A Rockland County man who boasted of spectacular investment prowess in his late 20s has admitted that he defrauded dozens of family members, friends and acquaintances of more than $3 million.
Solomon Lichtenstein, now 30, pleaded guilty of fraud in the offer or sale of securities, March 11 in U.S. District Court, White Plains.
Instead of clients doubling their investments annually, as he told them to expect, they lost more than $1.5 million.
Lichtenstein, of Stony Point, created Taraxa Capital Fund LP and Lightstone Trading Inc. in 2022.
He told investors that he had spent years honing trading skills and strategies under the tutelage of experienced financial mentors, according to a charging document filed on March 11. He falsely claimed to have made a 1,000% annual return investing his own money and to managing about $50 million.
Investors were told that Taraxa traded primarily in options and in futures on large stock indices and exchange traded funds. To reduce risk, Lichtenstein said he closed out each position at the end of the day. So as long as the stock market did not move more than two percent in one day, Taraxa would make money, and investors should expect returns of about 10% to 15% a month.
He charged a monthly management fee that totaled about 2% a year, and an annual performance fee that ran as high as 40% on net profits.
Lightstone Trading was pitched as a way to earn returns of 5% a month by loaning money to invest in Taraxa at no risk.
Lichtenstein told clients that all of their money was invested. In fact, the government says, very little was invested.
Lichtenstein received more than $3 million and deposited about $880,000 in trading accounts. He invested about $590,000 – about 20% of the money he received – and lost about $213,000 on bad trades.
He used about $1 million in embezzled funds to pay for a home mortgage, bars, restaurants, travel and cash withdrawals.
He posted fabricated results on each investor’s online dashboard, and used about $900,000 to pay back some investors, to maintain the illusion that Taraxa and Lightstone were legitimate.
Last October, on the same day Lichtenstein was arrested, arraigned and released on bail, the U.S. Securities and Exchange Commission accused him of civil securities fraud in White Plains federal court.
Lichtenstein argued in his formal answer to the charges that he had acted in good faith. But he declined to answer the allegations by invoking his Fifth Amendment right against self-incrimination.
On March 12, the SEC agreed to suspend the civil case until the criminal case concludes.
Lichtenstein is scheduled to be sentenced in the criminal case on July 8.
