Southern District of New York
Press releases recorded for this federal judicial district.
Two Men Sentenced to 30 and 46 Months in Prison for Scheme to Defraud New York City Program for Homeless VeteransRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JEROME WEAH was sentenced today in Manhattan federal court to 46 months in prison for engaging in a scheme to defraud a program of the New York City Human Resources Administration (“HRA”), which provides cash assistance to homeless veterans of the United States armed services (“Veterans”) seeking permanent housing. Another defendant, RUDEAN WEIR, was sentenced to 30 months in prison on March 30, 2023, for his participation in the scheme. The sentences were imposed by United States District Judge Denise L. Cote.
U.S. Attorney Damian Williams said: “Rudean Weir and Jerome Weah stole approximately $5.4 million from a New York City program intended to benefit U.S. veterans seeking permanent housing. These sentences should send a message that individuals who abuse Government programs to enrich themselves at the expense of taxpayers will face serious consequences.”
As alleged in the Complaint, Informations, and other documents in the public record, as well as statements made in public court proceedings:
From at least October 2020 through at least May 2022, RUDEAN WEIR and JEROME WEAH submitted more than 340 fraudulent applications seeking cash assistance pursuant to the Enhanced One Shot Deal (“EOSD”) program administered by the HRA. The EOSD is an emergency assistance program pursuant to which HRA makes a one-time cash assistance payment to qualifying individuals. EOSD payments are often used to help individuals move out of homeless shelters and/or other temporary housing into permanent housing. EOSD payments may be used to cover certain costs associated with the move to permanent housing, including rent, moving expenses, security deposits, broker’s fees, and payments for furniture and other household items. The HRA also offers and administers services and programs for Veterans, sometimes referred to as “Veteran’s Initiatives.” In connection with these services, the HRA has a designated group responsible for receiving and reviewing EOSD requests made on behalf of homeless Veterans seeking permanent housing.
Between October 2020 and May 2022, the HRA received at least 340 EOSD applications which claimed that the applicants were homeless Veterans who had entered into a lease agreement with a particular landlord (“Landlord-1”). Each of these applications (the “Landlord-1 EOSD Applications”) claimed that a particular company provided broker’s services in connection with the lease agreement (“Broker Company-1”). HRA paid approximately $5.4 million in EOSD payments and broker’s fees pursuant to the Landlord-1 EOSD Applications.
The Landlord-1 EOSD Applications were fraudulent. Landlord-1 and the Veterans did not, in fact, enter into the lease agreements submitted to HRA in connection with the Landlord-1 EOSD Applications, and Broker Company-1 did not provide real estate brokerage services to either Landlord-1 and/or the Veterans. The Veterans identified in the Landlord-1 EOSD Applications were not homeless and typically did not live in New York City. The Landlord-1 EOSD Applications, therefore, contained fake documentation and information and fraudulently induced HRA into making EOSD payments.
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In addition to the prison terms, both WEIR, 38, of Atlanta, Georgia, and WEAH, 47, of Trenton, New Jersey, were sentenced to three years of supervised release and ordered to pay restitution in the amount of $5,388,769.60. WEIR was ordered to forfeit $3,779,489.00, including his interest in two bank accounts and six real estate properties. WEAH was ordered to forfeit $2,179,922.60, including his interest in two bank accounts and one real estate property.
Mr. Williams praised the outstanding investigative work of the New York City Department of Investigation. Mr. Williams also thanked the New York City Department of Social Services and the U.S. Department of Veterans Affairs, Office of Inspector General for their assistance.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Matthew Weinberg is in charge of the prosecution.
Silk Road Dark Web Fraud Defendant Sentenced Following Seizure and Forfeiture of over $3.4 Billion in CryptocurrencyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JAMES ZHONG was sentenced today to one year and one day in prison for committing wire fraud in September 2012 when he unlawfully obtained approximaely 50,000 Bitcoin from the Silk Road dark web internet marketplace. United States District Judge Paul G. Gardephe imposed today’s sentence.
As part of the ZHONG investigation, the Government has obtained final orders of forfeiture for, among other items, 51,680.32473733 Bitcoin, valued at over $3.4 billion at the time of seizure and over $1.57 billion today.
U.S. Attorney Damian Williams said: “Back in 2012, James Zhong committed wire fraud by stealing 50,000 Bitcoin from Silk Road, and for the next 10 years, he managed to conceal what he had done and how he obtained his fortune. Zhong used a decentralized Bitcoin mixer, an overseas cryptocurrency exchange, and an impressive array of technological tools to frustrate tracing efforts. But thanks to the relentless and skillful efforts of law enforcement in following the money, the federal government uncovered Zhong’s scheme and obtained final orders of forfeiture for over 51,680 Bitcoin. Cyber-criminals should heed this message: we will follow the money and hold you accountable, no matter how sophisticated your scheme and no matter how long it takes.”
According to court filings and statements made in court proceedings:
ZHONG’s Scheme to Defraud
Silk Road was an online “darknet” black market. In operation from approximately 2011 until 2013, Silk Road was used by numerous drug dealers and other unlawful vendors to distribute massive quantities of illegal drugs and other illicit goods and services to many buyers and to launder all funds passing through it. In 2015, following a groundbreaking prosecution by this Office, Silk Road’s founder Ross Ulbricht was convicted by a unanimous jury and sentenced to life in prison. United States v. Ulbricht, 14-cr-68 (S.D.N.Y.).
In September 2012, ZHONG executed a scheme to defraud Silk Road of its money and property by (i) creating a string of approximately nine Silk Road accounts (the “Fraud Accounts”) in a manner designed to conceal his identity; (ii) triggering over 140 transactions in rapid succession in order to trick Silk Road’s withdrawal-processing system into releasing approximately 50,000 Bitcoin from its Bitcoin-based payment system into ZHONG’s accounts; and (iii) transferring this Bitcoin into a variety of separate addresses also under ZHONG’s control, all in a manner designed to prevent detection, conceal his identity and ownership, and obfuscate the Bitcoin’s source.
While executing the September 2012 fraud, ZHONG did not list any item or service for sale on Silk Road, nor did he buy any item or service on Silk Road. ZHONG registered the accounts by providing the bare minimum of information required by Silk Road to create the account; the Fraud Accounts were merely a conduit for ZHONG to defraud Silk Road of Bitcoin.
ZHONG funded the Fraud Accounts with an initial deposit of between 200 and 2,000 Bitcoin. After the initial deposit, ZHONG then quickly executed a series of withdrawals. Through his scheme to defraud, ZHONG was able to withdraw many times more Bitcoin out of Silk Road than he had deposited in the first instance. As an example, on September 19, 2012, ZHONG deposited 500 Bitcoin into a Silk Road wallet. Less than five seconds after making the initial deposit, ZHONG executed five withdrawals of 500 Bitcoin in rapid succession — i.e., within the same second — resulting in a net gain of 2,000 Bitcoin. As another example, a different Fraud Account made a single deposit and over 50 Bitcoin withdrawals before the account ceased its activity. ZHONG moved this Bitcoin out of Silk Road and, in a matter of days, consolidated them into two high-value amounts.
Nearly five years after ZHONG’s fraud, in August 2017, solely by virtue of ZHONG’s possession of the 50,000 Bitcoin that he unlawfully obtained from Silk Road, ZHONG received a matching amount of a related cryptocurrency — 50,000 Bitcoin Cash (“BCH Crime Proceeds”) — on top of the 50,000 Bitcoin. In August 2017, in a hard fork coin split, Bitcoin split into two cryptocurrencies, traditional Bitcoin and Bitcoin Cash (“BCH”). When this split occurred, any Bitcoin address that had a Bitcoin balance (as ZHONG’s addresses did) now had the exact same balance on both the Bitcoin blockchain and on the Bitcoin Cash blockchain. As of August 2017, ZHONG thus possessed 50,000 BCH in addition to the 50,000 Bitcoin that ZHONG unlawfully obtained from Silk Road. ZHONG thereafter exchanged through an overseas cryptocurrency exchange all of the BCH Crime Proceeds for additional Bitcoin, amounting to approximately 3,500 Bitcoin of additional crime proceeds. Collectively, by the last quarter of 2017, ZHONG thus possessed approximately 53,500 Bitcoin of total crime proceeds (the “Crime Proceeds”).
The Government’s Seizure of Over 50,000 Bitcoin
On November 9, 2021, pursuant to a judicially authorized premises search warrant, law enforcement agents recovered approximately 50,491.06251844 Bitcoin of crime proceeds from ZHONG’s Gainesville, Georgia, house. Law enforcement located these crime proceeds in an underground floor safe and on a single-board computer that was submerged under blankets in a popcorn tin stored in a bathroom closet. In addition, law enforcement recovered $661,900 in cash, 25 Casascius coins (physical bitcoin) with an approximate value of 174 Bitcoin, 11.1160005300044 additional Bitcoin, four one-ounce silver-colored bars, three one-ounce gold-colored bars, four 10-ounce silver-colored bars, and one gold-colored coin. Photographs of the popcorn tin, single-board computer, underground floor safe, and some of the seized items are included below:
Beginning in or around March 2022, ZHONG began voluntarily surrendering to the Government additional Bitcoin that ZHONG had access to and had not dissipated. In total, ZHONG voluntarily surrendered 1,004.14621836 additional Bitcoin.
Using a conservative estimate of the lowest spot price of Bitcoin on the seizure dates, the total value of all Bitcoin seized for which the Government has obtained final orders of forfeiture is approximately $3.4 billion.
Forfeiture Actions
On February 7, 2023, in United States v. Ross Ulbricht, S1 14 Cr. 68 (S.D.N.Y.), District Judge Lorna G. Schofield entered a final order of forfeiture as to the below property seized from ZHONG, vesting all right, title, and interest in the below property in the United States:
- 50,491.06251844 Bitcoin seized from ZHONG’s home on November 9, 2021;
- 825.38833159 Bitcoin provided by ZHONG on March 25, 2022; and
- 35.4470080 Bitcoin provided by ZHONG on May 25, 2022.
On March 14, 2023, District Judge Gardephe entered a final order of forfeiture as to the below property, vesting all right, title, and interest in the below property in the United States:
- ZHONG’s 80% interest in RE&D Investments, LLC, a Memphis-based company with substantial real estate holdings;
- $661,900 in United States currency seized from ZHONG’s home on November 9, 2021;
- Metal items, consisting of four one-ounce silver-colored bars, three one-ounce gold-colored bars, four 10-ounce silver-colored bars, and one gold-colored coin, all seized from ZHONG’s home on November 9, 2021;
- 11.1160005300044 Bitcoin seized from ZHONG’s home on November 9, 2021;
- 25 Casascius coins (physical Bitcoin) with an approximate value of 174 Bitcoin, collectively, seized from ZHONG’s home on November 9, 2021;
- 23.7112850 Bitcoin provided by ZHONG on April 27, 2022;
- 115.02532155 Bitcoin provided by ZHONG on April 28, 2022; and
- 4.57427222 Bitcoin provided by ZHONG on June 8, 2022.
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ZHONG, 32, of Gainesville, Georgia, and Athens, Georgia, previously pled guilty to one count of wire fraud before Judge Gardephe.
Mr. Williams praised the outstanding work of the Internal Revenue Service, Criminal Investigation’s Western Cyber Crimes Unit of the Los Angeles Field Office. Mr. Williams also thanked the Athens-Clarke County Police Department in Athens, Georgia, for its support and assistance with the case.
The prosecution of this case is being overseen by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorney David R. Felton is in charge of the case.
Florida Woman Pleads Guilty to Defrauding Holocaust Survivor of $2.8 Million in Connection with Romance ScamRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that PEACHES STERGO pled guilty today before United States District Judge Edgardo Ramos in connection with her years-long scheme to defraud an 87-year-old Holocaust survivor of his life savings.
U.S. Attorney Damian Williams said: “Peaches Stergo stole the life savings from an 87-year-old Holocaust survivor who was just looking for companionship. This conduct is sick – and sad. Using the millions in fraud proceeds, Stergo lived a life of luxury, purchasing a home in a gated community and a Corvette, taking vacations at hotels like the Ritz Carlton, and buying thousands in designer clothing, while at the same time causing her elderly victim to lose his apartment. Thanks to the hard work of the FBI and this Office, Stergo is being held accountable for her fraud.”
As alleged in the Indictment:
From at least in or about May 2017, up to and including at least October 2021, STERGO engaged in a scheme to defraud an 87-year-old Holocaust survivor (the “Victim”) of over $2.8 million, which was his life savings.
STERGO met the Victim on a dating website approximately six or seven years ago. In or about early 2017, STERGO asked the Victim to borrow money to pay her lawyer, who she claimed was refusing to release funds from an injury settlement. After the Victim gave her the money, STERGO said the settlement funds had been deposited into her TD Bank account. In reality, bank records show STERGO never received any money from an injury settlement.
Over the next four and a half years, STERGO continued her lies. She repeatedly demanded that the Victim deposit money into her bank accounts. She claimed that if he did not, her accounts would be frozen and he would never be paid back. In total, the Victim wrote 62 checks — totaling over $2.8 million — that were deposited into one of two of STERGO’s bank accounts.
In furtherance of the fraud, STERGO created a fake email account, intended to appear as if it belonged to a TD Bank employee. She also created fake letters from a TD Bank employee and fake invoices.
While the Victim lost his life savings and was forced to give up his apartment, STERGO lived a life of luxury with the millions she received from the fraud: she bought a home in a gated community, a condominium, a boat, and numerous cars, including a Corvette and a Suburban. During the course of the fraud, STERGO also took expensive trips, staying at places like the Ritz Carlton, and spent many tens of thousands of dollars on expensive meals, gold coins and bars, jewelry, Rolex watches, and designer clothing from stores like Tiffany, Ralph Lauren, Neiman Marcus, Louis Vuitton, and Hermes.
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STERGO, 36, of Champions Gate, Florida, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison. In connection with the guilty plea, STERGO agreed to pay $2,830,775 in restitution and to forfeit the same amount, along with over 100 luxury items she purchased with fraud proceeds, including Rolex watches, designer purses and clothing, and large amounts of gold and jewelry.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. Sentencing has been scheduled for July 27, 2023, at 11:00 a.m.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Adam Sowlati is in charge of the prosecution.
New York Litigation Funder Convicted in Trip-And-Fall Fraud Scheme Sentenced to 36 Months in PrisonRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that ADRIAN ALEXANDER, a New York litigation funder, was sentenced today to 36 months in prison for his participation in a scheme to obtain large insurance settlements and lawsuit recoveries from fraudulent trip-and-fall accidents. ALEXANDER is the 11th defendant to plead guilty or be convicted at trial for his participation in this fraud scheme and the fifth defendant to be sentenced. Defendants Ryan Rainford, Bryan Duncan and Robert Locust, who recruited patients into the scheme and were convicted at trial in May 2019, were previously sentenced on January 7, 2020, July 27, 2020, and July 9, 2021, respectively. Defendant Sady Ribeiro, a surgeon who participated in the scheme, was previously sentenced on March 23, 2023. U.S. District Judge Sidney H. Stein imposed all sentences.
U.S. Attorney Damian Williams said: “Adrian Alexander knowingly exploited some of the most vulnerable members of society – many of whom were poor, drug addicts, or homeless – in order to enrich himself and his investors. Today’s sentence should serve as a warning to unscrupulous litigation funders that, together with our law enforcement partners, we will hold accountable those who engage in unlawful practices and prey on litigants without the means to avail themselves of the judicial process.”
According to the Indictment, the Superseding Information, evidence presented in court, and statements made in court:
ALEXANDER, among others, was involved in an extensive fraud scheme through which fraud scheme participants defrauded businesses and insurance companies by staging trip-and-fall accidents and filing fraudulent lawsuits arising from those staged trip-and-fall accidents.
The fraud scheme participants recruited individuals (the “Patients”) to stage or falsely claim to have suffered trip-and-fall accidents at particular locations throughout the New York City area (the “Accident Sites”). In the course of the fraud scheme, scheme participants recruited more than 400 Patients. Members of the fraud scheme often recruited Patients who were extremely poor. For example, it was common for Patients to ask for food when they would appear for their intake meetings with the lawyers. Many of the Patients did not have sufficient clothing to keep them warm during the winter and had poor-quality shoes. Members of the fraud scheme also recruited Patients who were drug addicts, and it was common for scheme participants to recruit Patients from homeless shelters in New York City.
In the beginning, scheme participants would instruct Patients to claim they had tripped and fallen at a particular location, when in fact, the Patients had suffered no such accidents. Eventually, at the direction of the lawyers who filed fraudulent lawsuits on behalf of the Patients, scheme participants began to instruct Patients to stage trip-and-fall accidents, i.e., to go to a location and deliberately fall. Common Accident Sites used during the fraud scheme included cellar doors, cracks in concrete sidewalks, and purported “potholes.”
After the staged trip-and-fall accidents, Patients were referred to specific attorneys who would file personal injury lawsuits (the “Fraudulent Lawsuits”) against the owners of the Accident Sites and/or insurance companies of the owners of the accident sites (the “Victims”). The Fraudulent Lawsuits did not disclose that the Patients had deliberately fallen at the Accident Sites or, in some cases, had not fallen at all. During the course of the fraud scheme, the defendants, together with others known and unknown, attempted to defraud the Victims of more than $31,000,000.
The Patients were also instructed to receive ongoing chiropractic and medical treatment from certain chiropractors and doctors, including Ribeiro. The fraud scheme participants advised the Patients that if they intended to continue with their lawsuits, they were required to undergo surgery, which was critical to boosting the value of any potential settlement. Fraud scheme participants, including ALEXANDER, looked for doctors who were willing to perform surgeries, even when others would not. For example, in a May 2015 email, after one doctor informed ALEXANDER that a particular patient was “not . . . a surgical candidate,” ALEXANDER directed a Patient recruiter and case manager to “[t]ake him to [another doctor]—Nothing is done until its done.”
As an incentive to getting surgery, the recruited Patients were offered a payment, in the form of loans, typically between $1,000 and $1,500 after they completed surgery (“Post-Surgery Loans”). Patients generally were told to undergo two surgeries.
The Patients’ legal and medical fees were usually paid for by litigation funding companies (the “Funding Companies”), including a funding company owned by ALEXANDER, even if the Patient maintained medical coverage through an insurance company or a government-subsidized program. The Funding Companies also paid the fraud scheme organizers and participants referral fees, typically $1,000 to $2,500, for each Patient who signed a funding agreement. In an April 2015 email about a particular Patient’s staged accident, Alexander wrote to two of the recruiters and case managers, “I am sure you realize I want to do these deals; I am just trying to see how we can, without getting in trouble.”
In exchange for funding Patients’ medical and legal costs, the Funding Companies charged the Patients high interest rates, sometimes up to 50% on medical loans and up to 100% on personal loans. The interest rates were so high that oftentimes the majority of the proceeds that were awarded in the Fraudulent Lawsuits were paid to the Funding Companies, lawyers, doctors, and others, with the Patients receiving a much smaller percentage of the remaining recovery.
In addition to the high-interest rates charged by the Funding Companies, ALEXANDER also profited from the Fraud Scheme through an MRI facility that he owned and operated (“MRI Facility-1”). ALEXANDER pushed the case managers to send Patients to MRI Facility-1, which routinely prepared MRI reports that were “positive” for medical conditions justifying surgery, even though the Patients had not sustained any injuries. ALEXANDER received $1,000 per MRI that MRI Facility-1 prepared as part of the scheme.
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In addition to the prison term, ALEXANDER, 76, of New York, New York, was sentenced to three years of supervised release. ALEXANDER was further ordered to pay $659,011 in forfeiture. Restitution will be determined by the Court within 90 days.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation. Mr. Williams also thanked the National Insurance Crime Bureau for their assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Nicholas Chiuchiolo, Nicholas Folly, Danielle Kudla, and Alexandra Rothman are in charge of the prosecution.
U.S. Attorney Announces Agreement with the City University of New York to Remedy the Exclusion of A Student with Visual ImpairmentsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced a voluntary compliance agreement under Title II of the Americans with Disabilities Act (“ADA”) with the City University of New York (“CUNY”) pursuant to which CUNY will provide individual relief to a student with visual impairments who was excluded from full participation in their academic courses and implement systemwide policies to ensure future compliance with the ADA across CUNY’s 25 colleges in the five boroughs of New York City, which collectively serve 243,000 students.
U.S. Attorney Damian Williams said: “It is simply unacceptable that any student should be denied equal access to an education because of a disability. We are pleased that CUNY has agreed to provide relief to the student whose education was compromised and that CUNY is committed to improving the accessibility of its courses, including online and digital content, for all future students.”
Title II of the ADA prohibits public entities from discriminating against any individual on the basis of disability by excluding the individual from participation in services, programs, and activities. The ADA requires public entities to make reasonable modifications to avoid such discrimination and to administer their services, programs, and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities, including by furnishing appropriate auxiliary aids and services to ensure effective communication.
The out-of-court agreement resolves an investigation during which the U.S. Attorney’s Office determined that CUNY failed to provide reasonable accommodations required under the ADA for a student with visual impairments at CUNY’s John Jay School of Criminal Justice and identified shortcomings in CUNY’s accessibility and reasonable accommodation policies and procedures. Specifically, the investigation found, among other things, that CUNY failed to make qualified learning assistants available to ensure an integrated learning setting for the student in numerous science and mathematics courses. Additionally, John Jay instructors required students to use WebAssign, a third-party online learning product, to complete assignments, but that digital platform was not fully capable of reading out mathematical and scientific symbols and equations. Furthermore, John Jay repeatedly failed to make usable versions of required textbooks and other course materials available to the student by the start of courses. The student made a number of attempts to bring the deficiencies to the attention of staff at John Jay and CUNY, but neither John Jay nor CUNY had adequate policies and procedures to ensure that reasonable accommodation requests and related complaints are addressed in a timely and appropriate manner. As a result, the student received unduly poor grades and was forced to forgo taking other desired and required advanced courses for a number of academic years.
CUNY has agreed to prepare and implement systemwide policies to ensure improved accessibility of educational content to visually impaired students, including digital learning content, proper training of staff and faculty, and effective reasonable accommodation and complaint procedures.
Under the agreement, CUNY will permanently purge all of the affected student’s grades in the relevant courses in which reasonable modifications were not provided and pay the student $10,000 in compensatory damages. CUNY will also adopt systemwide policies and procedures to ensure:
- The prompt availability of qualified learning assistants, including by initiating an appropriate and timely search process, involving the relevant affected students in that process, and setting a reasonable level of compensation likely to attract qualified candidates;
- The prompt availability of accessible course materials by the start of the relevant course or as soon as practicable based upon early consultations with affected students;
- Reasonable accommodation and complaint mechanisms based on clear, short deadlines by which accommodation requests and complaints must be addressed and remaining concerns are promptly escalated to higher-level administrators as necessary;
- Information Technology accessibility consistent with the latest Web Content Accessibility Guidelines, including via verification of the accessibility of third-party learning products and of instructors’ awareness of accessibility requirements for instructor-created content; and
- Training of faculty and accessibility-services staff on ADA requirements.
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This case is being handled by the Office’s Civil Rights Unit in the Civil Division. Assistant U.S. Attorney Stephen Cha-Kim is in charge of the case.
Ten Defendants Charged with Decade-Long, Multi-Million-Dollar Scheme to Defraud International Cargo AirlineRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Thomas Fattorusso, the Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced the unsealing of a four-count Indictment charging LARS WINKELBAUER, ABILASH KURIEN, CARLTON LLEWELLYN, ROBERT SCHIRMER, SKYE XU, BENJAMIN WEI, a/k/a/ “Ben Wei,” ALVARO LOPEZ, FABIOLA CINO, ORLANDO WONG, and PATRICK LAU, a/k/a “Pat Lau,” in connection with a massive scheme to defraud Polar Air Cargo Worldwide, Inc. (“Polar”), a leading cargo airline, of tens of millions of dollars in revenue and the honest services of its employees. Nine defendants were arrested today. KURIEN, LLEWELLYN, SCHIRMER, and LAU will be presented in federal court in Manhattan this afternoon. WEI and WONG will be presented later today in federal court in the Central District of California. LOPEZ and CINO will be presented later today in federal court in the Southern District of Florida. WINKELBAUER was arrested today in Thailand and is pending extradition to the United States. SKYE XU remains at large.
U.S. Attorney Damian Williams said: “As alleged, the 10 defendants charged today conducted a widespread scheme that tainted nearly every aspect of Polar Air Cargo Worldwide’s operations and that cost the company an estimated $52 million in losses. The defendants, all of whom were either employed in high-level positions by Polar or were vendors reliant on business arrangements with Polar, allegedly showed a blatant disregard for the integrity of their companies in favor of lining their own pockets. Their pervasive fraud ends today, and each defendant now faces substantial prison time for their alleged crimes.”
FBI Assistant Director Michael J. Driscoll said: “For more than a decade, the defendants allegedly utilized a complex set of schemes at the expense of Polar Air to line their own pockets. The indictments today serve as a reminder to any unscrupulous actors attempting complex frauds – the FBI will hold you accountable in the criminal justice system.”
IRS-CI Special Agent in Charge Thomas Fattorusso said: “Today’s charges are the opening salvo against a decade-long scam by a small group of Polar’s executives and others that allegedly tainted every aspect of its business operations. These arrests and charges today will hopefully begin the process of righting the alleged wrongs of those charged and put the company on a path to integrity, which its hardworking employees and legitimate customers deserve.”
As alleged in the Indictment:[1]
From at least in or about 2009 through in or about July 2021, LARS WINKELBAUER, ABILASH KURIEN, CARLTON LLEWELLYN, ROBERT SCHIRMER, SKYE XU, BENJAMIN WEI, ALVARO LOPEZ, FABIOLA CINO, ORLANDO WONG, and PATRICK LAU participated in a massive scheme to defraud Polar. At all relevant times, WINKELBAUER, KURIEN, LLEWELLYN, and SCHIRMER (collectively, the “Executive Defendants”) were senior executives of Polar. XU, WEI, LOPEZ, CINO, WONG, and LAU (collectively, the “Vendor Defendants”) owned and operated various Polar vendors and customers. The Executive Defendants agreed to accept millions of dollars in kickbacks from the Vendor Defendants and also reaped substantial financial benefits as a result of their secret ownership interests in certain Polar vendors, in exchange for ensuring that those vendors received favorable business arrangements with Polar. The fraud they perpetrated — which involved a substantial portion of Polar’s senior management and at least 10 customers and vendors of Polar — led to pervasive corruption of Polar’s business, touching nearly every aspect of the company’s operations, for over a decade.
Polar’s business involved numerous outside vendors and customers. Polar relied heavily on third-party, general sales agents (“GSAs”) in the United States to sell cargo space on its planes. In turn, the GSAs hired by Polar often sold available cargo space to freight forwarding vendors, which had been hired by downstream customers to coordinate transportation logistics for large quantities of goods. Polar also contracted with ground handling vendors to load and unload cargo and with trucking vendors to transport cargo from domestic locations to the appropriate airports. In addition, Polar contracted with other partners for a variety of business reasons, including to secure cargo space on airline routes not serviced by Polar flights. The scheme to defraud Polar touched on each aspect of these operations.
