Seiden Law Group LLP | New York, New York

August 5, 2021

SEIDEN LAW GROUP APPOINTED BY ISRAELI TRUSTEE TO RECOVER STOLEN FUNDS FROM “THE ISRAELI MADOFF”

Seiden Law Group LLP has been appointed as US counsel to Trustee Adv. Lior Dagan, the court-appointed Trustee in an Israeli insolvency proceeding against Michael Ben-Ari aka Michael David Greenfield (“Greenfield”). Mr. Dagan was appointed by the Israeli courts to lead the global efforts to recover the monies allegedly stolen by Greenfield.  Greenfield, who has recently been dubbed by Israeli media as “the Israeli Madoff,” is under criminal investigation by the Israeli Securities Authority following an alleged 15-year long Ponzi scheme in which Greenfield, through his investment vehicle EGFE Israel Ltd., ensnared hundreds of American and Israeli victims and caused losses that may exceed $150 million.  

As counsel to Mr. Dagan, Seiden Law Group has filed a Chapter 15 case in US Bankruptcy Court in Manhattan, seeking recognition of the Israeli insolvency proceeding in the US. According to the Chapter 15 filing, Greenfield moved to Israel from the U.S. thirty years ago and began to solicit investment money in Israel from investors in a “guaranteed” return investment scheme. The Chapter 15 filing explains that after being released under house arrest in Israel, Greenfield immediately absconded, reportedly using a false passport, and has concealed his current whereabouts. The case has been referred to the FBI’s New York office.

On August 6, 2021, Bankruptcy Judge Hon. Shelley Chapman granted a powerful court order granting broad powers to Mr. Dagan, to recover assets in the United States that are identified as fruits of the alleged criminal enterprise. Seiden Law Group now moves forward with Mr. Dagan to identify and recover stolen funds, using the full powers provided by the U.S. courts.

BY SEIDEN LAW GROUP | NEW YORK, NEW YORK

July 2021

Seiden Law Group represents the Libra Group Inc., a U.S.-based conglomerate conducting international business in over 35 countries, worldwide. Seiden Law Group has been leading the Libra Group’s efforts in seeking justice against a former employee that swindled half a billion dollars from the company. The massive scam has spanned Europe, Hong Kong and New York, being brought in multiple courts around the world. The case has been reported on by Business Insurance in the U.S. and Greek Reporter in Greece.

BY SEIDEN LAW GROUP | NEW YORK, NEW YORK

DATE

Hong Liu v. Faraday & Future Inc. et al. (Case number 2:20-cv-08035 in US District Court for the Central District of California)

Seiden Law Group LLP is pleased to announce a successful outcome in its representation of Henry Liu after a hard-fought litigation. The positive result came within weeks of trial thanks to Seiden Law Group’s tenacious and creative lawyering.

Plaintiff Henry Liu had made claims of breach of contract, violation of the Securities Exchange Act of 1934, wrongful termination and intentional infliction of emotional distress against his former employer, Faraday & Future, an electric vehicle company set to go public via a SPAC merger later this month.

Read More Here

BY SEIDEN LAW GROUP | NEW YORK, NEW YORK

June 2021

Millions of life-saving masks that were intended for Puget Sound Veterans Hospital during the peak of the COVID pandemic in late 2020, never arrived. A Middle Eastern citizen operating via a Canadian and Middle Eastern company settled a claim this week brought by Seiden Law Group LLP on behalf of Oklahoma-based Asset Group Inc. for the alleged theft of millions of dollars. The defendant had taken tens of millions of dollars from Asset Group and a publicly-traded company as part of a multi-jurisdictional PPE fraud. A search of the defendant’s home by law enforcement found a hidden safe with diamonds and hundreds of thousands in cash. The defendant was arrested at the airport as he was attempting to flee Israel in April and charged with fraud, tax offenses, and money laundering. Asset Group and other victims filed claims against the defendant and after months of continued pressure in court and via law enforcement the defendant agreed to settle the claims leading to Asset Group recovering nearly all the money that was stolen.

