Mar 10, 2009 9:20 am US/Central
Gift Card Ponzi Scheme Uncovered
Accused Said To Have Bilked Investors Out Of Millions
MINEOLA, N.Y. (CBS) ―
A Long Island man is under arrest in another alleged Ponzi scheme.
Craig Ginsberg is accused of running off with millions of dollars, tricking investors into buying bogus gift cards. But as CBS station WCBS-TV found out his attorney said his client isn't a scam artist, he's just another failed business owner.
Gail Mambuca was stunned to hear her next-door neighbor was under arrest, accused of running the scheme.
"We never saw anything suspicious. It's a surprise to me, really a surprise," Gail Mambuca said.
Prosecutors said in 2006 Ginsberg began offering half-priced gift cards from stores like Target, Toys R Us, Nordstrom and Best Buy.
Nassau County District Attorney Kathleen Rice said Ginsberg's initial investors got what they paid for. Then those investors brought in more friends and family. Rice said Ginsberg sustained the scheme for about two years before it began to collapse by the weight of his greed.
"He started with friends and family gift cards for 50 cents on the dollar. Again, something that sounded to good to be true," Rice said. "The victims were not getting their money. They came to us and complained to us about this scheme. We investigated it and found it was a classic Ponzi scheme."
The district attorney said so far about 40 people have come forward claiming they were duped by Ginsberg. Their combined losses total at more than $2 million, but prosecutors believe there may be as many as 63 victims, with a total theft of more than $4.1 million.
Ginsberg's attorney released a statement Monday night saying: "My client was not involved in any Ponzi scheme. He is simply a businessman, whose business went sour, causing a lot of people who invested in him to lose money."
Ginsberg's neighbors said they knew nothing about his business.
"In the past we've seen cars getting towed and stuff like that, so there's been things going on, but nothing that would have us suspect he would be involved in a Ponzi scheme, unfortunately," Steve Burdo said.
Ginsberg is scheduled to be arraigned Tuesday. He's being charged with grand larceny and scheming to defraud. He could face up to 15 years in prison if found guilty.
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