It’s 2006, and you just received a phone call about an exciting opportunity in real estate development.  A company called Cobalt has been acquiring, developing, and marketing residential properties for decades, and it’s looking for new investors.  Under the leadership of CEO William Foster, the company has acquired several well-known hotels in Miami.  Some of the properties have earned returns as high as 204%!

It’s a great story…too bad none of it is true.

William Foster isn’t running the firm, and the company doesn’t own those hotels.  In fact, the company hasn’t made a single dime.

The real story of Cobalt is much darker…

It involves a boiler room run by a former associate of the Wolf of Wall Street, and a Ponzi scheme run by a convicted fraudster.  It’s a crazy story, I know.  But then Donald Trump got involved.

Hang tight, this episode is going to get ugly.

Background – Mark Shapiro

Its brochures said the company had been in business for decades, but Cobalt Multifamily Investors was in business for just two years.  Headquartered in Massachusetts, Cobalt was started in 2004 by 45-year old Mark Shapiro.  Cobalt said he was just a consultant, but Shapiro actually ran the company.

So why didn’t Shapiro just acknowledge that Cobalt was his company?  Well, he had a bit of a shady past…here’s the backstory.

In 1998, Shapiro pled guilty to bank fraud and conspiracy to commit tax fraud.  He’d defrauded a bank out of millions in loans, kept a phony set of books, and failed to report income to the IRS.

Now Shapiro later tried to back out of his guilty plea, claiming he was innocent, and that he’d only pled guilty to stop the feds from indicting his wife.  But Shapiro’s request was denied.  As it turns out, it’s not illegal for the government to pressure you to plead guilty by threatening to prosecute a family member.  It’s only illegal if the government has no legit reason to prosecute that person.  Shapiro’s own lawyer told him that his wife was implicated in the scheme.

In any case, Shapiro was sentenced to 2.5 years in prison and ordered to pay $350,000.  He tried to get his sentence reduced by snitching out an employee of the bank he’d defrauded.  Shapiro was supposed to call the employee and get him to admit that he participated in the scheme while the feds listened in on the call.  But the FBI insisted that Shapiro make the call from their offices in Connecticut.  This made the bank employee suspicious, as he didn’t recognize the number on the caller ID when Shapiro called him. So the FBI dropped the ball on that one.

Background – William Foster

So Shapiro couldn’t get out of going to prison.  And when he got out and started Cobalt, he needed to keep his dark past a secret.  But this meant he needed someone to be the front man, to pretend to be the CEO. That man would be 64-year old William Foster.

Foster didn’t know how to run a real estate firm, but he was a loyal friend. Foster had visited Shapiro back when he was in prison. Shapiro now rewarded that kindness by making Foster “CEO in name only.” What a great job.

So we’ve got a fake company with a fake track record and a fake CEO…

But we’re still missing a key component: fake or not, the company needed money!

Shapiro decided Cobalt would get that money by offering people an opportunity to invest. Shapiro placed ads in newspapers and magazines, and handed out glossy brochures at business networking events. But it wasn’t enough; Shapiro needed to kick things up a notch…

So he hired the sleaziest person he could find to start a boiler room.

Background – Irving Stitsky

49-year old Irving Stitsky was the perfect candidate.  He had worked for the notorious boiler room Stratton Oakmont in the 1990’s.  If that name doesn’t ring a bell, it’s the brokerage firm that was co-founded by Jordan Belfort, the so-called “Wolf of Wall Street.”  Stratton Oakmont had manipulated the price of penny stocks in pump-and-dump schemes, with the Wolf of Wall Street eventually going to prison.  They would tell clients things such as, “who wears the pants in your family?” or “Bill Gates and Warren Buffet are going to invest, you’ve got to get in.”

Stitsky thus learned high-pressure sales from the best in the business. But these tactics got him banned from associating with securities dealers & investment firms.  But that didn’t stop Stitsky.  After leaving Stratton Oakmont, he got involved in another scheme.  But this time he got in even more trouble.  He pled guilty to conspiracy to commit securities fraud & got 21 months in jail.

The SEC again banned him from being involved with broker dealers.  But then Shapiro found Stitsky.  Shapiro put him in charge of fundraising, and told him to find investors for Cobalt.  Stitsky set up the boiler room in New York and got to work, making tens of thousands of phone calls across the country.  He promised the sales staff 9% of whatever money they brought in, and he gave them strict instructions not to reveal Shapiro’s involvement.  They didn’t want investors to know the guys running the company had recently been convicted of fraud.  After all, Cobalt was committed to “high ethics in all its business dealings.” I’m not kidding, their brochures actually said that. 

