Jury convicts Smart ring CEO in nearly $2M Ponzi scheme

A federal jury has found the CEO of a wearable technology company guilty of running a nearly $2 million Ponzi scheme and fraudulently obtaining a $150,000 COVID-19 relief loan, the Justice Department announced.

Michelle Bisnoff, 59, of Boca Raton, Florida, also known as “Michelle Angeline Silverstein” and “Shelly Silverstein,” was convicted of six counts of securities fraud, six counts of wire fraud, two counts of money laundering, one count of wire fraud tied to the relief loan and one count of aggravated identity theft.

Evidence at the seven-day trial showed that McLear Ltd., a U.K.-based company, hired Bisnoff to develop a U.S. market for its patented payment rings, which were designed to embed credit card information in a wearable ring. Prosecutors said that by early 2017, she falsely claimed to own the key patent, including through a falsified assignment, and formed Esos Rings Inc. to market “smart rings.”

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According to the Justice Department, Bisnoff told investors that Esos was profitable, that she used their money to expand manufacturing and inventory to meet demand from retailers such as Target and Walmart, and that the company was receiving large investments from Apple Inc. and Roc Nation. She also claimed to be close to a licensing deal with Middle Earth Enterprises, which controls The Lord of the Rings brand, and said Esos would buy back investors’ shares at a profit.

In fact, Esos had little revenue and no agreements with Target. It sold six rings on Walmart.com, three of which were returned, and received no investment from Apple or Roc Nation. It never finalized the licensing deal. Prosecutors said Bisnoff knew that financial statements, a corporate tax return purportedly filed by Esos and a patent valuation she gave investors had not been prepared or signed by the professionals identified with them.

Bisnoff used most of the investments for personal expenses, including rent, and for Ponzi-type payments, according to the department. When promised returns did not arrive, she gave explanations one victim described at trial as “dog-ate-my-homework” excuses. She also attempted to embezzle about $550,000 from an employer to send to investors and sent checks that bounced. Prosecutors said she obtained nearly $2 million from investors, who lost approximately $1.4 million.

Separately, in March 2020, Bisnoff applied for an Economic Injury Disaster Loan under the name “Michelle Silverstein,” identified herself as Esos’ chief operating officer and misstated the company’s revenue and cost of goods, according to the release. Although she certified that the proceeds would be used only for business expenses, prosecutors said she spent some of the $150,000 she received on personal expenses, including approximately $15,600 in monthly rent on a house in Pacific Palisades.

U.S. District Judge Mónica Ramírez Almadani scheduled sentencing for Jan. 21, 2027. Bisnoff faces a statutory maximum of 20 years in prison on each securities fraud and wire fraud count and 10 years on each money laundering count. The aggravated identity theft conviction carries a mandatory two-year consecutive prison term. Those penalties are statutory limits, not a predicted sentence.

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In a related civil case, the Securities and Exchange Commission sued Bisnoff and Esos in 2023 over the alleged fraudulent raising of $1.95 million. A September 2023 judgment held them jointly and severally liable for $566,483 in disgorgement, $46,836 in prejudgment interest and a $223,229 civil penalty, totaling $836,548. The Justice Department said that, as of the release, neither had paid any of the amount due.

The FBI and the U.S. Small Business Administration Office of Inspector General investigated, with substantial assistance from the SEC and the U.S. Attorney’s Office for the Southern District of Florida. Assistant U.S. Attorneys Ranee A. Katzenstein, Alexandra Sloan Kelly and Diane Roldán are prosecuting the case.

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