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DA: Gift card Ponzi scheme busted in Nassau

A Hicksville man's offer to get his friends gift cards worth twice what they paid for them must have seemed to good to be true.

In the end, Nassau prosecutors said, it was.

Monday, Craig Ginsberg, 48, was arrested in a scheme that cost his friends more than $4 million, prosecutors said. His lawyer said he will plead not guilty Tuesday to felony larceny and fraud charges.

"Who gets 50 cents on the dollar for gift cards?" said Nassau District Attorney Kathleen Rice. "This is why you have to do your due diligence."

Ginsberg's lawyer, Michael Schwed of Kew Gardens, said his client was running a bartering business, not a Ponzi scheme.

"As far as I know, that's not illegal," Schwed said, adding that when Ginsberg's business started doing badly, Ginsberg even paid people back using his own money.

Prosecutors said at first, Ginsberg told family, friends, and business associates that he could get gift cards from stores like Target, Best Buy, Nordstrom's and Toys R Us, as well as Visa and American Express gift cards, for 50 cents on the dollar, but that they would have to wait three months to get them, prosecutors said. He then purchased some cards at face value, and gave them to his victims, saying he got them for half price.

Gradually, as people started to see returns on their investments and trust Ginsberg, they began paying more money into his schemes, prosecutors said. At the same time, the schemes got bigger and more expensive, including gift cards, luxury boxes to sports events and time shares.

The scheme fell apart in April 2008 when Ginsberg could no longer repay his investors, prosecutors said.

Prosecutors say Ginsberg checked himself into the Nassau University Medical Center's psychiatric wing soon after learning that his arrest was imminent. He was arrested in the parking lot as he was released.

Prosecutors said Ginsberg's victims, whose names they would not reveal, included doctors, lawyers, accountants and the congregation of a South Shore temple that lost a collected $15,000. One victim lost nearly $1 million in gift cards and time share investments, they said. Several others lost hundreds of thousands of dollars, they said.

"Even family and friends are not safe" from schemes like this, Rice said. "You may think you know someone, but you never do."

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