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Looks Like Rothstein Feeder Fund Exec Is Heading for Trial

October 7, 2014

George Levin in court pleadings said it’s an “undisputed” fact he was the primary target and the

“biggest victim” of Scott Rothstein’s $1.2 billion Ponzi scheme.

The Securities and Exchange Commission doesn’t see it the same way.

Levin, who owned a group of feeder funds dubbed Banyon Investments LLC, scored a victory

Monday when a Miami federal judge denied the SEC’s motion for summary judgment in the

agency’s federal civil securities fraud suit against him.

U.S. District Judge Ursula Ungaro’s ruling paves the way for a trial scheduled Oct. 20 trial in the

SEC’s case against Levin. It would be only the third trial in the 5­year­old Rothstein saga.

A status hearing is scheduled for Friday. The SEC is seeking disgorgement and a civil penalty.

Shortly before motions for summary judgment were due in August, Levin fired his attorneys and

hired Daniel L. Rashbaum of Marcus Neiman & Rashbaum in Miami.

“Levin, a self­made millionaire previously worth more than $200 million, invested a substantial

portion of his assets (and his family’s assets) in Rothstein’s fake discounted settlement

business,” Rashbaum wrote in a motion opposing the SEC’s request.

Rashbaum declined comment to the Daily Business Review, citing the ongoing litigation.

The SEC filed suit against Levin and his top executive at Banyon, Frank Preve, in May 2012.

The agency alleged the pair raised more than $157 million from 173 investors in about two

years by issuing promissory notes from Levin’s company and interest in a private investment

fund they operated.

Preve has already admitted liability but plans to seek mitigation of the $157 million penalty

sought by the regulatory agency.

If Levin is found liable at trial, he could claim in the penalty phase that Rothstein investors have

already been made whole, partly through the help of the defendants’ bankruptcy settlements.

Levin has not been charged criminally. The statute of limitations to charge Rothstein co-
conspirators expires Oct. 31.

Preve has negotiated a guilty plea to a conspiracy charge, taking responsibility for $20 million in

the fraud.

Levin insists he didn’t know Rothstein, chairman of the Rothstein Rosenfeldt Adler law firm in

Fort Lauderdale, was running a Ponzi scheme funded with Banyon money. He told investors in

a letter shortly after the fraud imploded in 2009 that he was duped by both Rothstein and TD

Bank, which handled most of Rothstein’s money.

Levin declared bankruptcy and he and wife, Gayla Sue Levin, filed separate lawsuits in 2012 in

Broward Circuit Court against TD Bank. The cases have settled.

victims reimbursed

Rothstein is serving a 50­year prison sentence, and more than 20 people associated with the

disbarred lawyer have been sentenced to prison. Prosecutors have said all victims have been

reimbursed through various means, including bankruptcy settlements.

The SEC’s amended fraud complaint filed in March alleges, among other things, that Levin

failed to register securities issued by Banyon, which was wholly owned by Levin and exclusively

invested in Rothstein settlements.

The SEC alleged Levin and Preve “marketed the Banyon investment to investors, met with

potential investors to tell them about Rothstein’s investment in purchasing court settlements at

a discount.”

The SEC claims the defendants told investors the fictional settlements concocted by Rothstein

were fully funded.

Levin has said he was so hands off at Banyon that he met with two or three investors at most.

In her 43­page order, Ungaro said there is a genuine dispute whether Levin and Preve acted

knowingly, recklessly or negligently on several purported misrepresentations in materials

provided to Banyon investors. She said the matter is best left for a jury to decide.

The judge also noted Preve, in the last four months of the scheme, demanded documentation

from Rothstein several times for the settlements he was purchasing with investors’ money.

“I really need the backup documentation,” one email from Preve to Rothstein reads. “I don’t

mind going ONE week without it but going a MONTH is asking for an enlightened attitude which

I was just not blessed with.”