(UPDATED 8:54 P.M. EDT U.S.A. See bottom of story.) Amid a rash of bank failures, an unprecedented number of mortgage foreclosures and a string of major fraud investigations, Florida is bracing for yet another spectacular Ponzi scheme probe.
This one involves the alleged sale of fraudulent structured legal settlements by Fort Lauderdale attorney Scott Rothstein and may involve up to $500 million. Other lawyers in Rothstein’s firm have sued to remove the boss and put the firm in receivership.
Rothstein, 47, was said to have returned from Morocco yesterday and was meeting with federal investigators. There were concerns that $500 million was deposited in a bank in Canada late last month and went missing, and accompanying concerns that Rothstein had contemplated suicide as the way out.
Florida media is all over the Rothstein story, which is beginning to get national exposure in its early hours.
Rothstein Rosefeldt and Adler, the law firm, has more than 70 lawyers at offices in Florida, New York and Venezuela, including “distinguished former judges,” according to a lawsuit the firm filed to remove Rothstein.
The complaint alleged Rothstein had control over financial affairs and silently started what appeared to be a securities business.
“Some investors allege that Defendant Rothstein may have been fabricating non-existent structured legal settlements for sale to investors,” the firm said in the lawsuit.
Famed attorney Kendall Coffey is representing the firm in its bid to oust Rothstein, who has a reputation for flashiness and for doling out money to politicians from both parties.
Coffey, a former U.S. Attorney, represented former U.S. Vice President Al Gore in the disputed 2000 election battle with then Texas-Gov. George W. Bush.
The Rothstein Rosefeldt and Adler law firm was reported suddenly to have less than $500,000 to operate, and attorneys are working without getting paid.
A dramatic story is shaping up.
Attorney Jeff Sonn said his firm is investigation Rothstein.
“Often these private investment schemes, in which many individuals invest in an unregistered hedge or mutual fund with the intent to share profits are nothing more than unregistered securities, that may not be exempt from state and federal securities laws,” Sonn said.
“In many instances, promoters claim these are private investments that need not be registered as they are allegedly exempt under Regulation D of the federal securities laws, but often they fail to meet all the exemption requirements, including failure to file a Form D with the SEC. If the securities are not exempt from registration, investors would be able to seek rescision of their investment and to hold all promoters, and possibly others, for the loss,” Sonn continued.
“I have heard that one of the funds run by Rothstein was named ‘Banyon Capital,’ but I have not yet seen the offering documents.” Sonn said, “My law firm had seen Scott Rothstein living a very large lifestyle, including armed body guards, police protection, very expensive cars, luxury homes, jewelry, donations, and appeared to be something out of a Great Gatsby movie.”
Read this story in the Miami Herald.
UPDATE 8:54 P.M. The Palm Beach Post is reporting that the FBI and the IRS are are at the law offices of Rothstein Rosefeldt and Adler tonight.