George Levin of Fort Lauderdale, Florida and Frank Preve of Plantation, Florida were reportedly accused of misleading investors in order to fund Scott Rothstein‘s Ponzi scheme, according to media reports. Levin, 71, and Preve, 68, were reportedly accused of federal counts of charged with multiple offenses, including selling unregistered securities and fraud by a civil complaint by the Securities and Exchange Commission.
News reports indicate that Levin and Preve have been accused of using their investment firm to purchase $157 million in legal settlements from Rothstein using funds derived from 173 investors. Levin, who apparently owned an investment firm and a private fund, allegedly used these resources to fund the scheme. “Levin and Preve sold promissory notes and created a feeder fund to funnel investor capital to Rothstein, ultimately becoming his largest source of capital,” alleged the SEC complaint, which accuses the business partners of supporting “Rothstein’s Ponzi scheme with the false sense of security they gave investors. They promised to safeguard investors’ assets, but gave Rothstein money with nothing to show for it.” As a result of the bad investments, the SEC claims that Levin and Preve’s investors lost approximately $140 million; however, authorities reportedly believe that Levin and Preve profited from the arrangement until Rothstein’s arrangements began to unravel.
In a nutshell, the SEC purportedly believes that Levin and Preve mislead investors into believing that their money was secure and protected, then buying private fund short-term promissory notes that went directly to Rothstein. The SEC also purportedly alleged that the pair continued to claim that their approach was profitable even after Rothstein ceased to pay investors. However, sources indicate that Levin and Preve have cooperated with the investigation into Rothstein’s Ponzi scheme extensively for several years, and the pair’s attorneys claim that Levin and Preve were victims in the scheme.
Reports indicate that Rothstein and Levin met in Fort Lauderdale, and that Levin started investing with him in 2007. The initial investments were reportedly made through Banyon 1030-32, Levin’s investment company, and included short-term promissory notes from approximately 90 investors. Later, Levin and Preve opened a private investment fund called Banyon Income Fund. Sources indicate that this was allegedly done upon Rothstein urging them to invest another $100 million in his legal settlements.
Scott Rothstein’s now infamous Ponzi scheme, which is believed to have brought in $1.2 billion and allowed him to live a highly extravagant lifestyle, landed Rothstein in prison with a 50-year sentence. Rothstein reportedly ran the Ponzi scheme, which sold fraudulent investments and legal settlements, out of a 70-attorney legal firm located on Las Olas boulevard in Fort Lauderdale. Rothstein himself was accused of stealing over $360 million from hundreds of investors and using the money on lavish houses, expensive prostitutes, sports cars, and other luxuries. Since then, nearly a dozen others have been accused of participating in the scheme, including attorneys and former employees of Rothstein’s law firm. Many of them have pled guilty as charged and been sentenced to prison time for their participation.