Aaron D. Fischman — Former CEO of Cardis Enterprises — Charged with Securities Fraud, Grand Larceny, Money Laundering, and Scheme to Defraud
New York Attorney General Letitia James today announced a 20-count criminal indictment charging Aaron D. Fischman — former CEO of the now defunct company Cardis Enterprises International (USA), Inc. (Cardis) — with operating a multi-million dollar securities fraud scheme that defrauded over $22 million from investors across the country and around the world.
“Aaron Fischman was able to fleece investors out of tens of millions of dollars for his own personal benefit,” alleged Attorney General Letitia James today. “These victims believed they were investing in technology to help businesses mitigate against costly charges from electronic transactions, but instead they fell victim to Fischman’s massive fraud. We will always hold white collar criminals accountable for their greed and deception that seek to illegally profit off others.”
According to statements made by the Office of the Attorney General (OAG) at arraignment, between January 2013 and December 2016, Fischman solicited millions of dollars of investments in Cardis — a Long Island-based company that claimed to possess a patented and proprietary technology that would make low-value credit card transactions less expensive. The technology was supposed to bundle multiple transactions under one fee. Fischman and his associates promised investors that their money would be used to promote the business of Cardis. However, today’s criminal charges allege that instead of using the money for business purposes, Fischman secretly devised a plan to divert millions of dollars of investor money into his personal bank accounts, to members of his family who had no business association with Cardis, and to select charities.
While New York served as the center of Fischman’s fraud, the scheme allegedly ensnared investors from multiple states and countries, who invested millions of dollars in Cardis. The OAG contends that Fischman conned many of these investors into making multiple investments across several years, and that many of these investors felt compelled to invest further to avoid risking losing their entire previous investment amounts. In the end, few, if any, of these investors received any return on their investments in Cardis, and the majority lost their entire investment.
The OAG alleges that investors in Cardis were instructed by employees of the company to wire money or write checks to multiple Interest on Lawyer Account (IOLA) accounts. Between January 2013 and December 2016, over $22 million of investor money flowed into four IOLA accounts and one business checking account in the name of Cardis USA. Of this $22 million, prosecutors allege that more than $3 million was diverted for the benefit of Fischman and his family. Some examples of these personal diversions include more than $1.4 million diverted to bank accounts in the name of Fischman and his wife, more than $285,000 was diverted to bank accounts in the names of Fischman’s relatives, more than $900,000 was diverted to select charities of Fischman’s choosing, and more than $400,000 was paid to American Express in connection with personal charges on American Express cards in the names of Fischman and his wife.
The OAG further indicates that investors were never told that portions of the money they invested would be used for non-business purposes, including to fund shopping sprees at high-end clothing stores, to pay for over $15,000 worth of limousine services for members of Fischman’s family, to fund nearly $30,000 in tuition and related expenses at a private school attended by one of Fischman’s children, and to make hundreds of thousands of dollars in charitable donations in Fischman’s name.
The OAG’s 20-count criminal indictment, unsealed today in Nassau County State Supreme Court, charges Fischman with: one count of Grand Larceny in the First Degree (a Class “B” felony), four counts of Grand Larceny in the Second Degree (a Class “C” felony), four counts of Grand Larceny in the Third Degree (a Class “D” felony), one count of Money Laundering in the Second Degree (a Class “C” felony), nine counts of securities fraud under the Martin Act (a class “E” felony), and one count of Scheme to Defraud in the First Degree (a Class “E” felony).
If convicted, Fischman faces up to 8 1/3 to 24 years in prison.
Fischman was arraigned earlier today in Nassau County State Supreme Court before the Honorable Judge Francis Ricigliano. Bail was set at $500,000.
The charges are merely accusations and Fischman is presumed innocent unless and until proven guilty in a court of law.
The Criminal Enforcement and Financial Crimes Bureau’s criminal investigation into Cardis began in September 2018, after a referral from the OAG’s Investor Protection Bureau. In December 2018, the Investor Protection Bureau filed a civil complaint in New York County State Supreme Court against Fischman and associated individuals and entities, including Cardis USA and Cardis NV. The Investor Protection Bureau subsequently secured default judgments against a number of these entities and individuals. The civil complaint alleges that, since 2011, Fischman and his associates solicited at least $30 million of investments in Cardis NV by fraudulently representing to investors that Cardis was close to monetizing its technology through agreements with prominent companies and that an initial public offering or buyout was on the horizon. The civil case, People v. Fischman, remains ongoing.
The investigation of Cardis was prompted by investor complaints to the OAG. Those with information about potential investor fraud are encouraged to submit a complaint online. Additionally, for those who wish to report fraudulent conduct without compromising their identity, the OAG launched a secure whistleblowing system — the New York Attorney General Whistleblower Portal — that allows for the simple and secure transmission of information and two-way anonymous communication.
The OAG wishes to thank the Finanicial Industry Regulatory Authority (FINRA) and, in particular, its Criminal Proseuction Assistance Group, for their invaluable assistance on this case.