Southern District of New York
Press releases recorded for this federal judicial district.
Owner of Consumer Products Testing Company Sentenced to 60 Months in Prison for Fraud Scheme Involving Fabricated Test ResultsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Catherine Hermsen, Assistant Commissioner, United States Food and Drug Administration Office of Criminal Investigations (“FDA-OIC”), Michael J. Driscoll, Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and Thomas Walsh, Rockland County District Attorney, announced that GABRIEL LETIZIA, Jr., was sentenced in White Plains federal court to 60 months in prison for defrauding customers of his consumer products testing company and causing misbranded drugs to be introduced into interstate commerce. United States District Judge Kenneth M. Karas imposed today’s sentence. LETIZIA previously pled guilty before United States Magistrate Judge Paul E. Davison.
U.S. Attorney Damian Williams said: “For three decades, Gabriel Letizia defrauded AMA’s customers and jeopardized the safety of millions of consumers, all in the name of greed. Thanks to our partners at FDA-OIC, the FBI, and the Rockland County District Attorney’s Office, he has now been sentenced to prison.”
According to the allegations in the Indictment, the Superseding Information to which LETIZIA pled guilty, court filings, and statements made in court:
LETIZIA was the owner and executive director of AMA Laboratories, Inc. (“AMA”), a consumer product testing company in Rockland County, New York. LETIZIA began operating AMA in the early 1980s, and became its sole owner in approximately 2003.
AMA purported to test the safety and efficacy of cosmetics, sunscreens, and other products on specified numbers of volunteer panelists for consumer products companies. Clients of AMA used the test results to support their claims that their products were safe, effective, hypoallergenic, or provided a certain Sun Protection Factor (“SPF”), including after exposure to water. AMA clients that manufactured sunscreens used the test results to comply with FDA regulations requiring sunscreen manufacturers to have their products tested and to maintain the test results for possible review by the FDA.
From 1987 through April 2017, LETIZIA and AMA personnel operating at his direction defrauded AMA’s customers of more than $46 million by testing products on materially lower numbers of panelists than the numbers specified and paid for by AMA’s customers. According to AMA employees, the majority of AMA’s tests contained fraudulent results, for two reasons. First, at LETIZIA’s instruction, AMA personnel rarely tested products on the number of panelists requested by AMA’s clients. Instead, AMA tested products on a far lower number of panelists, typically 20 or less, rather than the 50 for which the clients had paid. AMA’s fees for tests were based, in part, on the number of panelists that were to participate in the study. At LETIZIA’s direction, AMA sent its clients fraudulent test results in which AMA personnel included fictitious data for “phantom” panelists who had not actually participated in the tests.
Second, at LETIZIA’s direction, AMA personnel routinely falsified test results relating to its clients’ products, which included suppressing adverse reactions and deviating from testing protocols. From 2012 through April 2017, AMA received $46.2 million in revenue from the fraudulent reports.
* * *
In addition to his prison term, LETIZIA, 72, of New City, New York, was sentenced to three years of supervised release, restitution in the amount of $1,440,238, and forfeiture in the amount of $46,200,000.
Mr. Williams praised the outstanding investigative work of the U.S. Food and Drug Administration, Office of Criminal Investigations, the Federal Bureau of Investigation, and the Rockland County District Attorney’s Office.
The case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey C. Coffman, James McMahon, and Olga I. Zverovich are in charge of the prosecution.
Three Portfolio Managers and Allianz Global Investors U.S. Charged in Connection with Multibillion-Dollar Fraud SchemeRead the Press Release
Allianz Global Investors U.S. LLC Also Charged with Securities Fraud, Agrees to Plead Guilty
An indictment was unsealed today in the Southern District of New York charging Gregoire Tournant, the Chief Investment Officer and co-lead Portfolio Manager for a series of private investment funds managed by Allianz Global Investors U.S. LLC (AGI), with securities fraud, investment adviser fraud and obstruction of justice offenses in connection with a scheme to defraud investors. Those funds ultimately collapsed, leading to billions of dollars of investor losses. Tournant surrendered to Postal Inspectors in Denver, Colorado, this morning and is expected to be presented later today. The case has been assigned to U.S District Court Judge Laura Taylor Swain.
Also unsealed today are the guilty pleas of Trevor Taylor and Stephen Bond-Nelson in connection with their respective roles in the scheme. Taylor pleaded guilty pursuant to an information before U.S. District Judge Denise Cote on March 8. Bond-Nelson pled guilty pursuant to an information before U.S. District Judge Paul A. Engelmayer on March 3. Both are cooperating with the government.
“I previously warned that the Department of Justice would crack down on corporate crime, without regard to size, salary or other privilege,” said Deputy Attorney General Lisa O. Monaco. “For the second time in under a month, the Department has brought charges in connection with a sophisticated Wall Street scheme that cost victims billions of dollars. Other corporations should take note that the results here are driven in part by the fact that this company failed to self-report their crimes. The Department stands ready to keep bringing these kinds of charges to assure the public that no one is above the law.”
U.S. Attorney Damian Williams for the Southern District of New York and Inspector-in-Charge Daniel B. Brubaker of the New York Office of the U.S. Postal Inspection Service also announced today a plea agreement (the agreement) pursuant to which AGI will plead guilty to securities fraud in connection with this fraudulent scheme, and pay more than $3 billion in restitution to the victims of this fraud, pay a criminal fine of approximately $2.3 billion, and forfeit approximately $463 million to the government. The case has been assigned to U.S. District Judge Colleen McMahon. A conference has been scheduled for today at 3:00 p.m. before U.S. District Court Judge Loretta A. Preska, at which time AGI is expected to plead guilty to an information pursuant to the agreement.
“As alleged, Gregoire Tournant and his co-conspirators lied to investors and secretly exposed them to substantial risk in order to line their own pockets and those of their employer, AGI,” said U.S. Attorney Williams. “Pensions funds for so many retirees, religious organizations and essential workers – from laborers in Alaska, to teachers in Arkansas, to bus drivers and subway conductors here in New York City – invested with AGI because they were promised a relatively safe investment with strict risk controls. But AGI, the ‘master cop’ that Tournant claimed was watching over his shoulder, making sure that he adhered to his promises, was asleep on the beat. And when the storm came in March 2020, when the COVID-19 crash hit, these investors got soaked and lost billions. Today’s actions are further evidence that this office is not asleep on the beat and that with our law enforcement partners we will act swiftly to protect investors and bring white collar criminals to justice.”
“These individuals working under the name of Allianz Global Investors, an international management firm, allegedly took advantage of its global recognition when they devised a scheme to mislead investors leading to the loss of billions of dollars,” said Inspector-in-Charge Daniel B. Brubaker of the New York Office of the U.S. Postal Inspection Service. “Postal Inspectors will never let these schemes go unchecked and will vigorously investigate and pursue those who choose criminal behavior over honest business practices.”
