George Levin Was Rothstein's Whale

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Charles Ponzi would be proud.
Fort Lauderdale attorney Bill Scherer is about as good a source on the money end of Scott Rothstein's Ponzi scheme as you're going to find right now. He's representing about $100 million in investor losses, including those of the Doug Von Allmen family.

Von Allmen and his family members invested in Rothstein's secret settlements through his friend George Levin and Levin's Banyon hedge fund. Von Allmen tried to get several friends to invest right before the scheme imploded.

Scherer told me yesterday that he has learned that Levin invested $120 million of his own money into the scheme before raising at least $300 more to put into Rothstein's scheme (including the Von Allmen investments).

Here's the kicker: Scherer says Levin kept rolling his returns back into the scheme and never took any profits.

"Levin let it ride," Scherer says. "Rather than take it out, he would

reinvest it back in. He thought he had $850 million in it total [with the profits]. If he would have tried to call in his money, it would have collapsed a lot sooner."

Suddenly it makes more sense. I wondered how Rothstein managed to steal so much (from appearances, at least a couple of hundred million during the past two years), keep his Ponzi going for so long, and still have $230 million left to plunder during his break-out in October. It looks like Levin-related money is the answer. He was Rothstein's biggest mark.

To fool Levin and others, Rothstein made up bank account statements showing that his trust accounts had well over $1 billion in them. On October 6, he claimed to have roughly $1.2 billion in them and had fake documents, which had supposedly come straight from TD Bank, to back him up. "It was a Ponzi account balance," says Scherer. "It was false returns. It wasn't real money."  

Can you imagine how Levin felt when he learned that Rothstein had fled the country and all the money was gone? Talk about the bottom falling out. Still, sympathy in this case isn't easy. For one, Levin once owned a fraudulent firm himself and has used the court system to terrorize those who tried to bring attention to that fact. He hired a felon as Banyon's chief operating officer and is responsible for several fortunes lost in the scheme that were not his own. The whole scheme was seamy right off the bat; it was built on taking large parts of (fake) settlements from sexual assault victims and corporate whistleblowers. On top of that, the settlement investments didn't make sense from the get-go, and Rothstein was offering such huge returns that it's obvious that blind greed (or worse) was dictating Levin's decisions.

Scherer, though, says that Banyon was able to get a $70 million insurance policy in case of fraud on the Rothstein investments. So even an insurance company fell for the thing.

If he's successful, Scherer says that his clients and all other investors who weren't complicit in the crime will have their money returned. He says that without extreme negligence or worse from TD Bank officials like Frank Spinosa, Rothstein wouldn't have been able to do the damage he did. And he believes TD Bank is liable for the whole mess. 

"My goal is to get all the money back for the investors from the bank," Scherer said. "That's what I'm trying to do here." 

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