Lyndhurst man jailed in $1.5M Ponzi scheme


A Lyndhurst man was sentenced last week  to 46 months in prison for fraudulently obtaining more than $1.5 million from approximately 100 victims prior to high-profile initial public offerings (IPOs), Acting U.S. Attorney William E. Fitzpatrick announced.

Omar Hafez, 25, had previously pleaded guilty  to one count of wire fraud.  U.S. District Judge William H. Walls imposed the sentence last Thursday in Newark Federal Court.

In addition to the prison term, Hafez must pay restitution of $1.5 million and serve three years of supervised release.

According to Fitzpatrick’s office: 

From July 2014 through December 2015, Hafez operated an investment fraud scheme in which he and others created a number of entities, including Lotus Global. Several of these had websites and social media pages listing Hafez as the CEO and advertising themselves as successful wealth management companies.

To deceive victims, Hafez represented that he had access to shares of various companies prior to their initial public offerings and could use that access to provide significant profits. However, bank records for accounts controlled by Hafez and certain Lotus Global entities revealed that none of the money provided by victim investors was used to purchase shares or invest in any of the pre-IPO companies.

Instead, authorities reported, Hafez used the funds for his own benefit, including making several purchases at luxury car dealerships, ranging from approximately $8,690 to $87,000. In addition, he bought luxury goods, spending approximately $17,250 at Tourneau, $5,613 at Louis Vuitton and $3,000 at Tiffany’s — as well as plane tickets and hotel stays, with a single trip to Chicago totaling about $10,000.

Authorities said Hafez employed numerous strategies to maintain the victims’ confidence and induce further investments. For example, bank records showed that he occasionally used moneyfrom earlier victim investors to provide future victims with “lulling” payments.

“In classic Ponzi scheme fashion,”  Fitzpatrick’s office noted, “Hafez lied to investors and told them that these payments were returns on their investments.”

As funds began to run out and investors demanded their money with increasing frequency, Hafez provided certain victims with checks for thousands of dollars, claiming that they represented investment returns or a refund of initial investments. When victims attempted to deposit or cash these checks, they were rejected due to insufficient funds because Hafez and others had already spent the money. 

Fitzpatrick credited special agents of the FBI and inspectors from the U.S. Postal Inspection Service with the investigation leading to the conviction and sentence. 

  Karen Zautyk

[Editor’s note: When he was initially arrested in December 2015, authorities gave Hafez’ place of residence as North Arlington. Apparently, he moved.

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