Scheme Involving Private Placement Funds Draws SEC's Attention

August 18, 2008

Top executives at Wextrust Capital, a real estate-focused private equity and specialty finance company, were indicted on charges levied by the Securities and Exchange Commission claiming that the firm's principals and four affiliated funds ran a massive Ponzi scheme. The SEC and Federal Bureau of Investigation issued separate statements claiming that Steven Byers and Joseph Shereshevsky, Wextrust's chief executive and former chief financial officer, respectively, diverted funds that had been raised through private placement offerings. According to the SEC's complaint, Wextrust was formed in 2003 to pursue investment opportunities in undervalued real estate. An affiliate, Wextrust Securities, was created two years later to act as the selling agent for the private placement offerings. The Chicago firm also runs various commodities funds and controls interests in certain African diamond mines. Byers, the complaint says, was involved with the real estate investments, while Shereshevsky's role "was to take the lead in soliciting investors."

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