Together, the Executive Defendants and the Vendor Defendants defrauded Polar by corrupting Polar’s relationships with GSAs, freight forwarders, and other vendors, including those providing ground handling and trucking services. Unbeknownst to Polar, the Executive Defendants utilized their positions within Polar to secure, among other things, favorable contracts, valuable cargo space, favorable shipping rates, and enrollment in various incentive programs for the Vendor Defendants and their entities. In return, the Vendor Defendants paid the Executive Defendants kickbacks in various forms, including, for example, in payments calculated per kilo of cargo shipped with Polar or as a percentage of the revenue earned as a result of a vendor’s relationship with Polar. In addition, the Executive Defendants, in various combinations, held concealed ownership positions in certain companies which contracted with Polar and that were, in at least one case, associated with the Vendor Defendants. As a result, the Executive Defendants received ownership distributions based, in large part, on revenue derived from contracts with Polar — contracts that had been secured and, often times, renewed due to, in large part, the recommendation of the Executive Defendants with conflicts of interest.
To conceal the kickbacks and conflicted ownership interests from Polar, and thereby to continue the fraud scheme, WINKELBAUER, KURIEN, LLEWELLYN, and SCHIRMER often directed the kickbacks and ownership distributions be paid to limited liability companies with non-descript names that they, in fact, controlled. Additionally, the Executive Defendants communicated amongst themselves and with the Vendor Defendants about the scheme primarily using personal email accounts, while the Vendor Defendants conducted official Polar business with the Executive Defendants primarily using their professional email accounts.
As a result of the scheme, the Executive Defendants, along with two co-conspirators who also worked as senior executives at Polar, received unlawful payments, either directly or through various limited liability companies they controlled, in excess of approximately $23 million in kickback payments or disbursements received as a result of their ownership of conflicted companies. Additionally, a financial analysis conducted at Polar’s direction estimates that, as a result of the fraudulent scheme, Polar suffered at least approximately $52 million in losses between in or about 2009 and in or about July 2021.
In the Summer of 2021, Polar discovered documentary evidence of the conflicted ownership arrangements and kickback agreements. Shortly thereafter, Polar terminated the employment of WINKELBAUER, KURIEN, LLEWELLYN, and SCHIRMER, and reported the conduct to law enforcement authorities. Polar has continued to cooperate with law enforcement authorities through the investigation.
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WINKELBAUER, 47, of Bangkok, Thailand, KURIEN, 45, of Wilton, Connecticut, LLEWELLYN, 55, of Highland Mills, New York, SCHIRMER, 58, of Port Jefferson Station, New York, XU, 40, of West Covina, California, WEI, 58, of San Marino, California, LOPEZ, 50, of Aventura, Florida, CINO, 45, of Aventura, Florida, WONG, 60, of Manhattan Beach, California, and LAU, 43, of Flushing, New York, are each charged with one count of conspiracy to commit wire fraud and honest services wire fraud, which carries a maximum sentence of 20 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison. WINKELBAUER, KURIEN, LLEWELLYN, and SCHIRMER are also charged with one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Williams praised the outstanding work of the FBI and IRS-CI. Mr. Williams also thanked the United States Attorney’s Offices for the Central District of California and the Southern District of Florida as well as the Justice Department’s Office of International Affairs and Thai authorities for their assistance in the investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Katherine Reilly and Danielle Kudla are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described therein should be treated as an allegation.
Urologist Charged with Sexually Abusing PatientsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing today of a four-count Indictment charging DARIUS A. PADUCH, a New York–area urologist, with inducement of a person to travel to engage in unlawful sexual activity and inducement of a minor to engage in unlawful sexual activity for his yearslong sexual abuse of two victims who were his patients and who were minors during part of the period of abuse. PADUCH was arrested this morning and will be presented before U.S. Magistrate Judge Sarah L. Cave this afternoon. The case has been assigned to U.S. District Judge Ronnie Abrams.
U.S. Attorney Damian Williams said: “As alleged, for years, Darius Paduch abused the trust of patients, including minors, who saw him for sensitive medical problems. Paduch took advantage of his victims for his own deviant satisfaction. Thanks to this morning’s arrest, Paduch’s abuse of his patients ends today.”
FBI Assistant Director in Charge Michael J. Driscoll said: “The indictment unsealed today against Paduch, a New York-area doctor, details alleged systemic abuse of a number of patients, to include minors, over the course of several years. Sexual abuse of anyone at any age for any reason is a horrific crime that carries strict penalties. If you have been victimized by Darius Paduch in any way or have any additional information about his alleged illegal behavior, please call us at 1-800-CALL-FBI, or reach out to us at tips.fbi.gov.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]
Over the course of several years, PADUCH sexually abused multiple male patients, including minor male patients, while conducting purported urological examinations in his capacity as a medical doctor employed by a prestigious medical institution in New York, New York (“Medical Institution-1”).
From at least in or about 2015 through at least in or about 2019, PADUCH, while working as a urologist, enticed and induced multiple victims to travel to his medical offices at Medical Institution-1, so PADUCH could, among other things, sexually abuse the victims. In or about 2019, PADUCH began practicing at a different hospital located in Long Island, New York (“Medical Institution-2”), where he continued to sexually abuse patients. PADUCH used his position as a urologist at prominent medical institutions in New York to make or attempt to make the victims believe that the sexual abuse he inflicted on them was medically necessary and appropriate, when, in fact, it was not. PADUCH often directed the victims to schedule follow-up visits, and he instructed victims to return to see him again. As a result, some of the victims attended many appointments with PADUCH over the course of multiple years, at which PADUCH repeatedly abused them.
After appointments, PADUCH sent certain victims — including minor victims — text messages from his personal cellphone. In those messages, he made inappropriate and sexual comments and jokes, and he directed the victims to schedule follow-up appointments or to visit his office after regular business hours.
As alleged, PADUCH induced two victims to travel to New York, New York, from or through another state to engage in unlawful sexual activity — in other words, his abuse of the victims. PADUCH also used a telephone and other means of interstate commerce to induce two minor victims to engage in the unlawful sexual activity.
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PADUCH, 55, of North Bergen, New Jersey, is charged with inducement of a victim (“Minor Victim-1”) to travel to engage in unlawful sexual activity, which carries a maximum sentence of 20 years in prison; inducement of a victim (“Minor Victim-2”) to travel to engage in unlawful sexual activity, which carries a maximum sentence of 20 years in prison; inducement of Minor Victim-1 to engage in unlawful sexual activity, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; and inducement of Minor Victim-2 to engage in unlawful sexual activity, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.
The minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the FBI.
The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Marguerite B. Colson, Elizabeth A. Espinosa, and Jun Xiang are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
Restaurateur Sentenced to 57 Months in Prison for over $6 Million Pandemic Loan Fraud and Interstate ThreatsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that restaurateur BESIM KUKAJ was sentenced to 57 months in prison for orchestrating a sprawling loan fraud scheme, including while he was on pretrial release, whereby he fraudulently sought at least $6.14 million and received $1.5 million in Government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic. KUKAJ was also sentenced for attempting to intimidate a creditor as part of an interstate threats scheme with his already sentenced co-defendant Abduraman Iseni, a/k/a “Diamond.” U.S. District Judge Andrew L. Carter imposed today’s sentence.
U.S. Attorney Damian Williams said: “Manhattan restaurateur Besim Kukaj took advantage of the hardships created by the COVID-19 pandemic and the federal government’s efforts to help those in need by lining his own pockets with seven figures of illegally obtained funds. He did this out of pure greed, sending some of this money to a Florida real estate developer and using it to buy luxury items from Cartier and Hugo Boss. He even continued to commit the same crimes while he was on bail. And he didn’t stop there. He directed his co-conspirator to physically threaten a victim to whom he owed money. For his brazen crimes, Kukaj will serve meaningful time in prison.”
According to court filings and statements made in court proceedings:
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the Small Business Administration’s Paycheck Protection Program (“PPP”) and additional billions for the separate Economic Injury Disaster Loan program (“EIDL”). Pursuant to the CARES Act, the amount of PPP funds a business is eligible to receive is determined in significant part by the number of employees employed by the business and their average payroll costs. The amount of a loan under the EIDL program is determined in part by a formula based on the date the borrower began operating and the borrower’s gross revenue and cost of goods sold during a period before the pandemic. The loans can be used only for working capital and other normal operating expenses. Businesses applying for loans under the PPP and EIDL program must confirm the accuracy of their loan statements.
From at least in or about April 2020 through at least in or about July 2020, KUKAJ, working with others, submitted applications for loans under the EIDL program and the PPP to multiple banks on behalf of various restaurants KUKAJ or a relative of his owned. He did so on behalf of restaurants that were no longer operating or that had far less revenue and far fewer employees than were listed on the loan applications. KUKAJ and his co-conspirators applied for dozens of loans, totaling at least $6.14 million, from numerous financial institutions, using many different corporate entities, and they successfully received at least $1.5 million in loans.
KUKAJ was arrested in October 2020 and charged with bank fraud conspiracy and later indicted for the same charges in December 2020. He was released on pretrial release under a court order that notified him of the potential effect of committing a crime while on pretrial release. KUKAJ violated the terms of his bail for continuing to file false loan applications while on pretrial release for the same conduct. Specifically, in 2021, while on pretrial release, KUKAJ filed additional false loan applications that inflated the businesses’ number of employees and payrolls and falsely claimed that he was not under indictment.
Separately, on November 6, 2019, at the urging of KUKAJ, co-defendant Abduraman Iseni placed a telephone call to a victim, in which Iseni threatened physical violence against the victim. KUKAJ instructed Iseni to place this call because KUKAJ owed money to the victim.
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In addition to the prison sentence, KUKAJ, 43, of Fort Lee, New Jersey, was ordered to pay forfeiture of $1,500,000 and restitution in the amount of $1,500,000 to the U.S. Small Business Administration.
Mr. Williams praised the outstanding work of the Federal Bureau of Investigation New York’s Balkans and Middle East Organized Crime Squad, as well as the Small Business Administration Office of the Inspector General, the Social Security Administration Office of the Inspector General, and the New York State Liquor Authority for their investigative efforts and ongoing support and assistance with the case.
The prosecution of this case is being overseen by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys David R. Felton and Samuel L. Raymond are in charge of the case.
Woman Sentenced to 48 Months in Prison for Conspiring to Violate U.S. Sanctions Against IranRead the Press Release
A California woman was sentenced on April 7 to four years in prison followed by three years of supervised release for conspiring to violate the International Emergency Economic Powers Act (IEEPA) by providing services, including financial services, to Iran and the Government of Iran, in violation of U.S. sanctions against Iran, and for structuring.
According to court documents, Niloufar Bahadorifar, aka Nellie Bahadorifar, 48, of Irvine, pleaded guilty on Dec. 15, 2022, before U.S. District Judge Ronnie Abrams, who imposed the sentence.
“The Government of Iran has shown that it will take extreme measures to silence dissidents and critics around the world exercising their lawful rights, including through the use of violence on U.S. soil,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “We hold accountable an individual who violated U.S. sanctions by providing financial assistance that ultimately supported a failed kidnapping plot directed by the Iranian government, underscoring the Department’s commitment to bringing to justice those who criminally aid the Iranian regime.”
“Niloufar Bahadorifar provided financial support to a brazen plot intended to kidnap an Iranian human rights activist living in the United States whom the Iranian Government has sought to silence for years,” said U.S. Attorney Damian Williams for the Southern District of New York. “Efforts by malign foreign governments to stifle free speech and peaceful protest by means of intimidation or repression cannot be tolerated. The right to free speech is a core fundamental principle of American ideals, and this office is proud to protect that right with every means at our disposal.”
“Simply put, the defendant provided assistance to individuals who tried to help kidnap a journalist living in New York, who has criticized the regime in Teheran,” said Assistant Director Alan E. Kohler Jr. of the FBI’s Counterintelligence Division. “This case demonstrates that the government of Iran will continue to target dissidents and reach beyond their borders, violating U.S sanctions and national security, but more importantly threaten the personal safety of individuals living in our country. The FBI will continue to shield those who are targeted and aggressively pursue anyone who attempts to circumvent our laws and will leverage all our authorities to protect the right to free speech.”
According to the indictment and other documents in the public record, as well as statements made in public court proceedings:
For years, the Government of Iran has targeted a prominent Iranian dissident living in New York City (the Victim). The Victim is a journalist, author and human rights activist who has publicized the Government of Iran’s human rights abuses and suppression of political expression. Beginning in at least 2020, Iranian intelligence officials and assets, including co-defendant Mahmoud Khazein, plotted to kidnap the Victim from within the United States for rendition to Iran in an effort to silence the Victim’s criticism of the regime. As part of that plot, on multiple occasions in 2020 and 2021, agents of the Government of Iran procured the services of private investigators to surveil, photograph, and video record the Victim and the Victim’s household members. These agents of the Government of Iran, including Khazein, procured the surveillance by misrepresenting their identities and the purpose of the surveillance to the investigators and laundered money into the United States from Iran in order to pay for the surveillance, photos and video recordings of the Victim.
Beginning in approximately 2015, Bahadorifar, a U.S. citizen residing in California and originally from Iran, provided financial and other services, including access to the U.S. financial system and U.S. financial institutions, to Iranian residents and entities, including to Khazein. Bahadorifar, who is not charged with participating in the kidnapping conspiracy, provided financial services that ultimately supported the plot. Among other things, Bahadorifar caused a payment to be made to a private investigator for surveillance of the Victim on behalf of Khazein. Bahadorifar’s payment obscured the origin of those who had hired the private investigator, who surveilled the Victim without knowing it was on behalf of Iranian intelligence services. At no time did Bahadorifar obtain permission from OFAC to provide services to Iran.
Beginning in approximately 2019, Bahadorifar also structured cash deposits totaling hundreds of thousands of dollars. In total, Bahadorifar structured at least approximately $476,100 in more than 120 individual deposits. All but two of the deposits were less than $10,000.
The FBI New York Field Office Counterintelligence-Cyber Division and the New York FBI Iran Threat Task Force investigated the case, with valuable assistance provided by the New York City Police Department (NYPD) and the NYPD Intelligence Bureau, the FBI Los Angeles Field Office and the Justice Department’s National Security Division.
Assistant U.S. Attorneys Michael D. Lockard, Jacob H. Gutwillig and Matthew J.C. Hellman for the Southern District of New York and Trial Attorney Christopher M. Rigali of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.
Tech Company CEO Sentenced to 42 Months in Connection with Fraud Against His Former EmployerRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that SUNI MUNSHANI, the former Chief Executive Officer of a Connecticut-based technology company (the “Victim Company”), was sentenced to 42 months in prison for his participation in a scheme to defraud the Victim Company of millions of dollars. The sentence was imposed by U.S. District Judge Jed S. Rakoff.
U.S. Attorney Damian Williams said: “Suni Munshani believed that he could ransack a company that had put its trust in him. He lied for years — even impersonating his deceased uncle — to steal from an organization he was supposed to lead. His sentence shows once again that crime doesn’t pay, and that this Office will bring to justice those who flout the law, even if they have the top job.”
According to public court filings and statements made in Court:
Between 2011 and 2019, SUNI MUNSHANI was the CEO of the Victim Company, which provided data security services to its clients. Within six months of his appointment as CEO, MUNSHANI and others began an approximately eight-year scheme to defraud the Victim Company. During the scheme, MUNSHANI, among other things, created an email account in the name of his deceased uncle but controlled by MUNSHANI. MUNSHANI, posing as the uncle, used that email account to correspond with the Victim Company and to obtain payments from the Victim Company totaling at least approximately $3 million dollars for services that were never provided. These purported services were falsely represented to have been rendered by the uncle as well as others, including a marketing executive who had met MUNSHANI in social settings but had never worked for MUNSHANI or the Victim Company and had no idea his identity was being used by MUNSHANI. MUNSHANI also caused the Victim Company to issue a $3.5 million check for a purported tax liability, which check MUNSHANI then deposited into an unauthorized bank account created by MUNSHANI in the name of the Victim Company.
In addition, MUNSHANI defrauded the Victim Company through fraudulent licensing and reseller agreements between the Victim Company and two other companies (the “Licensing Company” and the “Reseller Company,” respectively). Among other things, MUNSHANI instructed another individual to set up the Reseller Company “in the same way as [the Licensing Company],” and then helped create and submit fraudulent invoices from the Reseller Company to the Victim Company.
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In addition to his prison term, MUNSHANI, 61, of Easton, Connecticut, was sentenced to three years of supervised release. The Court reserved decision on the amount of restitution.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation’s New York Office.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Timothy V. Capozzi and Steven J. Kochevar are in charge of the prosecution.
Founder and Former Chief Investment Officer of Infinity Q Sentenced to 15 Years in PrisonRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JAMES VELISSARIS, the founder and former chief investment officer of Infinity Q Capital Management (“Infinity Q”), a New York-based investment adviser that ran a mutual fund and a hedge fund that purported to have approximately $3 billion in assets under management, was sentenced to 15 years in prison for his participation in a scheme to defraud Infinity Q’s investors. The sentence was imposed by U.S. District Judge Denise L. Cote.
U.S. Attorney Damian Williams said: “Velissaris wove a complex scheme to defraud investors in Infinity Q’s investment funds, and he continuously lied to investors, auditors, and even the SEC in order to hide his crimes. Velissaris’s massive scheme was calculated and deceptive, and he now justly faces 15 years in federal prison. We hope this lengthy sentence resonates in the financial sector and deters anyone who may be tempted to lie to investors.”
According to public court filings and statements made in Court:
Background
VELISSARIS was the founder and chief investment officer of Infinity Q, an investment adviser that ran both a mutual fund (the “Mutual Fund”), started in about 2014, and a hedge fund (the “Hedge Fund,” and collectively the “Investment Funds”), started in about 2017. As of 2021, the two funds purported to have approximately $3 billion in assets under management. Infinity Q was headquartered in New York, New York, and employed a small staff, including a chief compliance and chief risk officer (“Employee-1”).
A major component of both the Mutual Fund and the Hedge Fund’s holdings were over-the-counter (“OTC”) derivative positions that involved customized contracts that allowed the counterparties to take positions on the volatility, or price movement, of underlying assets or indices. VELISSARIS, through Infinity Q, represented to its investors that it valued these OTC derivative positions based on fair value, and that in order to do so, it utilized the services of an independent third-party provider. In particular, Infinity Q represented to investors and other stakeholders that it used Bloomberg Valuations Service (“BVAL”) to independently calculate the fair value of these positions, in accordance with the terms of the underlying derivative contracts. These OTC derivative positions comprised hundreds of millions of dollars of the Investment Funds’ portfolios.
VELISSARIS’s Scheme to Lie to Investors and Inflate Derivative Swap Positions
In fact, however, VELISSARIS defrauded Infinity Q’s investors by taking an active role in the valuation of Infinity Q’s positions and by modeling the positions in ways that were not based on the actual terms of the underlying contracts and were inconsistent with fair value. VELISSARIS’s input into the BVAL valuation process was inconsistent with Infinity Q’s representations about the independence of the process and allowed VELISSARIS to fraudulently mismark positions in BVAL. VELISSARIS engaged in the mismarking of positions in BVAL by making false entries in BVAL’s system, including by secretly altering the computer code employed by BVAL that caused BVAL to alter and disregard certain critical terms. Altering and disregarding terms in this fashion caused BVAL to report values that were artificially inflated and, often, much higher than fair value.
By manipulating OTC derivative positions in BVAL in this way, VELISSARIS caused numerous positions in the Investment Funds to have anomalous and, at times, impossible valuations. For example, at times, VELISSARIS made manipulations in either the Mutual Fund and/or the Hedge Fund that caused certain identical positions that were held by both the Mutual Fund and the Hedge Fund (namely, a position where all the material terms are the same) to have substantially divergent values. In other cases, some of VELISSARIS’s manipulations caused certain positions held by the Investment Funds to have impossible values, such as where, under the true terms of the swap, the value adopted by VELISSARIS could only be true if volatility were negative – a condition which is mathematically impossible.
Ultimately, after VELISSARIS’s mismarking scheme was uncovered in or about February 2021, Infinity Q liquidated the Investment Funds and sold its OTC derivative positions. These positions were sold for hundreds of millions of dollars less than their purported market values in BVAL, thereby resulting in substantial losses to the investors in the Investment Funds.
VELISSARIS Lies to Auditors and Obstructs the SEC’s Investigation
In order to hide this scheme and prevent its detection, VELISSARIS lied to numerous outside stakeholders and regulators. First, in order to prevent Infinity Q’s outside auditor (the “Auditor”) from discovering the fraud, VELISSARIS provided the Auditor with falsified term sheets from counterparties that he had altered to change the true terms of certain OTC derivative positions. In particular, in connection with a number of audits, the Auditor selected certain OTC positions that it would independently value in order to confirm the reasonableness of Infinity Q’s values from BVAL. In order to ensure that the Auditor would not arrive at materially different results when independently valuing positions that VELISSARIS had manipulated in BVAL, VELISSARIS altered the terms of certain deal documents and provided them to the Auditor. After receiving these falsified documents and relying on them in its independent evaluation, the Auditor confirmed the reasonableness of VELISSARIS’s valuations in BVAL.
Furthermore, beginning in May 2020, the Securities and Exchange Commission (“SEC”) opened an inquiry and later an investigation into Infinity Q’s valuation practices. In connection with that investigation, VELISSARIS provided false and misleading information to the SEC. For example, when the SEC asked for original documents that had been provided to investors, VELISSARIS altered the documents before providing them to the SEC, including certain alterations that would help hide his mismarking scheme. For example, Infinity Q’s original investor materials stated that “[o]nce a price is established for a portfolio security, it shall be used for all Funds that hold the security.” As explained above, this was untrue, and on numerous occasions, manipulations in BVAL made by VELISSARIS caused the same positions in the Mutual Fund and the Hedge Fund to have substantially different values. To conceal the falsity of Infinity Q’s disclosures, VELISSARIS, along with Employee-1, removed this line from investor documents that were provided to the SEC.
In June 2020, the SEC requested that Infinity Q provide additional materials, including documents regarding Infinity Q’s valuation committee and all of its meeting minutes. Infinity Q’s investor materials had represented that Infinity Q had a valuation committee, including VELISSARIS; that the committee would meet monthly or more often; and that VELISSARIS would be responsible for preparing minutes of such meetings. In fact, however, VELISSARIS had not kept notes of any such meetings. Accordingly, days before responding to the SEC, VELISSARIS made up notes purporting to be from valuation committee meetings in 2019 and 2020 and submitted them to the SEC.
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In addition to his prison term, VELISSARIS, 38, of Atlanta, Georgia, was sentenced to three years of supervised release and agreed to pay approximately $22 million in forfeiture. The Court reserved decision on the amount of restitution.
Mr. Williams praised the work of the Federal Bureau of Investigation. He further thanked the SEC and the Commodity Futures Trading Commission for their cooperation and assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Margaret Graham is in charge of the prosecution.
United States Settles Fair Housing Act Lawsuit Against Artimus Construction for Failure to Construct Apartments Accessible to Persons with DisabilitiesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that the United States has settled a federal Fair Housing Act (“FHA”) lawsuit against ARTIMUS CONSTRUCTION, INC. (“ARTIMUS”). Under the settlement, ARTIMUS has agreed to make retrofits at rental buildings in Harlem and Chelsea, named Susan’s Court and Chelsea Park, respectively. ARTIMUS also agreed to provide $75,000 to compensate aggrieved persons and pay a $5,000 civil penalty. Additionally, ARTIMUS agreed to establish procedures to survey four additional properties, two in Manhattan and two in Queens, to improve accessibility and agreed to ensure that its future residential development projects will comply with the accessibility requirements of the FHA. The settlement was approved today by U.S. District Judge Paul A. Engelmayer.
U.S. Attorney Damian Williams said: “This Office has brought multiple suits to address the failure of real estate developers to comply with the Fair Housing Act, and we will continue to ensure that New York City’s residential housing market is open to everyone, including people with disabilities. We appreciate Artimus’s cooperation in remedying the inaccessible conditions in their buildings.”
According to the allegations in the complaint and the settlement approved today:
The FHA’s accessible design and construction provisions require multifamily housing complexes constructed after January 1991 to have basic features accessible to persons with disabilities. The inaccessible conditions at ARTIMUS’s rental buildings included excessively high thresholds at building entrances and entrances to common use areas, common use bathrooms that lack grab bars and pipe insulation, excessively high thresholds at entrances to individual apartments and within the apartments, and bathrooms in individual apartments that lack sufficient clear floor space for people who use wheelchairs. These features in the common use areas of ARTIMUS’s buildings, as well as in the buildings’ apartment interiors, did not meet the specifications set forth in the Fair Housing Accessibility Guidelines, Design Guidelines for Accessible/Adaptable Dwellings.
Under the settlement, ARTIMUS agreed to make retrofits to the public and common use areas as well as the individual units at the Chelsea Park and Susan’s Court buildings to improve accessibility. The settlement also requires ARTIMUS to establish procedures to ensure FHA compliance at its future development projects, including to retain an FHA compliance consultant to assess the design documents and conduct site visits to identify non-compliant conditions. In addition, ARTIMUS agreed to institute policies and training to ensure that its employees and agents will comply with the FHA’s accessibility requirements.
Finally, the settlement requires ARTIMUS to provide $75,000 to compensate aggrieved persons. Aggrieved persons may be entitled to monetary compensation from the fund created through today’s settlement. Aggrieved individuals may include those who:
- Were discouraged from living at ARTIMUS’s rental buildings because of the lack of accessible features;
- Have been hurt in any way by the lack of accessible features at ARTIMUS’s rental buildings;
- Paid to have an apartment at one of ARTIMUS’s rental buildings made more accessible to persons with disabilities; or
- Otherwise were discriminated against on the basis of disability at one of ARTIMUS’s rental buildings as a result of inaccessible design and construction.
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The settlement with ARTIMUS is the 18th settlement reached by this Office with developers and architects to remedy inaccessible housing in this District, including suits against The Durst Organization, Glenwood Management, Silverstein Properties, Related Companies, and Atlantic Development.
Any individual who may be entitled to compensation can file a claim by using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website https://www.justice.gov/usao-sdny/civil-rights or by sending a written claim to:
U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York 10007
Attention: Chief, Civil Rights Unit
The case is being handled by the Office’s Civil Rights Unit in the Civil Division. Assistant U.S. Attorney David J. Kennedy is in charge of the case.
California Resident Sentenced to Four Years in Prison for Conspiring to Violate U.S. Sanctions Against IranRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that NILOUFAR BAHADORIFAR, a/k/a “Nellie Bahadorifar,” was sentenced to four years in prison for conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) by providing services, including financial services, to Iran and the Government of Iran, in violation of U.S. sanctions against Iran, and for structuring. BAHADORIFAR pled guilty on December 15, 2022, before U.S. District Judge Ronnie Abrams, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “Niloufar Bahadorifar willfully violated sanctions and knowingly provided financial support to Iranian intelligence assets, who in turn were engaged in a plot to kidnap an Iranian human rights activist living in the United States whom the Iranian Government has sought to silence for years. Assisting malign foreign governments by violating sanctions can have devastating consequences, including for those targeted by hostile regimes for retribution. This Office will continue to prosecute efforts to subvert sanctions and is proud to protect victims from repressive regimes.”
