Meshuga rabbi bungles hedge fund shake down
A prominent Brooklyn rabbi, accused 7 years ago of stealing government grants, was arrested on Thursday for blackmailing a Connecticut hedge fund for $4 million which he allegedly planned to give to two schools he works with (Bais Yaakov and Torah Vodaath). Awww. Gotta love a criminal with a heart of gold. Hope it’s worth the jail time.
Rabbi Milton Balkany, 63, of Brooklyn, was charged with extortion, blackmail, wire fraud, and making false statements as part of an elaborate scheme to shake down the hedge fund he “discovered” had been using insider trading to profit from stock trades. Though prosecutors refuse to release the name of the hedge fund, Reuters has reported a source familiar with the matter confirmed that the hedge fund being blackmailed is SAC Capital Advisors, one of the world’s largest and most successful hedge funds which manages about $12 in assets. Mr. Balkany became privy to this information through his work as a “spiritual adviser” to a federal inmate. Prosecutors say that Balkany approached the hedge fund’s lawyers saying that the U.S Attorney’s Office and the FBI were trying to get the federal inmate to reveal what he knew about the illegal insider trades. There were apparently no such insider trades.
According to the New York Times, prosecutors say that Balkany told the hedge fund’s lawyers that unless they paid him $4 million, he would instruct the inmate to tell the authorities about the insider trades. The lawyers for the hedge fund recorded his conversations with Balkany. On Thursday, as video and audio tapes rolled, Balkany met with the lawyer and accepted two checks, totaling $3.25 million. He was arrested later that afternoon.
Balkany insists that he was merely trying to help a young man in prison. He was quoted in the NY Daily News as saying, “He got a very lengthy term and I was trying to reduce it. I was in touch with the U.S. Attorney’s office the whole time,” he said. Prosecutors are less than convinced. Balkany was in fact in contact with the U.S. Attorney’s office, but his motives appear to have been to induce prosecutors to contact the inmate in order to put pressure on the fund, prosecutors said. During those conversations, he allegedly made false statements.
Kudos to the unnamed hedge fund for walking away the victor in this one. In an era of extra-sensitivity regarding the mere suggestion of impropriety or insider trading, especially in the wake of the Galleon Group scandal, it would have been very easy to have give into the demands of a rogue extortionist in the interest of not being exposed for illegal activities (whether or not the fund had actually engaged in such practices, the mere suggestion could have been very damaging).
Balkany was released on $250,000 bond on Thursday, February 18.
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