SEIDEN LAW GROUP WELCOMES JACOB K. JOU TO THE FIRM

Press Release | New York, New York

January 22, 2021

Seiden Law Group LLP is pleased to announce that Jacob K. Jou has joined the Firm as Counsel. Jou joins the Seiden Team from Milbank LLP in the New York Office.

Seiden Law Group LLP adds seasoned commercial litigator Jacob K. Jou from Milbank LLP to its New York office.  Jou, a graduate of Harvard Law School and Yale University, joins the globally respected and fast-growing Seiden team as Counsel after 11 years at Milbank where he gained deep experience in complex commercial litigation, regulatory matters, and internal investigations. 

Jou will join seasoned litigators at Seiden Law Group to help prosecute their growing and dynamic caseload and build on past successes against banks, hedge funds, insurance companies and notorious international adversaries.

“We are excited to have Jacob join our growing team of some of the most talented lawyers and support staff in America.  Jacob’s practice and experience has focused for many years on working with an aggressive team of litigators to creatively prevail in complex commercial disputes.  This is our bread and butter and thus he is a natural fit for our firm,” said founding and managing partner Robert Seiden.

“We look forward to integrating Jacob into our rapidly growing practice, which regularly handles complex cross border litigation and international arbitration.   Jacob shares the ethos and motivation of our team of creative litigators who think outside the box,” said partner and head of litigation Amiad Kushner.

“Seiden Law Group is a unique law firm that impressed me with its talented people and premier clients. I had many opportunities in the legal community once I decided to move my practice off of a big-firm platform, but none compared to the ground-breaking work and collaborative, positive atmosphere at Seiden. The firm’s client-centered, warrior-like mentality of excellence and integrity is a platform that I expect to thrive in,” said Mr. Jou. “I’m excited to be part of the firm’s mission.”

BY MICHAEL RAPOPORT | Institutional Investor

They’d Find Fraud, Fraud, Fraud.’

JULY 22, 2020

A small group of short sellers, spurned investors, a former journalist,
and an ex-prosecutor are intent on revealing large-scale fraud in China.

The story of Chinese fraud goes back a decade and a half, to the mid-2000s, when a wave of Chinese companies rolled onto U.S. exchanges via a backdoor maneuver known as “reverse mergers.” Chinese companies would merge with a U.S. shell company and take over its public listing, gaining access to American exchanges, trading, and investors — all without the regulatory scrutiny a traditional initial public offering would have brought.

“Until that happens, there’s Robert Seiden”

But starting around 2011, revelations spilled out about the accounting and disclosure of company after Chinese company — that they’d inflated their revenues, pretended they had businesses they didn’t, or seen their coffers looted by executives.

Some of the more eyebrow-raising schemes, according to regulators: Universal Travel gave its auditor an address for a purported hotel customer of the company’s that turned out to be a public restroom. AgFeed Industries, an animal-feed and hog-production company, inflated its revenues by claiming sales of hogs that didn’t exist, and later tried to cover up the fraud by claiming the fake hogs had died. The CEO of TV ad-network company China MediaExpress offered a $1.5 million bribe to an outside accountant helping to look into the company’s finances. (The accountant declined.)

Some are still fighting to hold Chinese companies accountable, from Robert Seiden, a New York investigator who pursues shady Chinese companies as a court-appointed receiver empowered to seize their assets. . .

With these revelations, many Chinese companies’ stocks plunged, leaving shareholders with huge losses. The SEC barred about 180 Chinese companies from U.S. trading and filed dozens of lawsuits against the companies, their executives, and “gatekeepers” like auditors and consultants who helped them get access to U.S markets. And for a while, relatively few Chinese companies braved U.S. markets because of concerns about fraud. 