According to the Indictment and other documents in the public record, as well as statements made in public court proceedings:
The IEEPA confers upon the President authority to deal with unusual and extraordinary threats to the national security and foreign policy of the United States. Since 1979, the President has found that the situation in Iran constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. Among the Government of Iran’s malign practices, it has targeted and sought to repress, including through harassment, intimidation, and violence, those who defend human rights and criticize the regime. Pursuant to the IEEPA, and applicable Executive Orders and regulations, U.S. persons are prohibited from exporting any services, including financial and banking services, to Iran or the Government of Iran without a license from the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”).
For years, the Government of Iran has targeted a prominent Iranian dissident living in New York City (“the Victim”). The Victim is a journalist, author, and human rights activist who has publicized the Government of Iran’s human rights abuses and suppression of political expression. Beginning in at least 2020, Iranian intelligence officials and assets, including co-defendant Mahmoud Khazein, plotted to kidnap the Victim from within the United States for rendition to Iran in an effort to silence the Victim’s criticism of the regime. As part of that plot, on multiple occasions in 2020 and 2021, agents of the Government of Iran procured the services of private investigators to surveil, photograph, and video record the Victim and the Victim’s household members. These agents of the Government of Iran, including Khazein, procured the surveillance by misrepresenting their identities and the purpose of the surveillance to the investigators and laundered money into the United States from Iran in order to pay for the surveillance, photos, and video recordings of the Victim.
Beginning in approximately 2015, BAHADORIFAR, a U.S. citizen residing in California and originally from Iran, provided financial and other services, including access to the U.S. financial system and U.S. financial institutions, to Iranian residents and entities, including to Khazein. BAHADORIFAR, who is not charged with participating in the kidnapping conspiracy, provided financial services that ultimately supported the plot. Among other things, BAHADORIFAR caused a payment to be made to a private investigator for surveillance of the Victim on behalf of Khazein. BAHADORIFAR’s payment obscured the origin of those who had hired the private investigator, who surveilled the Victim without knowing it was on behalf of Iranian intelligence services. At no time did BAHADORIFAR obtain permission from OFAC to provide services to Iran.
Beginning in approximately 2019, BAHADORIFAR also structured cash deposits totaling hundreds of thousands of dollars. In total, BAHADORIFAR structured at least approximately $476,100 in more than 120 individual deposits. All but two of the deposits were less than $10,000.
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In addition to the prison term, BAHADORIFAR, 48, of Irvine, California, was sentenced to three years of supervised release.
Mr. Williams praised the outstanding efforts of the Federal Bureau of Investigation’s (“FBI”) New York Field Office Counterintelligence-Cyber Division and the New York FBI Iran Threat Task Force. Mr. Williams also thanked the New York City Police Department (“NYPD”) and the NYPD Intelligence Bureau, the FBI’s Los Angeles Field Office Orange County Resident Agency, and the Department of Justice’s National Security Division, Counterintelligence and Export Control Section for their assistance.
This prosecution is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorneys Michael D. Lockard, Jacob H. Gutwillig, and Matthew J.C. Hellman are in charge of the prosecution, with assistance from Trial Attorney Christopher Rigali of the Counterintelligence and Export Control Section.
Statement of U.S. Attorney Damian Williams on the Conviction of Nicholas TartaglioneRead the Press Release
“Martin Luna, Miguel Luna, Urbano Santiago, and Hector Gutierrez were beloved fathers, husbands, brothers, and sons. In 2016, Nicholas Tartaglione, a former police officer-turned drug dealer, suspected that Martin Luna had stolen money from him. Tartaglione then devised a scheme to confront Martin at a meeting. Unaware he was being lured into a deadly trap, Martin tragically brought his two nephews — Miguel and Urbano — and a family friend — Hector — to the meeting. What occurred next could only be described as pure terror, as Tartaglione tortured Martin, then forced one of his nephews to watch as Tartaglione strangled Martin to death with a zip-tie. Tartaglione and two of his associates then transported Miguel, Urbano, and Hector — who were simply at the wrong place at the wrong time — to a remote wooded location, forced them to kneel, and executed them with gunshots to the back of the head. Tartaglione then buried all four victims in a mass grave. Tartaglione’s heinous acts represent a broader betrayal, as he was a former police officer who once swore to protect the very community he devastated. Today, a jury has found Tartaglione guilty of these heinous acts, sending a message that no one is above the law. We commend the career prosecutors and investigators for their relentless pursuit of justice in this case over the past seven years, and for ensuring that Nicholas Tartaglione faces a lifetime in federal prison for his unconscionable murder of four men. Most of all, we thank the victims’ families for trusting law enforcement to find their loved ones and see that justice was done.”
Cryptocurrency Founder “Bruno Block” Pleads Guilty to Tax CrimesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that AMIR BRUNO ELMAANI, a/k/a “Bruno Block,” the founder of the cryptocurrency “Oyster Pearl,” pled guilty yesterday to tax offenses. In connection with his guilty plea, ELMAANI admitted that he had secretly minted and sold for his own gain Pearl cryptocurrency tokens, which caused the price of Pearl tokens to plummet, and that he did not pay income tax on certain cryptocurrency profits. ELMAANI agreed that he caused a tax loss of over $5.5 million. ELMAANI pled guilty before United States District Judge Colleen McMahon.
U.S. Attorney Damian Williams said: “Amir Elmaani violated the duty he owed to pay taxes on millions of dollars of cryptocurrency profits. As he admitted, he also violated the trust of investors in the cryptocurrency he founded. Our Office will continue to bring groundbreaking cases, like this one, to ensure participants in cryptocurrency markets play by the rules.”
Based on the allegations in the Indictment, in the Superseding Information to which ELMAANI pled guilty, the plea agreement, and other statements made and documents filed in court:
In September and October 2017, ELMAANI began promoting online a new cryptocurrency known as Pearl tokens. Using a variation of his online pseudonym “Bruno Block,” ELMAANI stated that he planned to develop an online data-storage platform, known as Oyster Protocol, which would allow users to purchase online data storage with Pearl tokens. Instead of using his real name, ELMAANI operated almost exclusively online under the pseudonym “Bruno Block.” ELMAANI concealed his true identity from his prospective employees and business associates and never met them in person.
In late October 2018, although the number of Pearl tokens was purportedly fixed, ELMAANI used his access to the blockchain technology used to create Pearl tokens to mint new tokens, which he took for his own personal use (the “Exit Scheme”). ELMAANI thereby increased the total volume of Pearl tokens. Shortly after creating the new tokens, ELMAANI converted the Pearl tokens he had obtained to other types of cryptocurrency on an online marketplace or exchange. As a result of ELMAANI’s conduct, trading in Pearl tokens halted on that exchange and the price of Pearl tokens held by investors dropped substantially. Pearl tokens were subsequently de-listed from the primary exchange where they were traded. Subsequent to the Exit Scheme, ELMAANI used his friends and family to receive cryptocurrency and to transfer funds to a bank account in his name.
While ELMAANI initially attempted to hide even “Bruno Block’s” involvement in the Exit Scheme, he later effectively admitted to the conduct online under his “Bruno Block” pseudonym. In a recorded call with the then-chief executive officer (“CEO”) of Oyster Protocol Inc., after the Exit Scheme, the CEO asked ELMAANI why he had to take the additional new Pearl tokens if he had already cashed out millions of dollars’ worth of Pearl tokens in the past. ELMAANI responded, in part, that “taxes are pretty nasty.” ELMAANI carried out the Exit Scheme only days before the exchange he had used to cash out his Pearl tokens was set to require “know your customer” personal identifying information from its users.
In connection with his plea, ELMAANI admitted in the plea agreement that:
In or about 2017, using the alias “Bruno Block,” I began an online project called the “Oyster Protocol.” In support of this project, an initial coin offering (“ICO”) was held in or about October 2017, in which a token named “Pearl” (“PRL”) was issued. I stated in public forums that after the ICO, the supply of PRL would not increase, and that the smart contract that created PRL would be “locked.” Contrary to these statements, on or about October 29, 2018, I used the smart contract to mint new PRL, without telling anyone, including others who worked on the Oyster Protocol project. I then sold these newly minted PRL on a digital trading platform. I was aware that the counterparties who were buying these newly minted PRL likely were not aware of my reopening of the smart contract, and did not know that I had just substantially increased the total supply of PRL. After Oyster management learned of my reopening of the smart contract and alerted the public, the price of PRL plummeted.
ELMAANI filed a false 2017 tax return stating that he had only approximately $15,000 of income from a “patent design” business, and he filed no return and reported no income to the Internal Revenue Service (“IRS”) in 2018. Nevertheless, ELMAANI spent, in 2018, over $10 million for the purchase of multiple yachts, $1.6 million at a carbon-fiber composite company, hundreds of thousands of dollars at a home improvement store, and over $700,000 for the purchase of two homes, one of which was titled in the name of a shell company and the other in the name of two of his associates. The tax loss to the United States from ELMAANI’s conduct was approximately $5,523,794.
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ELMAANI, 31, of Martinsburg, West Virginia, pled guilty to one count of subscribing to a false tax return for the year 2017, which carries a maximum sentence of three years in prison, and one count of failure to file a tax return for the year 2018, which carries a maximum sentence of one year in prison. ELMAANI also agreed to pay restitution in the amount of at least $5,523,794.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Williams praised the investigative work of the Federal Bureau of Investigation and the IRS and also thanked the Securities and Exchange Commission and the Commodity Futures Trading Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Margaret Graham, Adam Hobson, and Drew Skinner are in charge of the prosecution.
Dealer of Fentanyl-Laced Heroin That Resulted in the Overdose Death of Actor Michael K. Williams Pleads GuiltyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that IRVIN CARTAGENA, a/k/a “Green Eyes,” pled guilty today to conspiring to distribute heroin, fentanyl, and fentanyl analogue. As part of the conspiracy, CARTAGENA distributed the fentanyl-laced heroin that resulted in the death of Michael K. Williams. CARTAGENA pled guilty earlier today before U.S. District Judge Ronnie Abrams.
U.S. Attorney Damian Williams said: “Irvin Cartagena sold fentanyl-laced heroin in broad daylight in New York City, feeding addiction and causing tragedy. In doing so, he dealt the fatal dose that killed Michael K. Williams. This Office and our law enforcement partners will continue to hold accountable the dealers who push this poison, exploit addiction, and cause senseless death in our community.”
According to the allegations in the complaints, court filings, and statements made in Court:
Between at least in or about August 2020 and February 2022, a drug trafficking organization (the “DTO”) was operating in the vicinity of 224 South 3rd Street in the Williamsburg neighborhood of Brooklyn, New York. The DTO sold heroin laced with fentanyl and a fentanyl analogue on the street in front of, and from an apartment inside of, the apartment building located at 224 South 3rd Street, among other places. On or about September 5, 2021, members of the DTO sold Michael K. Williams heroin, which was laced with fentanyl and a fentanyl analogue, with CARTAGENA executing the hand-to-hand transaction. Williams died as a result of using that fentanyl-laced heroin. Despite knowing that Williams died after being sold the DTO’s product, CARTAGENA and his co-conspirators continued to sell fentanyl-laced heroin in broad daylight amidst residential apartment buildings in Brooklyn and Manhattan.
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CARTAGENA, 39, of Brooklyn, New York, pled guilty to one count of conspiracy to distribute and possess with intent to distribute fentanyl analogue, fentanyl, and heroin, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 years in prison. As part of his guilty plea, CARTAGENA stipulated that the substances he conspired to distribute and possess with intent to distribute resulted in the death of Michael K. Williams.
The statutory minimum and maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding work of the New York City Police Department and the New York/New Jersey High Intensity Drug Trafficking Area Intelligence Analysts. Mr. Williams also thanked the Organized Crime Drug Enforcement Task Forces New York Strike Force, the United States Marshals Service, the New York/New Jersey Regional Fugitive Task Force, and the New York Division of the Drug Enforcement Administration for their assistance in this case.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Micah Fergenson and David Robles are in charge of the prosecution.
Belize Real Estate Developer Charged with Embezzling Investor FundsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging ANDRIS PUKKE with wire fraud and with engaging in unlawful monetary transactions in connection with his embezzlement of more than $13 million from Sanctuary Belize, a real estate development in Belize that he directed and controlled. PUKKE was arrested this morning in Los Angeles and will be presented in the Central District of California later today.
U.S. Attorney Damian Williams said: “Andris Pukke sold residential lots in Belize with a promise to build out an affordable vacation and retirement community in a tropical paradise. Instead, Pukke’s planned paradise turned out to be just a mirage, as he allegedly stole the very funds the development needed to pay for roads, utilities, and other infrastructure, leaving the lot buyers with nothing but land they cannot access or use. This Office will continue to aggressively pursue consumer fraud to ensure that businesses deliver on their promises to their customers.”
FBI Assistant Director Michael J. Driscoll said: “The defendant, as alleged, sold his victims dreams of a tropical haven, instead he used their money for his own interests. Investigating and holding financial fraudsters like Mr. Pukke accountable in the criminal justice system remains a top priority for the FBI.”
According to the Indictment unsealed today in Manhattan federal court:[1]
PUKKE directed and controlled Sanctuary Belize, which was a vacation and retirement community under development in Belize. PUKKE marketed and sold residential lots in the development to U.S. residents with promises that the development, when finished, would be near an international airport and hospital and would include a marina, a wildlife reserve, a beach club, and an equestrian center, among other amenities. Lot buyers could construct homes on their lots once the infrastructure, such as roads and electricity, was built out by Sanctuary Belize.
PUKKE and his salespeople falsely represented to lot buyers that Sanctuary Belize was free of debt and that all income from lot sales would go to the development of Sanctuary Belize's infrastructure. In fact, Sanctuary Belize had more than $12 million in debt, and PUKKE stole more than $13 million of the $124 million that Sanctuary Belize received from sales of residential lots. PUKKE stole the money by directing Sanctuary Belize employees to transfer the funds to recipients he designated. These transfers of funds were concealed on the books and records of Sanctuary Belize as business expenses, such as professional fees, legal fees, consulting fees, loans receivable, and online advertising expenses.
PUKKE used the embezzled funds for his personal benefit, including the renovation of his home in Newport Beach, California; investments in various entities unrelated to Sanctuary Belize; investments in unrelated real estate developments; repayment of personal debt; and payments to PUKKE's family members.
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PUKKE, 54, of Newport Bach, California, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of engaging in unlawful monetary transactions, which carries a maximum sentence of 10 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the investigative work of the FBI. Mr. Williams also thanked the Federal Trade Commission for their assistance with the case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys James McMahon and Jeffrey C. Coffman are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described herein should be treated as an allegation.
Former Start-Up CEO Charged in $175 Million FraudRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Patricia Tarasca, the Special Agent in Charge of the New York Regional Office of the Federal Deposit Insurance Corporation’s Office of the Inspector General (“FDIC-OIG”), announced the unsealing of a criminal Complaint charging CHARLIE JAVICE with falsely and dramatically inflating the number of customers of her company, Frank, in order to fraudulently induce J.P. Morgan Chase (“JPMC”) to acquire Frank for $175 million. JAVICE, who appeared on the Forbes 2019 “30 Under 30” list, stood to gain over $45 million from the fraud.
JAVICE was arrested last night in New Jersey and will be presented later today before U.S. Magistrate Judge Barbara Moses.
U.S. Attorney Damian Williams said: “As alleged, Javice engaged in a brazen scheme to defraud JPMC in the course of a $175 million acquisition deal. She lied directly to JPMC and fabricated data to support those lies — all in order to make over $45 million from the sale of her company. This arrest should warn entrepreneurs who lie to advance their businesses that their lies will catch up to them, and this Office will hold them accountable for putting their greed above the law.”
FDIC-OIG Special Agent in Charge Patricia Tarasca said: “The allegations described in today’s criminal Complaint exemplify the many ways banks can be defrauded. The FDIC-OIG remains committed to holding individuals accountable who threaten the integrity of financial institutions, and we thank our law enforcement partners for their diligence and dedication to investigating such crimes.”
According to the Complaint unsealed today in Manhattan federal court:[1]
In or about 2017, JAVICE founded TAPD, Inc., d/b/a Frank (“Frank”), a for-profit company that offered an online platform designed to simplify the process of filling out the Free Application for Federal Student Aid (“FAFSA”). FAFSA is a federal government form, available free of charge, that students use to apply for financial aid for college or graduate school. JAVICE was Frank’s CEO.
In or about 2021, JAVICE began to pursue the sale of Frank to a larger financial institution. Two major banks, one of which was JPMC, expressed interest and began acquisition processes with Frank. JAVICE represented repeatedly to those banks that Frank had 4.25 million customers or “users.” JAVICE explicitly defined “users” — to both banks — as individuals who had signed up for an account with Frank and for whom Frank therefore had at least four identified categories of data (i.e., first name, last name, email address, and phone number). In fact, Frank had less than 300,000 users.
When JPMC sought to verify the number of Frank’s users and the amount of data collected about them — information that was critical to JPMC’s decision to move forward with the acquisition process — JAVICE fabricated a data set. To do this, JAVICE and a co-conspirator (“CC-1”) first asked Frank’s director of engineering to create an artificially generated data set (a so-called synthetic data set). The director of engineering raised concerns about the legality of the request, to which JAVICE responded, in substance and in part, “We don’t want to end up in orange jumpsuits.” The director of engineering declined the request.
JAVICE then approached an outside data scientist and hired him to create the synthetic data set. After the data set was created, JAVICE provided that synthetic data set to an agreed-upon third-party vendor in an effort to confirm to JPMC that the data set had over 4.25 million rows. JAVICE then caused the third-party vendor to convey to JPMC that the data set had over 4.25 million rows, consistent with JAVICE’s misrepresentations that Frank had 4.25 million users.
In reliance on JAVICE’s fraudulent representations about Frank’s users, JPMC agreed to purchase Frank for $175 million. As part of the deal, JPMC hired JAVICE and other Frank employees. JAVICE received over $21 million for selling her equity stake in Frank and, per the terms of the deal, was to be paid another $20 million as a retention bonus.
Unbeknownst to JPMC, at or about the same time that JAVICE was creating the fabricated data set, JAVICE and CC-1 sought to purchase, on the open market, real data for over 4.25 million college students to cover up their misrepresentations. JAVICE and CC-1 succeeded in purchasing a data set of 4.5 million students for $105,000, but it did not contain all the data fields that JAVICE had represented to JPMC were maintained by Frank. JAVICE then purchased an additional set of data on the open market in order to augment the data set of 4.5 million users. After JPMC acquired Frank, JPMC employees asked JAVICE and CC-1 to provide data relating to Frank’s users so that JPMC could begin a marketing campaign to those users. In response, JAVICE provided what was supposedly Frank’s user data. In fact, JAVICE fraudulently provided the data she and CC-1 had purchased on the open market at a small fraction of the price that JPMC paid to acquire Frank and its purported users.
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JAVICE, 31, of Miami Beach, Florida, is charged with one count of conspiracy to commit bank and wire fraud, one count of wire fraud affecting a financial institution, and one count of bank fraud, each of which carry a maximum sentence of 30 years in prison, and one count of securities fraud, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the Special Agents from the U.S. Attorney’s Office for the Southern District of New York and from FDIC-OIG.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit, and Assistant U.S. Attorneys Micah F. Fergenson and Dina McLeod are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Swiss Executive Pleads Guilty to Tax Fraud ConspiracyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James C. Lee, Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that DANIEL WÄLCHLI pled guilty today to conspiring to defraud the United States in connection with a scheme to help wealthy American clients conceal more than $60 million in income and assets held in undeclared offshore bank accounts and evade U.S. income taxes. WÄLCHLI was a member of the executive board of a Swiss holding company that owned, among other entities, a Zurich-based private bank called Privatbank IHAG Zurich AG (“IHAG”). WÄLCHLI pled guilty earlier today before U.S. District Judge Gregory H. Woods.
According to the allegations in the Indictment, court filings, and statements made in Court:
From in or about 2009 to in or about 2014, WÄLCHLI and his co-conspirators defrauded the IRS by concealing income and assets of three wealthy U.S. clients with undeclared bank accounts at IHAG. In order to assist the U.S. clients, WÄLCHLI and his co-conspirators devised and implemented a scheme dubbed the “Singapore Solution” to fraudulently conceal the bank accounts of the U.S. clients, their assets, and their income from U.S. authorities. In furtherance of the fraudulent scheme, WÄLCHLI and his co-conspirators agreed to transfer more than $60 million from undeclared IHAG bank accounts of the U.S. clients through a series of nominee bank accounts in Hong Kong and other locations before returning the funds to newly opened accounts at IHAG in the name of a Singapore-based asset-management firm that WÄLCHLI helped establish. The U.S. clients paid large fees to IHAG and others to help them conceal their assets and evade U.S. income taxes.
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WÄLCHLI, 55, of Switzerland, pled guilty to one count of conspiracy to defraud the United States, which carries a maximum sentence of five years in prison.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as WÄLCHLI’s sentence will be determined by the judge.
Mr. Williams praised the outstanding work of IRS-CI. Mr. Williams thanked the Department of Justice’s Tax Division for their partnership on this case.
This prosecution is being handled by the Complex Frauds and Cybercrime Unit of the United States Attorney’s Office for the Southern District of New York and the Department of Justice’s Tax Division. Assistant U.S. Attorney Olga I. Zverovich of the United States Attorney’s Office for the Southern District of New York and Senior Litigation Counsel Nanette Davis and Trial Attorney Christopher Magnani of the Tax Division are in charge of the prosecution.
Southern District of New York Court Employee and Practicing Attorney Charged with Bribery and Making False StatementsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today the unsealing of charges against DIONISIO FIGUEROA, a/k/a “Dionicio,” an employee of the United States District Court for the Southern District of New York (“the SDNY District Court”), and TELESFORO DEL VALLE, JR., a/k/a “Ted,” a criminal defense attorney practicing in the SDNY District Court and elsewhere, for their participation in a scheme in which FIGUEROA referred criminal defendants to DEL VALLE and encouraged those defendants to retain DEL VALLE as counsel in exchange for cash payments from DEL VALLE to FIGUEROA. FIGUEROA was arrested, and DEL VALLE surrendered earlier today, and both will be presented before United States Magistrate Judge Andrew E. Krause in the SDNY District courthouse in White Plains, New York.
U.S. Attorney Damian Williams said: “The public, the Court, and the bar all rely on the integrity and honesty of the professionals who work for the Court and the lawyers who appear there. For years, Figueroa and Del Valle allegedly violated their duties and undermined the fair administration of justice, all for their personal gain. This Office will do its part to uphold the high standards of conduct expected of all those who play a role in the criminal justice process.”
According to the allegations in the Indictment:[1]
As a clerk in the SDNY Magistrate Clerk’s Office since in or about 2002, FIGUEROA was responsible for performing duties that included, among other things, making data entries regarding official case events in criminal cases; making summary entries of documents and proceedings on case dockets; and performing inquiries and furnishing information, either in person or by correspondence, regarding the status of cases. FIGUEROA also played a role with respect to the intake of criminal cases, including by preparing appearance bonds, advising defendants and their family members about the conditions of the bonds, and ensuring that appearance bonds were signed by all parties prior to a defendant’s release.
SDNY District Court personnel policies prohibited FIGUEROA from having outside employment that would pose a conflict of interest; receiving payments, gifts, or other benefits from persons having business before the SDNY District Court; and recommending particular attorneys to members of the public. FIGUEROA also was subject to the United States Courts’ Code of Conduct for Judicial Employees (the “Code of Conduct”), which cautioned judicial employees that “[a] number of criminal statutes of general applicability govern federal employees’ performance of official duties. These include: 18 U.S.C. § 201 (bribery of public officials and witnesses) ….” The Code of Conduct likewise admonished, among other things, that “[a] judicial employee should never influence or attempt to influence the assignment of cases, or perform any discretionary or ministerial function of the court in a manner that improperly favors any litigant or attorney, nor should a judicial employee imply that he or she is in a position to do so.”
DEL VALLE is a private attorney who has appeared in numerous federal criminal cases pending before the SDNY District Court.
Between at least 2011 and 2022, FIGUEROA and DEL VALLE engaged in a scheme whereby FIGUEROA used his position as an employee of the SDNY District Court to encourage criminal defendants to retain DEL VALLE to represent them in pending criminal cases. In return, DEL VALLE paid FIGUEROA a portion of the fees clients paid to DEL VALLE. Over the course of more than a decade, FIGUEROA referred at least 45 SDNY criminal defendants to DEL VALLE, and DEL VALLE paid FIGUEROA tens of thousands of dollars in referral fees. DEL VALLE paid FIGUEROA directly and through an intermediary, who would pick up envelopes of cash for FIGUEROA from DEL VALLE’s law office.
Many of the clients who ended up retaining and paying DEL VALLE were assigned free, court-appointed counsel. Nevertheless, FIGUEROA encouraged those individuals to change counsel, including by vouching for DEL VALLE’s abilities as a lawyer. For example, in July 2018, FIGUEROA told family members of one defendant (“Defendant-1”), in substance, that FIGUEROA knew a good attorney who was a specialist in similar cases and could get
Defendant-1 out of trouble. He then provided FIGUEROA’s contact information to
Defendant-1’s relative. Similarly, in February 2020, FIGUEROA told a family member of another defendant (“Defendant-2”), in substance, that if anyone could help Defendant-2 in Defendant-2’s case, it was DEL VALLE. At the time, Defendant-2 was represented by court-appointed counsel.FIGUEROA and DEL VALLE are also charged with making false statements to law enforcement during the investigation. In November 2022, federal law enforcement agents separately interviewed both FIGUEROA and DEL VALLE. After advising each that lying to federal law enforcement agents is a federal crime, FIGUEROA and DEL VALLE each made materially false, fictitious, and fraudulent statements and representations in response to the agents’ questions. In particular, FIGUEROA denied making any referrals to DEL VALLE, except on a small number of occasions concerning close relations or friends, and further denied ever having received payments from DEL VALLE for referrals. As to DEL VALLE, upon being served with a federal grand jury subpoena requiring the production of records from his law firm, DEL VALLE denied having any records reflecting client referrals from, or payments to, FIGUEROA or anyone else.
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FIGUEROA, 66, of New York, New York, and DEL VALLE, 65, of Leonia, New Jersey, are each charged with one count of conspiracy to bribe a federal employee and pay illegal compensation to a judicial employee, which carries a maximum potential sentence of five years in prison; one count of bribery of a federal employee, which carries a maximum potential sentence of 15 years in prison; one count of illegal compensation to a judicial employee, which carries a maximum potential sentence of five years in prison; and one count of false statements, which carries a maximum potential sentence of five years in prison.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Williams praised the outstanding investigative work of the Special Agents from the U.S. Attorney’s Office for the Southern District of New York.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Frank Balsamello, Andrew Rohrbach, and Jarrod L. Schaeffer are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
Leader of $8 Million Medicaid Fraud Scheme Sentenced to 95 Months in PrisonRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JULIO ALVARADO was sentenced to 95 months in prison for leading a sprawling scheme to defraud Medicaid of millions of dollars through the billing of fraudulent transportation claims. ALVARADO previously pled guilty to one count of healthcare fraud. U.S. District Judge Kimba M. Wood imposed today’s sentence.