According to the allegations in the indictment and the agreement unsealed today in Manhattan federal court:
Between 2014 and 2020, Gregoire Tournant, the defendant, was the Chief Investment Officer of a set of private funds at AGI known as the Structured Alpha Funds. These funds were marketed largely to institutional investors, including pension funds for workers all across America. As alleged, Tournant and his co-conspirators misled these investors into believing that the funds were protected from a sudden stock market crash with particular hedges. But in late 2015, as the cost of those promised hedges increased, Tournant decided to lie and secretly buy cheaper hedges that provided much less protection to investors. As alleged, Tournant and his co-conspirators also provided investors with altered documents that were sent to investors to hide the true riskiness of the funds’ investments, including that they were buying cheaper hedges.
In March 2020, following the onset of market dislocations brought on by the COVID-19 pandemic, the funds lost in excess of $7 billion in market value, including over $3.2 billion in principal, faced margin calls and redemption requests, and ultimately were shut down. More than 100 institutional investors, representing more than 100,000 individuals, were victims of this scheme. These institutional investors included, among others, pension funds for teachers in Arkansas, laborers in Alaska, bus drivers and subway conductors in New York City, as well as religious organizations, engineers, and other individuals, universities and charitable organizations across the United States.
The scheme alleged was an egregious, long-running and extensive fraud that went undetected for years. It occurred at a very profitable component of AGI – one that accounted for 25% of AGI’s revenue in recent years, which amounted to hundreds of millions of dollars. As alleged, one of the ways Tournant carried out the fraud was by marketing the fact that he worked for a well-respected financial institution, AGI, which is a part of the Allianz SE (Allianz) family. Allianz is one of the world’s largest financial services companies and one of the world’s largest insurance companies. Tournant touted the protections provided by the funds’ position within the global Allianz corporate structure, calling Allianz a “master cop” that would ensure that Tournant followed the risk guidelines promised to investors.
Despite Tournant’s claim that Allianz acted as a “master cop” looking over his shoulder, no one at AGI or Allianz was verifying that Tournant and his colleagues were actually adhering to the investment strategies promised to investors. No risk or compliance personnel at AGI verified, attempted to verify or were responsible for verifying that Tournant and his colleagues were purchasing hedging positions within the range that was represented to investors. Much of this historic fraud was made possible because AGI’s control environment was not designed to verify that Tournant and his co-conspirators were telling investors the truth. Because AGI, a registered investment adviser, failed to provide meaningful oversight, Tournant and his co-conspirators were able to deceive investors about the risks they were taking with their money.
In addition, as alleged, in the summer of 2020, after the onset of the pandemic and in order to cover up the fraudulent scheme, Tournant attempted to obstruct an investigation by the U.S. Securities and Exchange Commission (SEC) into the circumstances that led to the losses in March 2020.
As the introductory phrase signifies, the entirety of the text of the indictment and the description of the indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
A chart containing the names, ages, residences, charges and maximum penalties for the defendants is attached.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
The U.S. Postal Inspection Service and the Special Agents of the U.S. Attorney’s Office for the Southern District of New York investigated this case. The U.S. Securities and Exchange Commission filed a parallel civil action today.
This case is being handled by SDNY’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Margaret Graham, Gina Castellano, Nicholas Folly and Richard Cooper 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.
Defendant
Age
Residence
Charges
Maximum Potential Sentence(s)
United States v. Gregoire Tournant, 22 Cr. 276 (LTS)
TOURNANT
55
Basalt, Colorado
Conspiracy to commit securities fraud, investment adviser fraud, and wire, 18 U.S.C. § 371 (Count One)
Securities fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
Investment adviser fraud, 15 U.S.C. §§ 80b-6 & 80b-17 (Count Three)
Investment adviser fraud, 15 U.S.C. §§ 80b-6(4) & 80b-17, 17 C.F.R. § 275.206(4)-8 (Count Four)
Conspiracy to obstruct justice, 18 U.S.C. § 371 (Count Five)
5 years
20 years
5 years (on each count)
5 years
5 years
United States v. Trevor Taylor, 22 Cr. 149 (DLC)
TAYLOR
49
Miami, Florida
Conspiracy to commit securities fraud, investment adviser fraud, and wire fraud, 18 U.S.C. § 371 (Count One)
Securities fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
Investment adviser fraud, 15 U.S.C. §§ 80b-6 & 80b-17 (Count Three)
5 years
20 years
5 years
United States v. Stephen Bond-Nelson, 22 Cr. 137 (PAE)
BOND-NELSON
51
Berkeley Heights, New Jersey
Conspiracy to commit securities fraud, investment adviser fraud, and wire fraud, 18 U.S.C. § 371 (Count One)
Securities fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
Investment adviser fraud, 15 U.S.C. §§ 80b-6 & 80b-17 (Count Three)
Conspiracy to obstruct justice, 18 U.S.C. § 371 (Count Four)
5 years
20 years
5 years
5 years
United States v. Allianz Global Investors U.S. LLC
AGI US
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
5 years’ probation
Three Portfolio Managers and Allianz Global Investors U.S. Charged in Connection with Multi-Billion Dollar Fraud SchemeRead the Press Release
Allianz Global Investors U.S. LLC Also Charged With Securities Fraud, Agrees to Plead Guilty
Damian Williams, the United States Attorney for the Southern District of New York, Lisa O. Monaco, the Deputy Attorney General of the United States, and Daniel B. Brubaker, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an indictment charging GREGOIRE TOURNANT, the Chief Investment Officer and co-lead Portfolio Manager for a series of private investment funds managed by Allianz Global Investors U.S. LLC (“AGI”), with conspiracy, securities fraud, investment adviser fraud, and obstruction of justice offenses in connection with a scheme to defraud investors. Those funds ultimately collapsed, leading to billions of dollars of investor losses. TOURNANT surrendered to Postal Inspectors in Denver, Colorado this morning and is expected to be presented later today. The case has been assigned to U.S District Judge Laura Taylor Swain.
Also unsealed today are the guilty pleas of TREVOR TAYLOR and STEPHEN BOND-NELSON in connection with their respective roles in the scheme. TAYLOR pled guilty pursuant to an Information before U.S. District Judge Denise Cote on March 8, 2022. BOND-NELSON pled guilty pursuant to an Information before U.S. District Judge Paul A. Engelmayer on March 3, 2022. Both are cooperating with the Government.
U.S. Attorney Williams, Deputy Attorney General Monaco, and Inspector-in-Charge Brubaker also announced today a plea agreement (the “Agreement”) pursuant to which AGI will plead guilty to securities fraud in connection with this fraudulent scheme, and pay more than $3 billion in restitution to the innocent victims of this fraud, pay a criminal fine of approximately $2.3 billion, and forfeit approximately $463 million to the Government. The case has been assigned to U.S. District Judge Colleen McMahon. A conference has been scheduled for today at 3:00 p.m. before U.S. District Judge Loretta A. Preska, Part I, at which time AGI is expected to plead guilty to an Information pursuant to the Agreement.