But since 2017, there have been 93 Chinese IPOs in the U.S., according to data provider Dealogic. Chinese companies have gotten savvier, Block says: They’re less prone to claiming outsize successes than they were in the past. “They know they have to look human from time to time.”

. . .

Why does this keep happening? Why do these problems recur, even after investors should be on notice that Chinese companies can be risky and difficult to hold to account?

Part of it, some observers say, is that people have short memories, are eager for easy trading gains, and keep wanting to benefit from the opportunities China presents. China and its companies know that. 

“Investors forgot” and “just needed to say no,” Block says. China is “this environment where fairy tales are created because investors can’t get enough.”

Many investors have exposure in China without even knowing about it. They hold mutual funds or other investments whose managers invest in Chinese stocks. “There’s a lot of money looking for targets,” says Anne Stevenson-Yang, co-founder of J Capital Research. “A ton of money that’s flowing around, and there are people who figure out a way to harness it.”

For their part, U.S. exchanges are hungry for Chinese listings too. “The public markets are desperate for listings, and they’ll list anything,” says Steve Dickinson, an attorney who specializes in China with law firm Harris Bricken.

There’s also a cultural gap. When Westerners invest in a Chinese company, many assume it has emerged in the same kind of market environment they’re accustomed to in the U.S., that it’s been subjected to the same kind of vetting and regulatory oversight. That’s not the case.

“There’s a certain amount of self-delusion there,” says Jim Peterson, an attorney and author specializing in accounting issues.

On the other side, many Chinese companies aren’t prepared for the level of disclosure and communication with investors that’s required of them when they’re listed in the U.S. Even if they have legitimate businesses, their response when they face criticism may be to avoid dealing with it — to pull up stakes and retreat to China, leaving investors holding the bag.

. . .

It doesn’t help U.S. investors that they can’t be sure that the auditors who review the finances of Chinese companies are doing a good job. In a fraud, the auditors are often deceived along with everyone else. “It’s devastating when skepticism is supposed to be one of the key elements of [an auditor’s] performance,” Peterson says.

The problem is compounded by China’s intransigence. U.S. regulators inspect the work of any auditors who audit U.S.-traded companies. But China has refused to allow such inspections for Chinese audit firms, including affiliates of the Big Four accounting firms that audit most major companies.

China regards the sensitive financial information about its companies that their auditors handle as akin to “state secrets.” Nearly 200 Chinese and Hong Kong companies traded in the U.S., including giants like Alibaba and Baidu, are audited by these firms. 

“We have no ability to verify in China and no prospects on the horizon,” said William Duhnke, chairman of the Public Company Accounting Oversight Board, the U.S. audit regulator, at the recent SEC roundtable.

And not just at Chinese companies. At nearly 100 U.S.-based multinationals that do business in China, including giants like Walmart and General Motors Co., some of the audit work is done by Chinese firms that U.S. regulators are barred from inspecting. Investors and regulators have no way of making sure that these companies’ tens of billions of dollars of Chinese business have been properly vetted to prevent errors or fraud.

U.S. regulators have tried for years to get China to change its stance on inspections, to little avail. 

. . .

Pressing China on allowing audit inspections and cooperating more with U.S. regulators may yield progress down the road. 

Until that happens, there’s Robert Seiden.

Seiden, a former New York prosecutor, has carved out an unusual legal specialty: When a U.S. court renders a judgment against a Chinese company that’s defrauded or otherwise slighted its shareholders, Seiden gets appointed by the court as a receiver, empowered to seize corporate assets for the shareholders’ benefit — something he’s done at 30 Chinese companies now.

He then takes advantage of a quirk in how many Chinese companies are structured: To get around Chinese government restrictions on foreign investment, the companies use subsidiaries outside China to hold their operating assets, often in the British Virgin Islands or the Cayman Islands.

Seiden pursues a court judgment against a company — and then he can go into China as the legal owner of its assets, not just another foreign creditor who can be shoved aside. He uses his position as leverage to force the company’s executives to sit down and discuss a settlement.