U.S. Attorney Damian Williams said: “Julio Alvarado was the leader of a multi-million-dollar scheme to defraud Medicaid by filing false claims for medical transportation services that were never provided. He brazenly lined his own pockets with Medicaid funds meant to help the neediest New Yorkers. Today’s sentence makes clear that this type of criminal conduct will be prosecuted and punished to the full extent of the law.”
According to court filings and statements made in court proceedings:
From August 2017 to February 2020, KJ Transportation C Services Inc. (“KJ”) was paid more than $20 million for providing transportation services for Medicaid enrollees in the New York City area. A large volume of those claims were fraudulent. In some instances, the Medicaid recipient was deceased or out of the country when KJ claimed it was transporting that person to medical appointments. In other instances, the company used stolen identities, whereby the Medicaid recipient had never heard of KJ and had never taken any rides with the company. In other instances, the Medicaid recipients had received unlawful kickbacks from defendants in exchange for either providing KJ their Medicaid information or for fraudulently scheduling trips they did not take.
ALVARADO, who supervised more than a dozen other participants in the scheme, was responsible for billing more than $8 million in fraudulent trip claims.
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In addition to the prison term, ALVARADO, 63, of Yonkers, New York, was sentenced to three years of supervised release and ordered to pay $8,507,115 in restitution and to forfeit $8,507,115.
Mr. Williams praised the outstanding work of Homeland Security Investigations and the United States Department of Health and Human Services’ Office of Inspector General. He also thanked the Office of the Medicaid Inspector General for its assistance.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Kedar S. Bhatia and Brandon D. Harper are in charge of the prosecution.
Civil Forfeiture Complaint Filed Against World War I-Era Documents Stolen from an American UniversityRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today the filing of a civil complaint seeking forfeiture of various World War I-era documents, letters, and photographs relating to Russian military personnel, including the diary of a Russian general, for the purpose of returning the antiquities to the American university from which they were stolen.
U.S. Attorney Damian Williams said: “Antiquities allow us to see and study pieces of history from, in this case, more than one hundred years ago. The University’s important historical research was undercut by the alleged theft and illegal smuggling of these antiquities abroad. Thanks to the hard work and dedication of the FBI’s Art Crime Team, these records have been recovered and will be returned to their rightful owner.”
According to the allegations in the Complaint filed in Manhattan federal court today:[1]
The United States seeks the forfeiture of documentary materials, relating primarily to the 1917 Russian Revolution and World War I Russian military personnel, that were stolen from a university located in New York, New York (the “University”). The stolen materials included the 1919 diary of General Nikolai Iudenitch, a commander of the Russian Imperial Army during World War I, along with other documents, correspondence, and photographs that had been sent to an auction house located in Paris, France, (the “Auction House”) for inclusion in an April 2018 auction of Russian documents and books. The Auction House was not provided with any certificate of authenticity or proof as to the provenance of the materials. After a curator employed by the University recognized the items in a catalog published by the Auction House, the stolen materials were seized by law enforcement.
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Mr. Williams praised the investigative work of the Federal Bureau of Investigation/New York City Police Department Joint Major Theft Task Force/Art Crime Team. In addition, Mr. Williams thanked authorities in France for their assistance.
This matter is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Emily Deininger and Benet Kearney are in charge of the case.
The allegations contained in the Complaint are merely accusations.
[1] As the introductory phrase signifies, the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Recidivist Fraudster Pleads Guilty to $40 Million Ponzi SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that FRANKLIN RAY pled guilty today to four counts of wire fraud, including one count of wire fraud while released under conditions of bail, and one count of aggravated identity theft in connection with various fraud schemes relating to his operation of a trucking business known as CSA Business Solutions LLC and another Michigan-based trucking company. RAY, who was previously convicted of wire fraud and bank fraud in the Eastern District of Michigan and was released from prison in 2010, pled guilty before United States District Judge Analisa Torres.
U.S. Attorney Damian Williams said: “As he admitted in court today, between June 2020 and April 2022, Franklin Ray engaged in four separate fraudulent schemes by lying about the business operations of his purported trucking companies, including two separate PPP frauds and a $40 million Ponzi scheme. Ray continued his crime spree even after he was arrested by federal authorities in March 2022, brazenly defrauding investors in his fake trucking company of nearly $2 million while he was on bail following his arrest. Thanks to the hard work of the FBI and this Office, he is being held accountable for his serial fraudulent conduct.”
As alleged in the previously filed Complaint and Indictment and other court documents:
Beginning in at least June 2021, FRANKLIN RAY began to offer investors an opportunity to invest in his trucking and logistics company, CSA Business Solutions LLC (the “Truck Investment Scheme”). Specifically, RAY and the investors entered into contracts pursuant to which CSA Business Solutions LLC would procure and operate a truck in its trucking business for each $20,000 contributed by the investor. RAY told investors that the trucks would perform delivery services for a multinational e-commerce company and/or a multinational shipping company and that the investors would be entitled to 77% of the net income of the trucks. In reality, CSA Business Solutions LLC operated few trucks and had minimal revenues from trucking activities. Instead, investors in the Truck Investment Scheme received payments from new investments into the scheme or from other sources. After the investors purchased the rights to trucks from CSA Business Solutions LLC, RAY sent them falsified spreadsheets at regular intervals, purporting to show the performance of their trucks during the relevant period. RAY ultimately induced approximately 275 investors to invest at least $40 million and fraudulently claimed to have purchased over 2,000 trucks with the investments.
RAY also pled guilty to carrying out fraudulent schemes to obtain over $1.9 million in government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic on behalf of CSA Business Solutions LLC and another Michigan-based trucking company (the “SBA Loan Fraud Schemes”). In connection with the SBA Loan Fraud Schemes, RAY submitted false information and forged documents to the Small Business Administration and commercial lenders. RAY claimed that these businesses engaged in significant trucking business, but they had minimal revenues and trucking activity.
Finally, RAY pled guilty to fraudulently inducing a New York City-based real estate company (the “Company”) to pay $175,000 in startup costs for a joint venture (the “Join Venture”) between the Company and CSA Business Solutions LLC. RAY misrepresented CSA Business Solutions LLC and his own personal business experience to the Company. Rather than pay for startup costs, RAY spent the funds on personal expenses, including private airplane trips. The Joint Venture was never formed.
RAY was arrested in early March 2022, and a CSA Business Solutions LLC bank account was seized at that time. After his arrest, up until his Indictment in April 2022, RAY continued to operate the Truck Investment Scheme. RAY hid the fact of his arrest and the seizure of the bank account and lied to investors about why he did not make expected payments after his arrest. During the period after his arrest, RAY opened new bank accounts on behalf of CSA Business Solutions LLC and continued to solicit and accept investor funds for trucks that did not exist. In the post-arrest period alone, RAY defrauded investors into paying at least $1.9 million into his scheme.
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RAY, 51, of Canton, Michigan, pled guilty to four counts of wire fraud, including one count of wire fraud while released under conditions of bail and two counts of wire fraud affecting a financial institution, and one count of aggravated identity theft. The counts of wire fraud while released under conditions of bail and wire fraud affecting a financial institution each carry a maximum sentence of 30 years in prison. The remaining count of wire fraud carries a maximum sentence of 20 years in prison. Aggravated identity theft carries an additional mandatory two-year sentence, which must be imposed consecutively to any other sentence. RAY also agreed to forfeit $42,128,912, including the funds on deposit at several bank accounts used in connection with the fraudulent schemes, including the primary CSA Business Solutions bank account. RAY also agreed to pay restitution to the victims.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. RAY is scheduled to be sentenced at 11:40 a.m. on July 25, 2023, by U.S. District Judge Analisa Torres.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Matthew Weinberg is in charge of the prosecution.
If you believe you have been a victim of the schemes described above, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at 866-874-8900 or [email protected].
Former Law Firm Partner Arrested for Bankruptcy FraudRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment charging JOHN ROESSER, a former attorney, with abusing the bankruptcy system by making false statements under penalty of perjury and submitting falsified records. By February 2022, after years as a partner at major law firms, ROESSER owed the Internal Revenue Service (“IRS”) millions of dollars in income taxes and filed for Chapter 11 bankruptcy. Through multiple false statements, ROESSER lied to the Bankruptcy Court and the IRS about his purported receipt of millions of dollars in order to receive the protections of bankruptcy and keep his assets – including a multi-million-dollar residence and an Aston Martin sports car – while not paying his bills. ROESSER was arrested this morning in Bronxville, New York, and will be presented today in Manhattan federal court.
U.S. Attorney Damian Williams said: “Bankruptcy is a lifeline for many people who need its protections to keep their lives together. The defendant allegedly corrupted and degraded a system that helps so many. As alleged, he manipulated the bankruptcy system by lying and falsifying bank records so that he could use its protections to keep his assets and to avoid paying his bills. And he should have known better — he used to be a lawyer. This Office will always bring to justice those who use their status to abuse the public’s trust and to try to put themselves above the law.”
FBI Assistant Director Michael J. Driscoll said: “As alleged, Roesser committed bankruptcy fraud when he lied to both the Bankruptcy Court and the IRS about his receipt of millions of dollars so he could retain his assets – which included a multi-million-dollar residence and a luxury sports car – while avoiding paying his bills. The FBI will continue to investigate and bring to justice those who attempt to fraudulently exploit our nation’s legitimate financial protections to satisfy their own selfish desires.”
As alleged in the Indictment:[1]
From in or about March 2013 through in or about January 2018, ROESSER was a partner at three multinational law firms. During his time as a partner at these law firms, ROESSER earned substantial income — and incurred substantial income tax liability. ROESSER resigned from the New York bar in or about June 2020 after admitting to misappropriating client funds.
By 2022, ROESSER owed the IRS, and others, over three million dollars. He also owned a house that he estimated was worth millions of dollars and an Aston Martin Rapide, a luxury sports car. Instead of paying his debts, in February 2022, ROESSER filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York. See In re John Roesser, No. 22 Bk. 22049 (Bankr. S.D.N.Y.) (the “Bankruptcy”). In a Chapter 11 bankruptcy, a debtor may remain “in possession,” meaning that the debtor keeps possession and control of his assets during the bankruptcy. But a debtor-in-possession must propose a viable plan of reorganization, which creditors then vote on. If a debtor fails to comply with the requirements of Chapter 11, a Chapter 11 bankruptcy can be converted to a Chapter 7 bankruptcy or dismissed. In a Chapter 7 bankruptcy, an appointed trustee usually converts a debtor’s assets into cash for distribution among creditors. If a bankruptcy is dismissed, the debtor loses the protections of bankruptcy; for example, creditors can take steps to seize a debtor’s assets.
ROESSER told the Bankruptcy Court and the IRS that he would soon receive millions of dollars and be able to pay his debts while keeping his house. Then, ROESSER filed a false declaration and submitted falsified records in the Bankruptcy indicating that he had received millions of dollars. This was false. ROESSER was concealing that he had not received millions of dollars after all, in a fraudulent effort to retain control of his assets while avoiding payment of his debts.
On or about March 3, 2023, after some of the above false statements were withdrawn by ROESSER’s attorney in the Bankruptcy, ROESSER’s Chapter 11 bankruptcy was dismissed. Without the protections of bankruptcy, creditors can now take steps to seize ROESSER’s assets to pay his debts.
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ROESSER, 52, of Bronxville, New York, is charged with one count of falsification of records in bankruptcy, which carries a maximum sentence of 20 years in prison, and one count of false oaths and claims in bankruptcy, which carries a maximum sentence of five years in prison.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Williams praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Steven J. Kochevar is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described therein should be treated as an allegation.
Defense Company CEO Pleads Guilty to Conspiracy to Defraud Investors and CreditorsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that BAREND OBERHOLZER, a/k/a “Barry Oberholzer,” the Chief Executive Officer of a defense technology start-up (“Start-Up-1”), pled guilty today in Manhattan federal court in connection with a conspiracy to solicit investment in and financing for Start-Up-1 on the basis of fraudulent misrepresentations regarding financial solvency, access to cash, and use of investor funds. Magistrate Judge Robert W. Lehrburger accepted the defendant’s guilty plea. The case is assigned to U.S. District Judge Andrew L. Carter, Jr.
U.S. Attorney Damian Williams said: “Barend Oberholzer attempted to use the reputation of a retired, four-star Army General in order to solicit investments in his start-up company and a device he developed that purportedly could detect concealed weapons. Instead of attracting investors honestly, Oberholzer lied continuously to make his company more appealing to investors. Fortunately, law enforcement was able to detect the defendant’s lies, and he is now facing substantial time in prison.”
According to the allegations in the Indictment and other filings and statements made in court:
Beginning in or around 2018, OBERHOLZER began soliciting investments in Start-Up-1 and a purported security device it had developed (“Security Device-1”) from at least two venture capital firms on false pretenses. OBERHOLZER sent multiple emails to the firms, posing as a retired, four-star General in the United States Army (“Retired General-1”), who was employed by a prominent private equity firm based in New York, New York (“Private Equity Firm-1”). Therein, OBERHOLZER, posing as Retired General-1, endorsed and solicited investment in Start-Up-1 and Security Device-1, a smartphone case that purportedly permitted its users to detect at a distance weapons or other dangerous items concealed on another person.
OBERHOLZER and his co-conspirator, JAROMY PITTARIO, a/k/a “Jaromy Jannard-Pittario,” also solicited investments in and loans to Start-Up-1 and Security Device-1 by falsely representing, among other things, their financial solvency, access to cash, and use of investor funds. For instance, the pair repeatedly provided falsified financial statements to potential creditors to secure funding.
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OBERHOLZER, 39, of Calabasas, California, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. PITTARIO previously pled guilty on January 26, 2023. The sentencing of PITTARIO is scheduled for May 25, 2023, before Judge Andrew L. Carter, Jr., and the sentencing of OBERHOLZER is scheduled for July 11, 2023.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the New York Office of the U.S. Postal Inspection Service.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jilan J. Kamal and Timothy V. Capozzi are in charge of the prosecution.
New York Doctor Who Performed Unnecessary Back Surgeries as Part of Trip-And-Fall Fraud Scheme Sentenced to 36 Months in PrisonRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that SADY RIBEIRO, a New York-licensed pain management doctor, was sentenced today to 36 months in prison for his participation in a scheme to obtain fraudulent insurance reimbursements and other compensation from fraudulent trip-and-fall accidents. U.S. District Judge Sidney H. Stein imposed today’s sentence.
U.S. Attorney Damian Williams said: “Sady Ribeiro abused his professional license and broke his vow to do no harm by performing scores of medically unnecessary, invasive surgeries to increase the value of fraudulent trip-and-fall lawsuits. In carrying out the scheme, Ribeiro and his co-conspirators preyed upon the most vulnerable members of society – many of whom were poor, drug addicts, or homeless – in order to enrich themselves. Ribeiro now faces serious penalties for his callous crime.”
According to the Indictment, the Superseding Information, evidence presented in court, and statements made in court:
RIBEIRO, among others, was involved in an extensive fraud scheme through which fraud scheme participants defrauded businesses and insurance companies by staging trip-and-fall accidents and filing fraudulent lawsuits arising from those staged trip-and-fall accidents.
The fraud scheme participants recruited individuals (the “Patients”) to stage or falsely claim to have suffered trip-and-fall accidents at particular locations throughout the New York City area (the “Accident Sites”). In the course of the fraud scheme, scheme participants recruited more than 400 Patients. Members of the fraud scheme often recruited individuals who were extremely poor as Patients. For example, it was common for Patients to ask for food when they would appear for their intake meetings with the lawyers. Many of the Patients did not have sufficient clothing to keep them warm during the wintertime and had poor-quality shoes. Members of the fraud scheme also recruited Patients who were drug addicts, and it was common for scheme participants to recruit Patients from homeless shelters in New York City.
In the beginning, scheme participants would instruct Patients to claim they had tripped and fallen at a particular location, when in fact, the Patients had suffered no such accidents. Eventually, at the direction of the lawyers who filed fraudulent lawsuits on behalf of the Patients, scheme participants began to instruct Patients to stage trip-and-fall accidents, i.e., to go to a location and deliberately fall. Common Accident Sites used during the fraud scheme included cellar doors, cracks in concrete sidewalks, and purported “potholes.”
After the staged trip-and-fall accidents, Patients were referred to specific attorneys who would file personal injury lawsuits (the “Fraudulent Lawsuits”) against the owners of the Accident Sites and/or insurance companies of the owners of the accident sites (the “Victims”). The Fraudulent Lawsuits did not disclose that the Patients had deliberately fallen at the accident sites or, in some cases, had not fallen at all. During the course of the fraud scheme, the defendants, together with others known and unknown, attempted to defraud the Victims of more than $31,000,000.
The Patients were also instructed to receive ongoing chiropractic and medical treatment from certain chiropractors and doctors, including RIBEIRO. The fraud scheme participants advised the Patients that if they intended to continue with their lawsuits, they were required to undergo surgery. As an incentive to getting surgery, the recruited Patients were offered a payment typically between $1,000 and $1,500 after they completed surgery (“Post-Surgery Payments”). Patients generally were told to undergo two surgeries.
Doctors in the fraud scheme, including RIBEIRO, were expected to, and in fact did, conduct these surgeries, such as discectomies, regardless of the legitimate medical needs of the Patients. RIBEIRO performed discectomies, among other medical procedures, on more than 200 Patients. To maximize his patient base, RIBEIRO paid participants cash kickbacks in exchange for patient referrals.
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In addition to the prison term, RIBEIRO, 72, of New York, New York, was sentenced to three years of supervised release.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation. Mr. Williams also thanked the National Insurance Crime Bureau for their assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Nicholas Chiuchiolo, Nicholas Folly, Danielle Kudla, and Alexandra Rothman are in charge of the prosecution.
Financial Advisor, Financial Planner, NBA Agent, and Previously Convicted Fraudster Charged with Schemes to Defraud Professional Basketball PlayersRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a six-count Indictment charging DARRYL COHEN, BRIAN GILDER, CHARLES BRISCOE, and CALVIN DARDEN, JR. in connection with two schemes to defraud professional basketball players. COHEN and GILDER were arrested this morning in, respectively, Chatsworth, California, and North Ridge, California, and will be presented later today in the United States District Court for the Central District of California. BRISCOE was arrested this morning in Katy, Texas, and will be presented later today in the United States District Court for the Southern District of Texas. DARDEN, JR. was arrested this morning in Atlanta, Georgia, and will be presented later today in the United States District Court for the Northern District of Georgia.
U.S. Attorney Damian Williams said: “As alleged in the indictment, these defendants believed that defrauding their professional athlete clients of millions of dollars would be a layup. That was a huge mistake, and they now face serious criminal charges for their alleged crimes.”
FBI Assistant Director Michael J. Driscoll said: “As alleged, the defendants engaged in schemes to defraud four professional basketball players of more than $13 million. Today’s actions should serve as an example to others who engage in criminal activity to serve their own greedy financial desires at the expense of others – the FBI is committed to bringing you to justice.”
As alleged in the Indictment:[1]
COHEN and GILDER
From at least in or about 2017 through in or about 2020, COHEN, a registered investment adviser, orchestrated a scheme to defraud three different professional basketball player clients (“Athlete-1,” “Athlete-2,” and “Athlete-3,” respectively) of a total of over $5 million by taking advantage of his advisory and fiduciary relationships with those clients. COHEN conspired with BRIAN GILDER, an independent financial planner whom COHEN encouraged his clients to work with and who assisted in tax preparation for Athletes-1, -2, and -3.
First, COHEN and GILDER fraudulently induced Athletes-1, -2, and -3 to purchase viatical life insurance policies at massive markups. COHEN and GILDER did not disclose that GILDER had arranged for a purported law firm (“Law Firm-1”) that he controlled to purchase the polices and then to sell them to the athletes at markups of 222%, 310%, and 244%, respectively. Indeed, Law Firm-1 made approximately $4.5 million in profit from the sale of the policies to COHEN and GILDER’s athlete clients. COHEN and GILDER used a substantial portion of these illicit proceeds to pay their own personal expenses. In particular: (i) GILDER used approximately $257,479 of the funds to pay off a mortgage he owed; (ii) COHEN used approximately $178,462 of the funds to renovate his home and to perform work on his pool; (iii) COHEN used approximately $67,500 of the funds to pay off his personal credit card bill; and (iv) COHEN transferred approximately $200,000 of the funds to an individual with whom he was in a romantic relationship.
Second, COHEN directed that $500,000 be transferred from the accounts of Athletes-2 and -3 as purported donations to a non-profit organization. COHEN then used approximately $238,000 of the funds purportedly donated to the non-profit to build athletic training facilities in the backyard of his home. Athletes-2 and -3 never, in fact, authorized any transfers of their funds to the non-profit organization. When Athlete-2 confronted COHEN about the donations, COHEN told Athlete-2 in a text message, in substance and in part, that Athlete-2’s money had “[h]elped a lot of future prospects and a lot of underprivileged kids.” COHEN did not disclose to Athlete-2 that a substantial portion of Athlete-2’s donations had, in fact, been used to build an athletic training facility in COHEN’s backyard.
Third, COHEN and GILDER used a sports agency and another law firm to channel approximately $328,125 of Athlete-2’s money to repay a former professional baseball player (“Athlete-4”), who was a disgruntled client of COHEN’s. Athlete-4 had expressed concern to COHEN about investments and loans that COHEN made on Athlete‑4’s behalf and demanded to be repaid. On or about February 19, 2020, in the midst of making the payments of Athlete-2’s money to Athlete-4, COHEN messaged GILDER, “We gotta send [Athlete-4] more to get rid of him.” Athlete-2 did not authorize the use of funds from his account to repay debts owed by COHEN to Athlete-4.
BRISCOE and DARDEN, JR.
BRISCOE and DARDEN, JR. also defrauded professional basketball players. BRISCOE was an NBA agent, and DARDEN, JR. had previously pled guilty to wire fraud in the Southern District of New York.
BRISCOE served as the sports agent of a professional basketball player (“Athlete-5”). Athlete-5 began discussing the possibility of purchasing a professional women’s basketball team (“Team-1”), and BRISCOE introduced Athlete-5 to DARDEN, JR. Because Athlete-5 was not permitted to purchase Team-1 as an active professional basketball league player, BRISCOE, DARDEN, JR., and a relative of DARDEN, JR., who serves or has served on the boards of multiple public companies (“Relative-1”), discussed with Athlete-5 an arrangement in which Athlete-5 would indirectly purchase Team-1 through a company (“Company-1”) purportedly controlled by Relative-1. BRISCOE provided Athlete-5 with a slide deck outlining a “vision plan” for the purchase of Team-1 by Company-1. The “vision plan” claimed, among other things, that Company-1 was led by Relative-1 and was advised by a board including several prominent individuals in sports, entertainment, and corporate America. In truth and in fact, and as BRISCOE and DARDEN, JR. well knew, at least two of those individuals never served as advisors to Company-1.
Between in or about November 2020 and in or about December 2020, Athlete‑5 caused $7 million to be transferred to a bank account controlled by DARDEN, JR. Athlete-5 understood that these payments were in order for Athlete-5 to purchase and become full owner of Team-1. In truth and in fact, none of the money Athlete-5 sent went toward the purchase of Team-1, and Athete-5 did not become an owner of Team-1. Instead, from approximately November 2020 until approximately December 2021, DARDEN, JR. transferred more than $1 million of the funds to BRISCOE. In addition, DARDEN, JR. retained a substantial portion of the funds for himself and his relatives, sending more than $500,000 to a relative and more than $400,000 to a cryptocurrency exchange for his benefit. DARDEN, JR. also used some of the funds to pay for luxury goods for himself, including approximately $880,000 to luxury car companies, more than $300,000 to art galleries, and more than $100,000 to purchase a piano, among other things. DARDEN, JR. also spent in excess of approximately $1 million in connection with purchasing and making improvements to a residence, including, among other things, the addition of a koi pond.
BRISCOE and DARDEN, JR. also worked together to defraud Athlete-2. BRISCOE, in consultation with COHEN and GILDER, was purportedly building a new sports agency (“Agency-1”) funded by Athlete-2. BRISCOE convinced Athlete-2 that BRISCOE had signed, through Agency-1, a highly touted athlete preparing for a professional basketball draft (“Athlete-6”). In fact, Athlete-6 had not signed with BRISCOE or Agency-1. Rather, BRISCOE forged the signature of Athlete-6 and Athlete-6’s mother on a player-agent contract and sent that forged contract to Athlete-2. BRISCOE then directed Athlete-2 to transfer $1 million to BRISCOE as a “loan” to Athlete-6 while Athlete-6 prepared for the draft. In fact, Athlete-6 never had any conversations with BRISCOE or DARDEN, JR. about signing with BRISCOE or about receiving a $1 million loan, and Athlete-6 never received any part of the $1 million loan. Instead, BRISCOE used approximately $306,642 of the funds transferred by Athlete-2 to pay off a debt that BRISCOE had personally incurred and also transferred approximately $544,000 to a bank account controlled by DARDEN, JR.
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COHEN, 49, of Chatsworth, California, and Las Vegas, Nevada, GILDER, 49, of North Ridge, California, BRISCOE, 35, of Katy, Texas, and DARDEN, JR. 49, of Atlanta, Georgia, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud. Each count carries a maximum sentence of 20 years in prison. COHEN is also charged with one count of investment advisor fraud, which carries a maximum sentence of five years in prison, and BRISCOE is also charged with one count of aggravated identity theft, which carries a mandatory prison term of two years.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Williams praised the outstanding work of the FBI. Mr. Williams also thanked the United States Attorney’s Offices for the Central District of California, the Northern District of Georgia, and the Southern District of Texas for their assistance in the investigation. Mr. Williams further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action against COHEN, for its assistance and cooperation in this investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Katherine Reilly and Kevin Mead are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described therein should be treated as an allegation.
Coindawg Founder Arrested for Laundering Proceeds of Fraudulently Obtained Small Business Administration LoansRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced today the arrest of CHARLES RILEY CONSTANT, a/k/a “Chuck Constant,” for charges in connection with a scheme to steal and launder over $1 million in fraudulently obtained loans from the Small Business Administration (“SBA”), including the use of fraud proceeds to purchase cryptocurrency ATMs. CONSTANT was arrested yesterday morning and is being presented today before a U.S. Magistrate Judge in the Eastern District of Texas. In connection with CONSTANT’s arrest, law enforcement agents seized, among other things, 18 cryptocurrency ATMs in Texas and Oklahoma that CONSTANT purchased with fraud proceeds to start a cryptocurrency ATM business named “Coindawg LLC,” as well as Coindawg’s website.
U.S. Attorney Damian Williams said: “As alleged, Charles Constant helped to launder over $1 million of proceeds from loans that his co-conspirators fraudulently obtained from the SBA. He converted the bulk of the crime proceeds into Bitcoin for his co-conspirators and used a portion of the rest to start his own lucrative cryptocurrency ATM business. Thanks to this Office’s teamwork with the HSI, Constant is now facing serious criminal charges for his alleged crimes. We will continue to hold accountable people who steal funds intended for small businesses that struggled as a result of the COVID-19 pandemic.”
