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Lyndhurst Man Sentenced To 46 Months In $1.5M Bergen-Passaic IPO Swindle

Outside the Martin Luther King U.S. District Courthouse in Newark
Outside the Martin Luther King U.S. District Courthouse in Newark Photo Credit: CLIFFVIEW PILOT

LYNDHURST, N.J. -- A Lyndhurst man who admitted conning investors from Bergen and Passaic counties out of $1.5 million prior to high-profile initial public offerings was sentenced Thursday to a plea-bargained 46 months in federal prison.

Omar Hafez, 25, used the money to buy himself luxury cars -- one for $87,000 at Prestige Motors -- as well as other treasures, among them purchases of $17,250 at Tourneau Inc., $5,613 at Louis Vuitton and $3,000 purchase at Tiffany & Co., Acting U.S. Attorney William E. Fitzpatrick noted.He also spent nearly $10,000 on airline tickets and hotel stays for a single trip to Chicago, the U.S. attorney said.One victim lost $400,000, authorities charged.

From July 2014 until his arrest in December 2015, Hafez and a group of unidentified co-conspirators solicited money "purportedly to be invested in shares of various companies" prior to Initial Public Offerings, an FBI complaint on file in U.S. District Court in Newark says.

One was supposed to be a cloud communications company, the complaint says. Articles about the purported IPO were published by the Wall Street Journal and other media -- although no date had been set, it says.

The other IPO was to be for an Internet domain registrar/hosting company. It's IPO, as well, was "widely covered by the media," the complaint says.

The bogus companies included: Lotus Global Wealth Management, Lotus Wealth Management, Lotus Global Capital Investments Corporation, Lotus Global Capital Parners LLC.

Hafez "held himself out to be the Chief Executive Officer of Lotus Global Entities," the complaint alleges. He was also listed the registered agent, it says.

However, neither Hafez nor Lotus Global Entities was registered with the Financial Regulating Authority -- prohibiting either from selling securities to the public, FBI Special Agent Karl Ubellacker wrote in the complaint.

Instead of investing the hundreds of thousands of dollars they received in those companies, Hafez and others used it "for their own use and benefit," the complaint says.

Hafez "employed numerous strategies to maintain the victims’ confidence and induce further investments," Fitzpatrick said.

"For example," he said, "bank records showed that Hafez occasionally used money from earlier victim investors in order to pay future victims 'lulling' payments. In classic Ponzi scheme fashion, Hafez lied to investors and told them that these payments were returns on their investments.

"As funds began to run out and investors demanded their money with increasing frequency, Hafez provided certain victim investors with checks for thousands of dollars, claiming that they represented investment returns or a refund of initial investments," the U.S. attorney said.

"When victim investors attempted to deposit or cash these checks," he added, "the checks were rejected due to insufficient funds because Hafez and others had already spent the victims’ money."

In addition to the prison term, Hafez was sentenced to three years of supervised release and must pay restitution of $1.5 million.

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