Rabbi Allen Schwartz recalls Chaim Regensberg as a family man who hosted fundraisers in his Upper West Side home for charities in Israel or for Congregation Ohab Zedek, where he was an active member.
“I always thought he was an honest guy, upright in all areas,” said Ohab Zedek’s rabbi, who has known Regensberg for about 10 years. “But something happened, he got in over his head and instead of coming clean immediately, it got worse.”
Federal prosecutors paint a different picture of Regensberg, 44, who was sentenced to eight years in jail last week for defrauding nearly two dozen people in a three-year, $11 million Ponzi-scheme.
They say he methodically roped in members of his Orthodox community with promises of returns as high as 18 percent via fictional investment schemes until his arrest in March 2008. A jury last April found him guilty of two counts of securities fraud and seven counts of wire fraud. He faced 20 years.
Federal Judge Victor Marrero said Regensberg, who was a gabbai at Ohab Zedek, used a “mask of piety” to lure investors, according to the New York Post.
But Rabbi Schwartz said no one would have invested with Regensberg because of his position at the shul.
“He was one of seven gabbaim,” said the rabbi on Tuesday. “It would be very strange to me if someone said, normally I wouldn’t have invested with him but I will because he was a gabbai. People invested with him because he was making money for them in good times.”
The rabbi speculated that “what probably happened was when times got tough he did something too risky. Even the investors who want his head now would tell you he [appeared to be] an honest guy.”
According to the indictment by the U.S. attorney for New York’s Southern District, Michael J. Garcia, Regensberg falsely told investors he had access to initial public offerings on foreign exchanges before the general public, and that he could sell such stocks quickly for returns of 5 to 15 percent within weeks.
A second scheme involved loans to trading firms to use for leveraged investments. Since the funds supposedly were not traded but kept in accounts as collateral, Regensberg told investors he could guarantee a return of up to 18 percent per year, according to Garcia, who said Regensberg in reality lost large portions of the money in unrelated risky investments; he then began paying early investors with income from new ones in a Ponzi scheme, while diverting large amounts to himself and his relatives.
The scheme fell apart when some investors confronted Regensberg in 2007 about missed payments, and he presented them with a forged bank document claiming a $9 million balance, while the actual sum was only about $9,000, prosecutors convinced the jury.
Rabbi Schwartz said neither he nor the shul had any money invested with Regensberg, and that most of those who lost money attended other congregations.
In giving Regensberg the benefit of a doubt, the rabbi speculated that if the investor had engaged in fictitious money schemes, he had likely done so “to fix a situation that just went bad” in an effort to recoup losses from legitimate investments.
At his sentencing, Regensberg said his crimes stemmed from an addiction to gambling. But Rabbi Schwartz said he took that to mean high-risk investments, and did not know Regensberg to frequent casinos or other forms of gaming. “Investments that were too risky, that’s how I understood it,” he said.
Zev Brenner, a member of Ohab Zedek and host of the Talkline Jewish radio programs, said people at the congregation were upset by the scandal but that many believed, as the rabbi does, that Regensberg started with pure intentions.
“They feel like this is similar to the [Bernard] Madoff story, where he started out innocently and got over his head and kept taking future money to pay back the past,” said Brenner. “When you do that, you’re bound to fail.”
Another longtime member of the shul, Glenn Richter, said he knew no one who was cheated by Regensberg.
“There is a large transient population [at the shul], people who stay here only a few years and move on. It could very well be that this happened to some of them,” said Richter. “But logically people who are burned aren’t going to get up and wave their hands and tell everyone.”
Richter, who knows Regensberg casually, said his impression, “like everyone else’s is that he was a very upstanding gentleman. He wasn’t a flashy guy. A gabbai is somebody who is trustworthy. You don’t give that position to someone who is a bubblehead.”
Rabbi Schwartz said Regensberg would be welcomed back to the synagogue on his release only if he showed a willingness to atone. “According to Jewish law, it’s not just to do the time but to gain forgiveness from those who were hurt.” The Talmud, he said, discusses different ways to atone for a financial crime, from rituals to restitution.
In his Shabbat sermon this week, Rabbi Schwartz stressed the importance of compassion for Regensberg’s wife and three children, citing the Torah’s warning that the iniquity of the father would be visited upon his sons.
He said Regensberg’s wife and children had not been to the shul in some time, but the congregation president had reached out to them.
“The family will need support,” he reiterated in an interview Tuesday. “The children will have no one to sit next to in shul. And what’s going to happen to them in school? Kids can be cruel. We have to have sensitive parents, even parents who were involved, to be careful what they say in front of their kids, who could repeat it in school.”
The lesson for the community, he said, was to take prompt responsibility for any misdeeds.
“There are people in power in the Tanach who do things wrong and their greatness is that they don’t just bury themselves deeper in their wrongdoing,” said the rabbi. “[Regensberg’s] tragic story is that he was not able to dig himself out. It was destined to end this way.”