Teaneck Man Ran $80 Million Fraud Scheme: U.S. Attorney

TEANECK, NJ — A Teaneck man orchestrated a long-running bank and securities fraud scheme that cost financial institutions and investors millions, Acting U.S. Attorney Rachael A. Honig announced.

Seth Levine, 52, of Teaneck, pleaded guilty Wednesday to one count of conspiracy to commit bank fraud and one count of securities fraud. He could face decades in prison, and up to $6 million in fines.

Levine was the founding partner, owner, and managing member of Norse Holdings, a parent company to more than 70 subsidiary companies. Each of the subsidiary companies owned one or more multifamily buildings, located primarily in New Jersey, according to court documents.

From 2009 through August 2019, Levine directed a scheme to fraudulently refinance the multifamily properties by providing materially false information to financial institutions about the rents collected, the number of apartments leased, the expenses, and the true owners of the properties, court documents revealed.

Levine and others provided lenders fake documents, including falsified leases that created the appearance that vacant spaces were occupied and that:

• overstated the rent paid by tenants
• fake personal financial statements
• fake expense documents
• fake operating agreements that misrepresented ownership interests in the multifamily properties

Levine also forged signatures on some of the fraudulent documents submitted to lenders, according to court documents.

Levine received cash payouts from the lenders as a result of this fraudulent activity, which he and others used for "their own enrichment and to continue the fraud scheme," according to the U.S. Attorney's Office.

Many of the lenders who approved mortgages based on the false statements of Levine and others sold those mortgages to the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).

Because the refinances were obtained with fraudulent data regarding the properties’ income and expenses, the multifamily properties were overvalued and rents and other income from the properties did not cover mortgage payments and general expenses, according to court documents.

To cover the shortfalls, Levine obtained additional cash-out refinances, thereby increasing his total debt incurred, the Attorney's Office said.

In total, Levine controlled at least 70 multifamily properties, comprising approximately 2,500 apartments. The outstanding balance of the fraudulently obtained mortgages on the multifamily properties was more than $150 million, including 40 mortgages held by Freddie Mac with an outstanding loan balance of approximately $103 million. The bank fraud conspiracy resulted in losses to victim lenders of at least $65 million, according to court documents.

While defrauding the lending financial institutions, Levine also carried out a securities fraud scheme targeting investors in the multifamily properties, the Attormey's Office said.

He solicited investors in the multifamily properties based on "materially false statements and promises about the condition of the properties and the use of investor funds," according to the Attorney's Office.

Levine told investors that his conduct would be limited by an operating agreement, but after acquiring the properties, he violated representations made to the investors, including by selling off portions of his ownership interest in the properties without investor consent, bringing on additional investors without consent, and refinancing the multifamily properties without investor consent.

Levine provided fraudulent documents to investors, such as operating agreements that overstated his personal investment in the multifamily properties and documents with forged signatures.

He also co-mingled investor funds and used them in violation of representations to investors, by using investor money to support other multifamily properties, make payments to other investors, and further the fraud. The securities fraud victims lost more than $15 million, according to court documents.

The conspiracy to commit bank fraud carries a maximum potential penalty of 30 years in prison and a $1 million fine. The securities fraud count is punishable by a maximum of 20 years in prison and a $5 million fine. Sentencing is scheduled for July 26, 2021.

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