The Fraud Develops

So the boiler room was successful; the sales staff raked in millions from investors.  And they did this with lies.  They said Cobalt was run by people who had managed $2 billion in real estate.  They said Cobalt bought Miami’s Simone Hotel, and that its value had since doubled.  And they told investors they’d receive an 8% annual return.  Every one of these statements was a lie.

Cobalt showed investors a portfolio of more than 50 properties it had supposedly acquired and sold, with returns ranging from 9 to 204%.  But in reality, Cobalt owned just a handful of properties, and it had defaulted on its mortgage payments.  So this raises the million-dollar question: what happened to investors’ money?

What Cobalt Really Did with the Money

Well, most of the money was siphoned away through excessive fees.  Cobalt said it took a 9% “acquisition fee” from each investment.  In reality, it took up to 20%.  It did the same thing with its 9% “sales compensation” fee.

Some of the money went to boiler room and its leader, Stitsky.  But the one who profited the most was Shapiro.  He received at least $2.6 million of investors’ money.  Shapiro used it to pay his credit card bills, buy jewelry, and make the payments for his Porsche and Land Rover.

Now you’re probably wondering, “How did this last for two years? Wouldn’t the initial investors be demanding some return on their investment?”  Well, some of the investors did receive money – about $400,000.  But remember: Cobalt owned very few properties and didn’t make any money.  Thus, the $400,000 return paid to the old investors came from new investors.

That’s right, it was a Ponzi scheme.  Cobalt’s only cash flow came from the investors themselves. 

Cobalt Gets Shut Down

The feds must have been tipped off because they executed a search warrant at Cobalt’s offices in December of 2005.  But this didn’t even phase Shapiro or Stitsky, as they continued to seek new investors! This is insane…

But remember, we’re dealing with professionals here. This wasn’t their first fraud.  In fact, Stitsky was involved in two other SEC enforcement actions and criminal cases during this exact same time period.  He may have been dishonest, but he knew how to multi-task.

Cobalt finally shut down when the SEC filed a complaint on March 27, 2006.  In turned out Cobalt had swindled 250 investors out of $23 million.  Shapiro and Stitsky were arrested by the FBI.  They rejected a plea deal, and were convicted of fraud after a 3-week trial.


The judge threw the book at Shapiro and Stitsky at the sentencing.  They both got 85 years in prison.  That’s a long sentence for white-collar crime, but I see why the judge did it.  Both of these guys were career con men, and the fraud had wiped out the life savings of several investors.

Foster (the fake CEO) got off the easiest with a sentence of just 3 years.  Foster later died while appealing his case, so his conviction was wiped out.

And that was the end of the matter…Or was it?

President Trump

In 2020, Stitsky asked the court to be released early.  He said he had a medical condition and was worried about COVID-19, but his request was denied.

Then in December of 2020 came a bombshell.

President Trump commuted the sentences of both Stitsky and Shapiro.  Both of them would be getting an early release.  In a press release mentioning the commutations, the president’s press secretary said Cobalt had failed due to the 2008 financial crisis.  That’s very misleading; the SEC filed its complaint against Cobalt a full two years before the financial crisis.  It seemed like the White House was trying to downplay the severity of Shapiro and Stitsky’s actions.


In any event, I found this entire case to be really sad.  All people make mistakes, and I don’t think that committing fraud necessarily makes someone a bad human being.  But Shapiro and Stitsky didn’t just commit fraud once; they did it again and again, and they never seemed to accept responsibility for what they did.

Shapiro tried to withdraw his first guilty plea by saying he was coerced.  Then, Stitsky tried to get out of jail early by complaining about his health.

Hopefully they changed during their time in prison, and have remorse for their actions.  They just got out of an 85-year sentence and have a new lease on life!  They can start an organic garden, adopt a gluten-free lifestyle, and collect stamps.  I mean, they’re both in their sixties now, so they’re not going to get involved with another fraud…Right?

I’m Michael McLaughlin, and you’ve been listening to Scheme.


SEC complaint
SEC litigation release
2006 – arrested by federal agents
2009 – FBI press release / convicted after a 3-week jury trial
2009 – Stratton Oakmont boiler room
Convicted after a 13-day trial
More details about the trial; also, tried to get compassionate release
2010 – FBI press release for sentencing
2010 – sentenced to 85 years
2010 – details about the case & sentencing from the U.S. Attorney’s Office
2014 – investors court case against Shapiro (great background info)
Trump commutations
The 1998 case against Shapiro
Stratton Oakmont
The Wolf of Wall Street