U.S. Attorney Damian Williams said: “As alleged, Gregoire Tournant and his co-conspirators lied to investors and secretly exposed them to substantial risk in order to line their own pockets and those of their employer, AGI. Pension funds for so many retirees, religious organizations, and essential workers – from laborers in Alaska, to teachers in Arkansas, to bus drivers and subway conductors here in New York City – invested with AGI because they were promised a relatively safe investment with strict risk controls. But AGI, the “master cop” that Tournant claimed was watching over his shoulder, making sure that he adhered to his promises, was asleep on the beat. And when the storm came in March 2020, when the COVID crash hit, these investors got soaked and lost billions. Today’s actions are further evidence that this office is not asleep on the beat and that with our law enforcement partners we will act swiftly to protect investors and bring white collar criminals to justice.”
Deputy Attorney General Lisa O. Monaco said: “I previously warned that the Department of Justice would crack down on corporate crime, without regard to size, salary, or other privilege. For the second time in under a month, the Department has brought charges in connection with a sophisticated Wall Street scheme that cost victims billions of dollars. Other corporations should take note that the results here are driven in part by the fact that this company failed to self-report their crimes. The Department stands ready to keep bringing these kinds of charges to assure the public that no one is above the law.”
USPIS Inspector-in-Charge Daniel B. Brubaker said: “These individuals working under the name of Allianz Global Investors, an international management firm, allegedly took advantage of its global recognition when they devised a scheme to mislead investors leading to the loss of billions of dollars. Postal Inspectors will never let these schemes go unchecked and will vigorously investigate and pursue those who choose criminal behavior over honest business practices.”
According to the allegations in the Indictment and the Agreement unsealed today in Manhattan federal court:[1]
Between 2014 and 2020, GREGOIRE TOURNANT, the defendant, was the Chief Investment Officer of a set of private funds at AGI known as the Structured Alpha Funds. These funds were marketed largely to institutional investors, including pension funds for workers all across America. As alleged, TOURNANT and his co-conspirators misled these investors into believing that the funds were protected from a sudden stock market crash with particular hedges. But in late 2015, as the cost of those promised hedges increased, TOURNANT decided to lie and secretly buy cheaper hedges that provided much less protection to investors. As alleged, TOURNANT and his co-conspirators also provided investors with altered documents that were sent to investors to hide the true riskiness of the funds’ investments, including that they were buying cheaper hedges.
In March 2020, following the onset of market dislocations brought on by the COVID-19 pandemic, the funds lost in excess of $7 billion in market value, including over $3.2 billion in principal, faced margin calls and redemption requests, and ultimately were shut down. More than 100 institutional investors, representing more than one hundred thousand individuals, were victims of this scheme. These institutional investors included, among others, pension funds for teachers in Arkansas, laborers in Alaska, bus drivers and subway conductors in New York City, as well as religious organizations, engineers, and other individuals, universities, and charitable organizations across the United States.
The scheme alleged was an egregious, long-running, and extensive fraud that went undetected for years. It occurred at a very profitable component of AGI – one that accounted for 25% of AGI’s revenue in recent years, which amounted to hundreds of millions of dollars. As alleged, one of the ways TOURNANT carried out the fraud was by marketing the fact that he worked for a well-respected financial institution, AGI, which is a part of the Allianz SE (“Allianz”) family. Allianz is one of the world’s largest financial services companies and one of the world’s largest insurance companies. TOURNANT touted the protections provided by the funds’ position within the global Allianz corporate structure, calling Allianz a “master cop” that would ensure that TOURNANT followed the risk guidelines promised to investors.
Despite TOURNANT’s claim that Allianz acted as a “master cop” looking over his shoulder, no one at AGI or Allianz was verifying that TOURNANT and his colleagues were actually adhering to the investment strategies promised to investors. No risk or compliance personnel at AGI verified, attempted to verify, or were responsible for verifying that TOURNANT and his colleagues were purchasing hedging positions within the range that was represented to investors. Much of this historic fraud was made possible because AGI’s control environment was not designed to verify that TOURNANT and his co-conspirators were telling investors the truth. Because AGI, a registered investment adviser, failed to provide meaningful oversight, TOURNANT and his co-conspirators were able to deceive investors about the risks they were taking with their money.
In addition, as alleged, in the summer of 2020, after the onset of the pandemic and in order to cover up the fraudulent scheme, TOURNANT attempted to obstruct an investigation by the U.S. Securities and Exchange Commission (the “SEC”) into the circumstances that led to the losses in March 2020.
* * *
A chart containing the names, ages, residences, charges, and maximum penalties for the defendants is attached.
The maximum potential sentences in this case 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 USPIS and Special Agents of the United States Attorney’s Office. Mr. Williams further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Margaret Graham, Gina Castellano, Nicholas Folly, and Richard Cooper 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.
Defendant
Age
Residence
Charges
Maximum Potential Sentence(s)
United States v. Gregoire Tournant, 22 Cr. 276 (LTS)
TOURNANT
55
Basalt, Colorado
Conspiracy to commit securities fraud, investment adviser fraud, and wire, 18 U.S.C. § 371
(Count One)
Securities fraud, 15 U.S.C. §§ 78j(b) & 78ff
(Count Two)
Investment adviser fraud, 15 U.S.C. §§ 80b-6 & 80b-17 (Count Three)
Investment adviser fraud, 15 U.S.C. §§ 80b-6(4) & 80b-17, 17 C.F.R. § 275.206(4)-8 (Count Four)
Conspiracy to obstruct justice, 18 U.S.C. § 371 (Count Five)
5 years
20 years
5 years (on each count)
5 years
5 years
United States v. Trevor Taylor, 22 Cr. 149 (DLC)
TAYLOR
49
Miami, Florida
Conspiracy to commit securities fraud, investment adviser fraud, and wire fraud, 18 U.S.C. § 371 (Count One)
Securities fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
Investment adviser fraud, 15 U.S.C. §§ 80b-6 & 80b-17 (Count Three)
5 years
20 years
5 years
United States v. Stephen Bond-Nelson, 22 Cr. 137 (PAE)
BOND-NELSON
51
Berkeley Heights, New Jersey
Conspiracy to commit securities fraud, investment adviser fraud, and wire fraud, 18 U.S.C. § 371 (Count One)
Securities fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
Investment adviser fraud, 15 U.S.C. §§ 80b-6 & 80b-17 (Count Three)
Conspiracy to obstruct justice, 18 U.S.C. § 371
(Count Four)
5 years
20 years
5 years
5 years
United States v. Allianz Global Investors U.S. LLC, 22 Cr. 279 (CM)
AGI US
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
5 years’ probation
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
Man Charged with December 2021 Broad Daylight Murder in Bronx ParkRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Keechant L. Sewell, Police Commissioner for the City of New York (“NYPD”), announced today that RICARDO FERGUSON, a/k/a “Mayback,” was charged with the December 5, 2021 murder of Robert Brown, Sr., in the Aqueduct Walk park in the University Heights neighborhood of the Bronx. FERGUSON was arrested today and will be presented this afternoon in Manhattan federal court. The case has been assigned to United States District Judge Richard M. Berman.