So far, his efforts have yielded $10 million for U.S. shareholders at companies like Oriental Dragon Corp., Advanced Battery Technologies, and Shengtai Pharmaceutical. Admittedly, that isn’t much given the scale of the problem, and Seiden acknowledges it’s tough going.

“We’re making a lot of progress, but it’s slow,” he says. There’s a “huge disconnect between how China works and an open system. Their system is ‘might makes right’ — if they can get away with something, they will.”

Investors in the companies Seiden represents recognize the difficulty, but they’re hopeful his strategy can help. “I think we are able to get some small portion of our money back,” says Gary Wolfson of GEP Capital Group, an investor in Oriental Dragon Corp., where Seiden recently obtained a $3 million settlement for investors.

Seiden’s combination of skills equips him well for the job. He was a prosecutor in the Manhattan district attorney’s office, and later worked in China, overseeing investigators and lawyers doing corporate due diligence. He was also a monitor for the Port Authority of New York and New Jersey, pursuing waste and fraud in the building of the Freedom Tower on the former World Trade Center site after 9/11.

Currently, he’s pursuing Link Motion, formerly known as NQ Mobile, whose co-founder allegedly diverted assets away from investors’ control. Seiden was named receiver by a U.S. federal judge in 2019; he’s seized Link Motion’s Hong Kong bank accounts, and his handpicked CEO won an arbitration proceeding in China giving him control over a key Link Motion entity.

Link Motion went dark without any sort of offer to pay the company’s public shareholders, says Wayne Baliga, a Link Motion investor. “If they could do this, any listed Chinese company could do this, and I don’t know what recourse there would be.”

Seiden knows the obstacles, but he has no intention of stopping. “I’m very persistent.”

For all the efforts by the likes of Seiden, Sherwood, and short sellers, tomorrow will look a lot like today when it comes to ensuring that Chinese companies are straight with their investors. Even if the measure to force Chinese auditor inspections becomes law, companies will have three years to comply. The puzzle box isn’t going to be solved anytime soon.

Some are suggesting ways to flag for investors when a company is using an auditor that hasn’t been inspected, to ensure they know the risks. In the absence of inspections, Block suggests making the U.S. arms of the Big Four accounting firms financially responsible for any failures of their Chinese siblings — just like parents are liable for any mischief by their kids, he says.

Chinese companies remain “very highly speculative stocks to invest in,” Nussbaum says. He suggests making it more difficult for retail investors to put their money into such risky companies. At the end of the day, though, “we’re still talking about a huge market with a very, very bright future.”

Others are more pessimistic about whether Chinese companies will get more reliable. “You hate to say just drop it all, we made a mistake, delist,” Stevenson-Yang says. “But I don’t know how to address it.”

On February 4, 2020, Cayman Islands Judge, the Honorable Margaret Ramsay-Hale ruled in favor of Robert W. Seiden, Esq., recognizing his capacity as temporary receiver over the parent company Link Motion Inc. (“LKM”), a U.S. company previously listed on the New York Stock Exchange. This ruling effectively named Robert Seiden, of New York-based Seiden Law Group LLP, the first-ever U.S. receiver over a Cayman Islands company.

The ruling can be read in full in the link below.

The Seiden Law Group is representing client Senior Health Insurance Company (“SHIP”) in a lawsuit in New York federal court against Lincoln International LLC and Lincoln Partners Advisers LLC (“Lincoln”) arising from the massive fraud involving the Platinum Partners hedge fund and its affiliate, Beechwood Re Ltd.   SHIP, an insurance company, incurred massive losses of over $100 million in the fraud.  SHIP’s lawsuit alleges that Lincoln, a valuation firm, aided and abetted the fraud by issuing inflated valuations.

