Fake it until you make it, is what the head of a real estate investment and hedge fund firm based in Chicago allegedly told his partner as the firm cheated almost 1,200 investors, mostly Orthodox Jews, out of about $255 million, the SEC charged Monday.

According to court documents, Joseph Shereshevsky, 51, the former chief operating officer of Wextrust Capital, told his partner in crime Steven Byers, 46, the firm’s former chairman, in an e-mail:

“We have faked it until we made it for long enough and now we must clean it up.”

The two men were arrested Monday and were charged with federal criminal fraud charges.

Andrew Sacks, an attorney who represents Shereshevsky in the criminal case, said that his client intended to vigorously contest the allegations.

“He denies that he committed fraud,” Sacks said. “This was likely started by disgruntled investors who have not gotten the return that they hoped for.”

Wextrust Capital raised money going as far back as 2002 for about 60 private placements for 150 entities, according to the SEC complaint which was filed in New York federal district court. However, instead of buying or investing in the properties, the firm would go on to raise money from other investors in a traditional “Ponzi” scheme motif.

One of the schemes involved properties that the offering memorandum said would be leased to the General Services Administration. Another scheme involved investment in a diamond mine in Namibia.

Shereshevsky had been in the diamond trading business and was well-known in the Orthodox Jewish community, the SEC claimed. He had also been in trouble with the law before. He pleaded guilty to one count of bank fraud in 2003 and paid restitution of almost $39,000.

Complaints had already been filed against the company. In May, an unnamed investor filed a complaint with the Illinois Attorney General, stating that he “smells a rat,” and “This is smelling like a giant PONZI scheme.”