U.S. Attorney Damian Williams said: “Ferguson allegedly murdered Robert Brown, Sr., in broad daylight in a Bronx park. We hope that today’s charges bring some measure of comfort to the family of Robert Brown, Sr. and make clear that this Office and our law enforcement partners will continue to be relentless in our pursuit of anyone who takes another person’s life.”
NYPD Commissioner Keechant L. Sewell said: “Aqueduct Walk is a tree lined stretch lined with park benches where New Yorkers can take a walk or find a moment’s peace from the bustle of Fordham Road. When gunfire broke that peace on December 5th and a man was shot dead on that tree lined stretch, NYPD detectives went to work to gather evidence and bring justice. I want to thank US Attorney Damian Williams and the Criminal Investigators of the US Attorney’s Office for the Southern District of New York for their efforts that resulted in this federal indictment. These federal charges should remind those willing to carry guns or commit murder associated with drug-trafficking: You may face many years or even life in prison.”
According to the allegations in the Indictment unsealed today in Manhattan federal court[1]:
On or about December 5, 2021, in the Aqueduct Walk park, near Aqueduct Avenue and West Fordham Road in the Bronx, FERGUSON shot and killed Robert Brown, Sr. while FERGUSON and another attempted to rob Brown.
* * *
FERGUSON, 36, of the Bronx, New York, is charged with one count of conspiracy to distribute crack cocaine, which carries a maximum sentence of twenty years in prison; one count of attempted Hobbs Act robbery, which caries a maximum sentence of twenty years in prison; one count of using violence in furtherance of a plan to commit Hobbs Act robbery, which carries a maximum sentence of twenty years in prison; and using a firearm to commit murder during a drug-trafficking crime and crime of violence, which carries a maximum sentence of death or life in prison, and a mandatory minimum term of five 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 NYPD and the Special Agents of the United States Attorney’s Office.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Mathew Andrews and Peter Davis 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 herein, constitute only allegations, and every fact described should be treated as an allegation.
CEO of Private Equity Fund Sentenced to 97 Months for $133 Million Bank and Securities Fraud SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that defendant ELLIOT SMERLING was sentenced to 97 months in prison for a multi-year bank and securities fraud scheme that caused the issuance of approximately $133 million in collateralized loans on the basis of forged documents, including subscription agreements from purported limited partners, audit letters attesting to his private equity firm’s finances, and falsified bank account statements. SMERLING previously pled guilty before U.S. District Judge Denise L. Cote, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “Elliot Smerling previously admitted to securing funding for his private equity fund by submitting a constellation of fraudulent documents and assurances to lenders. Smerling’s misrepresentations ultimately resulted in massive losses to banks, as he received over $133 million in ill-gotten loans. Smerling has now fittingly been sentenced to more than eight years in federal prison for his bank and securities fraud scheme.”
According to the allegations contained in public court filings and statements made in court:
From at least in or about January 2019 through at least in or about March 2021, ELLIOT SMERLING was the mastermind of a scheme to secure financing for a series of private equity funds (the “Funds”) through fraud and deceit. SMERLING solicited and obtained loans totaling approximately $133 million on behalf of the Funds, which were secured by purported capital commitments made by limited partners in the Funds. SMERLING obtained the loans on the basis of falsified documents and material misrepresentations, including: (1) a forged audit letter, purportedly prepared by an international network of accounting, audit, tax, and professional services firms, attesting to audited financial statements; (2) forged subscription agreements that falsely represented, among other things, that the investment fund of a private university based in New York, New York had committed $45 million to the Funds, and that the investment management division of a banking and financial services firm headquartered in New York, New York had committed $40 million to the Funds; and (3) falsified bank records showing wire transfers from purported limited partners to the Funds.
In connection with his bank fraud scheme, from at least in or about January 2013 through at least in or about March 2021, SMERLING also solicited investments in his Funds through materially false and misleading statements concerning the Funds’ audited financial statements, limited partners, capital commitments, and holdings.
* * *
In addition to his prison term, SMERLING, 52, of Lake Worth, Florida, was sentenced to three years of supervised released. The Court deferred its decision on the amount of restitution.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation.
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.
Man Charged with April 2018 Mount Vernon MurderRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, John B. DeVito, Special Agent-in-Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives, New York Field Division (ATF), Frank A. Tarentino, Special Agent-in-Charge of the Drug Enforcement Administration, New York Division (DEA), and Glenn Scott, Commissioner of the Mount Vernon Police Department, announced the unsealing of a federal Indictment charging JAMES BAZEMORE, a/k/a “TJ,” with the broad daylight murder of Tasheen Williams on April 30, 2018 in Mount Vernon, New York. The Indictment also charges JARED MUJAAHID, a/k/a “Jay,” with aiding and abetting assault with a deadly weapon by providing BAZEMORE with the gun BAZMORE used to commit the murder. The Indictment also charges BAZEMORE and MUJAAHID with racketeering conspiracy. BAZEMORE is detained pending trial on other federal charges brought by this Office and MUJAAHID is serving a sentence from a prior federal conviction in this District. The defendants will be brought to the federal courthouse in White Plains, New York to be presented before a United States Magistrate Judge.
U.S. Attorney Damian Williams said: “In April 2018, Tasheen Williams was shot dead in broad daylight just as a local school was letting out, the victim of senseless gang-related violence. As alleged in the Indictment, James Bazemore is responsible for that murder, and Jared Mujaahid gave him the murder weapon. Thanks to the work of our remarkable law enforcement partners, Bazemore and Mujaahid now stand charged in federal court for this terrible crime.”
ATF Special Agent-in-Charge John B. DeVito said: “ATF’s top priority is investigating and apprehending those who commit firearms violence and those who provide firearms for use in violent crimes. This indictment demonstrates the commitment of ATF and our great partners at DEA and the Mount Vernon Police Department to relentlessly pursue justice for victims of violent gun crime and hold those responsible accountable no matter how long it takes.”
DEA Special Agent-in-Charge Frank A. Tarentino said: “This cold-blooded murder is another example of drug-related violence plaguing our cities. DEA’s priority is making our communities safer through investigations and arresting members of criminal organizations responsible for drug-related overdoses, drug trafficking, and violent crime. I thank the ATF and US Attorney's Office Southern District of New York for their partnership and diligent work on this investigation.”