On December 3, 2019, the Honorable Jed S. Rakoff of the United States District Court for the Southern District of New York declined to dismiss SHIP’s claims against Lincoln for aiding and abetting fraud.  In his decision, Judge Rakoff held that SHIP’s complaint “adequately pleads that Lincoln’s fraudulent valuations contributed to preventing SHIP from discovering the fraud.” 

The complete text of Judge Rakoff’s decision is available below:

EXCERPT FROM Strategies for Asset Recovery from Mainland China

BY HENRY W. LONGLEY | TEMPLE INT’L & COMP. L.J.

A. Sino Clean Energy, Inc. v. Seiden—Corporate Governance Strategy in Action

In May 2014, a Nevada state court appointed Robert Seiden, Esquire,(171) the receiver of Sino Clean Energy, Inc. (Sino), after a group of U.S. investors requested the appointment when Sino went dark and caused economic losses.(172) Sino is a Chinese Reverse Merger holding firm incorporated in Nevada with subsidiaries in Mainland China that produce coal-water slurry.(173) The Sino bankruptcy case synthesizes the corporate governance strategy in the Chinese Reverse Merger context and shows some of the more creative techniques a receiver can employ when former firm insiders meddle with the recovery process.

In May 2015, the receiver filed criminal charges with H.K. police alleging that Sino’s chairman, Baowen Ren, fraudulently backdated a transfer of shares in Sino’s H.K. subsidiary to a British Virgin Islands firm that Ren controlled—pilfering Sino and its shareholders—without the receiver’s permission or knowledge.(174) Despite attempts by the receiver’s agents to resolve issues with Ren, Ren refused to settle or comply with the court’s receivership orders.(175)

In 2014, the court-appointed receiver installed a new board of directors at the Sino holding firm in Nevada.(176) Soon after, however, former board members, acting by and through Ren, filed a Chapter 11 petition for bankruptcy on behalf of the firm.(177) The receiver, Seiden, moved to dismiss, and the bankruptcy court granted the motion—a decision the former Sino directors later appealed.(178) In the Chinese Reverse Merger context, in addition to establishing board control over the U.S.- based holding firm, controlling the board of the operating firm in China allows the receiver to go into Mainland China as the legal owner of operating assets “standing in the shoes of the company.”(179) Accordingly, before January 2015, the Nevada court-appointed receiver reported removal and replacement of the board of directors of Sino’s operating firm in Mainland China with an American chairman.(180)

In February 2016, a Nevada district court judge overseeing the same action held Ren in criminal contempt for repeatedly violating its receivership orders.(181) In addition to an outstanding civil per diem penalty of $500 ordered in June 2015, the court ordered a bench warrant to imprison Ren for his contempt.(182) The court ordered Ren to be jailed until he transferred Sino’s official corporate seal, known as a “chop,”(183) to the receiver.(184) The court also held Ren’s illegal transfer of Sino’s assets to be invalid.(185) The receiver stated that the bench warrant would be sent to Interpol in Beijing, along with a request for assistance from Chinese authorities to arrest Ren.(186)

Meanwhile, the ongoing bankruptcy case against Sino also affected its existing contractual liability. The appointment of a receiver can change who possesses control over a firm, but it does not affect the corporate existence of a firm, which means the firm continues to be liable for its existing contracts after the appointment of a receiver.(187) According to the January 2015 report, the receiver communicated with Sino’s suppliers, business partners, and its customers around the globe, contacted Sino’s Chinese banks to change signatories and gain control over accounts, put in place an interim management team to run day-to-day operations, and selected an independent auditor to advise on the economic state of Sino and its subsidiaries.(188)

In Sino Clean Energy, Inc. v. Seiden, former directors of Sino appealed the dismissal of their 2015 bankruptcy petition—arguing that federal bankruptcy law preempts a receiver appointed under state law from barring a corporation from filing for bankruptcy.(189) In January 2017, the Court affirmed the bankruptcy court’s dismissal because appellants did not have authority to file for bankruptcy on behalf of Sino at the time of the petition. (190)

