Seth Levine Admits Decade-Long $80 Million Fraud Scheme
NEWARK, N.J. – A Bergen County, New Jersey, man today admitted orchestrating a long-running bank and securities fraud scheme, which led to large-scale losses for financial institutions and investors, Acting U.S. Attorney Rachael A. Honig announced.
Seth Levine, 52, of Teaneck, New Jersey, pleaded guilty by
videoconference before U.S. District Judge Madeline Cox Arleo to an information
charging him with one count of conspiracy to commit bank fraud and one count of
securities fraud.
According to documents filed in this case and statements
made in court:
Levine was the founding partner, owner, and managing member of Norse Holdings, which was the parent company to more than 70 subsidiary companies. Each of the subsidiary companies owned one or more multifamily buildings, located primarily in New Jersey. From 2009 through August 2019, Levine directed a scheme to fraudulently refinance the multifamily properties by providing materially false information to financial institutions about the rents collected, the number of apartments leased, the expenses, and the true owners of the properties.
Levine and
others provided lenders fake documents, including falsified leases that created
the appearance that vacant spaces were occupied and that overstated the rent
paid by tenants; fake personal financial statements; fake expense documents;
and fake operating agreements that misrepresented ownership interests in the
multifamily properties. Levine also forged signatures on some of the fraudulent
documents submitted to lenders. As a result of the fraudulent refinances, Levine
received cash payouts from the lenders, which Levine and others used for their
own enrichment and to continue the fraud scheme.
Many of the lenders who approved mortgages based on the false statements of Levine and others in turn sold those mortgages to the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae). Because the refinances were obtained with fraudulent data regarding the properties’ income and expenses, the multifamily properties were overvalued and rents and other income from the properties did not cover the mortgage payments and other expenses associated with the properties. To cover the shortfalls,
Levine obtained additional cash-out
refinances, thereby increasing his total debt incurred. In total, Levine
controlled at least 70 multifamily properties, comprising approximately 2,500
apartments. The outstanding balance of the fraudulently obtained mortgages on
the multifamily properties was more than $150 million, including 40 mortgages
held by Freddie Mac with an outstanding loan balance of approximately $103
million. The bank fraud conspiracy resulted in losses to victim lenders of at
least $65 million.
While defrauding the lending financial institutions, Levine also carried out a securities fraud scheme to defraud investors in the multifamily properties. He solicited investors to invest in the multifamily properties based on materially false statements and promises about the condition of the properties and the use of investor funds. Levine represented to investors that his conduct would be limited by an operating agreement. However, after Levine acquired the multifamily properties, he violated representations made to the investors, including by selling off portions of Levine’s ownership interest in the properties without investor consent, bringing on additional investors without consent, and refinancing the multifamily properties without investor consent.
Levine provided fraudulent
documents to investors, such as operating agreements that overstated Levine’s
personal investment in the multifamily properties and documents bearing
signatures forged by Levine. He also co-mingled investor funds and used the
funds in violation of representations to investors, by using investor money to support
other multifamily properties, make payments to other investors, and further the
fraud. The securities fraud victims lost more than $15 million.
The conspiracy to commit bank fraud carries a maximum
potential penalty of 30 years in prison and a $1 million fine. The securities
fraud count is punishable by a maximum of 20 years in prison and a $5 million
fine. Sentencing is scheduled for July 26, 2021.
Individuals who believe they may have information about this
case may contact the FBI at 1-800-CALL-FBI (225-5324).
Acting U.S. Attorney Honig credited special agents of the
FBI, under the direction of Special Agent in Charge George M. Crouch Jr. in
Newark, and special agents of the Federal Housing Finance Agency, Office of
Inspector General, under the direction of Special Agent in Charge, Robert
Manchak, with the investigation leading to today’s guilty plea. The U.S.
Securities and Exchange Commission has filed a civil complaint against Levine
today based on allegations underlying the securities fraud charge.
The government is represented by Assistant U.S. Attorney
Heather Suchorsky of the
Economic Crimes Unit and Special Assistant U.S. Attorney
Charlie L. Divine of the Federal Housing Finance Agency, Office of Inspector
General.
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