New York AG Files Judgement Against LI Company For Fraud

New York Attorney General Letitia James announced that her office had secured a default judgement in a securities fraud lawsuit against a Long Island company that defrauded investors out of at least $30 million.

“Individuals who sell false promises and commit fraud will be held responsible for their misdeeds,” said James. “We will continue to seek justice for small business proprietors who fall victim to the greed of those intent on breaking the law. New Yorkers can rest assured that my office will always fight to hold companies that aim to defraud investors and tarnish the name of honest businesses accountable for their lies and deceitful actions.”

According to James, Cardis, a now-defunct technology startup based out of Cedarhurst, claimed to possess patented and proprietary technology that would make low-value credit card transactions less expensive for merchants. These transactions have posed a problem for merchants because they include a fixed fee — regardless of the size of the transaction — which has had the effect of severely depressing margins. But Cardis raised tens of millions of dollars from investors in stock sales and loans through a steady drumbeat of false representations, including that it was on the verge of monetizing its technology through partnerships with prominent companies, and that an initial public offering (IPO) or buyout of Cardis was on the horizon.

In fact, many of Cardis’ purported partnerships did not advance beyond preliminary discussions, and there was never an IPO or buyout ever actually coming. Cardis even failed to maintain basic books and records, making the notion of an IPO or buyout impossible.

In December 2018, the Attorney General’s office filed suit against Cardis and company personnel Aaron Fischman, Stephen Brown, Steven Hoffman and Seth Rosenblatt for participating in the fraudulent marketing of Cardis to investors. The complaint further alleged that, while Cardis was raising significant investor funds, Fischman was fraudulently diverting much of the proceeds to enrich himself, family members and his favored charities. Additionally, the complaint alleged that Lawrence Katz — Cardis’ in-house attorney — aided in Fischman’s theft and diversion of investor funds from the company’s principal bank account.

Last week, James secured default judgments against Cardis and a number of Cardis-related entities, including Choshen Israel LLC, a company controlled by Fischman. James also secured default judgments against a number of Fischman’s relatives, including Nina Fischman, Rafaela Fischman, Alexander Fischman, Anne Shimanovich and Ethel Weissman — all of whom were personally enriched through Fischman’s fraud, she said.