The court found the appellants’ argument unpersuasive because the receiver removed appellants in 2014—installing a new board of directors more than a year before appellants filed their bankruptcy petition in 2015.(191) The court’s order did not affect a corporation’s right to file for bankruptcy but prevented a former board of directors from filing by holding that only a corporation’s current board of directors can file for bankruptcy.(192) The district court’s decision demonstrates that a courtappointed receiver is unequivocally empowered to reconstruct the board of directors of a Chinese Reverse Merger holding firm based in the United States. Moreover, the Sino Clean Energy, Inc. saga shows that a court-appointed receiver with control of a Chinese Reverse Merger corporate structure can capably affect its Mainland China-based management at the operating business level as well.(193)

______________________________________________________________________________

171. THE SEIDEN GROUP, supra note 134 (detailing that Seiden has vast experience with integrity monitoring and has been appointed receiver over twenty times in the United States); see also Stevenson & Goldstein, supra note 33 (“Robert W. Seiden is a Wall Street bounty hunter. He tracks down executives of Chinese companies that listed on stock exchanges in the United States and then blew up.”).

172. Sino Clean Energy Inc. v. Seiden, 565 B.R. 677, 679–80 (D. Nev. 2017); BVI Shell Company Allegedly Used to Steal US and Chinese Shareholder Interests in Energy Firm, CARIBBEAN NEWS NOW! (June 26, 2015), https://www.caribbeannewsnow.com/2015/06/26/bvishell-company-allegedly-used-to-steal-us-and-chinese-shareholder-interests-in-energy-firm/.

173. Sino Clean Energy Inc., 565 B.R. at 679–80; Sino Clean Energy, Inc. Prospectus, NASDAQ (Dec. 21, 2010), https://www.nasdaq.com/markets/spos/filing.ashx?filingid=7820499; see BVI Shell Company Allegedly Used to Steal US and Chinese Shareholder Interests in Energy Firm, supra note 172 (describing the corporate structure of Sino Clean Energy); see also Markus Aarnio, Sino Clean Energy Poised to Double Production Capacity in 2012, SEEKING ALPHA (Jan. 15, 2012, 7:45 AM), https://seekingalpha.com/article/319701-sino-clean-energy-poised-to-doubleproduction-capacity-in-2012 (describing Sino Clean Energy as the fifth largest producer of coalwater slurry fuel by sales in China).

174. BVI Shell Company Allegedly Used to Steal US and Chinese Shareholder Interests in Energy Firm, supra note 172.

175. Id.

176. Written Consent, supra note 168.

177. Sino Clean Energy Inc., 565 B.R. at 680.

178. Id.

179. Michael Rapoport, Court Appointee Chases (and Finds) Investor Cash that Vanished in China, WALL ST. J. (June 21, 2015, 4:28 PM), https://www.wsj.com/articles/court-appointeechases-and-finds-investor-cash-that-vanished-in-china-1434918506.

180. U.S. Court-appointed Receiver for Sino Clean Energy Inc. (Nasdaq “SCEI”) Taking Control of Chinese Company, PR NEWSWIRE (Jan. 25, 2015), https://www.prnewswire.com/newsreleases/us-court-appointed-receiver-for-sino-clean-energy-inc-nasdaq-scei-taking-control-ofchinese-company-300018796.html.

181. U.S. Court Orders China Businessman Jailed for Defying Court-Appointed Receiver and Judge’s Order to Cede Control of the Company to the Receiver, PR NEWSWIRE (Feb. 29, 2016), https://www.prnewswire.com/news-releases/us-court-orders-china-businessman-jailed-fordefying-court-appointed-receiver-and-judges-order-to-cede-control-of-the-company-to-thereceiver-300228158.html.

