A letter from a family of investors demanding more than $4 million from South Florida Ponzi schemer Scott Rothstein nearly blew the lid off his scam moths before it collapsed, the former attorney claimed in recent testimony.
"Holy (expletive), this is going to explode," Rothstein recalled thinking, according to transcripts of testimony obtained by the Sun-Sentinel. "They figured out the Ponzi scheme. They know there's no money in the accounts. We are all going to jail."
The transcripts, released this week, include three weeks of Rothstein testimony from behind closed doors earlier this month. Rothstein, 50, is serving a 50-year sentence for the $1.2 billion scheme at an undisclosed location.
According to Rothstein, in February 2009, eight months before the scheme collapsed, he received a letter from investor Gerald Brauser and his family demanding $4.25 million they had invested with him.
Rothstein claims he paid the family with other investors' money and had them sign a confidential settlement after an attorney for them obtained bank statements showing Rothstein's law firm, Rothstein Rosenfeldt Adler, didn't have as much money in their accounts as Rothstein was claiming.
"We didn't want them to go to authorities," Rothstein said.
Allan Joseph, another attorney for the Brausers, told the Sun-Sentinel that Rothstein's claim that he bought their silence is "nonsense."
"They asked for their principal back because they were led to believe they could withdraw the money at any time and one of the Brausers had the need for the investment back to pay off the mortgage on a completely unrelated property," Joseph said. He added that the other attorney, Frank Graziadei, testified he didn't mention a banking report to Rothstein.
The family is being sued by a bankruptcy trustee from Rothstein's former law firm to collect the money.
"My clients are victims and now they have to defend against a lawsuit solely on Scott Rothstein's testimony," Joseph said.
More than 5,000 pages of Rothstein testimony from this month have been made public, with another 1,000 pages expected to be released. In December, Rothstein spent 10 days being questioned by attorneys seeking to claim money from the Ponzi scheme.