An investor in the Cardis Enterprises investment scam has sued to stop the perpetrator from using bankruptcy court to escape a $5.3 million debt.
Shalom S. Maidenbaum accused Aaron Fischman of concealing his true financial condition, in a complaint filed Nov. 13 in U.S. Bankruptcy Court, Poughkeepsie.
“Fischman raised in excess of $70 million in funding for Cardis,” the complaint states. “However, little if any of that money was used for developing Cardis’ technology. Instead, the money was diverted to Fischman and his wife, Nina, who spent the bulk of it on an extravagant lifestyle and, apparently, hid the rest in overseas accounts.”
Cardis was a Dutch firm that claimed to have patented technology that could cut merchants’ credit card fees. Fischman, of Loch Sheldrake, Sullivan County, lured investors, according to court records, by suggesting that their shares would become more valuable when Cardis went public or was sold.
But there was no impending initial public offering or proposed buyout, and Cardis had failed to maintain even basic financial records.
Former New York Attorney General Barbara Underwood sued Cardis and Fischman for civil securities fraud in 2018.
Attorney General Letitia James indicted him on criminal charges in 2020, claiming he diverted more than $22 million of investor monies to himself, family members and charities.
Last year, Fischman pled guilty to two felonies and agreed to pay $2 million in restitution as part of a plea agreement and to settle the civil case.
This past August he filed for Chapter 11 bankruptcy protection for Choshen Israel LLC, a Loch Sheldrake business implicated in the Cardis swindle, and a Chapter 13 petition for himself.
Maidenbaum, a Cedarhurst, Nassau County attorney, asserts that Fischman’s debts may not be discharged in bankruptcy court because they are products of fraud.
He says Fischman owes $5,283,065 for investments and loans from 2009 to 2013. Fischman lists his debt to Maidenbaum at $4,826,982 but characterizes it as disputed.
Maidenbaum says Fischman may not use bankruptcy protection to quash his debts.
“Fischman’s conscious intention was solely to enrich himself,” the complaint states, “by means of misappropriating investments and advances that were intended to be used to develop Cardis’ technology.”
Maidenbaum also questions the veracity of Fischman’s bankruptcy papers.
He was in a position “to loot nearly the entirety of the $70 million raised from investors and lenders,” the complaint states, but “has not attempted to explain where that substantial amount of money went.”
In 2016, Maidenbaum sought financial records in a civil action filed in Nassau Supreme Court, but for seven years, according to the complaint, Fischman has refused to comply with the subpoena.
Nassau Justice Bruce Cozzens stated in a April ruling that Fischman was “making a mockery of this court.”
Maidenbaum argues that the bankruptcy cases, which automatically stop all other legal proceedings, were filed to avoid complying with the subpoena for financial records.
Fischman’s bankruptcy attorneys from Kirby Aisner & Curley in Eastchester did not reply to a message asking for responses to the allegations.
