added, according to the sentencing memo.
In addition to financial hardships, the Ponzi scheme had a major psychological toll on the victims, prosecutors said.
In a sentencing memo submitted on Sassi Mizrahi’s behalf, Newhouse wrote his client had no part in running their company, MBIG.
“The government’s allegations that this was Motty’s and Sassi’s Ponzi scheme from the beginning… is simply not true,” Newhouse wrote.
Newhouse told McClatchy News that “no evidence was introduced at trial that showed Sassi playing any role in recruiting investors with Motty’s company...collecting any money, managing (and largely losing) the money in brokerage accounts, or making ANY misrepresentations to investors or indeed that he had any knowledge of the extent or timing of payments that were received by the scheme.”
According to prosecutors, Sassi Mizrahi directly received $181,688 from investors while Motty Mizrahi received $467,536.
Sassi Mizrahi is accused of playing a major role in the fraud scheme in the sentencing memo.
“In sum, (Sassi Mizrahi’s) crimes had dire, real-world consequences for the people who placed their trust in him,” prosecutors wrote.
However, Newhouse said his client was convicted of “’guilt by association’ not by legally sufficient proof of any wrongdoing on his account” in his statement to McClatchy News.
More than a year after the Ponzi scheme ended, a more than $3 million judgment was obtained by the U.S. Securities and Exchange Commission against Motty Mizrahi and the brothers’ company, according to the release.