N.Y. rabbi accused of blackmailing Conn. hedge fund

A prominent Brooklyn rabbi was arrested Thursday in a scheme to extort a Connecticut-based hedge fund into paying millions of dollars to two schools, federal prosecutors said. Rabbi Milton Balkany, the dean of Bais Yaakov day school and a prolific campaign fundraiser, was charged with wire fraud, extortion, false statements and blackmail. Prosecutors did not know the name of his attorney. His home phone number was unlisted. Balkany, 63, was accused in 2003 of improperly using a $700,000 federal grant intended for disabled children but avoided prosecution by admitting he disobeyed terms of the grant. He agreed to repay the grant's administrator. On Thursday, prosecutors alleged in a complaint filed in Manhattan federal magistrate court that Balkany threatened and lied to workers at the unnamed hedge fund to persuade them to send him checks totaling $3.25 million. Balkany contacted representatives of the hedge fund between December 2009 and February saying he was the spiritual adviser of an inmate incarcerated in upstate New York who had knowledge of purported insider trading involving six securities traded by the hedge fund, prosecutors said. Balkany told them government officials had visited the inmate but that Balkany would not allow the inmate to speak to them about the purported illegal trading so long as the hedge fund agreed to give $4 million to two schools, Bais Yaakov and another Jewish yeshiva, both in Brooklyn, according to the complaint. Investigators determined that the inmate was not in contact with government officials about any purported illegal trading, the complaint said. Instead, after a delay in receiving the money he had demanded from the hedge fund, Balkany contacted federal prosecutors in January to tell them that he had some "very vital information" they would be interested in hearing from the inmate, the complaint said. Prosecutors said he made false statements and concealed information from the government in contacting the authorities during those conversations. According to court documents, Balkany had received two checks by Thursday from the hedge fund totaling $3.25 million, paid as part of a sting. Balkany was released on his own recognizance after posting $250,000 bond and about $1 million property in equity. He surrendered his passport and was ordered not to leave the state.