Firm Under SEC Investigation Targeted Institutional Investors


The SEC charged Wextrust Capital LLC, a private equity firm, and various affiliates, on Aug. 12 with running a scheme to bilk investors by raising money for a particular investment, while instead using that money to pay off backers of previous investments. The firm’s two principals, CEO Steven Byers and former COO Joseph Shereshevsky, are under arrest. Although it is not clear if any institutions actually committed capital to Wextrust, institutional investors were clearly in their cross hairs.

In a December 2007 article on Finalternatives.com, where Wextrust’s Avi Benamu, director of partner relations, is quoted extensively, the story states “WexTrust is also in discussions with institutional investors to manage a fund that would invest in distressed loans.”

And Benamu posted the following in December 2007 on Hedge Fund Message Board.com:

“My name is Avi Benamu….I am currently director of partner relations at Wextrust Capital where I raise funds from HNWI as well as institutions for Real Estate syndications and structured products.”

He signs the posting, “Avi Benamu, Director of Partner Relations, Institutional Desk, WexTrust Capital, LLC.”
Janie Tisdale, senior relationship manager of WexTrust Capital, describes herself on her LinkedIn profile as “Interested in raising equity for global private placement offerings.” And she defines her duties at WexTrust, where she’s worked since May 2007 as raising equity “from both accredited and qualified investors for private placement offerings.”

Shereshevsky’s role, according to the SEC complaint, was to take the lead in soliciting investors through his extensive contacts in the Orthodox Jewish community and to manage the offerings and investments relating to the purchase of real estate and specific assets, including African diamond mines. What’s strange about his involvement with any form of investing is that he is a convicted felon. In March 1993, he was arrested for bank fraud, among other things. In June 2003, he pleaded guilty to one felony count of bank fraud and was sentenced to time served, 24 months supervised release and had to pay restitution.

A source with knowledge of the situation said that Shereshevsky oversaw equity raising and had relationships with private investors at Wextrust, but the source did not know if Shereshevsky solicited institutional investors.

It’s highly unlikely that any institutions would have fallen for Wextrust’s tricks, since a basic due diligence check would have turned up Shereshevsky’s fraud conviction. But caveat emptor. Clearly these people were hunting for big game, even if they hadn’t caught any yet.

Nancy Gordon is a Senior Editor at Buyouts.