HSI Special Agent in Charge Ivan J. Arvelo said: “As alleged, Charles Constant specifically exploited the Small Business Administration’s Economic Injury Disaster Loan program put in place to help our small businesses weather the COVID-19 pandemic, for the purpose of expanding his criminal money laundering enterprise. Constant is accused of defrauding the federal government and robbing U.S. taxpayers with his illicit money-laundering scheme. HSI New York will continue to exhaust every resource at our disposal to ensure criminals like this will be held accountable for their actions.”
According to the allegations in the Complaint, which was unsealed today in Manhattan federal court:[1]
CHARLES RILEY CONSTANT, a/k/a “Chuck Constant,” knowingly assisted others involved in a scheme to fraudulently obtain over $1 million in loans from the SBA, which CONSTANT and his co-conspirators laundered through Bitcoin transactions. The perpetrators of the fraud against the SBA used false identities and non-existent companies to obtain seven Economic Injury Disaster Loans from the SBA — funds that were intended to help small businesses financially harmed by the COVID-19 pandemic. The loan proceeds were transferred directly from the SBA to a bank account held by C2 LLC, an entity that CONSTANT owned and registered with the U.S. Treasury Department as a money services business. CONSTANT then used approximately $700,000 of the crime proceeds — a portion of which he routed through a second bank account held by C2 LLC — to purchase Bitcoin from a cryptocurrency exchange headquartered in New York City. CONSTANT directed the New York-based exchange to distribute the Bitcoin to his co-conspirators.
CONSTANT then stole the remaining $300,000 of fraud proceeds. CONSTANT transferred $53,000 of the $300,000 to a third bank account held by C2 LLC and an additional $98,300 to an account in CONSTANT’s name at a cryptocurrency exchange headquartered in California. Beginning in the fall of 2020, CONSTANT used a portion of these fraud proceeds to purchase, among other things, seven cryptocurrency ATMs (“Crypto ATMs”), cryptocurrency, and promotional services to start a cryptocurrency ATM business named “Coindawg LLC.” CONSTANT used revenue generated by the seven Crypto ATMs to acquire additional Crypto ATMs and more cryptocurrency to expand Coindawg’s operations. To date, Coindawg has exchanged over $3,000,000 worth of cryptocurrency and charged 15% in transaction fees. Below is a photograph of one of the Coindawg Crypto ATMs seized by law enforcement in connection with CONSTANT’s arrest:
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CONSTANT, 54, of Allen, Texas, is charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; one count of theft of public money, which carries a maximum sentence of 10 years in prison; and one count of interstate receipt of stolen money, which carries a maximum sentence of 10 years in prison.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the investigative work of the HSI. Mr. Williams also thanked the HSI Field Office in Dallas, Texas, for their assistance in the investigation of this case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah Lai, Olga I. Zverovich, and Andrew K. Chan are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described herein should be treated as an allegation.
CEO of Paycheck Protection Program Lender MBE Capital Pleads Guilty in Connection with Fraudulent Loan and Lender ApplicationsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that RAFAEL MARTINEZ, the CEO of MBE Capital Partners, LLC, pled guilty to conspiring to commit wire fraud in connection with loan and lender applications submitted through the Paycheck Protection Program (the “PPP”) administered by the U.S. Small Business Administration (the “SBA”). MARTINEZ pled guilty before United States District Judge Lewis J. Liman, to whom his case is assigned.
U.S. Attorney Damian Williams said: “In the depths of the COVID-19 pandemic, Martinez lied to get money that was supposed to help people. His abuse of the system during a terrible time has now been brought to light. Martinez took advantage of his employees, a tax preparer, and the public at large — all to fund a lavish lifestyle of cars, jets, and fancy homes. Let me be clear, this Office will not tolerate such conduct and will continue to bring to justice those who put their greed above the law.”
According to the allegations in the Complaint, court filings, and statements made during plea proceedings:
MARTINEZ used false representations and documents to fraudulently obtain the approval of the SBA for his company, MBE Capital Partners, LLC (“MBE”), to be a non-bank lender through the PPP. He engaged in this criminal conduct to fraudulently secure hundreds of millions of dollars in capital for PPP loans and, ultimately, to collect more than approximately $71 million in lender fees. In addition, MARTINEZ engaged in a scheme to obtain a PPP loan for MBE in the amount of approximately $283,764 through false statements regarding the number of employees of MBE and the wages paid to MBE employees and using the forged signature of MBE’s tax preparer.
At all relevant times, MARTINEZ has been the CEO and primary owner of MBE, a New York limited liability company formed in or about March 2015. Republic Group, LLC, a/k/a Republic Group Parts, LLC (“Republic Group”), which is owned and controlled by MARTINEZ, serves as the holding company for MBE and conducts business as MBE. According to MBE’s website, “For over 20 years, MBE Capital Partners has been a leading provider of financing solutions for small and diverse businesses . . . In 2019, we financed over $1.7 billion in public and private debt and we funded over 35,000 PPP loans worth $800M.”
On or about April 5, 2020, MARTINEZ applied to a financial institution for a government-guaranteed loan for Republic Group, through the SBA’s PPP. In connection with the loan application, MARTINEZ represented that MBE had as many as 15 employees and an average monthly payroll of approximately $119,390 in 2019. In fact, however, from in or about April 2018 through in or about April 2020, MBE had at most four employees who had a total average monthly payroll of no more $25,000. In order to support the false representations made by MARTINEZ in the loan application about the number of employees at and the wages paid by MBE, MARTINEZ submitted fraudulent and doctored tax records that contained the forged signature of a tax preparer located in Manhattan, New York (the “Tax Preparer”). Based on the false documentation provided by MARTINEZ, MBE was approved for a PPP loan in the amount of approximately $283,764, which was disbursed to a bank account controlled by MARTINEZ. A majority of the loan proceeds do not appear to have been used for payroll for employees of MBE or other business expenses.
On or about April 9, 2020, within five days of applying for the PPP loan referenced above, MARTINEZ submitted an application to the SBA for MBE to become a non-bank PPP lender. As part of the PPP lender application process, MARTINEZ represented that MBE had originated and serviced over $3.8 billion in business loans or other commercial financial receivables for the three-year period from in or about 2017 through in or about 2019 and submitted fraudulent financial statements that purported to be audited by the Tax Preparer’s firm for the years 2018 and 2019. Based on the false information provided by MARTINEZ to the SBA, MBE was approved as a non-bank lender for PPP loans.
On or about April 27, 2020, MARTINEZ submitted various documents, including the same fraudulent audited financial statements for 2019 provided to the SBA, to a life insurance company (the “Company”) as part of a proposed partnership to fund PPP loans for minority and women-owned small businesses. On or about May 13, 2020, the Company provided MBE with $100 million to fund PPP loans, which MBE in turn used as collateral to borrow additional capital of approximately $832 million through the Payment Protection Program Liquidity Facility (“PPPLF”) with the Federal Reserve.
As a result of the above fraudulent misrepresentations, MARTINEZ, through his company MBE, became an approved PPP lender and issued approximately $823 million in PPP loans to approximately 36,600 businesses. These loans earned MARTINEZ a total of approximately $71.3 million in fees. MARTINEZ spent the proceeds from his criminal conduct on, among other things, the purchase of a villa in the Dominican Republic for over $10 million, a $3.5 million mansion located in Franklin Lakes, New Jersey, a chartered jet service, and several luxury vehicles, including a 2018 Porsche 911 Turbo, a 2017 Ferrari 488 Spider, a 2017 Bentley Continental GT, a BMW 750, and a 1962 Mercedes Benz 190.
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MARTINEZ, 57, of Franklin Lakes, New Jersey, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of five years in prison.
The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
As part of his plea agreement, MARTINEZ agreed to pay restitution in the amount of $71,711,893.07 and to forfeit $44,546,712.94, including more than $15 million previously seized by law enforcement, properties in New Jersey and the Dominican Republic, and five luxury vehicles.
Mr. Williams praised the outstanding investigative work of the Internal Revenue Service, Criminal Investigation; U.S. Small Business Administration, Office of Inspector General; and the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection, Eastern Region.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Micah Fergenson, Katherine Reilly, and Steven Kochevar are in charge of the prosecution.
Former Lumentum Executive Pleads Guilty to Insider TradingRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that AMIT BHARDWAJ, the former Chief Information Security Officer (“CISO”) at Lumentum Holdings Inc. (“Lumentum”), pled guilty to 13 counts arising from his participation in a scheme to commit insider trading based on material, non-public information (“MNPI”) that BHARDWAJ misappropriated from his employer, Lumentum. BHARDWAJ traded on the misappropriated MNPI himself and tipped his associates with this same information so that they could place profitable trades in Lumentum’s acquisition targets. BHARDWAJ was arrested and charged in July 2022 and pled guilty earlier today before U.S. District Judge Gregory H. Woods.
U.S. Attorney Damian Williams said: “Amit Bhardwaj, the former Chief Information Security Officer of Lumentum, ironically failed to keep the confidential information he was trusted with secure as he shared it with numerous friends and a family member in order to make a profit. Not only did Bhardwaj betray his company and cheat the securities markets, but when confronted by the FBI, he also schemed to conceal his illicit behavior and obstruct the investigation. Today’s guilty plea emphasizes this Office’s commitment to protecting the integrity of the financial markets.”
According to the allegations in the Indictment and statements made in public court proceedings:
In approximately December 2020, BHARDWAJ learned that Lumentum was considering acquiring Coherent, Inc (“Coherent”). Based on this information, BHARDWAJ himself purchased Coherent stock and call options, and BHARDWAJ tipped three associates –– his friend Dhirenkumar Patel, another friend, and one of BHARDWAJ’s close family relatives ––and these individuals all traded in Coherent securities as a result. BHARDWAJ and Patel agreed that Patel would pay BHARDWAJ 50% of the profits that Patel earned by trading in Coherent based on the MNPI provided by BHARDWAJ. When Coherent’s stock price increased substantially following the announcement of the Lumentum acquisition, BHARDWAJ, his close family member, his friend Patel, and another friend closed their positions in Coherent securities and collectively profited by nearly $900,000.
In or about October 2021, BHARDWAJ learned that Lumentum was engaged in confidential discussions with Neophotonics Corporation (“Neophotonics”) about a potential acquisition. BHARDWAJ provided this information to SRINIVASA KAKKERA, ABBAS SAEEDI, and Ramesh Chitor, and these individuals all traded in Neophotonics securities as a result. In connection with Chitor’s trading, BHARDWAJ and Chitor agreed that Chitor and BHARDWAJ would split the profits equally. When Neophotonics’ stock price increased substantially following the announcement of the Lumentum acquisition in November 2021, KAKKERA, SAEEDI, and Chitor closed their positions in Neophotonics securities and made collectively approximately $4.3 million in realized and unrealized profits.
After they were interviewed by the Federal Bureau of Investigation (“FBI”) voluntarily and served with federal grand jury subpoenas on approximately March 29, 2022, BHARDWAJ took steps to obstruct the federal investigation of their conduct. On the day of the March 29, 2022, FBI interviews, BHARDWAJ drove to the homes of certain of his co-conspirators to encourage them not to tell the federal authorities the truth about their insider trading scheme. BHARDWAJ and his associates subsequently met in person on multiple occasions and discussed, among other things, potential false stories that would conceal their insider trading scheme as well as creating false documents to buttress lies regarding payments that were, in reality, related to the insider trading scheme.
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BHARDWAJ, 49, of San Ramon, California, pled guilty to seven counts of securities fraud and two counts of wire fraud, each of which carries a maximum term of 20 years in prison, and four counts of conspiracy to commit securities fraud and wire fraud, each of which carries a maximum term of five years in prison.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. BHARDWAJ is scheduled to be sentenced by Judge Woods on July 11, 2023, at 10 a.m.
Mr. Williams praised the investigative work of the FBI. He also acknowledged the assistance of the Securities and Exchange Commission, which separately initiated civil proceedings against BHARDWAJ.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Noah Solowiejczyk and Adam Hobson are in charge of the prosecution.
Bulgarian Woman Charged for Role in Multi-Billion-Dollar Cryptocurrency Pyramid Scheme “OneCoin” and Extradited from Bulgaria to the United StatesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Thomas Fattorusso, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation, New York Field Office (“IRS-CI”), announced today the unsealing of charges against IRINA DILKINSKA in connection with her participation in the massive OneCoin fraud scheme. OneCoin, which began operations in 2014 and was based in Sofia, Bulgaria, marketed and sold a fraudulent cryptocurrency by the same name through a global multi-level-marketing (“MLM”) network. As a result of misrepresentations made about OneCoin, victims invested over $4 billion worldwide in the fraudulent cryptocurrency. DILKINSKA was extradited from Bulgaria yesterday and will be presented before United States Magistrate Judge Sarah Netburn later today.
U.S. Attorney Damian Williams said: “Irina Dilkinska, the supposed Head of Legal and Compliance for the OneCoin cryptocurrency pyramid scheme, accomplished the exact opposite of her job title and allegedly enabled OneCoin to launder millions of dollars of illegal proceeds through shell companies. Dilkinska helped perpetuate a wide-ranging scheme with millions of victims and billions of dollars in losses, and she will now face justice for her alleged crimes.”
FBI Assistant Director Michael J. Driscoll said: “As alleged in the charges unsealed today, Dilkinska helped her co-conspirator, Mark Scott, launder approximately $400 million in OneCoin proceeds while she was purportedly OneCoin’s Head of Legal and Compliance. Further, when she learned of Scott’s arrest, she destroyed incriminating documents and sent another co-conspirator incriminating messages. As the actions announced today should demonstrate, the FBI will continue its determination to bring alleged fraudsters like Dilkinska to justice.”
IRS-CI Special Agent in Charge Thomas Fattorusso said: “The charges against Irina Dilkinska are the outcome of the exceptional investigative work of our federal and international law enforcement partners. Those who commit fraud are put on notice today that IRS Criminal Investigation is committed to holding them accountable no matter where they are located.”
According to the allegations in the Superseding Indictment and other filings and statements made in court:[1]
In 2014, RUJA IGNATOVA, a/k/a “the Cryptoqueen,” and KARL SEBASTIAN GREENWOOD co-founded OneCoin,[2] a company based in Sofia, Bulgaria, that marketed a purported cryptocurrency by the same name, which was in fact a fraudulent pyramid scheme. OneCoin operated as a MLM network through which members received commissions for recruiting others to purchase cryptocurrency packages. This MLM structure influenced rapid growth of the OneCoin member network. Indeed, according to OneCoin’s promotional materials, over three million people invested in fraudulent cryptocurrency packages. OneCoin records show that, between the fourth quarter of 2014 and the fourth quarter of 2016 alone, OneCoin generated €4.037 billion in sales revenue and earned “profits” of €2.735 billion.
DILKINSKA was the purported Head of Legal and Compliance for OneCoin, but rather than ensuring that OneCoin complied with the law, DILKINKSA assisted in the creation and management of shell companies in order to launder OneCoin proceeds and to hold property belonging to IGNATOVA. For example, in 2016 and 2017, DILKINSKA helped co-conspirator MARK SCOTT, a former equity partner at a prominent international law firm, launder approximately $400 million in OneCoin proceeds through a series of fake Cayman Islands investment funds operated by SCOTT. Among other things, DILKINSKA used a company named B&N Consult EEOD, which was falsely described as offering “proprietary consulting services, support and software solutions” to its clients and as generating €200 million in 2015 through 2016, to disguise the transfer of millions of dollars as purported “investments” into SCOTT’s funds. In reality, B&N was a shell company that did not generate legitimate income and was used by DILKINSKA to launder OneCoin proceeds. In or around September 2018, DILKINSKA learned of SCOTT’s arrest in connection with his laundering of OneCoin proceeds. Shortly thereafter, DILKINSKA burned incriminating documents, sent co-conspirator KONSTANTIN IGNATOV a text message with a link to a newspaper article about the arrest, and then wrote a series of texts, including, “See this!!!!!”; “Something is going on!!!!!”; and “If this is true I need the mega lawyers for whom [co-conspirator FRANK SCHNEIDER] was talking!!!”
On October 12, 2017, IGNATOVA was charged with OneCoin-related fraud and money laundering charges in the United States District Court for the Southern District of New York, and a federal warrant was issued for her arrest. On October 25, 2017, IGNATOVA traveled on a commercial flight from Sofia, Bulgaria, to Athens, Greece, and has not been seen publicly since. IGNATOVA was added to the FBI’s Top Ten Most Wanted List in June 2022. The FBI is offering a $100,000 reward for information leading to IGNATOVA’s arrest.
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DILKINKSA, 41, of Sofia, Bulgaria, has been charged with one count of conspiracy to commit wire fraud, which carries a maximum potential sentence of 20 years in prison, and one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 20 years in prison.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Williams praised the outstanding investigative work of the IRS-CI and the FBI, which jointly conducted this investigation with Special Agents from the U.S. Attorney’s Office. Mr. Williams also thanked the United States Marshals Service, the Justice Department’s Office of International Affairs, and Bulgarian authorities.
If you have any information about IGNATOVA’s whereabouts, please contact your local FBI office or the nearest American Embassy or Consulate. Tips can be reported anonymously and can also be reported online at tips.fbi.gov.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Christopher J. DiMase, Nicholas Folly, Juliana N. Murray, and Kevin Mead are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
[2] OneCoin has operated using several corporate entities and d/b/a names, including “OneCoin Ltd.,” “OnePayments Ltd.,” “OneNetwork Services Ltd.,” “OneAcademy,” and “OneLife.” These entities and d/b/a names are referred to collectively here as “OneCoin.”
U.S. Attorney Announces Arrest of Yonkers Man for Threatening to Kill Yonkers Police OfficersRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Keechant L. Sewell, the Commissioner of the New York City Police Department (“NYPD”), and Christopher Sapienza, Commissioner of the City of Yonkers Police Department (“YPD”), announced that RIDON KOLA was arrested today based on a criminal Complaint filed in White Plains federal court charging KOLA with making threatening interstate communications, in which KOLA threatened to kill officers of the YPD and the Mayor of Yonkers. KOLA will be presented in White Plains federal court later today before United States Magistrate Judge Paul E. Davison.
U.S. Attorney Damian Williams said: “As alleged, Ridon Kola posted threats on social media against law enforcement, stating his support for ISIS and his intention to murder numerous police officers. Undeterred after questioning from law enforcement, Kola’s conduct escalated, as he continued to assure police his threats would be carried out. Threatening violence against police or to undermine public safety will not be tolerated, as Kola now stands charged and faces prison time for his threats against our dedicated law enforcement partners tasked with keeping us safe.”
FBI Assistant Director Michael J. Driscoll said: “As we allege today, Kola, who has demonstrated support for radical Islamic extremism and terrorist attacks, made a series of threats to the lives of law enforcement and others, and now he will be forced to face the consequences of his actions. Counterterrorism remains the FBI’s top priority, and through our NY JTTF, we remain committed to keeping all New Yorkers safe from acts of terror.”
NYPD Commissioner Keechant L. Sewell said: “The NYPD remains steadfast in its commitment to fight against the grave threat of violence and hate in every form. This arrest reinforces our work to protect people and ensure consequences for those who are charged with threatening our way of life. I want to thank the members of the FBI-NYPD Joint Terrorism Task Force, the United States Attorney’s Office for the Southern District of New York, and everyone else who worked to interdict and stop this threat.”
YPD Commissioner Christopher Sapienza said: “The safety of our residents, our community, and the members of our Police Department is paramount; every threat is investigated to the fullest extent possible. Thankfully, due to the outstanding collaborative efforts of the FBI’s New York Joint Terrorism Task Force and our Yonkers Police Intelligence Division, our City will enjoy a safe Saint Patrick’s Day parade tomorrow free from intimidation by bad actors.”
As alleged in the Complaint unsealed today:[1]
KOLA has engaged in escalating threats of violence against, among others, law enforcement, culminating in recent online threats against the YPD in connection with the Yonkers St. Patrick’s Day parade scheduled for Saturday, March 18. KOLA’s posts demonstrate support for radical Islamic extremism and terrorist attacks. In a recent threatening post, KOLA displayed himself with an axe.
On November 19, 2021, KOLA posted to a YPD official social media account a message in Albanian that translated to the following: “I am going to slaughter you little girls.”
On December 5, 2021, KOLA posted to the same YPD social media account a message stating that: “Starting tomorrow I will start killing your officers just so u know who is doing it, Ridon Kola Albanian blood,” and that he would also kill the Mayor of Yonkers.
Following those threats, in December 2021, YPD detectives interviewed KOLA at his residence. KOLA admitted to making the threatening posts but claimed he had no plans to harm YPD officers or the Mayor. Based on his demeanor, YPD subsequently issued a warning to officers to exercise diligence and caution in any encounters with KOLA. Beginning in early 2023, and continuing in the days leading up to the planned St. Patrick’s Day parade, KOLA has escalated his threats against the YPD and other government officials and has expressed his support for violent Islamic extremism and terrorist attacks.
In January 2023, KOLA posted multiple statements expressing support for “jihad,” or “to war against non-Muslims,” and the establishment of a “caliphate,” and depicting the raised index finger gesture used by jihadist groups, including the terrorist organization the Islamic State of Iraq and al-Sham (“ISIS”).
On March 6, 2023, appearing to reference YPD’s prior interview of KOLA, KOLA sent a direct message to the YPD social media account stating: “I’m looking for that officer that came to my house and threatened me and my family to kill us. I’m going to burn the world until I find him Vallahi [by God], no matter what happens to me there will never be peace in this country anymore! Allahu Ekberr.” The phrase “Allahu Ekberr” is one form of an Arabic phrase meaning “God is great,” which radical Islamic extremists have proclaimed in connection with the commission of terrorist attacks.
The next day, March 7, 2023, KOLA posted a statement praising Sayfullo Saipov, the recently convicted perpetrator of a terrorist attack for ISIS in which Saipov used a truck on Halloween in 2017 to murder eight victims and injure many more on a bike bath in lower Manhattan. KOLA referred to Saipov as “my BROTHER.”
As of March 9, 2023, KOLA’s social media account profile included the statement, “Now is personal America and the world!!!” and a threat to burn “cia fbi nsa police jud[g]es alive w their families too!”
Also on March 9, KOLA sent two direct messages to the YPD social media account stating: “First people to be crucified will be the Yonkers rats Vallahi. Allahu Ekberr”; and “I will crucify Yonkers cops and their bosses all along McLean ave. It will be a horror scene . . . Allahu Ekberr.” McLean Avenue in Yonkers is part of the route for the Yonkers St. Patrick’s Day Parade taking place on March 18, and numerous YPD officers will be posted to the parade route along that street. KOLA’s residence is in the area of the parade route.
Three days later, on March 12, 2023, KOLA posted to his social media feed a photograph of himself holding an axe with a statement in Albanian, translated to the following: “Come on Judas, I’m waiting for you.”
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KOLA, 32, of Yonkers, New York, is charged with making threatening interstate communications, which carries a maximum sentence of five years in prison.
The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Williams praised the outstanding investigative efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state, and local agencies. Mr. Williams also thanked the YPD and the Yonkers Police Intelligence Division for their assistance.
The case is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorney Kevin Sullivan is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the descriptions of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Queens Man Sentenced to 121 Months in Prison for Laundering Millions of Dollars of Fraud and Hacking Schemes and Committing Bank FraudRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that DJONIBEK RAHMANKULOV was sentenced today to 121 months in prison for laundering millions of dollars in criminal proceeds obtained from computer hacking, healthcare fraud, and Small Business Administration loan fraud, as well as operating an international unlicensed money transmitting business. The defendant was convicted at trial on September 1, 2022, of money laundering conspiracy, bank fraud, and conspiracy to operate an unlicensed money transmitting business. U.S. District Judge Ronnie Abrams imposed today’s sentence.
U.S. Attorney Damian Williams said: “Djonibek Rahmankulov laundered money for a living. He exploited the financial system to launder millions of dollars from multiple fraudulent schemes and repeatedly lied to banks to operate his illegal enterprise. Once caught — and even after he was convicted — the defendant continued to show that he believed he was above the law by threatening a witness and submitting false information to the Court. Today’s sentence reflects that this Office will find and prosecute those who seek to abuse the U.S. financial system to launder dirty money.”
According to the superseding Indictment, evidence at trial, and statements made in Court:
Between 2017 and September 2020, RAHMANKULOV operated a network of shell companies that were used to launder millions of dollars of criminal proceeds from multiple types of criminal activity. RAHMANKULOV worked with computer hackers who fraudulently gained control of the bank accounts of victims located throughout the United States and executed millions of dollars in fraudulent wire transfers into bank accounts opened by RAHMANKULOV and his co-conspirators. RAHMANKULOV received wire transfers into bank accounts he created and bank accounts he instructed others to create and laundered these proceeds through multiple additional bank accounts to prevent the victims and the banks from recovering the stolen funds.
In addition, RAHMANKULOV worked with a network of pharmacies engaged in Medicare and Medicaid fraud. These pharmacies submitted millions of dollars of fraudulent billing for HIV medications that they did not dispense or obtained illegally, including by repurchasing medications from HIV patients who were Medicaid recipients. RAHMANKULOV created companies to receive these criminal proceeds from the pharmacies and laundered them through a variety of means, including by using them to fund an unlicensed money transmitting business that illegally moved money to and from multiple countries, including Iran.
In 2020, when the COVID-19 pandemic began, RAHMANKULOV filed fraudulent applications for COVID relief loans from the Small Business Administration for multiple companies he controlled. He laundered the proceeds of loans and grants through these companies. RAHMANKULOV also made a number of materially false statements to financial institutions in connection with his money laundering schemes, both when opening bank accounts and when executing financial transactions with those bank accounts.
RAHMANKULOV sought to obstruct justice during the pendency of his case. In the months before trial, RAHMANKULOV instructed a witness to lie to law enforcement. When the witness later informed RAHMANKULOV that the witness would tell the truth to law enforcement, RAHMANKULOV threatened the witness, stating, among other things, that if he went to prison, “I will drag all of you with me, and once you are there, then I will have my revenge.” Nonetheless, the witness testified at trial. RAHMANKULOV continued seeking to obstruct justice after his conviction. In advance of his sentencing, he submitted multiple letters to the Court purporting to show support from members of the community, but two of these letters were in fact fraudulent and had not been written by the purported authors.
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In addition to the prison term, RAHMANKULOV, 35, of Queens, New York, was sentenced to three years of supervised release. RAHMANKULOV was further ordered to pay a forfeiture of $5,413,278 and a $40,000 fine.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation’s New York Money Laundering Investigation Squad.
The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Cecilia Vogel, Thane Rehn, and Samuel Raymond, with the assistance of Paralegal Specialist Nerlande Pierre, are in charge of the prosecution.
Good Samaritan Helps Apprehend Armed Man Brandishing Two Loaded Guns in ManhattanRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Keechant L. Sewell, the Commissioner of the New York City Police Department (“NYPD”), announced the arrest of JASON FLEMING after he brandished a loaded semiautomatic Hi-Point carbine rifle and a loaded Smith & Wesson .357 Magnum revolver in broad daylight after a dispute in a bodega in Chelsea. FLEMING was arrested after a civilian, seeing FLEMING running down the street with a revolver in his hand as police were chasing him, stood in FLEMING’s way and pushed him into a nearby fence and then held onto him until police officers, who were still in pursuit, placed FLEMING under arrest.