MVPD Commissioner Glenn Scott said: “This arrest again shows that Mount Vernon continues to benefit from the partnership the MVPD has formed with its Federal Law Enforcement partners. The Bureau of Alcohol, Tobacco, Firearms, and Explosives, NY Field Office has shown how dedicated they are to assisting the MVPD with closing violent crime investigations. Mount Vernon Police has had Detectives assigned as Task Force Officers with the ATF for several years and this is just one of the many violent crimes that has been solved as a result of the hard work of the Detectives and the Special Agents from ATF. In cases of this magnitude the MVPD always strives to bring justice to the families effected by violence and we will utilize any and all resources and partnerships that we can do achieve that goal.”
According to the allegations in the Indictment[1]:
BAZEMORE and MUJAAHID were members or associates of a racketeering enterprise known as Big Paper. In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of Big Paper committed, conspired, attempted, and threatened to commit acts of violence against rivals, including murder and assault; conspired to distribute and possess with intent to distribute narcotics; and obtained, possessed and used firearms, including by brandishing and discharging them.
On or about April 30, 2018, BAZEMORE acquired a gun from MUJAAHID, and then BAZEMORE stalked and shot Tasheen Williams dead in Mount Vernon, New York.
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BAZEMORE is charged with one count of racketeering conspiracy, which carries a statutory maximum sentence of life in prison, one count of murder in aid of racketeering, which carries a statutory maximum sentence of life in prison, and a mandatory minimum sentence of life in prison; and one count of murder through use of a firearm, which carries a statutory maximum sentence of life in prison, and a mandatory minimum sentence of five years in prison.
MUJAAHID is charged with one count of racketeering conspiracy, which carries a statutory maximum sentence of twenty years in prison, one count of aiding and abetting assault with a deadly weapon in aid of racketeering, which carries a statutory maximum sentence of twenty years in prison; and one count of aiding and abetting the discharge of a firearm in furtherance of a crime of violence, which carries a statutory maximum sentence of life in prison and a mandatory minimum sentence of ten years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Mr. Williams praised the outstanding work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives and the Drug Enforcement Administration, and thanked the Westchester County District Attorney’s Office and the Mount Vernon Police Department for their assistance with the investigation.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Christopher Brumwell and Benjamin A. Gianforti are in charge of the prosecution.
[1] As the introductory phase 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 should be treated as an allegation.
High-Ranking Member of MS-13 Sentenced to 13 Years in PrisonRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that AMILCAR ROMERO, a/k/a “Soldado,” a high-ranking member of Mara Salvatrucha, or MS-13, was sentenced by U.S. District Judge Vernon S. Broderick to 13 years in prison. ROMERO previously pled guilty to conspiracy to distribute and possess with intent to distribute methamphetamine. Judge Broderick ordered ROMERO’s sentence in this case to run consecutively to a prior sentence for attempted murder imposed in California state court in 1997 and another prior sentence for conspiring to participate in the affairs of a racketeering enterprise, namely MS-13, imposed in the District of New Jersey in 2016.
U.S. Attorney Damian Williams said: “Amilcar Romero, a senior leader of the L.A. Program of MS-13, helped plan a cross-border methamphetamine distribution network. He did this by communicating with other members of the gang through a contraband cellphone in state prison while serving a lengthy sentence for a violent crime. With our law enforcement partners, we will continue to hold accountable those like Romero who threaten the safety and well-being of our communities, even if they do so from prison.”
According to the Indictment, other filings in this case, and statements during court proceedings:
ROMERO is a member of MS-13, a transnational racketeering enterprise which operates throughout North and Central America, including in El Salvador, Mexico, New York, California, Texas, Virginia, Tennessee, and North Carolina. To enrich the enterprise, protect and expand its criminal operations, enforce discipline among its members, and retaliate against members of rival gangs, members and associates of MS-13 committed, conspired, attempted, and threatened to commit acts of violence; distributed and possessed with intent to distribute narcotics, including methamphetamine; and obtained, possessed, and used firearms.
MS-13 is organized into chapters called “cliques.” Groups of cliques, in turn, are aligned as “programs.” Each program is governed by a group of senior gang leaders known as the “table.”
ROMERO is a high-ranking member of the table of the “L.A. Program” of MS-13. In 2019, ROMERO participated in the transnational and nationwide affairs of MS-13 through a contraband prison cellphone while he was incarcerated in Calipatria State Prison in California, including by communicating with and relaying orders to other members of MS-13 throughout the United States and in El Salvador.
In the summer and fall of 2019, ROMERO helped plan, with other high-ranking members of MS-13, for the establishment of a methamphetamine distribution network that started in Mexico and operated throughout the United States, including North Carolina, New York, Virginia, and Tennessee.
In addition, in September 2019, ROMERO and other senior members of MS-13 conspired to extort another gang member, who was told that he either had to repay money or be “green lit” (i.e., killed) for introducing a “bad connection” who supplied poor quality narcotics to the gang.
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In addition to the prison term, Judge Broderick sentenced ROMERO, 52, to three years of supervised release.
Mr. Williams praised the investigative work of Homeland Security Investigations and the New York City Police Department.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation. OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF..
This case is being handled by the Office’s Violent & Organized Crime Unit. Assistant United States Attorneys Michael D. Longyear, Justin V. Rodriguez, and Jacob Warren are in charge of the prosecution.
CEO of Cryptocurrency and Forex Trading Platform Charged with Fraudulent Scheme Involving over $59 MillionRead 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, announced today the unsealing of a Complaint in Manhattan federal court charging EDDY ALEXANDRE, the leader of a purported cryptocurrency and forex trading platform called EminiFX, with commodities fraud and wire fraud offenses. As alleged, ALEXANDRE solicited more than $59 million in investments from hundreds of individual investors after making false representations in connection with the EminiFX trading platform. ALEXANDRE was arrested this morning and will be presented later today before Magistrate Judge Katharine H. Parker in the U.S. District Court for the Southern District of New York.
U.S. Attorney Damian Williams said: “Eddy Alexandre allegedly induced his clients to invest over $59 million with promises of huge passive income returns via his own proprietary trading platform called EminiFx. In reality, no such technology existed, as Alexandre is alleged to have invested very little of their money – most of which he lost – and transferred most of it to his own personal accounts to pay for luxury items for himself. As in any of the financial markets, the foreign exchanges offer high return potential, but investors should beware of the downside risks of false claims and get rich quick schemes that oftentimes are too good to be true.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “As alleged, Mr. Alexandre solicited millions of dollars from unwitting investors to whom he ‘guaranteed’ weekly returns of 5% through his trading platform using a new technology he refused to disclose. As with many greedy actors who have preceded him, he then used significant portions of the investor funds he solicited to buy expensive luxuries for himself. Today's action again demonstrates the FBI's commitment to pursuing fraudsters like Mr. Alexandre and guaranteeing they face the consequences of their actions in the federal criminal justice system.”
