The founder of a bankrupt New York City litigation funding firm has pled guilty to securities fraud and admitted to using investor funds for his personal use and to double-pledging the same case recoveries as collateral to multiple parties.
According to court documents filed with the US District Court for the Southern District of New York, Jaeson Birnbaum solicited and obtained more than $3 million in promissory notes for Cash4Cases based on fraudulent misrepresentations between 2017 and 2019. The notes, called “investor security agreements” (ISAs), claimed to provide investors with a security interest in the recoveries associated with lawsuits that were ostensibly purchased by Cash4Cases. The ISAs also purportedly provided that Cash4Cases would repay investors with interest, regardless of the outcome of the lawsuits pledged as collateral.
However, Birnbaum pledged as collateral lawsuits that he had previously pledged to other investors or lenders, or had previously assigned or sold. He also directed an employee to falsify the company’s books and records to make it appear that certain cases were available to be pledged as collateral to new investors, when they had in fact already been concluded or dismissed and any related settlement payments had already been paid out.
Birnbaum also admitted to misappropriating a large portion of investors’ funds for his personal use and to make promised payments to earlier investors. For example, an investor gave Birnbaum $1 million under the erroneous belief that Cash4Cases would use the money exclusively for advances to litigants. But on the day Cash4Cases received the $1 million investment, Birnbaum used the money to send a $530,000 wire toward the purchase of a house in New Jersey.
“Jaeson Birnbaum conned investors through a series of lies about his litigation finance business, Cash4Cases,” Audrey Strauss, US Attorney for the Southern District of New York, said in a statement. “He used Cash4Cases to steal cash for himself and then tried to cover up his scheme by directing a subordinate to falsify books and records.”
Birnbaum, 47, is scheduled to be sentenced in January 2022 and faces a maximum of 20 years in prison.