U.S. Attorney Damian Williams said: “As alleged, the defendant illegally brandished two loaded firearms in broad daylight on a Manhattan street, one of which was a carbine rifle, frightening numerous New Yorkers, including a child. Thanks to our law enforcement partners and the heroic efforts of a Good Samaritan, the defendant was apprehended before he could hurt anyone, and his weapons are now off the streets.”
HSI Special Agent in Charge Ivan J. Arvelo said: “HSI special agents are committed to public safety and do not hesitate to act when members of the community are threatened. I am proud of our agents’ hard work and efforts with the rapid apprehension of this criminal and the follow-on investigative support provided to the New York City Police Department. HSI remains steadfast in our commitment to our law enforcement partners in the cause of community safety.”
NYPD Commissioner Keechant L. Sewell said: "The firearms allegedly displayed by the defendant in this case have no place on the streets of New York City. The NYPD will continue to aggressively pursue anyone who uses these illegal weapons to threaten the people we serve, and we will employ every resource available to hold them fully accountable. I want to thank the U.S. Attorney's Office for the Southern District of New York, the New York Field Office of Homeland Security Investigations, and everyone else who aided in this arrest."
According to the allegations in the Complaint:[1]
On or about March 16, 2023, JASON FLEMING entered a crowded bodega in the Chelsea neighborhood in Manhattan after having a verbal dispute with a man. FLEMING then stood in the doorway of the bodega and flashed a handgun as a girl attempted to leave the bodega. The child then ran away from the store when she was able to pass by FLEMING onto the sidewalk. The surveillance video then shows FLEMING outside the bodega and pulling back his coat momentarily to reveal a rifle that had been swung over his shoulder.
Police officers then approached FLEMING after a witness called 911, and FLEMING took off running down the sidewalk. While running, FLEMING brandished a semiautomatic carbine rifle in broad daylight while frightened civilians began running away from him, as seen in the below screenshots from surveillance videos:
FLEMING then threw the rifle over a fence near where customers were dining at a restaurant’s outdoor dining shed. Law enforcement officers recovered the rifle and found that it was a loaded semiautomatic Hi-Point carbine rifle, a photograph of which is below:
Meanwhile, after throwing the rifle, FLEMING brandished a revolver and continued running down the street, with police officers in foot pursuit. A nearby civilian, seeing FLEMING running down the street with a revolver in his hand, stood in FLEMING’s way and pushed him into a nearby fence and then held onto him until police officers, who were still in pursuit, placed FLEMING under arrest and handcuffed him. A screenshot of FLEMING, brandishing the revolver after the civilian made contact with him, is below, along with a photograph of the revolver:
FLEMING was not permitted to possess firearms because of his two prior felony convictions for unlawful firearms possession.
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JASON FLEMING, 39, of New York, New York, is charged with possession of firearms after a felony conviction, which carries a maximum sentence of 15 years in prison.
The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding investigative work of HSI and the NYPD. Mr. Williams also thanked the Bureau of Alcohol, Tobacco, Firearms, and Explosives for its assistance in this case.
This case is being handled by the Office’s Violent & Organized Crime Unit. Assistant U.S. Attorney Michael R. Herman is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Minnesota Man Sentenced to Three Years in Prison for Scheme to Commit Computer Intrusion and to Illegally Stream Content from Four Major Professional Sports LeaguesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JOSHUA STREIT, a/k/a Josh Brody,” was sentenced today in Manhattan federal court by United States District Judge Andrew L. Carter for conducting intrusions into Major League Baseball (“MLB”) computer systems and illegally streaming copyrighted content from MLB, the National Basketball Association (the “NBA”), the National Football League (the “NFL”), and the National Hockey League (the “NHL”) on a website that STREIT operated, which offered the illegally streamed content to the public for profit.
U.S. Attorney Damian Williams said: “Joshua Streit intruded into MLB computer networks and illegally streamed sports content online from MLB, the NHL, the NBA, and the NFL for his own personal profit. Today’s sentence shows that this crime is no game. Those who compromise computer networks and steal copyrighted content will be held accountable.”
According to allegations in the Complaint, the Information, and statements made during court proceedings:
Beginning in or about 2017 to in or about August 2021, STREIT operated a website which streamed copyrighted content, primarily livestreamed games from major professional sports leagues, including MLB, the NBA, the NFL, and the NHL, which STREIT had no authorization to stream. STREIT obtained the copyrighted content by gaining unauthorized access to the websites for those sports leagues via misappropriated login credentials from legitimate users of those websites. One of the victim sports leagues sustained losses of approximately $3 million due to STREIT’s conduct.
In addition, at the same time STREIT was illicitly streaming copyrighted content from MLB, STREIT engaged in an attempt to extort approximately $150,000 from MLB via a threat from STREIT to publicize unrelated vulnerabilities in MLB’s internet infrastructure. Specifically, in multiple communications with MLB employees, STREIT claimed that he knew MLB reporters who were “interested in the story,” and stated that it would be bad if the vulnerability were exposed and MLB was embarrassed.
* * *
In addition to the prison sentence, STREIT, 31, of St. Louis Park, Minnesota, was sentenced to three years of supervised release and ordered to pay $2,995,272.64 in restitution and $500,000 in forfeiture.
Mr. Williams praised the outstanding work of the Federal Bureau of Investigation. He also thanked MLB, the NBA, the NFL, and the NHL for their ongoing support and assistance with the case.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit, and Assistant U.S. Attorney Dina McLeod is in charge of the prosecution.
Ho Wan Kwok, A/K/A “Miles Guo,” Arrested for Orchestrating over $1 Billion Dollar Fraud ConspiracyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a twelve-count Indictment charging HO WAN KWOK, a/k/a “Miles Guo,” a/k/a “Miles Kwok,” a/k/a “Guo Wengui,” a/k/a “Brother Seven,” a/k/a “The Principal,” and KIN MING JE, a/k/a “William Je,” with various wire fraud, securities fraud, bank fraud, and money laundering charges. JE, who is KWOK’s financier, is also charged with obstruction of justice. The charges in the Indictment arise from an alleged sprawling and complex scheme by the defendants, and others, to solicit investments in various entities and programs through false statements and representations to hundreds of thousands of KWOK’s online followers. As alleged, KWOK and JE misappropriated hundreds of millions of dollars in fraudulently obtained funds during the course of their conspiracy. KWOK was arrested this morning in New York, New York, and will be presented this afternoon. JE is currently at large.
In addition, Mr. Williams announced that between September 2022 and March 2023, the U.S. Government seized approximately $634 million from 21 different bank accounts. The $634 million constitutes proceeds of KWOK’s alleged fraud, which the Government will seek to forfeit. Today, law enforcement also seized assets that were purchased with proceeds of KWOK’s alleged fraud, including a Lamborghini Aventador SVJ Roads.
U.S. Attorney Damian Williams said: “As alleged, Ho Wan Kwok, known to many as “Miles Guo,” led a complex conspiracy to defraud thousands of his online followers out of over $1 billion dollars. Kwok is charged with lining his pockets with the money he stole, including buying himself, and his close relatives, a 50,000 square foot mansion, a $3.5 million Ferrari, and even two $36,000 mattresses, and financing a $37 million luxury yacht.
As alleged, Kwok lied to his victims and promised them outsized returns if they invested, or provided money to, GTV, his so-called Himalaya Farm Alliance, G|CLUBS, and the Himalaya Exchange.
Kwok is further charged with laundering hundreds of millions of stolen funds to conceal the conspiracy’s illegal activities and continue the fraud’s operations. My office and our law enforcement partners will continue to do all that we can to protect the community from the devastating consequences of pernicious fraud schemes. If you believe you are a victim of Kwok and Je’s fraud, please contact [email protected] or https://forms.fbi.gov/NY_GTV. My Office and the FBI are here to help those who were harmed by this malicious fraud.”
FBI Assistant Director Michael J. Driscoll said: “The indictment today alleges the defendants were behind an elaborate scheme that defrauded thousands of individuals of over one billion dollars. Fraudulent investment scams make victims out of innocent people, ultimately harming the public’s confidence in the integrity of financial systems. The FBI continues to make investigating complex financial crimes a top priority, and anyone attempting these crimes will be made to face the consequences in the criminal justice system.”
As alleged in the Indictment unsealed in Manhattan federal court and court filings:[1]
From at least in or about 2018 through at least in or about March 2023, KWOK, JE, and others, conspired to defraud thousands of victims of more than approximately $1 billion. KWOK was the leader of this complex conspiracy.
KWOK is an exiled Chinese businessman who has resided in the United States since in or about 2015 and garnered a substantial online following. In or about 2018, KWOK founded two purported nonprofit organizations, namely, the Rule of Law Foundation and the Rule of Law Society. KWOK used the nonprofit organizations to amass followers who were aligned with his purported policy objectives in China and who were also inclined to believe KWOK’s statements regarding investment and money-making opportunities.
JE is a dual citizen of Hong Kong and the United Kingdom who principally resided in the United Kingdom. JE owned and operated numerous companies and investment vehicles central to the scheme and served as its financial architect and key money launderer.
KWOK and JE’s fraud relied on at least four interrelated parts: the GTV Media Group, Inc. (“GTV”) Private Placement, the Farm Loan Program, G Club Operations, LLC (“G|CLUBS”), and the Himalaya Exchange.
GTV Private Placement
On or about April 21, 2020, KWOK posted a video on social media announcing the unregistered offering of GTV Media Group, Inc. (“GTV”) common stock via a private placement. GTV was touted as a wide-ranging media company. In that video, KWOK described, in substance and in part, the investment terms for the GTV Private Placement, and directed people to contact him, via a mobile messaging application, with any questions about the GTV Private Placement. The video and GTV Private Placement materials included a written “Confidential Information Memorandum” (the “PPM”). The PPM stated on the cover “Everything Is Just the Beginning!,” provided information about GTV, and contained false representations regarding how the money raised from the GTV Private Placement would be used.
Between on or about April 20, 2020 and on or about June 2, 2020, approximately $452 million worth of GTV common stock was purportedly sold to more than 5,500 investors. Investors participated in the GTV Private Placement based, in part, on the belief that their money would be invested into GTV to develop and grow that business, as the PPM promised. In early June 2020, just days after the GTV Private Placement closed, KWOK and JE directed that $100 million of funds raised from the GTV Private Placement be invested in a high-risk hedge fund for the benefit of GTV’s parent company and its ultimate beneficial owner who was a close family relative of KWOK.
Farm Loan Program
KWOK, JE, and their co-conspirators fraudulently obtained more than approximately $150 million in victim funds through the “Himalaya Farm Alliance.” The Himalaya Farm Alliance, which KWOK organized and promoted, was a collective of informal groups (each known as a “Farm”) located in various cities around the world. KWOK, JE, and others working on their behalf and at their direction, obtained these funds by making further misrepresentations to the investors in the GTV Private Placement and fraudulently soliciting further investments, this time in the form of “loans” to a Farm, and promising that such loans would be convertible into GTV common stock at a conversion rate of one share per dollar loaned. On or about July 22, 2020, in a video distributed via social media, KWOK promoted the Farm Loan Program. After launching the Farm Loan Program, KWOK continued to promote GTV and to falsely represent the value of GTV. For example, on or about August 2, 2020, in a video distributed via social media, KWOK falsely stated, in substance and part, “How much is GTV? . . . a market value of 2 billion US dollars.” In truth and in fact, and as KWOK well knew, GTV’s market value was far less.
KWOK and JE misappropriated funds that were raised through the Farm Loan Program. For example: (i) approximately $2.3 million was used to cover maintenance expenses associated with an approximately 145-foot luxury yacht worth approximately $37 million, nominally owned by close family relative of KWOK and used by KWOK, which is pictured below; and (ii) approximately $10 million was transferred to personal bank accounts in the name of JE and/or JE’s spouse.
G|CLUBS
KWOK, JE and others known and unknown, fraudulently induced KWOK’s followers to transfer additional funds to a purported online membership club called G|CLUBS. From at least in or about October 2020 through at least in or about March 2023, KWOK, JE, and others fraudulently obtained more than approximately $250 million in victim funds through G|CLUBS. G|CLUBS claimed, on its website, to be “an exclusive, high-end membership program offering a full spectrum of services” and “a gateway to carefully curated world-class products, services and experiences.”
In truth and in fact, and as KWOK and JE well knew, G|CLUBS provided nothing close to “a full spectrum of services” and “experiences” to its members. Indeed, most of the money G|CLUBS members paid did not fund the business of G|CLUBS. Rather, the defendants misappropriated a substantial portion of the victim funds using, among other things, a complex web of entities and bank accounts to do so. For example, G|CLUBS funds were used by KWOK and JE: (i) toward the purchase of KWOK’s 50,000 square foot New Jersey mansion (pictured below); (ii) to purchase various furniture and decorative items including, among other items, Chinese and Persian rugs worth approximately $978,000, a $62,000 television, and a $53,000 fireplace log cradle holder; and (iii) to purchase a custom-built Bugatti sports car for approximately $4.4 million (pictured below):
Himalaya Exchange
KWOK, JE, and others known and unknown, fraudulently obtained more than approximately $262 million in victim funds through the Himalaya Exchange, a purported cryptocurrency “ecosystem” accessible on the Internet. The Himalaya Exchange included a purported stablecoin called the Himalaya Dollar (“HDO” or “H Dollar”) and a trading coin called Himalaya Coin (“HCN” or “H Coin”). In videos distributed via social media, KWOK trumpeted the prospects and valuation of the Himalaya Exchange and both HCN and HDO, which he publicly described as cryptocurrencies. For example, in a video posted on the Internet on or about October 20, 2021, KWOK falsely stated: “If the H Coin is worthless, [the issuer of H coin] can sell all 20% of the gold, exchange it to you, and become your money. Or take all the value of 20% gold and ask everyone to unify it and make it yours;” and “If anyone loses money, I can say that I will compensate 100%. I give you 100%. Whoever loses money, I will bear it.” The initial coin offering of HCN and HDO occurred on or about November 1, 2021. HCN began trading at 10 cents and, within approximately two weeks, the Himalaya Exchange website claimed that each HCN purportedly was worth approximately 27 HDO (i.e., $27), which represented a 26,900% increase in value and a total value of approximately $27 billion. JE also falsely claimed to media outlets that a €3.5 million Ferrari was purchased via the Himalaya Exchange. In truth, a Himalaya Exchange employee sent the Ferrari broker an international bank wire to cover the cost of the Ferrari, while also processing a corresponding “transaction” on the Himalaya Exchange to create the false appearance that the purchase had taken place using HDO in order to show HDO was easily tradeable and to promote the Himalaya Exchange. The buyer of the Ferrari was a close relative of KWOK.
U.S. Government Seizures
On or about September 20, 2022 and September 21, 2022, U.S. authorities served judicially-authorized seizure warrants on several domestic banks, and subsequently seized approximately $335 million of proceeds from bank accounts held in the names of Himalaya Exchange entities and other entities associated with KWOK and JE. Within approximately two days of the first judicially authorized seizures of Himalaya Exchange-related funds, on or about September 22, 2022, JE contacted the management of a domestic bank that held Himalaya Exchange bank accounts. JE sought to implement a wire transfer, which he and a Himalaya Exchange executive claimed to the domestic bank was needed to effectuate a “redemption” from HDO to U.S. dollars for an unnamed “VIP” (i.e., very important client of the Himalaya Exchange). In subsequent communications with the domestic bank, JE revealed that the VIP was, in fact, JE himself. JE provided the domestic bank with documents reflecting two purported HCN sales by JE on or about September 22, 2022—totaling 46 million HDO, which JE was attempting to “convert” into $46 million. JE twice emphasized to the domestic bank’s management, in substance and in part, that the $46 million transfer needed to happen “today or it is meaningless.”
U.S. Authorities subsequently seized additional funds from KWOK and JE-associated entities in October 2022 and March 2023. In total, U.S. Authorities seized more than approximately $634 million of fraud proceeds, including approximately $278 million from bank accounts held in the names of the Himalaya Exchange entities.
Today, pursuant to judicially-authorized warrants, U.S. Authorities are seizing additional items from KWOK-associated properties, which KWOK and JE allegedly purchased with fraud proceeds.
* * *
HO WAN KWOK, a/k/a “Miles Guo,” a/k/a “Miles Kwok,” a/k/a “Guo Wengui,” a/k/a “Brother Seven,” a/k/a “The Principal,” 52, of New York, New York, and KIN MING JE, a/k/a “William Je,” 56, of London, England, are charged in an Indictment with the following offenses:
Count
Charge
Defendant
Maximum Penalty
1
Conspiracy to Commit Wire Fraud, Bank Fraud, Securities Fraud and Money Laundering
KWOK and JE
5 years in prison
2
Wire Fraud (GTV Private Placement)
KWOK and JE
20 years in prison
3
Securities Fraud (GTV Private Placement)
KWOK and JE
20 years in prison
4
Wire Fraud (Farm Loan Program)
KWOK and JE
20 years in prison
5
Securities Fraud (Farm Loan Program)
KWOK and JE
20 years in prison
6
Wire Fraud (G|CLUBS)
KWOK and JE
20 years in prison
7
Securities Fraud (G|CLUBS)
KWOK and JE
20 years in prison
8
Wire Fraud (Himalaya Exchange)
KWOK and JE
20 years in prison
9
International Promotional Money Laundering
KWOK and JE
20 years in prison
10
International Concealment Money Laundering
KWOK and JE
20 years in prison
11
Unlawful Monetary Transactions
KWOK and JE
10 years in prison
12
Obstruction of Justice
JE
20 years in prison
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Williams praised the investigative work of the FBI. Mr. Williams further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action against KWOK and JE, for its assistance and cooperation in this investigation. Mr. Williams also expressed appreciation for the assistance of the United States Marshals Service, the Justice Department’s Office of International Affairs, and the U.K. Metropolitan Police.
If you believe you are a victim of KWOK and JE’s fraud, please find more information here: https://www.justice.gov/usao-sdny/united-states-v-ho-wan-kwok-aka-miles-guo-and-kin-ming-je-aka-william-je
The case is being handled by the Complex Frauds and Cybercrime Unit of the Office’s Criminal Division. Assistant U.S. Attorneys Ryan B. Finkel, Juliana N. Murray, and Micah F. Fergenson are in charge of the prosecution.
The allegations in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
HO WAN KWOK, 豪万郭（音译）a/k/a，“MILES GUO”别称“迈乐斯郭”因策划超过 10 亿美元的欺诈阴谋而被捕Read the Press Release
美国纽约南区检察官 Damian Williams（达米安威廉姆斯）和联邦调查局 (“FBI”) 纽约外地办事处负责人助理主任 Michael J. Driscoll 宣布公开一份12项的起诉书，指控 HO WAN KWOK 豪万郭（音译），a/k/a “Miles Guo”别称”迈乐斯郭”， a/k/a “Miles Kwok”, a/k/a 别称“郭文贵”, a/k/a 别称“七哥”, a/k/a别称“领头人”和 KIN MING JE，吉建明（音译），又名“William Je”“威廉吉”，涉及多种电汇欺诈、证券欺诈、银行欺诈和洗钱指控。 JE吉是郭的财务设计师，他同时还被控妨碍司法公正。起诉书中的指控源于被告和其他人操纵庞大而复杂的阴谋，目的是通过向数十万 KWOK 郭的在线粉丝提供虚假陈述和陈述来招揽对各种实体和项目的投资。如指控所述，KWOK郭和JE吉在串谋过程中挪用了数亿美元的欺诈所得资金。KWOK郭今天早上在纽约市，纽约州被捕，将于今天下午出庭。JE吉目前在逃。
此外，威廉姆斯先生宣布在2022年9月至2023年3月期间，美国政府从21个不同的银行账户中扣押了约6.34亿美元。这6.34亿美元构成了郭某涉嫌欺诈的收益，政府将寻求没收这些收益。今天，执法部门还从KWOK郭的财产中扣押了以下资产，这些资产是 KWOK郭 用涉嫌欺诈的收益购买的，其中包括一辆Lamborghini Aventador SVJ Roads兰博基尼。
美国检察官Damian Williams达米安威廉姆斯说：“正如所指控的那样，HO WAN KWOK 豪万郭（音译），许多人称他为 “Miles Guo”迈乐斯郭”， 操纵一个复杂的阴谋，从他数千名在线追随者骗取了超过10亿美元的资金。郭被控用偷来的钱财中饱私囊，包括为自己和他的近亲购买一座50,000平方英尺的豪宅、一辆价值350万美元的法拉利，甚至还有两张价值 36,000 美元的床垫，以及出资获取一艘价值3700万美元的豪华游艇。
如指控所言，Kwok郭对他的受害者撒谎，并承诺如果他们投资或提供金钱给GTV、给所谓的喜马拉雅农场联盟，G|CLUBS俱乐部和喜马拉雅交易所，就会获得丰厚的回报。郭还被指控洗钱数亿被盗资金，以掩盖串谋从事非法行为并继续进行欺诈活动。我的办公室和我们的执法伙伴将继续竭尽全力保护社区免受恶性欺诈带来破坏性后果。如果您认为自己是 Kwok郭和Je吉的欺诈的受害者，请联系[email protected]或访问 http://forms.fbi.gov/NY_GTV。我的办公室和联邦调查局是来帮助那些受到这种恶意欺诈伤害的人们的。”
FBI联邦调察局助理局长Michael J. Driscoll（迈克尔 J. 吉尔斯克勒）说：“今天的起诉书指控的被告是一个精心策划的计划的幕后黑手，该阴谋骗取了数千人超过10亿美元。欺诈性投资骗局使无辜者成为受害者，最终损害公众对金融体系完整性的信心。FBI联邦调察局继续将把调查复杂的金融犯罪作为首要任务，任何企图实施这些犯罪的人都将面临刑事司法系统带来后果。 ”
正如曼哈顿联邦法院开封的起诉书和法院文件中所称：[1]
从至少在2018年左右到至少在2023年3月左右，KWOK郭、JE吉和其他人共谋诈骗了数千名受害者超过约10亿美元。郭是这个复杂阴谋的领头人。
KWOK郭是一名流亡的中国商人，自2015年左右以来一直居住在美国，并在网上拥有大量追随者。大约在2018年左右，郭成立了两个据称是非营利的组织，即法治基金会和法治协会。郭利用非营利组织招聚追随者，这些追随者与他声称的在中国的政策目标一致，并且也倾向于相信郭关于投资和赚钱机会的陈述。
JE吉为香港及英国双重公民，主要居住于英国。JE吉拥有并经营为数众多的公司和对阴谋成败悠关投资工具，并担任其金融设计师和主要洗钱者。
KWOK郭和JE吉的欺诈至少依赖于四个相互关联的部分：GTV Media Group GTV 媒体团队, Inc. (“GTV”)Private Placement(GTV)私募、The Farm Loan Program 农场贷款项目、G Club Operations, LLC (“G|CLUBS”)G俱乐部操作有限公司和Himalaya Exchange喜马拉雅交换所 。
GTV私募
2020年4月21日前后，KWOK郭在社交媒体上发布了一段视频，宣布通过私募方式未注册发行 GTV Media Group, Inc.(“GTV”) 普通股。 GTV被吹捧为一家范围广泛的媒体公司。在那段视频中，KWOK 实质上和部分地描述了 GTV 私募的投资条款，并指示人们通过移动信息的应用程序与他联系，询问有关 GTV 私募的任何问题。视频和 GTV 私募材料包括书面的“机密信息备忘录”（“PPM”）。 PPM在封面上写着“一切都只是开始！”，提供了有关 GTV 的信息，并包含有关如何使用 GTV 私募筹集的资金的虚假陈述。
在 2020 年 4 月 20 日或前后至 2020 年 6 月 2 日左右，价值约 4.52 亿美元的 GTV 普通股出售给了5，000多名的投资者。投资者参与 GTV 私募的部分原因是相信他们的资金将投资于 GTV 以发展和壮大该业务，正如 PPM 所承诺的那样。 2020 年 6 月上旬，就在GTV私募结束几天后，KWOK郭和JE吉指示从GTV私募筹集的1亿美元资金投资于高风险对冲基金，以受惠于GTV的母公司及它的最终受益拥-郭某的近亲。
农场贷款项目
KWOK郭、JE吉和他们的同谋者通过“喜马拉雅农场联盟”骗取了超过约 1.5亿美元受害人资金。由郭氏组织及推动的喜马拉雅农场联盟，是一个由分布于世界各地不同城市的（每个单元叫“农场”）的非正式团队组成。KWOK郭、JE吉和其他代表他们并在他们的指导下工作的人通过在GTV私募中进一步向投资者作出虚假陈述，并以欺诈方式招揽更多投资，这次是以向农场“贷款”的形式获得这些资金，以及承诺此类贷款可以转换为 GTV 普通股，转换率为每借出 1 美元一股。 2020 年 7 月 22 日前后，KWOK郭在通过社交媒体发布的一段视频中宣传了农场贷款项目。推出农场贷款项目后，KWOK郭继续宣传GTV并虚假陈述GTV的价值。例如，在 2020 年 8 月 2 日左右，在通过社交媒体传播的一段视频中，KWOK郭实质地和部分地虚假陈述，“GTV值多少钱？ . . .市值20亿美元。”事实上，正如 KWOK郭所了解的那样，GTV的市值要低很多。
KWOK郭和JE吉挪用了通过农场贷款项目筹集的资金。例如:(i)约230万美元用于支付与价值约3700万美元的约145英尺豪华游艇相关的维护费用,该游艇名义上由郭的近亲拥有并由郭使用，如下图所示;(ii) 约1000万美元转入JE吉和/或JE吉的配偶名下的个人银行账户。
G|俱乐部
KWOK郭、JE吉及其他已知和未知的人以欺诈手段引诱KWOK郭的追随者将额外资金转移到一个名叫G/俱乐部— 一个号称为在线会员的俱乐部。从至少在2020年10月左右到至少在2023年3月左右，KWOK郭、JE吉和其他人通过G|俱乐部，欺诈性地获得了超过约 2.5 亿美元的受害人资金。 G|俱乐部在其网站上号称是“提供全方位服务的独家高端会员项目”和“通往精心策划的世界级产品、服务和体验的门户”。
事实上，正如 KWOK郭和JE吉所熟知的那样，G|俱乐部并未为其会员提供任何接近于“全方位服务”和“体验”的东西。事实上，G|俱乐部会员支付的大部分钱并没有为 G|俱乐部的业务提供资金。相反，被告挪用了受害人的很大部分地资金，其中包括使用复杂的网络实体和银行账户来执行。例如，KWOK郭和JE吉使用 G/俱乐部的资金： ( i ) 用于购买 KWOK郭50,000平方英尺的新泽西豪宅（如下图）；(ii) 购买各种家具和装饰品，其中包括价值约978,000美元的中国和波斯地毯、价值62,000美元的电视和价值53,000美元的壁炉架； (iii) 以大约440万美元的价格购买一辆定制的布加迪跑车（如下图）：
喜马拉雅交易所
KWOK郭、JE吉和其他已知和未知的人通过 Himalaya Exchange喜马拉雅交易所欺诈性地获得了超过约2.62 亿美元的受害人资金，这是一个自称可以在互联网上使用的加密货币“生态系统”。喜马拉雅交易所包括一种名为 Himalaya Dollar喜马拉雅美元（“HDO”或“H Dollar”H美元）的稳定币和一种名为 Himalaya Coin喜马拉雅硬币（“HCN”或“H Coin”H硬币）的交易币。在通过社交媒体发布的视频中，KWOK郭大肆宣扬喜马拉雅交易所以及HCN（H硬币和HDO（H美元）的前景和估值，他公开将其描述为加密货币。例如，在 2021 年 10 月 20 日前后发布在互联网上的一段视频中，KWOK郭谎称：“如果 H硬币不值钱，[H硬币的发行人]可以卖掉20%的所有的黄金，换给你，并成为你的钱。或者把价值20%的黄金全部拿走，让大家统一起来，使之成为你的；” “如果有人赔钱，我可以说我会100%赔偿。我给你100%。谁亏了钱，我来承担。” HCN(H硬币)和 HDO（H美元） 的首次代币发行发生在2021年11月1日左右。HCN（H硬币）以10美分的价格开始交易，在大约两周内，喜马拉雅交易所网站声称每个HCN（H硬币）价值约27HDO（H美元）（即 27 美元），价值增长了 26,900%，总价值约为 270 亿美元。JE吉还向媒体谎称一辆价值 350万欧元的法拉利是通过喜马拉雅交易所购买的。事实上，喜马拉雅交易所的一名员工向法拉利经纪人发送了一封国际银行电汇，以支付法拉利的费用，同时还在喜马拉雅交易所处理了相应的“交易”，以制造购买是使用 HDO（H美元）进行的虚假表象，以便展示 HDO（H美元）易于交易并促进喜马拉雅交易所。法拉利的买家是郭某的近亲。
美国政府扣押行动
在 2022年9月20日和2022年9月21日前后，美国当局向几家国内银行发出了司法授权的扣押令，随后从以喜马拉雅交易所的实体和其他与郭和吉相关的实体持有的银行账户中扣押了约 3.35 亿美元。在 2022年9月22日左右，即首次司法授权扣押 Himalaya Exchange（喜马拉雅交易所）相关资金后的大约两天内，JE吉联系了一家持有Himalaya Exchange(喜马拉雅交易所)银行账户的国内银行的管理层。 JE吉试图实施电汇，他和喜马拉雅交易所的一位高管向国内银行声称需要电汇才能为一位未具名的“VIP”（即喜马拉雅交易所非常重要的客户）实现从HDO（H美元）“赎回” 美元 .在随后与国内银行的沟通中，JE吉透露，VIP（重要人物）其实就是JE吉本人。 JE吉向国内银行提供的文件反映了JE吉在2022年9月22日左右进行的两笔 HCN（H硬币）销售——总计 4600 万 HDO（H美元），JE吉试图将其“转换”为4600万美元。 JE吉两次实质上和部分地向国内银行的管理层强调，4600万美元的转账需要“在今天进行，否则就毫无意义”。
美国当局随后于2022年10月和2023年3月从KWOK郭和JE吉相关联的实体扣押了额外资金。美国当局总共扣押了超过约 6.34 亿美元的欺诈收益，其中包括来自以喜马拉雅交易所实体持有的银行账户的约 2.78 亿美元。
今天，根据司法授权的逮捕令，美国当局从KWOK郭和JE吉涉嫌用欺诈所得购买的与 KWOK郭相关的财产中没收了其他物品.