As alleged in the Complaint unsealed today in Manhattan federal court[1]:
From in or about September 2021, up to and including in or about May 2022, ALEXANDRE, operated EminiFX, Inc. (“EminiFX”), a purported investment platform that ALEXANDRE founded, and for which he solicited more than $59 million in investments from hundreds of individual investors. ALEXANDRE marketed EminiFX as an investment platform through which investors would earn passive income through automated investments in cryptocurrency and foreign exchange (“FOREX”) trading. ALEXANDRE offered his investors “guaranteed” high investment returns using new technology that he claimed was secret. Specifically, ALEXANDRE falsely represented to investors that they would double their money within five months of investing by earning a 5% weekly return on their investment using a “Robo-Advisor Assisted account” to conduct trading. ALEXANDRE referred to this technology as his “trade secret” and refused to tell investors what the technology was. Each week EminiFX’s website falsely represented to investors that they had earned at least 5% on their investment, which they could withdraw or re-invest.
In truth and in fact, and as ALEXANDRE well knew, EminiFX did not earn 5% weekly returns for its investors. ALEXANDRE did not even invest the vast majority of investor funds entrusted to him, and ALEXANDRE sustained over $6 million in losses on the limited portion of funds that he did invest, which he did not disclose to his investors. Instead of using investors’ funds as he had promised, ALEXANDRE misdirected at least approximately $14,700,000 to his personal bank account and failed to invest the vast majority of the investors’ funds. For example, ALEXANDRE used $155,000 in investor funds to purchase a BMW car for himself and spent an additional $13,000 of investor funds on car payments, including to Mercedes Benz.
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ALEXANDRE, 50, of Valley Stream, New York, is charged with one count of commodities fraud, which carries a maximum sentence of 10 years in prison, and one count of 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 defendant will be determined by a judge.
Mr. Williams praised the investigative work of the Federal Bureau of Investigation and also thanked the Commodity Futures Trading Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Nicholas Folly and Jared Lenow are in charge of the prosecution.
[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.
Recording Artist Gang Leader Pleads Guilty to Racketeering and Narcotics Trafficking ConspiraciesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that recording artist CASWELL SENIOR, a/k/a “Casanova,” pled guilty today to racketeering and narcotics offenses arising out of his leadership role in the Untouchable Gorilla Stone Nation Bloods Gang (“Gorilla Stone”) in Westchester County, New York City, and Florida. As part of the racketeering conspiracy offense, SENIOR admitted to participating in a shooting in Florida on July 5, 2020, a robbery in New York City on August 5, 2018, and conspiring to traffic over 100 kilograms of marijuana. SENIOR pled guilty before U.S. District Judge Philip M. Halpern.
U.S. Attorney Damian Williams said: “Like twelve of his co-defendants, Caswell Senior, an accomplished recording artist and performer, now stands convicted of playing a leadership role in Gorilla Stone, a particularly violent Bloods gang that operates throughout New York and across the country. In addition to his supervisory role, Senior was an active, hands-on participant in the gang’s senseless violence, including a shooting in Miami and contributing to a robbery at a Manhattan diner. Dismantling violent gangs and stopping gun violence continues to be one of my highest priorities. Thanks to the dedication of our partners at the Federal Bureau of Investigation, Senior now awaits sentencing for his dangerous conduct.”
According to the Indictment, public court filings, and statements made in court:
Beginning in at least 2004 and lasting until December 2020, SENIOR participated in and was associated with the Gorilla Stone racketeering conspiracy. Senior admitted that as part of the racketeering activity, on or about July 5, 2020, while at a party in Florida that included gang members, he discharged a firearm at an individual with whom he was having a gambling dispute. A victim suffered serious bodily injury because of the shooting. Thereafter, other party attendees discharged multiple firearms. Additionally, SENIOR stipulated that as part of a separate August 5, 2018 robbery in Manhattan, a victim was restrained and suffered serious bodily injury. In connection with his guilty plea, SENIOR further stipulated that he was an organizer or leader of a criminal activity that involved five or more participants and he agreed to traffic at least 100 kilograms of marijuana.
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SENIOR, 35, of Montville, New Jersey, is scheduled to be sentenced by United States District Judge Philip M. Halpern on December 6, 2022, at 11:00 a.m. SENIOR pled guilty to one count of conspiring to conduct and participate in the conduct of the affairs of a criminal enterprise through a pattern of racketeering activity and one count of conspiring to distribute over 100 kilograms of marijuana. The total maximum term of prison on these two counts is 60 years, with a mandatory minimum term of five years in prison.
The maximum and mandatory minimum 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.
SENIOR is the thirteenth defendant in the Gorilla Stone case to plead guilty. The twelve other defendants who previously pled guilty are: DESHAWN THOMAS, a/k/a “Don,” NAYA AUSTIN, a/k/a “Baby,” BRANDON NIEVES, a/k/a “Untouchable Dot,” DONAVAN GILLARD, a/k/a “Donnie Love,” JARRETT CRISLER, Jr., a/k/a “Jayecee,” DEZON WASHINGTON, a/k/a “Blakk,” STEPHEN HUGH, a/k/a “Chino,” JORDAN INGRAM, a/k/a “Flow,” SHANAY OUTLAW, a/k/a “Easy,” ROBERTA SLIGH, a/k/a “Trouble,” BRINAE THORNTON, a/k/a “Luxury,” and JAMAL TRENT, a/ka/ “Trap Smoke.”
Mr. Williams praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force, which is comprised of special agents and task force officers from the FBI, US Probation, New York State Police, New York State Department of Corrections and Community Supervision, NYPD, Westchester County PD, Westchester County DAs Office, Putnam County Sheriff's Office, Rockland DAs Office and the Yonkers, New Rochelle, Mount Vernon, Greenburgh, White Plains, Peekskill, Ramapo and Clarkstown Police Departments.
This case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Shiva H. Logarajah, David R. Felton, and Courtney L. Heavey are in charge of the prosecution.
New York Racehorse Veterinarian and Standardbred Trainer Plead Guilty in Federal Doping CaseRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that defendants LOUIS GRASSO and RICHARD BANCA pled guilty to their respective roles in the distribution of adulterated and misbranded drugs with the intent to defraud and mislead, in connection with the charges filed in United States v. Grasso et al., 20 Cr. 163 (OKC). Both GRASSO and BANCA pled guilty before U.S. District Judge P. Kevin Castel. GRASSO and BANCA will each be sentenced by Judge Castel on September 6, 2022.
U.S. Attorney Damian Williams said: “Grasso and Banca represent the corruption and greed of those in the racehorse industry looking to win at any cost. In peddling illegal drugs and selling prescriptions to corrupt trainers, Louis Grasso abdicated his responsibilities as a medical professional to ensure the safety and health of the racehorses he “treated.” By injecting horses with unnecessary and, at times, unknown drugs, Grasso risked the lives and welfare of the animals under his care, all in service of helping corrupt racehorse trainers like Banca line their pockets through fraud. These latest convictions demonstrate the commitment of this Office and of our partners at the FBI to hold accountable individuals seeking to profit from animal abuse and deceit.”