182. Id.

183. Dezan Shira & Assocs., Company Chops in China: What are They and How to Use Them, CHINA BRIEFING (May 10, 2017), http://www.china-briefing.com/news/2017/05/10/use-ofcompany-chops-in-china.html (explaining that “the chop” is mandatory to do business in Mainland China and functions as the company’s official signature).

184. U.S. Court Orders China Businessman Jailed for Defying Court-Appointed Receiver and Judge’s Order to Cede Control of the Company to the Receiver, supra note 181.

185. Id.

186. Id.

187. British Virgin Islands—Restructuring and Insolvency, OGIER (Nov. 4, 2013), www.ogier.com/publications/british-virgin-islands-restructuring-and-insolvency.

188. U.S. Court-appointed Receiver for Sino Clean Energy Inc. (Nasdaq “SCEI”) Taking Control of Chinese Company, supra note 180. 

189. Sino Clean Energy Inc. v. Seiden, 565 B.R. 677, 679 (D. Nev. 2017).

190. See id. at 681, 683 (finding that Nevada law gives a corporation’s current board of directors exclusive power to file for bankruptcy); see also Richard Levin, Recent Developments in Bankruptcy Law, JENNER & BLOCK ¶ 4.1.a (July 2017), https://jenner.com/system/assets/assets/10294/original/Recent%20Developments%20in%20Bankr uptcy%20Law%20-%20July%202017.pdf (“State law here authorizes the current directors to authorize a filing.”).

191. Sino Clean Energy, 565 B.R. at 681.

192. Id. at 677; Levin, supra note 190.

193. See generally U.S. Court-appointed Receiver for Sino Clean Energy Inc. (Nasdaq “SCEI”) Taking Control of Chinese Company, supra note 180.

A Wine Ponzi Scheme Targeted New York’s Most Powerful Enophiles, Clients Allege

BY MITCH FRANK | Wine Spectator

Omar Khan organized dinners with top chefs and rare vintage wines. Now several clients allege that he’s a fraud who took their money

Sep 9, 2019:

For wine lovers and executives, the dinners were sorely tempting: dishes cooked by some of the world’s top chefs (Daniel Boulud, Tom Colicchio, Daniel Humm), paired with some of the rarest wines in the world (Domaine de la Romanée-Conti, Cheval-Blanc, Dom Pérignon) and featuring business-savvy speakers. Since 2013, the International Business & Wine Society (IB&WS) has offered members monthly dinners paired with lectures and chats with leading business minds.

Was it all an elaborate Ponzi scheme? The organization’s founder, Omar Khan, stands accused of taking money from investors and wine retailers to make the dinners happen and pocketing it instead.

Last week, 13 disgruntled clients filed a suit against Khan in New York state court, alleging fraud, misrepresentation, unjust enrichment and five other counts. They claim he owes them more than $8.3 million. Several other lawsuits are pending against Khan, the IB&WS and his other company, Sensei International, including one from a Burgundy hotelier and another from a wine retailer in Putnam County, New York.

“I was a prosecutor for 11 years and have been a lawyer for 30 years and I’ve never seen such a brazen example of a con man taking advantage of decent hardworking people”

Robert Seiden, Seiden Law Group

“I was a prosecutor for 11 years and have been a lawyer for 30 years and I’ve never seen such a brazen example of a con man taking advantage of decent hardworking people,” Robert Seiden of the Seiden Law Group, which is representing the 13 clients in the suit filed on Sept. 3, told Wine Spectator. “This guy is like a micro-Madoff. He engaged in a multi-year scheme to defraud people in return for entry into the global wine world.”

Seiden’s clients include several high-powered names in finance: Robert Van Brugge, CEO and chairman of Sanford C. Bernstein; Kresimir Penavic of hedge fund Renaissance Capital; Peter Slagowitz, CEO of Spurs Capital; Lorine Schaefer, vice president at Morgan Stanley; as well as Robert Gelfond, director of the Cato Institute, a conservative think tank. Charles Curtis, former head of wine for Christie’s in both Asia and the Americas, is also a plaintiff. According to the suit, Khan hired him as a consultant, then never paid him. (Curtis deferred to Seiden for comment.)