* * *
HO WAN KWOK, 豪万郭（音译），a/k/a “Miles Guo”别称”迈乐斯郭”, a/k/a, a/k/a “郭文贵”, a/k/a “七哥”, a/k/ a “领头人”, 52 岁，来自纽约市， 纽约州，KIN MING JE(建明吉)，又名“William Je”（威廉吉），56岁，来自英国伦敦，起诉书指控以下的犯罪行为：
项数
指控
被告
最高刑罚
一
串谋从事电汇诈骗、银行诈骗、证券诈骗和洗钱
郭与杰
5年监禁
二
电汇诈骗（GTV私募）
郭与杰
20年监禁
三
证券欺诈(GTV私募)
郭与杰
20年监禁
四
电汇欺诈（农场贷款计划）
郭与杰
20年监禁
五
证券欺诈（农业贷款计划）
郭与杰
20年监禁
六
电汇欺诈 (G|俱乐部)
郭与杰
20年监禁
七
证券欺诈(G|俱乐部)
郭与杰
20年监禁
八
电汇欺诈（喜马拉雅交易所）
郭与杰
20年监禁
九
国际促销洗钱
郭与杰
20年监禁
十
国际隐瞒洗钱
郭与杰
20年监禁
十一
非法货币交易
郭与吉
10年监禁
十二
妨碍司法公正
吉
20年监禁
法定最高刑期由国会规定，此处仅供参考，因为对被告判的的任何刑期都将由法官决定。
威廉姆斯先生赞扬了联邦调查局的调查工作。威廉姆斯先生进一步感谢美国证券交易委员会在本次调查中的协助与合作，该委员会今天对KWOK郭和JE吉提出了平行民事诉讼。威廉姆斯先生还对美国法警部，司法部国际事务办公室和英国大都会警察局的协助表示感谢。
如果您认为自己是KWOK郭和JE吉欺诈的受害者，请在此处查找更多信息：http//www.justice.gov/usao-sdny/united-states-v-ho-wan-kwok-aka-miles-guo-and-kin-ming-je-aka-william-je 。
此案由该办公室刑事部的多层面欺诈和网络安全小组负责。美国助理检察官Ryan B. Finkel、Juliana N. Murray 和 Micah F. Fergenson负责起诉。
起诉书中的指控仅仅是指控，被告被假定为无罪，除非并直到被证明有罪。
[1] 正如介绍性的短句所言，起诉书的全文本以及此处对起诉书指控的描述，构成仅仅是指控，所描述每一个实情都应作为指控来对待。
Statement of U.S. Attorney Damian Williams on the Conviction of Former Congressman Stephen Buyer for Insider TradingRead the Press Release
Former Congressman Stephen Buyer leveraged his privileged position as a corporate advisor to twice use his clients’ material nonpublic information to commit insider trading. Buyer’s conviction underscores this Office’s commitment to detect and hold accountable those who break our insider trading laws just to make a buck.
Sayfullo Saipov to Be Sentenced to Life in Prison for 2017 Truck Attack for ISISRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that a jury was unable to reach a unanimous decision as to whether to authorize the death penalty for SAYFULLO SAIPOV. U.S. District Judge Vernon S. Broderick will sentence SAIPOV to the statutorily mandated sentence of life in prison for carrying out a terrorist attack on October 31, 2017, in the name of the Islamic State of Iraq and al-Sham (“ISIS”), in which SAIPOV used a truck to murder eight victims and injure many more on a bike path in lower Manhattan.
On January 26, 2023, the same jury convicted SAIPOV of all 28 counts in the Indictment, which charged SAIPOV with murder for the purpose of gaining entrance to a racketeering enterprise (ISIS); assault with a dangerous weapon and attempted murder for the purpose of gaining entrance to a racketeering enterprise (ISIS); providing material support to a designated foreign terrorist organization (ISIS) resulting in death; and damage and destruction to a motor vehicle resulting in death.
U.S. Attorney Damian Williams said: “On October 31, 2017, Sayfullo Saipov stole eight innocent lives – and devastated the lives of many more – in a horrendous terrorist attack. This evil act was fueled by Saipov’s allegiance to ISIS, an allegiance which Saipov proudly maintained after the attack and up through his trial. Today a jury has declined to authorize the death penalty for Saipov, and accordingly the defendant will be subject to a mandatory sentence of life imprisonment without the possibility of parole.”
Saipov’s crimes were predicated on ISIS’s commitment to murder innocent civilians and its disdain for rule of law. But, in the end, Saipov’s actions have highlighted one of the pillars of the rule of law in this country: the right to a full and fair public trial before a jury drawn from the community. We thank the jurors for their careful consideration of the evidence and the law during this long trial, and for their willingness to serve. We also thank the families of the murdered victims, and the surviving victims, for their patience and understanding as the legal process played out. Even though the trial has ended, we know that their pain and grief endures. We stand with them in honoring the lives of their loved ones, and all who were affected by this senseless attack.”
As set forth in public documents in the case and statements made during court proceedings:
On Halloween afternoon in 2017, SAYFULLO SAIPOV used a 6,000-pound truck to strike more than 20 innocent people on the Hudson River Bike Path in lower Manhattan. SAIPOV killed eight of his victims and critically injured many others, including a 14-year-old child. SAIPOV’s surviving victims suffered amputations, serious brain injuries, life-altering physical injuries, and significant psychological trauma. SAIPOV committed his attack after years of devotion to the brutal terrorist organization ISIS and after months of careful planning. In the weeks before his attack, for example, SAIPOV rented a truck to practice maneuvering it so that he could hit as many people as possible. SAIPOV brought a note to the attack with the ISIS flag and rallying cry written on it. After his attack, while in custody at a hospital, SAIPOV told the FBI that he committed the attack in response to calls from the leader of ISIS and that he was proud of what he had done. SAIPOV smiled when describing his attack and sought to hang the ISIS flag in his hospital room. After the attack, ISIS praised SAIPOV as an Islamic State soldier and called his attack one of the most prominent attacks in the United States. In the years since his attack, SAIPOV continued to demonstrate his devotion to ISIS, including though statements in court, recorded telephone calls, and writings seized from his prison cell. In prison, SAIPOV also made statements confirming his continued belief that enemies of ISIS should be eliminated and threatening to cut the heads off of corrections officers. At the liability and sentencing phases of trial, many of SAIPOV’s victims and their family members bravely described the terror he caused and the pain and suffering they continue to endure.
* * *
SAIPOV, 34, of Uzbekistan, will be sentenced to life in prison on all nine capital counts in the Indictment.
Mr. Williams praised the outstanding investigative efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state, and local agencies. Mr. Williams also thanked the FBI Legal Attaché Office for Central Asia and the FBI’s Counterterrorism Division, Laboratory Division, Victim Services Division, and Language Services Section, Homeland Security Investigations, New York, and the Department of Justice’s National Security Division, Capital Case Section, Organized Crime and Gang Section, Office of Enforcement Operations, and Office of International Affairs for their assistance.
The case is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorneys Amanda L. Houle, Jason A. Richman, Alexander Li, and Andrew Dember, with the assistance of Paralegal Specialist Daniel Sitko, are in charge of the prosecution, with assistance from Trial Attorney John Cella of the National Security Division’s Counterterrorism Section and Trial Attorney Michael Warbel of the Capital Case Section. Mr. Williams also thanked Wendy Olsen and the Office’s Victim and Witness Section for their outstanding efforts in assisting the victims of this crime and their families.
Rockland County Jail Inmates Charged with Production of Child Pornography While Awaiting Trial on Murder and Other ChargesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Louis Falco III, the Rockland County Sheriff, announced that DARIN PETERSON and ANTHONY MITCHELL were charged today with production of child pornography. According to the Complaints, PETERSON and MITCHELL enticed a child (the “Victim”) — while the Victim was 14 and 15-years-old and while the defendants were incarcerated, awaiting trial for murder and other serious charges — to send them digital content of herself engaged in sexually explicit activity. The defendants were transferred into federal custody today and presented on the charges in White Plains Federal Court.
U.S. Attorney Damian Williams said: “The harm that child sex abuse can inflict on the most innocent of victims is something no child should bear. That these defendants committed these crimes while awaiting trial for murder and other serious charges makes their conduct especially contemptible, and this Office and our FBI partners will continue to exhaustively detect, identify, and charge any individuals engaged in this sinister conduct.”
FBI Assistant Director Michael J. Driscoll said: “Petersen and Mitchell, while incarcerated awaiting trial for murder and additional violent crimes, allegedly preyed on a child, inducing them to send sexually explicit content to the defendants. The FBI and our partners in law enforcement will remain tireless in our efforts to protect children from violent predators.”
Rockland County Sheriff Louis Falco III said: “The Rockland County Sheriff’s Office and the Rockland County Intelligence Center were proud to assist the FBI Safe Streets Task Force in this investigation. Sexual predators who exploit children, who are among the most vulnerable members of society, will be investigated and prosecuted to the fullest extent of the law.”
As alleged in the Complaints:[1]
From on or about August 12, 2022, up to and including on or about September 25, 2022, in the case of MITCHELL, and from on or about December 7, 2022, up to and including on or about January 29, 2023, in the case of PETERSON, the defendants contacted the Victim and demanded that she take and send to them sexually explicit digital media depicting herself.
The defendants committed these crimes while PETERSON awaited trial for murder, assault, and criminal possession of a weapon, and while MITCHELL awaited trial for murder, attempted murder, and criminal possession of a weapon.
* * *
MITCHELL, 23, of Haverstraw, New York, and PETERSON, 29, of West Haverstraw, New York, are charged with one count of production of child pornography, which carries a mandatory minimum sentence of 15 years in prison and a maximum potential sentence of 30 years in prison.
The minimum and maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Williams praised the outstanding work of the FBI and the Rockland County Sheriff’s Office and thanked the Rockland County District Attorney’s Office for its assistance in this case.
The case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorney Ben Arad is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitutes only allegations, and every fact described therein should be treated as an allegation.
Former Finance Director of Non-Profit Trade Association Charged with Embezzlement SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today charges against DONNA MURRAY, a former director of finance for a non-profit financial services trade association headquartered in Manhattan, for a months-long embezzlement scheme through which she stole approximately $490,000 from her employer. MURRAY is expected to be presented later today in the Southern District of Florida.
U.S. Attorney Damian Williams said: “As alleged, Donna Murray betrayed her employer’s trust by using her employer’s bank account — to which she had access as its finance director — as her personal ATM, stealing nearly half a million dollars and spending the stolen money on frivolous items, even including a cat treadmill. Today’s charges send a message to would-be embezzlers: if you abuse your position of trust for personal gain, we will hold you accountable.”
FBI Assistant Director Michael J. Driscoll said: “As we allege today, Ms. Murray misappropriated approximately $490,000 from her employer over several years and used the funds for a variety of personal uses. Violating her employer’s trust in the manner in which she did is a federal crime, and, as a consequence, she will now be forced to face the consequences of her actions.”
According to the allegations contained in the Complaint:[1]
From in or about December 2017 through in or about August 2022, MURRAY was employed as the Director of Finance for a non-profit financial services trade association located in Manhattan. The organization, which has more than 600 institutional members, works to promote industry thought leadership, participate in industry advocacy work, educate members and stakeholders, and establish industry standards and best practices.
As the Director of Finance, MURRAY had access to the organization’s bank accounts. From at least October 2019 through at least in or about March 2021, MURRAY misappropriated approximately $490,000 from one of the organization’s bank accounts through more than 100 unauthorized wire transactions from the organization’s bank account to her personal bank account. To conceal the embezzlement from her employer, MURRAY fabricated recipients and invoice numbers purporting to be associated with the wire transactions in her employer’s general ledger, even though MURRAY was the true recipient of those wire transfers.
After siphoning hundreds of thousands of dollars from her employer’s bank account to her own, MURRAY withdrew from her bank account over $400,000 in cash on more than 300 occasions and used the remainder of the stolen funds for peer-to-peer online money transfers, loan payments, and consumer and luxury items, including Yves Saint Laurent and Michael Kors designer apparel; beauty, wellness, and skincare products and services; home furnishings and décor; hundreds of Amazon orders; smoke shop purchases; and a treadmill for cats.
* * *
MURRAY, 38, of Staten Island, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Williams praised the outstanding investigative work of the FBI.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Jerry J. Fang is in charge of the prosecution.
The charge contained in the Complaint is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Bronx Daycare Provider Charged with Sexual Exploitation of A Child and Production, Receipt, and Distribution of Child PornographyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Patrick J. Freaney, Special Agent in Charge of the New York Field Office of the United States Secret Service (“USSS”), Michael J. Driscoll, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Keechant L. Sewell, the Commissioner of the New York City Police Department (“NYPD”), announced today that SILFREDO CASTILLO MARTINEZ was charged with sexual exploitation of a child and production of child pornography as well as receipt, distribution, and possession of child pornography. CASTILLO MARTINEZ will be presented today before United States Magistrate Judge Gabriel W. Gorenstein.
U.S. Attorney Damian Williams said: “Silfredo Castillo Martinez’s primary responsibility as a daycare provider was to watch over neighborhood children. Instead, he allegedly abused that role in order to sexually exploit one of the minors under his care. During the time when he was supposed to be protecting children, he also allegedly received, distributed, and possessed tens of thousands of images of child pornography. Castillo Martinez’s alleged conduct was unconscionable, and we will continue to work tirelessly to protect the children of our community.”
USSS Special Agent in Charge Patrick J. Freaney said: “The charges brought forth today allege reprehensible violation and exploitation committed by an individual who was expected to provide extraordinary trustworthiness and protection to the most vulnerable. Our expert investigators and partners assigned to the Internet Crimes Against Children Task Force have successfully brought this individual before our justice system to face these allegations. I am thankful for their continued dedication and unending work in our shared investigative priority to keep our children safe from harm.”
FBI Assistant Director Michael J. Driscoll said: “The crimes Castillo Martinez stands charged with today are nearly unimaginable. As alleged, while operating a licensed day care facility, he enticed an 11-year-old child to engage in sexually-explicit conduct and made recordings of the conduct. Our children are some of our society’s most vulnerable members, and protecting them from predators remains a top priority for the FBI. We encourage anyone who believes they may have information relevant to this investigation to contact us at 1-800-CALL-FBI or online at tips.fbi.gov.”
NYPD Commissioner Keechant L. Sewell said: “This investigation highlights the most important function of law enforcement in our society: protecting the vulnerable against criminal predators who would seek to abuse, exploit, and harm them. Today’s charges affirm, again, that the NYPD and our partners will never abate our efforts to keep children safe – and we will relentlessly pursue anyone who targets them. To that end, I thank and commend the U.S. Attorney’s Office for the Southern District, the United States Secret Service, the New York Field Office of the FBI, and every investigator who worked on this important case.”
According to the allegations contained in the Complaint:[1]
From in or about July 2015 through in or about at least May 3, 2022, CASTILLO MARTINEZ operated a licensed daycare facility for children at his residence in the Bronx, New York (the “Daycare Facility”).
From at least in or about May 2018 through at least in or about July 2018, CASTILLO MARTINEZ induced an 11-year-old minor (“Minor Victim-1”) who attended the Daycare Facility to engage in sexually explicit conduct at the Daycare Facility, and CASTILLO MARTINEZ recorded that conduct on his cellphone and camera.
On or about May 3, 2022, law enforcement agents executed a search warrant at CASTILLO MARTINEZ’s residence and seized several electronic devices belonging to CASTILLO MARTINEZ. Those devices contained, among other things, several images and a video containing child pornography depicting Minor Victim-1 and approximately 9,800 other images depicting child pornography.
* * *
CASTILLO MARTINEZ, 32, of the Bronx, New York, is charged with one count of sexual exploitation of a child, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of life in prison; one count of receipt and distribution of child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 years in prison; and one count of possession of child pornography, which carries a maximum sentence of 20 years in prison.
The minimum and maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Any individuals who believe they have information that may be relevant to this investigation should contact the FBI at 1-800-CALL-FBI or https://tips.fbi.gov.
Mr. Williams praised the outstanding investigative work of the USSS’s Internet Crimes Against Children Task Force, the FBI, and the NYPD. Mr. Williams also thanked the Bronx County District Attorney’s Office for its assistance.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Jackie Delligatti is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint constitutes only allegations, and every fact described herein should be treated as an allegation.
Maine Man Charged with Participation in A Murder-For-Hire SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of HYUNKOOK KORSIAK for participating in a plot to commit murder for hire in Midtown Manhattan. Thankfully, and unbeknownst to KORSIAK, he plotted with undercover FBI agents and the intended victim was fictitious. KORSIAK was arrested last night in Tarrytown, New York, and will be presented today before U.S. Magistrate Judge James L. Cott.
U.S. Attorney Damian Williams said: “As alleged in the complaint, Hyunkook Korsiak agreed to murder another person for the price of $50,000. Thanks to the work of our remarkable law enforcement partners, Korsiak now stands charged in federal court for his alleged role in this terrible crime.”
FBI Assistant Director Michael J. Driscoll said: "As alleged, the defendant was willing to travel over three hundred miles in order to fulfill his depraved desire to be paid for taking another human’s life. The defendant displayed callous disregard for life and planned to conduct his act of violence in the middle of Manhattan. The FBI will not tolerate such acts of violence, and any individual willing to cold heartedly kill another person will be made to face the consequences in the criminal justice system."
As alleged in the amended Complaint filed today in Manhattan federal court and in other court papers and proceedings:[1]
From in or about January 2023, through in or about March 8, 2023, KORSIAK participated in a scheme to murder a fictitious businessman in Manhattan in exchange for a payment of $50,000. The FBI began its investigation after communications KORSIAK sent expressing his desire to kill a person for money were intercepted by the Bureau of Prisons. Over the course of the last two months, KORSIAK met with an undercover FBI agent on multiple occasions in both New York and Boston and agreed to murder a fictitious businessman who was purported to be staying at a Midtown Manhattan hotel. During one of the meetings with the undercover agent, KORSIAK described how he intended to commit the murder and what weapons he planned on using, including an AR-15 rifle and a 9MM pistol that he possessed. KORSIAK asked the undercover agents to provide him with silencers for the two weapons and a latex mask so that he could defeat facial recognition technology. In another meeting, KORSIAK told agents that he would use a car to approach the victim as he walked on a Midtown Manhattan street and planned to shoot the victim from inside the car. KORSIAK’s plan also included the use of a police uniform in an effort to evade capture after he committed the murder.
On March 8, 2023, KORSIAK traveled from Maine to Tarrytown, New York, where he intended to make his final preparations for the murder. Instead, Korsiak was apprehended by FBI agents. KORSIAK was found in possession of four firearms, including two AR-15 rifles and two 9MM semi-automatic pistols. In addition to the firearms, agents seized (i) a bullet resistant vest; (ii) hundreds of rounds of various caliber ammunition; (iii) a latex mask; (iv) rifle scopes; (v) high-capacity magazines; and (vi) latex gloves, many of the same items KORSIAK told the undercover agents he intended to use during the murder. These items are pictured below:
KORSIAK has a 2017 federal felony conviction for theft from a licensed firearms dealer.
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KORSIAK, 41, of Augusta, Maine, is charged with one count of murder-for-hire, which carries a maximum potential sentence of 10 years in prison, and one count of possession of a firearm following a felony conviction, which carries a maximum sentence of 15 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the FBI and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
The prosecution if this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorney Dominic A. Gentile is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint constitutes only allegations, and every fact described herein should be treated as an allegation.
Former President of International Aircraft Parts Distributor Sentenced to 84 Months in Prison for Role in Multi-Million-Dollar Fraud SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that STEFAN GILLIER, a/k/a “Stephan Gillier,” a/k/a “Stefan R.R. Gillier,” a/k/a “Roland Gillier,” a/k/a “Roland Van Gorp,” was sentenced today in Manhattan federal court by United States District Judge Paul A. Engelmayer to 84 months in prison for engaging in a conspiracy to fraudulently obtain over six million dollars’ worth of aircraft parts. GILLIER was convicted in September 2022 following a one-week jury trial.
U.S. Attorney Damian Williams said: “With today’s sentence, Stefan Gillier’s aircraft parts fraud scheme has been grounded. As the sentence for this extradited defendant shows, those who flee justice will be held accountable for their crimes, no matter how long it takes.”
According to the Indictment, documents previously filed in the case, and evidence introduced at trial:
GILLIER was the president and ran the day-to-day business activities of RTF International Inc. (“RTF”), a broker of aircraft parts. RTF began obtaining aircraft parts from Honeywell International, Inc. (“Honeywell”) in June 2004. Starting in 2005, RTF began increasing the number of parts it ordered from Honeywell, paying for them by check. RTF paid with checks written in foreign currency and for amounts well above the cost of the parts, which created an apparent credit balance in RTF’s favor in Honeywell’s accounting system. RTF wrote approximately $17 million worth of checks to Honeywell but stopped payment on approximately $15 million worth of checks.
In particular, GILLIER signed checks to Honeywell on behalf of RTF but repeatedly caused stop payment orders to be placed after Honeywell shipped the parts to RTF. When questioned by Honeywell’s employees about these stop payment orders, GILLIER, using the alias “Roland Van Gorp,” falsely represented that the stop payment orders were the result of a misunderstanding with the bank and that he would check with RTF’s finance department. In fact, as GILLIER knew, he had issued the stop payment orders, and RTF did not have a finance department.
In total, GILLIER was able to obtain over $6 million worth of aircraft parts from Honeywell without paying for the parts.
In June 2006, Honeywell executed a civil attachment order and recovered some of the aircraft parts stolen by GILLIER. Following the execution of the civil attachment order by Honeywell, GILLIER caused various large transfers of fraud proceeds into bank accounts controlled by him, his relatives, and a co-conspirator (“CC-1”). The day after making those transfers, on June 15, 2006, GILLIER left the United States for Canada.
After Honeywell discovered that it was being victimized by RTF, GILLIER and CC-1 continued their fraud scheme through a new corporate entity, “UN Air Services, Inc.” (“UAS”) (which had no relation to the United Nations). In 2006, UAS began obtaining aircraft parts from Pratt & Whitney Component Solutions, Inc. (“Pratt & Whitney”). Like RTF, UAS began stopping payment on checks it had written to Pratt & Whitney for the aircraft parts after Pratt & Whitney delivered the aircraft parts to UAS.
GILLIER was arrested and extradited from Italy in 2019.
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In addition to the prison sentence, GILLIER, 49, a citizen of Belgium, was sentenced to three years of supervised release.
Mr. Williams praised the outstanding investigative work of Homeland Security Investigations and the U.S. Department of Defense, Defense Criminal Investigative Service.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Dina McLeod, Micah F. Fergenson, and Michael Neff are in charge of the prosecution.
Former CEO of Medical Device Company Indicted for Creating and Selling A Fake Medical Component That Was Implanted into PatientsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Fernando P. McMillan, the Special Agent in Charge of the New York Field Office of the U.S. Food and Drug Administration – Office of Criminal Investigations (“FDA-OIC”), announced today the filing of a two-count Indictment (the “Indictment”) charging Laura PERRYMAN, the former Chief Executive Officer (“CEO”) of STIMWAVE LLC, a Florida-based medical device company, in connection with a scheme to create and sell a non-functioning dummy medical device for implantation into patients suffering from chronic pain, resulting in millions of dollars in losses to federal healthcare programs. PERRYMAN was arrested this morning in Delray Beach, Florida, and will be presented later today in the United States District Court for the Southern District of Florida.
