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Operator of Fake Hedge Fund Sentenced to 63 Months in Prison

Aug. 12 (Bloomberg) -- Benjamin Koifman, who pleaded guilty to conspiracy for his role in a scheme to cheat investors with a phony New York-based hedge fund, was sentenced to five years and three months in prison.

Koifman and William Shternfeld ran A.R. Capital Global Fund LP, an unregistered investment adviser, and ARC Global Fund, a hedge fund that said it invested in equity of international real estate, according to prosecutors in the office of Manhattan U.S. Attorney Preet Bharara.

Koifman was sentenced by U.S. District Judge Sidney Stein in Manhattan today. At a separate hearing, Stein said he intends to impose the same sentence on Shternfeld in October after the defendant undergoes a medical evaluation.

Prosecutors claimed that, from 2004 to 2006, Shternfeld and Koifman engaged in a scheme with co-conspirators to get at least 70 investors to invest about $20 million in the ARC Global Fund by making false statements about it.

At the hearing today, Koifman, 36, cried three times during his remarks to the judge while pleading for a light sentence.

“I did terrible things,” Koifman told Stein. “This mistake has caused people including my family to suffer.”

Koifman was also sentenced to three years’ supervised probation and ordered to pay restitution of $7 million. The same probation and restitution would be ordered for Shternfeld, the judge said. As part of their plea agreement, Koifman and Shternfeld paid $50,000 of the restitution so far.

“He knew this was a fraud,” the judge said to Koifman’s lawyer, Arthur Gershfeld. “He kept calling elderly people. They took the money and ran. That’s pretty pernicious.”

Oral Cancer

Shternfeld and his lawyer, Michael Rosen, argued before the judge that the Bureau of Prisons may not have the ability to properly treat Shternfeld, who has oral cancer and wears a mouth prosthesis that needs adjustments every few months.

Stein agreed for Shternfeld to have a medical evaluation and rescheduled his sentencing for Oct. 13.

“I’m ready to be sentenced,” Shternfeld said in court. “But do I have to go through torture every day?”

Prosecutors said they recovered $620,000 in the bank accounts of A.R. Capital. Other money obtained in the fraud was sent to the Ukraine and other countries that were formerly part of the Soviet Union and won’t be recovered, said Assistant U.S. Attorney Daniel Goldman.

Two other men in the case, Igor Levin of Brooklyn, New York, and Yevgeny Shvartsshteyn of Belle Harbor, New York, pleaded guilty to conspiracy in December.

The case is U.S. v. Shternfeld, 10-cr-00031, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net; Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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