Khan could also be staring down more serious trouble. New York prosecutors are investigating his actions, according to two sources with knowledge of the case. The district attorney’s office is looking into whether Khan altered an email from Philippe Sereys de Rothschild, co-owner of Bordeaux’s Château Mouton-Rothschild, in order to convince an investor that he had partnered with the first-growth on a series of dinners. If true, that would suggest Khan knew he was committing fraud.

Khan told Wine Spectator, “I deny any wrongdoing and refuse to comment due to pending litigation.”

Power players and power wines

According to a bio on the Sensei International website, Khan is an international business consultant and the author of several books on using language to persuade people. Khan is “one of the pioneers of Neuro-linguistic programming,” the site claims. It also says he was born in Egypt, the son of Pakistani diplomats, and attended Oxford University.

Khan began holding his wine dinners in New York in late 2013. According to media reports at the time, his goal was to combine business forums with wine passion, inviting top executives to hear speakers, enjoy good food and rare wines. A typical dinner featured David Bouley and Anita Lo preparing six courses for guests at Bouley Test Kitchen, while Château Palmer’s Thomas Duroux personally served several vintages of the Bordeaux and the CEO of CHC Helicopter gave a talk. Members at that time paid $5,000 a year, as well several hundred dollars for each dinner.

According to the lawsuit, Khan asked some regular attendees to partner with him on upcoming dinners. For example, Schaefer of Morgan Stanley was introduced to Khan in 2018 by a sommelier, according to the lawsuit. He asked if she was interested in investing $36,050 in an event at Craft in New York for an estimated profit of $13,500 to be split equally. In March 2019, Khan hosted the event but never sent Schaefer any money, the suit alleges.

One plaintiff, Penavic, invested millions of dollars in IB&WS over the course of several years for various dinners in New York, London, Hong Kong and other cities, the suit alleges. Khan also approached him about investing in collaborations with Mouton-Rothschild. After months of asking for updates and being told that his share of profits was held up by French agencies or the IRS, Penavic began approaching other clients about suing. (Sereys de Rothschild did not respond to a request for comment.)

More than one allegation

Penavic and his fellow plaintiffs’ suit is not the only legal jeopardy Khan faces, however. In January, Napa Valley winery Sinegal Estate owner (and former Costco CEO) David Sinegal sued Khan over $75,000 he invested in a dinner offering 23 vintages of Pétrus. According to the complaint, Sinegal suspected something was wrong when Khan wouldn’t allow him to inspect the bottles’ provenance. The dinner was eventually cancelled. The suit was settled in June for $125,000.

In December, Jean-Claude Bernard, the owner of one of Burgundy’s best-known hotels, Hotel Le Cep in Beaune, filed suit against Khan. According to his complaint, he met Khan at a Paris dinner featuring a vertical of DRC that the IB&WS organized. Khan and Bernard hit it off and decided to organize several dinners in Beaune, Paris and London. Some happened, some did not. Bernard invested a total of $472,500 and has not received a dime back, the lawsuit claims.

And in April, the owner of Cellaraiders, a rare wine store in Brewster, N.Y., filed a suit. According to Ben Wallace’s complaint, he and Khan partnered on a series of wine dinners in 2018, with Cellaraiders investing more than $250,000 as well as supplying more than $36,000 worth of rare wines. Khan sent Wallace several checks, all of which bounced.

As of now, the three active cases are moving through New York state court. Seiden says in the days since he filed his clients’ complaint, several other Khan clients have contacted him with their own allegations.

For now, the IB&WS website is down, offering only an error message. But under contact info, the site simply states, “We do not offer refunds.”

—With reporting by Suzanne Mustacich, Bruce Sanderson and Augustus Weed. This story is developing. Check back for updates. [Click button below]