In addition, Mr. Williams announced the unsealing of a non-prosecution agreement (the “Agreement”) with STIMWAVE LLC ("STIMWAVE"), which filed for bankruptcy on June 15, 2022. The Agreement was entered into on October 29, 2022, and was sealed by the United States Bankruptcy Court for the District of Delaware, pending the Government’s ongoing investigation. Under the terms of the Agreement, STIMWAVE has accepted responsibility for its conduct by, among other things: (i) making admissions and stipulating to the accuracy of an extensive Statement of Facts; (ii) paying a $10,000,000 monetary penalty; and (iii) maintaining an adequate compliance program, to include employing a Chief Compliance Officer and holding regular compliance committee meetings. STIMWAVE is also required to cooperate fully with the Government. STIMWAVE’s obligations under the Agreement will continue for a period of three years from the date of execution of the Agreement.
The U.S. Attorney’s Office also unsealed a civil fraud lawsuit filed against STIMWAVE under the False Claims Act (“FCA”), and the parties’ settlement of that suit (the “FCA Settlement”). The settlement has been submitted to United States District Judge George B. Daniels for approval. In connection with the FCA Settlement, STIMWAVE admitted and accepted responsibility for conduct alleged in the Government’s civil complaint and agreed to pay $8,600,000 to the United States. This payment will be credited towards the $10,000,000 monetary penalty discussed above. The civil complaint also brings claims against PERRYMAN under the FCA, which are pending.
U.S. Attorney Damian Williams said: “As alleged, at the direction of its founder and CEO Laura Perryman, Stimwave created a dummy medical device component — made entirely of plastic — designed to be implanted in patients for the sole purpose of causing doctors to unwittingly bill Medicare and private insurance companies more than $16,000 for each implantation of the piece of plastic. The defendant and Stimwave did this so that they could charge medical providers many thousands of dollars for purchasing their medical device. Our Office will continue to do everything in its power to bring to justice anyone responsible for perpetuating health care fraud, which in this case led to patients being used as nothing more than tools for financial enrichment.”
FBI Assistant Director Michael J. Driscoll said: “Ms. Perryman, as the Chief Executive Officer of Stimwave, allegedly led a scheme to sell medical devices that contained a non-functioning component that doctors unwittingly implanted into patients suffering from chronic pain. As a result of her illegal actions, not only did patients undergo unnecessary implanting procedures, but Medicare was defrauded of millions of dollars. Today’s action demonstrates the FBI’s continuing commitment to protect Medicare and other government programs from financial fraud and abuse.”
FDA-OIC Special Agent in Charge Fernando P. McMillan said: “Individuals and companies that manufacture and distribute medical devices with non-functional components put the health of patients at significant risk. We will continue to pursue and bring to justice those who jeopardize the health of their patients and of the public.”
According to the documents unsealed today in Manhattan federal court and the United States Bankruptcy Court for the District of Delaware:[1]
STIMWAVE was a medical device company that manufactured and distributed implantable neurostimulation devices designed to treat intractable, chronic pain. Founded in 2010 by PERRYMAN and others, STIMWAVE was headquartered in Pompano Beach, Florida.
STIMWAVE was founded on the premise that its products would provide non-opioid alternatives to chronic pain management. As the founder and CEO of STIMWAVE, PERRYMAN oversaw the design of the StimQ PNS System (the “Device”), a neurostimulator medical device that treated chronic pain by producing electrical currents to target peripheral nerves outside the spinal cord. From at least in or about 2017 up to and including her termination in or about 2019, PERRYMAN, as STIMWAVE’s CEO, engaged in a multi-year scheme (the “Scheme”) to design, create, manufacture, and market an inert, non-functioning component of the Device — called the “White Stylet” — that served no medical purpose but was included with the Device through in or about 2020 in order to make the product financially viable for doctors to purchase.
When STIMWAVE originally brought the Device to market in or about 2017, it contained three primary components: (i) an implantable electrode array (the “Lead”) that stimulated the nerve; (ii) an externally worn battery that sat outside the body and wirelessly provided power to the Lead through the patient’s skin (the “Battery”); and (iii) a separate implantable receiver measuring approximately 23 centimeters in length with a distinctive pink handle — called the “Pink Stylet.” The Pink Stylet contained copper and, unlike the White Stylet, functioned as a receiver to transmit energy from the Battery to the Lead.
STIMWAVE sold the Device to doctors and medical providers for over approximately $16,000. Medical insurance providers, including Medicare, would reimburse medical practitioners for implanting the Device into patients through two separate reimbursement codes, one for implantation of the Lead and a second for implantation of the Pink Stylet. The billing code for implanting the Lead provided for reimbursement at a rate of between approximately $4,000 and $6,000, while the billing code for implanting a receiver, like the Pink Stylet, provided for reimbursement at a rate of between approximately $16,000 and $18,000.
Soon after the Device was released, physicians informed STIMWAVE that they were having trouble implanting the Pink Stylet in certain patients because the Pink Stylet was too long. STIMWAVE and PERRYMAN knew that the Pink Stylet could not be cut or trimmed to shorten it without interfering with the functionality of the Pink Stylet as a receiver, and without a receiver component for doctors to implant and seek reimbursement for, doctors would incur a substantial financial loss with every purchase of the Device, thereby making it more difficult for STIMWAVE to sell the Device to doctors and medical providers at the approximately $16,000 price.
However, STIMWAVE — at the direction of PERRYMAN — did not lower the price of the Device so that its cost to doctors and medical providers could be covered by reimbursement for the implantation of only the Lead, nor did PERRYMAN recommend that doctors not implant the Device or its receiver component in cases where the Pink Stylet could not fit comfortably. Instead, PERRYMAN directed that STIMWAVE create the White Stylet — a dummy component made entirely of plastic that served no medical purpose but which STIMWAVE misrepresented to doctors as a customizable receiver alternative to the Pink Stylet. The White Stylet could be cut to size by the doctor for use in smaller anatomical spaces and was created solely so that doctors and medical providers would continue to purchase the Device for use in those scenarios and continue to bill for the implantation of a receiver component. To perpetuate the lie that the White Stylet was functional, PERRYMAN oversaw training that suggested to doctors that the White Stylet was a “receiver,” when, in fact, it was made entirely of plastic, contained no copper, and therefore had no conductivity. In addition, PERRYMAN directed other STIMWAVE employees to vouch for the efficacy of the White Stylet, when she knew that the White Stylet was actually non-functional.
As a result of these misrepresentations regarding the functionality of the White Stylet, PERRYMAN caused doctors and medical providers to unwittingly implant the non-functional White Stylet into patients and submit fraudulent reimbursement claims for implantation of the White Stylet to Medicare, resulting in millions of dollars in losses to the federal government.
On June 15, 2022, STIMWAVE filed for bankruptcy in Delaware under Chapter 11 of the Bankruptcy Code, through which it sold substantially all of its assets to a third-party through an auction.
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PERRYMAN, 54, of Delray Beach, Florida, has been charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison, and one count of health care fraud, which carries a maximum potential sentence of 10 years in prison.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the investigative work of the FBI and thanked the FDA for its assistance.
The criminal case is being handled by the Complex Frauds and Cybercrime Unit of the Office’s Criminal Division. Assistant U.S. Attorneys Louis A. Pellegrino, Jacob M. Bergman, and Mónica P. Folch are in charge of the prosecution. The civil case against STIMWAVE and PERRYMAN is being handled by the Civil Frauds Unit of the Office’s Civil Division. Assistant U.S. Attorneys Jacob M. Bergman and Mónica P. Folch are in charge of the civil case.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment constitutes only allegations, and every fact described herein should be treated as an allegation.
United States Settles with United Alloys and Steel Corporation for the Release of Mercury in the Village of Rye BrookRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Lisa F. Garcia, the Regional Administrator for the U.S. Environmental Protection Agency (“EPA”), Region 2, announced today that the United States has filed a civil lawsuit against UNITED ALLOYS AND STEEL CORPORATION (“Defendant”) and has simultaneously filed a consent decree settling the lawsuit. In the complaint, brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) – commonly known as the Superfund statute – the United States alleged that the Defendant arranged for the disposal or treatment of mercury by Port Refinery, Inc. (“Port Refinery”), a mercury refining business in the Village of Rye Brook, New York, which led to releases of mercury into the environment. The consent decree provides for a payment of $260,000 by the Defendant for costs incurred by EPA in conducting clean-up activities at the Port Refinery site (the “Site”).
U.S. Attorney Damian Williams said: “United Alloys and Steel Corporation played a part in causing contamination in a residential community by delivering 17,253 pounds of scrap mercury for re-smelting purposes to Port Refinery, and it is paying a share of the costs that EPA had to incur to clean up this site. The parties responsible for this environmental contamination are now being held accountable.”
EPA Regional Administrator Lisa F. Garcia said: “This company sent scrap mercury to the site operator, which handled mercury in a way that resulted in it being released into the environment and contaminating homes. Even relatively small amounts of mercury can cause serious health problems. EPA has addressed mercury vapors in people’s homes at the site, and now we are holding this company accountable for its part in putting people at risk.”
As alleged in the complaint filed today in White Plains federal District Court:
The Defendant arranged for Port Refinery’s treatment or disposal of scrap mercury at the Site. Port Refinery’s treatment and processing of mercury sent by the Defendant and other parties led to extensive releases of mercury into the environment, necessitating two separate clean-up actions by EPA. In connection with the second clean-up, EPA incurred costs at the Site for investigative and removal activities, including, among other things, excavating and disposing of more than 9,300 tons of mercury-contaminated soil from the Site.
In the consent decree filed today, the Defendant admits and accepts responsibility for the following:
- EPA has determined that from the 1970s through the early 1990s, Port Refinery engaged in, among other things, the business of mercury reclaiming, refining, and processing;
- Port Refinery operated in the Village of Rye Brook out of a two-story garage bordered by private residences on its south, east, and west sides;
- EPA has determined that Port Refinery took virtually no environmental precautions or safety measures during its mercury refinement process;
- EPA has determined that Port Refinery released a significant amount of mercury into the environment, contaminating the Site;
- EPA has determined that mercury from the Defendants’ mercury-containing products was comingled at the Site and contributed to the mercury released into the environment; and
- United Alloys and Steel Corporation delivered 17,253 pounds of scrap mercury for re-smelting purposes to Port Refinery during its period of operations.
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Pursuant to the consent decree, the Defendant will pay a total of $260,000 in costs incurred by EPA. The payment amount was based on the Defendant’s documented inability to pay its full share of the costs incurred.
This lawsuit is the United States’ eighth lawsuit against responsible parties to recover clean-up costs for the second clean-up at the Site. With this settlement, the United States has recovered a total of $3,079,392 from responsible parties.
The consent decree will be lodged with the District Court for a period of at least 30 days before it is submitted for the Court’s approval to provide public notice and to afford members of the public the opportunity to comment on the consent decree.
Mr. Williams thanked the assigned EPA Region 2 Assistant Regional Counsel for his critical work on this matter.
This case is being handled by the Office’s Environmental Protection Unit. Assistant U.S. Attorney Anthony J. Sun is in charge of the case.
Operators and Attorney of Global Multi-Million-Dollar Cryptocurrency Ponzi Scheme “AirBit Club” Plead GuiltyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today the guilty pleas of PABLO RENATO RODRIGUEZ, GUTEMBERG DOS SANTOS, SCOTT HUGHES, CECILIA MILLAN, KARINA CHAIREZ, and JACKIE AGUILAR for their roles in an internationally coordinated fraud and money laundering ring that deceived individuals into investing in AirBit Club, a purported cryptocurrency mining and trading company. AirBit Club co-founder DOS SANTOS pled guilty before United States District Judge George B. Daniels on October 21, 2021. Senior AirBit Club promoters CHAIREZ, MILLAN, and AGUILAR pled guilty before Judge Daniels on January 31, February 8, and February 22, 2023, respectively, and are scheduled to be sentenced by Judge Daniels on June 28, July 25, and June 27, 2023, respectively. SCOTT HUGHES, an attorney who laundered Airbit Club fraud proceeds for RODRIGUEZ and DOS SANTOS, pled guilty before Judge Daniels on March 2, 2023, and is scheduled to be sentenced on August 9, 2023. Airbit Club co-founder RODRIGUEZ pled guilty before Judge Daniels earlier today and is scheduled to be sentenced on July 25, 2023. As part of their guilty pleas, the defendants collectively have been ordered to forfeit their fraudulent proceeds of Airbit Club, which include seized or restrained assets consisting of U.S. currency, Bitcoin, and real estate currently valued at approximately $100 million.
U.S. Attorney Damian Williams said: “The defendants took advantage of the growing hype around cryptocurrency to con unsuspecting victims around the world out of millions of dollars with false promises that their money was being invested in cryptocurrency trading and mining. Instead of doing any cryptocurrency trading or mining on behalf of investors, the defendants built a Ponzi scheme and took the victims’ money to line their own pockets. These guilty pleas send a clear message that we are coming after all of those who seek to exploit cryptocurrency to commit fraud.”
According to the Superseding Indictment, the defendants’ statements when pleading guilty, and statements made in related court filings and proceedings:
RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, CHAIREZ, and AGUILAR participated in a coordinated scheme in which victim-investors (the “Victims”) were induced to invest in AirBit Club based on the false promise of guaranteed profits in exchange for cash investments in club “memberships” (the “AirBit Club Scheme” or the “Scheme”). Beginning in late 2015, AirBit Club, through its founders, RODRIGUEZ and DOS SANTOS, as well as its promoters (the “Promoters”), including MILLAN, CHAIREZ, and AGUILAR, marketed AirBit Club as a multilevel marketing club in the cryptocurrency industry. Promoters falsely promised Victims that AirBit Club earned returns on cryptocurrency mining and trading and that Victims would earn passive, guaranteed daily returns on any membership purchased.
RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, CHAIREZ, and AGUILAR traveled throughout the United States and around the world to places in Latin America, Asia, and Eastern Europe, where they hosted lavish expos and small community presentations aimed at convincing Victims to purchase AirBit Club memberships. In furtherance of the AirBit Club Scheme, the Victims were fraudulently induced to buy memberships in cash, including in the Southern District of New York. Following a Victim’s investment, a Promoter provided the Victim with access to an online AirBit Club portal to view the purported returns on memberships (the “Online Portal”). While Victims saw “profits” accumulate on their Online Portal, those representations were false; no Bitcoin mining or trading on behalf of Victims in fact took place. Instead, RODRIGUEZ, DOS SANTOS, MILLAN, and AGUILAR enriched themselves and spent Victim money on cars, jewelry, and luxury homes, and financed more extravagant expos to recruit more Victims.
HUGHES, an attorney licensed to practice law in California, had previously represented RODRIGUEZ and DOS SANTOS in a Securities and Exchange Commission investigation related to another investment scheme known as Vizinova. He then aided RODRIGUEZ and DOS SANTOS in perpetrating the AirBit Club Scheme by, among other things, helping to remove negative information about AirBit Club and Vizinova from the internet.
In many instances, as early as 2016, Victims who attempted to withdraw money from the AirBit Club Online Portal and complained to a Promoter were met with excuses, delays, and hidden fees amounting to more than 50% of the Victim’s requested withdrawal, if they were able to make any withdrawal at all. In one instance, AGUILAR told one Victim of the AirBit Club Scheme who was complaining about her inability to withdraw AirBit Club returns that she should “bring new blood” into the AirBit Club Scheme in order to receive her returns.
In April 2020, another victim received a notice on the AirBit Club Online Portal that his account was closed – and principal investment lost – due to “execution of financial sustainability Reserve, policy #34 of the Airbit Club Terms and Conditions, due to the economic and financial crisis caused by (Covid-19).”
RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN sought to conceal the AirBit Club Scheme, as well as their respective control of the proceeds of that Scheme, by requesting that Victims purchase memberships in cash, using third-party cryptocurrency brokers, and by laundering the Scheme’s proceeds through several domestic and foreign bank accounts, including an attorney trust account managed by HUGHES (the “Hughes Trust Account”). The Hughes Trust Account was ostensibly intended to maintain custody of HUGHES’s law practice’s client funds. Instead, the Hughes Trust Account was used by RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN to conceal the nature and origin of the AirBit Club Scheme’s illicit proceeds. Through that account, HUGHES directed Victim funds to the personal expenses of RODRIGUEZ, DOS SANTOS, CHAIREZ, MILLAN, and himself, and funded promotional events and sponsorships designed to further promote the AirBit Club Scheme.
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RODRIGUEZ, 40, of Irvine, California, DOS SANTOS, 48, of Panama City, Panama, MILLAN, 41, of Greensboro, North Carolina, CHAIREZ, 47, of Modesto, California, AGUILAR, 58, of Plano, Texas, and HUGHES, 47, of Newport Beach, California, have pled guilty to charges including wire fraud conspiracy, which carries a maximum potential sentence of 20 years in prison; money laundering conspiracy, which carries a maximum potential sentence of 20 years in prison; and bank fraud conspiracy, which carries a maximum potential sentence of 30 years in prison.
The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendants will be determined by the judge.
Mr. Williams praised the outstanding investigative work of Special Agents from Homeland Security Investigations’ (“HSI”) El Dorado Task Force, HSI Panama, the HSI Panama City Transnational Criminal Investigative Unit, and HSI New Orleans. Mr. Williams further thanked the attorneys and investigators at the Securities and Exchange Commission whose expertise and diligence were integral to the development of this investigation.
If you believe you are a victim of the AirBit Club fraud, updated information regarding the case and victims’ rights as well as contact information for the victim witness coordinator is available here.
The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Kiersten A. Fletcher, Samuel L. Raymond, and Cecilia E. Vogel are in charge of the prosecution.
Laurence Doud, Former CEO of Pharmaceutical Distributor, Sentenced to 27 Months in Prison for Conspiring to Unlawfully Distribute Controlled Substances and Defrauding the DEARead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that LAURENCE F. DOUD III, the former Chief Executive Officer of Rochester Drug Co-Operative, Inc. (“RDC”), was sentenced today in Manhattan federal court to 27 months in prison for conspiring to unlawfully distribute oxycodone and fentanyl and conspiring to defraud the Drug Enforcement Administration (“DEA”). DOUD was sentenced today by United States District Judge George B. Daniels after being convicted at trial in February 2022.
U.S. Attorney Damian Williams said: “Laurence Doud cared more about his own paycheck than his responsibility as CEO of RDC to prevent dangerous opioids from making their way to pharmacies, drug dealers, and people struggling with addiction. The sentence imposed today holds Doud responsible for shipping massive amounts of dangerous and highly addictive oxycodone and fentanyl to pharmacies that he knew were illegally dispensing those controlled substances and reaffirms this Office’s commitment to seeking justice for the many victims of the opioid epidemic.”
According to the Indictment and the evidence at trial:
Violations of the Federal Narcotics Laws
From 2012 through March 2017, DOUD knowingly and intentionally violated the federal narcotics laws by distributing, through RDC, dangerous, highly addictive opioids to pharmacy customers that he knew were being sold and used illicitly. At the direction of its senior management, including DOUD, RDC supplied large quantities of oxycodone, fentanyl, and other dangerous opioids to pharmacy customers that its own compliance personnel determined were dispensing those drugs to individuals who had no legitimate medical need for them. RDC, at the direction of DOUD and others, distributed controlled substances to those pharmacies even after identifying “red flags” of diversion, including dispensing highly abused controlled substances in large quantities; dispensing primarily controlled substances; dispensing quantities of controlled substances in amounts consistently higher than accepted medical standards; accepting a high percentage of cash for controlled substance prescriptions; dispensing to out-of-state patients; and filling controlled substances prescriptions issued by practitioners acting outside the scope of their medical practice, under investigation by law enforcement, or on RDC’s “watch list.” In addition, and at DOUD’s direction, RDC frequently brought on pharmacy customers that had been terminated by other distributors.
Conspiracy to Defraud the DEA
From 2012 through March 2017, DOUD took steps to conceal RDC’s illicit distribution of controlled substances from the DEA and other law enforcement authorities. Among other things, DOUD made the deliberate decision not to investigate, monitor, or report to the DEA pharmacy customers that DOUD and others at RDC knew were diverting controlled substances for illegitimate use. Because they knew that reporting these pharmacies would likely result in the DEA investigating and shutting down RDC’s customers, RDC’s senior management, including DOUD, directed the company’s compliance department not to report them and instead to continue supplying those customers with dangerous controlled substances that the company knew were being dispensed and used for illicit purposes. Among other things, pursuant to DOUD’s instructions, and contrary to the company’s representations to the DEA, RDC opened new customer accounts without conducting due diligence and supplied those customers – some of whom had been terminated by other distributors – with dangerous controlled substances. Additionally, DOUD caused RDC to avoid filing suspicious order reports with the DEA as required by law. As a result, the DEA’s ability to identify and prevent the illicit dispensing of highly addictive controlled substances by several of RDC’s pharmacy customers was impeded.
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In addition to his prison term, LAURENCE F. DOUD III, 79, of Port Orange, Florida, was sentenced to three years of supervised release and ordered to pay a $100,000 fine.
Mr. Williams praised the outstanding investigative work of the DEA’s Westchester Tactical Diversion Team and thanked Special Agents of United States Attorney’s Office for their assistance.
The prosecution of this case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Thomas Burnett, Nicolas Roos, and Alexandra Rothman are in charge of the prosecution and represented the Government at trial. Assistant U.S. Attorney Louis Pellegrino also participated in the investigation into RDC and DOUD.
Doctor Sentenced to 12.5 Years in Prison for Illegally Distributing Oxycodone from Midtown Manhattan PracticeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that HOWARD ADELGLASS was sentenced today by U.S. District Judge Jed S. Rakoff to 150 months in prison for his participation in a conspiracy to illegally prescribe oxycodone. ADELGLASS was convicted in November 2022 following a two-week trial before Judge Rakoff.
U.S. Attorney Damian Williams said: “For years, Howard Adelglass illegally prescribed enormous quantities of highly addictive and deadly opioids to people he knew were suffering from substance abuse disorders or were dealers. By monetizing his prescription pad and distributing mammoth quantities of oxycodone pills for no legitimate medical purpose, Adelglass practiced as a drug dealer, not a doctor. Adelglass did not simply betray his medical oath; he destroyed lives and families and helped fuel the opioid epidemic gripping the nation. Today’s sentence makes clear that this Office and our law enforcement partners will work tirelessly to hold responsible those who have contributed to the national opioid crisis no matter their professional stature.”
According to the allegations contained in the Indictment, the evidence offered at trial, and matters included in public filings:
HOWARD ADELGLASS was a licensed physician. Together with his office manager, MARCELLO SANSONE, he operated a pain-management clinic located in Midtown Manhattan (the “Clinic”). The Clinic serviced purported patients seeking oxycodone and other pain-relief medications commonly diverted for illicit purposes. In exchange for cash payments, sex acts, and cocaine, ADELGLASS wrote thousands of prescriptions for large quantities of oxycodone, many to individuals whom ADELGLASS knew did not need the pills for a legitimate medical purpose. When they occurred, ADELGLASS’s examinations were perfunctory. ADELGLASS's purported patients included individuals addicted to opioids and, in some cases, individuals who sold the oxycodone on the street. Even when faced with clear evidence of his purported patients’ drug abuse and diversion, ADELGLASS continued to prescribe large quantities of oxycodone without a legitimate medical purpose and outside the scope of professional practice.
Initially, ADELGLASS staffed the Clinic with inexperienced young women, some of whom he caused to be addicted to oxycodone through illegal prescriptions. Around October 2018, after serving as a primary source of patient referrals, SANSONE took over as the Clinic’s office manager. In that role, SANSONE helped to control access to ADELGLASS and the lucrative prescriptions he wrote for medically unnecessary oxycodone. With particularly vulnerable patients, ADELGLASS and SANSONE solicited and, in some instances, received sex acts in exchange for illegal oxycodone prescriptions.
Between in or about November 2017 and in or about September 2020, ADELGLASS prescribed more than 1.3 million oxycodone pills.
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In addition to their prison terms, ADELGLASS, 67, of New York, New York, and SANSONE, 37, of Old Bridge, New Jersey, were each sentenced to three years of supervised release.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation, New York City Police Department, and the U.S. Department of Health and Human Services, Office of Inspector General.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Nicholas W. Chiuchiolo, Marguerite B. Colson, and Daniel G. Nessim are in charge of the prosecution.
Defendant Sentenced to 17 Years for Murder-For-Hire Scheme and Related Shooting in PoughkeepsieRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William V. Grady, the Dutchess County District Attorney, announced that JUSTTIN KENYOTTA HAYWOOD was sentenced to 17 years in prison for his participation in a murder-for-hire scheme and related shooting in Poughkeepsie in 2020 in which HAYWOOD, having been offered $5,000 to kill another individual, wrongly identified, pursued, and shot at a 17-year-old boy who had been playing basketball in a park with two friends in Poughkeepsie. HAYWOOD previously pled guilty to murder for hire and being a felon in possession of a firearm and ammunition before United States District Judge Nelson S. Román, who imposed the sentence.
U.S. Attorney Damian Williams said: “Justtin Haywood’s sentence shows that senseless acts of violence will be met with severe consequences. Haywood agreed to murder another individual and then shot at an innocent 17-year-old boy, who had been playing basketball with friends in a park. For this crime, Haywood will spend 17 years in federal prison.”
FBI Assistant Director Michael J. Driscoll said: “As this sentence demonstrates, there is no place in our community for anyone willing to commit murder. Criminal behavior like Haywood's is a dangerous bane to society and often results in innocent people being placed in harm's way. The FBI's Hudson Valley Safe Streets Task Force and our partners in law enforcement work tirelessly to make those who have complete disregard for humanity face the consequences of their actions.”
Dutchess County Chief Assistant District Attorney Matthew Weishaupt said: “We commend the joint effort by all the agencies involved in bringing Mr. Haywood to justice for this horrific shooting and targeting of an innocent young man. Let the message be clear: we will use all available resources to bring violent criminals to justice and ensure the safety of our community. We have an outstanding working relationship with our federal partners and will continue to work together to combat this senseless violence.”
According to the Complaint and the Information filed against the defendant, other documents filed in federal court, and statements made in public court proceedings:
In late December 2019 and early January 2020, Haywood traveled from Colorado to North Carolina and then ultimately up to Poughkeepsie, New York, and met with a co-conspirator (“CC-1”) who offered him $5,000 to kill another male individual. Haywood agreed to do so, and on January 15, 2020, wrongly believing to have found his intended target, approached three teenagers playing basketball in King Street Park in Poughkeepsie and attempted to shoot one of them, a 17-year-old boy, ultimately chasing them in his car as they fled on foot and firing multiple shots from inside of his car. Fortunately, no one was hit.
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In addition to his prison sentence, HAYWOOD, 40, of Aurora, Colorado, was sentenced to three years of supervised release.
Mr. Williams praised the outstanding work of the FBI, the Town of Poughkeepsie Police Department, the City of Poughkeepsie Police Department, and the Dutchess County District Attorney’s Office.
The FBI’s Hudson Valley Safe Streets Task Force, the Town of Poughkeepsie Police Department, the City of Poughkeepsie Police Department, and the Dutchess County District Attorney’s Office conducted a joint investigation of the 2020 shooting and murder-for-hire scheme.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Kevin Sullivan is in charge of the prosecution.