Bergen County Man Charged in Financial Fraud Scheme

NEWARK—A Teaneck, New Jersey man was charged today in connection with a scheme in which he allegedly defrauded Morgan Stanley Smith Barney LLC of more than $37,000, U.S. Attorney Paul J. Fishman announced.

Moshe Butler, 33, surrendered early this morning to FBI special agents in Newark on a complaint charging him with one count of bank fraud. He is scheduled to make an initial appearance today before U.S. Magistrate Judge Cathy L. Waldor in Newark federal court.

According to the complaint and other documents:

In July 2011, Butler opened an investment account with Morgan Stanley Smith Barney (“MSSB”) in New York. He was the sole signatory on the account. The type of account that Butler opened allowed him to have immediate access to funds deposited by check. On August 12, 2011, Butler funded his MSSB account by depositing a $50,000 check. He quickly used the entire $50,000 to cover the purchases of various securities and commodities option contracts. Butler’s purchases were largely unsuccessful and within five days, he lost his entire $50,000 investment as well as an additional $18,921.

On August 19, 2011, Butler deposited a $100,000 check into his MSSB account, purportedly to cover the negative balance in the account. The $100,000 check Butler deposited was drawn against a bank account that Butler solely controlled, but which had been closed by the issuing bank more than two months earlier, in part because Butler had written a dozen checks that were returned for insufficient funds. Despite having deposited a check he knew was written on a closed account, Butler took advantage of the fact that MSSB made the funds immediately available to him by quickly withdrawing $7,000 in cash and purchasing securities and commodities option contracts in his account. Those purchases were also unsuccessful and quickly resulted in additional losses of $11,496. In October 2011, Butler deposited a $30,000 check purportedly to cover the losses in his MSSB, but that check was also returned for insufficient funds. As a result of Butler’s fraudulent scheme, MSSB has been defrauded out of at least $37,417. On December 14, 2011, Butler pleaded guilty to a separate fraud scheme and is currently scheduled to be sentenced on May 8, 2012.

On the bank fraud count charged in the current complaint, Butler faces a maximum potential penalty of 10 years in prison and a $1 million fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, for the investigation leading to today’s complaint.

The government is represented by Assistant U.S. Attorney Matthew E. Beck, Deputy Chief of the General Crimes Unit in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The charge and allegations contained in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.

Defense Counsel: Edward Dauber Esq., Newark