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California Man Sentenced to 7 Years for $7M Ponzi Scheme Against Israeli-Americans

Sassi Mizrahi was sentenced to more than seven years in prison after being found guilty of five counts of wire fraud related to helping his brother defraud at least 40 investors, according to the Justice Department.

A San Fernando Valley, Calif. man will spend more than seven years in federal prison after being found guilty for helping defraud at least 40 investors of more than $7 million, according to the Department of Justice.

According to prosecutors, Sassi Mizrahi and his brother Motty preyed on fellow members of the Orthodox Jewish Israeli community in their neighborhood while running an unregistered investment company out of their parents’ home.

In February, Sassi Mizrahi was found guilty of five counts of wire fraud at the end of a six-day jury trial. His brother pleaded guilty the prior month to six counts of wire fraud and one count of aggravated identity theft and is scheduled to be sentenced Dec. 18.

Both Sassi and his brother operated a Ponzi scheme by targeting the Israeli-American community they were welcomed into, victims “they knew had a reason to trust them,” according to prosecutors.

“Exploiting the goodwill engendered by such affinity, (the) defendants scammed millions of dollars from their victims with false promises of risk-free investments and guaranteed returns,” prosecutors claimed in the sentencing memorandum.

According to SEC and DOJ documents, the siblings’ victims either knew them through their synagogue in Los Angeles or were introduced via family and friends. Starting around 2012 or 2013, they’d meet clients at their homes or at the “offices” of MBIG, the “investment company” Motty Mizrahi ran out of their parents’ apartment. 

Motty Mizrahi would lull investors by promising investments and “insurance contracts” and other products generating guaranteed monthly returns ranging from 2-3%, and that the majority of the funds would be in cash, allowing clients to withdraw their funds easily. Motty Mizrahi also claimed to be a professional money manager, licensed broker and certified public accountant.

But the claims of guaranteed returns were false, with Motty Mizrahi and his brother creating fraudulent account statements showing monthly gains.

“The gains represented in these emailed account statements did not exist,” the DOJ complaint read. “Instead, these falsified account statements were part of a scheme by Motty Mizrahi and Sassi Mizrahi to lull investors into foregoing notification of authorities.”

MBIG didn’t have a commercial brokerage account, with Motty Mizrahi instead depositing investors’ funds into personal accounts at E*Trade and TD Ameritrade. According to the DOJ, E*Trade supplied information to the SEC showing Motty Mizrahi’s personal accounts posted annual losses in the six figures, eventually losing more than $2 million through 2018 (E*Trade closed the accounts that November). 

In all, victims lost at least $3.3 million, with Sassi’s role in the scheme being to help his brother conceal the truth about the scheme. The brothers would send false monthly account statements lying about gains, claiming MBIG’s account balances stood between $6 million and $9 million.

“When victims asked for their money back, [Sassi Mizrahi] gaslit them with lies about the safety of their investments, promises of repayment he knew could not be honored, threats of retaliation, and forged documents meant to corroborate his increasingly baroque excuses for why the money was unavailable,” the prosecutors argued.

In total, Sassi Mizrahi was sentenced to 87 months in prison and ordered to pay more than $4.5 million in restitution for victims. In Oct. 2020, the Securities and Exchange Commission (SEC) won a judgment of $3 million against Motty Mizrahi and MBIG.

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