Long Island Man Sentenced in Manhattan Federal Court to Five Years in Prison in Multi-Million-Dollar Investment Fraud Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that NIZAR OTHMAN, the former principal of a Manhattan-based financial firm, NAOK Financial, Inc. (“NAOK”), was sentenced today to five years in prison for a fraudulent investment scheme in which OTHMAN lied to victims and tricked them into paying him over $2 million for purported investments with supposed guaranteed rates of return. In reality, OTHMAN did not invest the funds as promised, and instead, used the funds largely for his own benefit. OTHMAN pled guilty in September 2014 before U.S. District Judge Lorna G. Schofield, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Nizar Othman was a fraudster who through his investment firm swindled numerous individuals out of millions of dollars. He preyed on people’s life savings and took the benefits of a widowed spouse while he exploited personal relationships for personal gain. We hope today’s sentence gives some measure of comfort to the victims.”
Assistant Director in Charge George Venizelos said: “This was another phony investment scheme, pitched to some of the most vulnerable people in our society. Today, Othman rightfully finds himself facing a stiff sentence for his investor shakedown.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at court proceedings:
From 2008 through March 2013, OTHMAN owned and operated NAOK, a now-defunct financial consulting and investment firm with an office in Manhattan. In connection with his operation of NAOK, OTHMAN engaged in a fraudulent scheme whereby he tricked multiple victims into investing millions of dollars with his company. For example, in April 2011, OTHMAN convinced Victim-1to invest $1.2 million with NOAK, using the proceeds of her recently-deceased husband’s life insurance and pension benefits. OTHMAN falsely told Victim-1 that he would invest the money in real estate ventures and promised to triple her investment in three years. OTHMAN even showed Victim-1 photographs of properties that he claimed he was investing in. Instead of investing the $1.2 million in real estate, however, OTHMAN used Victim-1’s money to pay for NAOK’s operating expenses, to repay other individuals who had invested with NAOK, and to pay for OTHMAN’s personal expenses, including dining, clothing, and travel expenses. Victim-1 lost her entire $1.2 million investment.
In addition to Victim-1, OTHMAN defrauded at least five other victims by fraudulently inducing them to invest hundreds of thousands of dollars with NAOK. In each instance, OTHMAN exploited personal relationships with the victims to gain their trust, and then betrayed that trust by lying about how the victims’ money would be invested and the rates of return that the victims would receive. For example, in March 2011, OTHMAN induced Victim-2, a retired barber, to invest his life savings of $480,000 with NAOK. OTHMAN falsely claimed that Victim-2’s money would be invested with a hedge fund broker with whom OTHMAN claimed to have a business relationship. OTHMAN visited Victim-2 at his house multiple times, invited Victim-2 to NAOK’s office in Manhattan, and guaranteed Victim-2 that he would receive at least a 10 percent return on his investment in three years. OTHMAN further promised to pay the guaranteed 10 percent return himself if the investment failed. As with Victim-1’s investment, instead of investing Victim-2’s money as promised, OTHMAN used the money for his own personal benefit. Victim-2 lost his entire $480,000 investment.
Further, in order to conceal and perpetuate the scheme, OTHMAN made various misrepresentations to the victims regarding the performance of their investments. For example, in October 2012, when Victim-1 inquired about the status of her $1.2 million real estate investment, OTHMAN told her that it was presently valued at $1.35 million. In truth and in fact, and as OTHMAN was well aware, OTHMAN never invested Victim-1’s $1.2 million in any real estate ventures. Similarly, in the first year following Victim-2’s $480,000 investment, OTHMAN falsely represented that the investment had earned a 13 percent return; in the second year, OTHMAN falsely reported a 14 percent return.
In total, the defendant’s fraudulent investment scheme resulted in losses to victims of approximately $2,138,000.
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In addition to the prison sentence, OTHMAN, 31, of Albertson, New York, was sentenced to three years of supervised release. OTHMAN was also ordered to pay $2,138,000 million in restitution to his victims, and to forfeit $2,138,000 in criminal proceeds.
Mr. Bharara praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Serrin Turner, Daniel Noble, and Alexander Wilson are in charge of the prosecution.