According to the allegations contained in the Superseding Indictment, the Superseding Information charging GRASSO and BANCA, prior charging instruments and other filings in this case[1], and statements during court proceedings:
The charges in the GRASSO case arise from an investigation of widespread schemes by racehorse trainers, veterinarians, PED distributors, and others to manufacture, distribute, and receive adulterated and misbranded PEDs and to secretly administer those PEDs to racehorses competing at all levels of professional horseracing. By evading PED prohibitions and deceiving regulators and horse racing officials, participants in these schemes sought to improve race performance and obtain prize money from racetracks throughout the United States, all to the detriment and risk of the health and well-being of the racehorses. GRASSO, a veterinarian, not only accepted payment in exchange for prescriptions for powerful and medically unnecessary performance-enhancing drugs, he also created, distributed, and administered custom-made performance-enhancing drugs that were all misbranded and adulterated substances designed solely to improve racehorse performance. Through this fraudulent scheme, GRASSO helped corrupt trainers collect over $47 million in ill-gotten purse winnings. As a racehorse trainer, BANCA purchased and administered adulterated and misbranded drugs to his racehorses, and as a result of his crimes, his horses earned over $16 million in purse winnings. BANCA stood to profit from the success of racehorses under his control by earning a share of his horses’ winnings, and by improving his horses’ racing records, thereby yielding higher trainer fees and increasing the number of racehorses under his control.
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U.S. Attorney Williams praised the outstanding investigative work of the FBI New York Office’s Eurasian Organized Crime Task Force and its support of the Bureau’s Integrity in Sports and Gaming Initiative. Mr. Williams also thanked the Food and Drug Administration for their assistance.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Sarah Mortazavi and Anden Chow are in charge of the prosecution.
[1] As to Grasso and Banca’s co-defendants, the entirety of the texts of the Indictments and the descriptions of the Indictments set forth herein constitute only allegations and every fact described should be treated as an allegation.
New Jersey Man Convicted of Receiving Military-Type Training from Hizballah, Marriage Fraud, and Making False StatementsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that ALEXEI SAAB, a/k/a “Ali Hassan Saab,” a/k/a “Alex Saab,” a/k/a “Rachid,” was convicted today of receiving military-type training from a designated foreign terrorist organization, Hizballah, marriage fraud conspiracy, and making false statements, following a two-week trial before the Honorable Paul G. Gardephe.
U.S. Attorney Damian Williams said: “A unanimous jury found today that Alexei Saab is guilty of receiving military-type training from Hizballah, a known terrorist organization. The evidence at trial showed that Saab surveilled some of New York’s most iconic and highly trafficked locations, such as the U.N. headquarters, Statue of Liberty, Rockefeller Center, Times Square, the Empire State Building, and local airports, tunnels, and bridges— in order to provide critical intelligence on how they could be most effectively attacked. Saab’s chilling campaign against the American ideals of liberty and freedom has thankfully come to an end.”
According to court documents and evidence at trial:
Hizballah is a Lebanon-based Shia Islamic organization with political, social, and terrorist components. Hizballah was founded in the 1980s with support from Iran after the 1982 Israeli invasion of Lebanon, and its mission includes establishing a fundamentalist Islamic state in Lebanon. Since Hizballah’s formation, the organization has been responsible for numerous terrorist attacks that have killed hundreds, including United States citizens and military personnel. In 1997, the U.S. Department of State designated Hizballah a Foreign Terrorist Organization, pursuant to Section 219 of the Immigration and Nationality Act, and it remains so designated today. In 2001, pursuant to Executive Order 13224, the U.S. Department of Treasury designated Hizballah a Specially Designated Global Terrorist entity. In 2010, State Department officials described Hizballah as the most technically capable terrorist group in the world, and a continued security threat to the United States.
The Islamic Jihad Organization (“IJO”), which is also known as the External Security Organization and “910,” is a component of Hizballah responsible for the planning and coordination of intelligence, counterintelligence, and terrorist activities on behalf of Hizballah outside of Lebanon. In July 2012, an IJO operative detonated explosives on a bus transporting Israeli tourists in the vicinity of an airport in Burgas, Bulgaria, which killed six people and injured 32 others. Law enforcement authorities have disrupted several other IJO attack-planning operations around the world, including the arrest of an IJO operative surveilling Israeli targets in Cyprus in 2012, the seizure of bomb-making precursor chemicals in Thailand in 2012, and a seizure of similar chemicals in May 2015 in connection with the arrest of another IJO operative. In June 2017, two IJO operatives were arrested in the United States and charged with terrorism-related offenses in the Southern District of New York. In May 2019, a jury convicted one of those two IJO operatives on all counts, and in December 2019, he was sentenced principally to a prison term of 40 years.
SAAB joined Hizballah in 1996. SAAB’s first Hizballah operations occurred in Lebanon, where he was tasked with observing and reporting on the movements of Israeli and Southern Lebanese Army soldiers in Yaroun, Lebanon. Among other things, SAAB reported on patrol schedules and formations, procedures at security checkpoints, and the vehicles used by soldiers. SAAB also, alongside his brother, planted an improvised explosive device that detonated and hit Israeli soldiers, seriously injuring at least one.
In approximately 1999, SAAB attended his first Hizballah training. The training was focused on the use of firearms, and SAAB handled and fired an AK-47, an M16 rifle, and a pistol, and threw grenades. In 2000, SAAB transitioned to membership in Hizballah’s unit responsible for external operations, the IJO, and he then received extensive training in IJO tradecraft, weapons, and military tactics, including how to construct and detonate bombs and other explosive devices and how to best use these devices in attacks. Specifically, SAAB received detailed instruction in, among other things, triggering mechanisms, explosive substances, detonators, and the assembly of circuits.
In 2000, SAAB entered the United States. While living in the United States, SAAB remained an IJO operative, continued to receive military training in Lebanon, and conducted numerous operations for the IJO. For example, SAAB surveilled dozens of locations in New York City—including the United Nations headquarters, the Statue of Liberty, Rockefeller Center, Times Square, the Empire State Building, and local airports, tunnels, and bridges—and provided detailed information on these locations, including photographs, to the IJO. In particular, SAAB focused on the structural weaknesses of locations he surveilled in order to determine how a future attack could cause the most destruction. SAAB’s reporting to the IJO included the materials used to construct a particular target, how close in proximity one could get to a target, and site weaknesses or “soft spots” that the IJO could exploit if it attacked a target in the future. SAAB conducted similar intelligence gathering in a variety of large American cities, including Boston and Washington, D.C. SAAB also was tasked by Hizballah with opening a front company that he could use to obtain fertilizer in the United States for use as an explosives precursor.
