Lakewood, NJ – An attempt by lawyers to quash a lawsuit by victims of a Ponzi scheme in Lakewood has failed as a federal judge ruled the case will continue.
The judge has allowed a lawsuit to proceed that accuses prominent Lakewood religious figures and outside attorneys of working with an alleged Ponzi schemer to silence victims, block civil discovery, and keep fraud allegations out of public court, after methods to resolve the matter within the community’s religious system broke down.
U.S. District Court Judge Edward S. Kiel ruled that key claims in the case were sufficiently pleaded to survive dismissal, clearing the way for discovery in a lawsuit that centers on alleged efforts to force investors into confidential religious arbitration instead of civil litigation.
According to the complaint, the central defendant induced dozens of local residents to invest millions of dollars by promising returns of up to 30 percent, while allegedly operating a Ponzi scheme that paid earlier investors with new funds.
At least 35 investors later pursued a din torah in an attempt to recover assets but obtained little relief, the lawsuit states.
What is Din Torah?
A Din Torah (Hebrew for “Torah Law”) is a Jewish arbitration process where a dispute between Jews is brought before a Beis Din (rabbinical court) for resolution according to Jewish law (Halacha). Both parties sign an arbitration agreement (Shtar Berurin) to abide by the judges’ (Dayanim) binding decision, which is often legally enforceable in secular courts as well, offering a faster, cheaper, and religiously-based alternative to civil courts.
One investor instead filed a nine-count civil lawsuit in Ocean County Superior Court and served subpoenas on the bais din and a retained financial expert seeking records tied to the alleged scheme.
The Ocean County judge ruled against the victim.
Those subpoenas were quashed after defense counsel argued that disclosure would undermine confidentiality and participation in religious arbitration proceedings.
The subsequent federal lawsuit alleges that the accused investor and his counsel then sought assistance from influential Lakewood leaders (askonim) to steer all disputes into a bais din process, avoiding civil discovery and public scrutiny.
The complaint claims the askonim retained a Baltimore-based attorney to pressure the civil plaintiff to abandon his lawsuit and submit to arbitration under strict confidentiality.
The lawsuit alleges that during meetings in 2023, the investor raised concerns about hidden assets held through trusts and related entities, but was instead threatened with communal retaliation if he continued in civil court.
The complaint further alleges that settlement discussions were conditioned on withdrawing the lawsuit and proceeding only through bais din arbitration.
Judge Kiel allowed, among other claims, a count alleging unauthorized practice of law to move forward. The court found plaintiffs plausibly alleged that an out-of-state attorney provided unsolicited legal advice in New Jersey without proper licensure, interfered with litigation strategy, and caused measurable financial harm.
The defendants have denied wrongdoing, and no findings of liability have been made. The case now moves into discovery in federal court.
This case was reported by FAA News.
