Main Line furniture heir, tech founder faces federal fraud charges

Josh S. Verne, the furniture heir who convinced his wealthy Gladwyne friends and neighbors and some of Philadelphia’s best-known developers and professionals to invest $31 million in his online businesses, was charged by a federal grand jury Friday with 25 counts of fraud, plus aggravated identity theft, retaliation and threatening one of his workers to try to get them not to testify.

Verne was arrested Friday in Fort Lauderdale, where he had moved and began promoting other businesses after some of his Main Line investors demanded their money back in 2020. He is due for arraignment in Philadelphia federal court next week.

Verne and a lawyer representing him on other fraud charges didn’t immediately return calls seeking comment.

Last summer, the Securities and Exchange Commission filed civil fraud charges against Verne, accusing him of spending much of the money he raised from others on his own expensive lifestyle instead of the businesses, and hiding shortfalls with “Ponzi-like” payments to fool investors into giving him more money.

Verne’s investors included billionaire Fanatics owner Michael Rubin and developers David Adelman and Bart Blatstein, among others. Several told The Inquirer last year that they had been contacted by criminal investigators reviewing possible federal crimes.

Joseph Kohn, the Philadelphia lawyer Verne hired to defend the SEC charges, said earlier this year that investors’ losses were due to “market factors beyond our control.” In a brief phone interview last winter, Kohn said he looked forward to telling his side of the story at the appropriate time.

Prosecutors said Friday that they are seeking $14.2 million from Verne that could be traced to his alleged crimes. Sam Katz, a Philadelphia investment banker turned filmmaker and past Republican mayoral candidate, said he and other investors, given the long delay before Verne was charged, had started expecting they would see little, if any, of the money they trusted to Verne and his companies.

According to the indictment, Verne’s extended family formerly ran a wholesale furniture business, Home Line Furniture Industries, whose management he and a cousin inherited. The company shut production and sales operations in 2011.

Verne then started a payroll-deduction purchase and layaway business, WorkPaysMe.com, which he and other backers sold for $6 million in 2014. His next venture was FlockU LLC, a content site targeted at college students.

To raise more money for FlockU, the government says Verne lied to potential investors, claiming he had raised a vastly inflated $90 million from WorkPaysMe, and showing off a forged $50 million family assets statement on Goldman Sachs letterhead. He was not a Goldman Sachs customer, according to the indictment.

Among the early investments Verne gathered was $1 million from Adelman, whose businesses include national college housing manager and developer Campus Apartments, South Philly-based FS Investments, and the development group that plans to build a new Sixers arena. Impressed by Verne’s inflated claims and Adelman’s participation, others contributed millions more.

But FlockU failed in 2018, and Verne sold the assets for just $1, according to the government.

Failures aren’t unusual for early-stage investors; Verne continued to raise cash for new ventures. He next developed Ownable, a “rent-to-own” plan to finance laptops, smartphones and other must-have electronics for cash-poor consumers.

According to the indictment, Verne lied again, falsely claiming he was putting more than $2 million of his own money into Ownable. The government says he didn’t.

Verne sold Ownable stakes to investors but used much of the money “for his own personal purposes” — Shore house renovations, private-jet rides, political and charitable contributions, country club payments, his daughter’s bat mitzvah celebration, and debts unrelated to the company.

Verne ended up borrowing money from his employees to keep the business going, according to the indictment.

Verne is also accused of fraudulently pocketing money he raised for other businesses.

Besides securities frauds and wire frauds, Verne was charged with aggravated identity theft by impersonating one of his employees to raise money for Ownable, which Verne kept.

He is charged with retaliating against, and with threatening and trying to “corruptly persuade,” that same employee and their spouse, to keep them from testifying to the grand jury.