In addition to his attack-planning activities in the United States, SAAB conducted operations abroad. For example, in or about 2003, SAAB attempted to murder a man he later understood to be a suspected Israeli spy. SAAB pointed a firearm at the individual at close range and pulled the trigger twice, but the firearm did not fire. SAAB also conducted surveillance in Istanbul, Turkey, and elsewhere.
Finally, in or about 2012, SAAB entered into a fraudulent marriage in exchange for $20,000. The purpose of the marriage was for SAAB’s purported wife to apply for her citizenship. SAAB later falsely affirmed, under penalty of perjury, and in connection with his purported wife’s efforts to obtain status in the United States, that the marriage was not for any immigration-related purposes.
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SAAB, 44, of Morristown, New Jersey, was convicted of one count of receiving military-type training from a designated foreign terrorist organization, which carries a potential sentence of 10 years in prison; one count of conspiracy to commit marriage fraud, which carries a maximum sentence of five years in prison; and one count of making false statements, which carries a maximum sentence of five years in prison. SAAB was also acquitted of one count of conspiracy to provide material support to Hizballah, one count of citizenship application fraud, and one count of naturalization fraud.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as the defendant’s sentence will be determined by Judge Gardephe.
Mr. Williams praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the Federal Bureau of Investigation and detectives from the New York City Police Department. Mr. Williams also thanked the Counterterrorism Section of the Department of Justice’s National Security Division.
This prosecution is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorneys Sam Adelsberg, Jessica Fender, and Jason A. Richman are in charge of the prosecution, with assistance from Trial Attorney Alexandra Hughes of the Counterterrorism Section.
Manhattan Gang Member Convicted of 2014 Murder of Orlando RiveraRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today the conviction of CHRISTIAN PABON, a/k/a “Banga,” of racketeering conspiracy and murder in aid of racketeering. A unanimous jury convicted PABON of every count presented to the jury after a one-week trial before U.S. District Judge Sidney H. Stein.
U.S. Attorney Damian Williams said: “For years, Christian Pabon terrorized his northern Manhattan neighborhood as a shooter in a violent street gang. The jury’s verdict holds him accountable for his senseless violence, which injured two young people and ripped a father away from his family. My office remains committed to combatting gang violence and seeking justice for victims.”
According to the Indictment and the evidence at trial:
PABON was a member of a street gang known as the “200.” The 200 was based in the neighborhood around Dyckman Street in northern Manhattan. Between 2014 and 2018, the 200’s members and associates engaged in armed robberies, shootings, pharmacy burglaries, assaults, and the distribution of heroin, crack, and other drugs. PABON was one of the gang’s “shooters,” meaning that the gang called upon him to provide guns and commit violence against rivals.
On October 2, 2014, PABON and other members of the 200 drove to their rival gang’s territory in the vicinity of 193rd Street in the Washington Heights neighborhood of Manhattan, intending to shoot at members of the enemy gang. After driving to the area, PABON and three other members of the 200 approached the intersection of 193rd and Saint Nicholas Avenue on foot. Upon reaching the intersection, PABON and Marcos Espinal, a/k/a “Ito,” who was also a member of the 200, fired at least 15 shots at a group of people standing in front of a bodega. PABON and Espinal hit three people with their gunshots. Two of the victims—a 17-year old girl and a 20-year old man—survived their injuries. The third victim was Orlando Rivera, a 42-year old father and innocent bystander who was standing in front of the bodega. Rivera was killed by a bullet to his back as he attempted to run away from the bullets that PABON and Espinal fired. Espinal was previously prosecuted for his participation in this crime by the New York County District Attorney’s Office.
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PABON, age 29, of Manhattan, was convicted of racketeering conspiracy, which carries a maximum sentence of life in prison, and murder in aid of racketeering, which carries a mandatory sentence of life in prison.
Mr. Williams praised the investigative work of the Drug Enforcement Administration and the New York City Police Department.
The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Rushmi Bhaskaran, Elizabeth A. Espinosa, and Adam S. Hobson are in charge of the prosecution and represented the Government at trial. Assistant U.S. Attorneys Jamie Bagliebter, Maurene Comey, Margaret Graham, and Hagan Scotten also participated in the investigation and prosecution of this case.
Former Chief of Honduran National Police Extradited to the United States on Drug Trafficking and Weapons OffensesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Anne Milgram, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced today the extradition of JUAN CARLOS BONILLA VALLADARES, a/k/a “El Tigre,” on charges of conspiring to import cocaine into the United States and related weapons offenses involving the use and possession of machine guns and destructive devices. BONILLA VALLADARES arrived from Honduras in the Southern District of New York yesterday, and will be presented today before U.S. Magistrate Judge Katharine H. Parker.
U.S. Attorney Damian Williams said: “Rather than use his high-powered position as the Chief of Honduran Police to combat drug trafficking, Juan Carlos Bonilla Valladares, a/k/a ‘El Tigre,’ corruptly exploited his position to protect and assist the drug trafficking organizations he was obligated to disrupt. With his support and protection, Bonilla Valladares’s associates became a critical pipeline for the Central American drug trade to the United States. His extradition demonstrates that no one is exempt by virtue of their title or position of authority – even foreign Presidents and police chiefs – from criminal prosecution for contributing to the flood of illegal narcotics into this country that causes so much harm.”
DEA Administrator Anne Milgram said: “Former Honduran President Juan Orlando Hernandez would not have risen to power and successfully benefited from massive drug proceeds had it not been for his expansive network of corrupt associates. These associates, including Bonilla Valladares, likewise exploited their positions to traffic cocaine to the United States and violently protect other politically connected drug traffickers, all for their own personal gains. Bonilla Valladares further betrayed the Honduran people by using his law enforcement badge to cover for his crimes. Bonilla Valladares’s extradition shows the world once again that corrupt officials cannot hide behind their positions. DEA, in coordination with our U.S. and international partners, will stop at nothing to bring to justice anyone who threatens the safety and health of Americans.”
According to the allegations contained in the Complaint charging BONILLA VALLADARES, evidence presented at the October 2019 trial of Juan Antonio Hernandez Alvarado (“Hernandez Alvarado”) in the Southern District of New York, and statements in open court during the prosecution of Hernandez Alvarado[1]:
Between approximately 2003 and 2020, multiple drug-trafficking organizations in Honduras and elsewhere worked together, and with support from certain prominent public and private individuals, including Honduran politicians and law enforcement officials, to receive multi-ton loads of cocaine sent to Honduras from, among other places, Colombia and Venezuela via air and maritime routes, and to transport the drugs westward in Honduras toward the border with Guatemala and eventually to the United States. For protection from law enforcement interference, and in order to facilitate the safe passage through Honduras of multi-ton loads of cocaine, drug traffickers paid bribes to public officials, including certain presidents, members of the National Congress of Honduras, and personnel from the Honduran National Police, including BONILLA VALLADARES.
BONILLA VALLADARES was a member of the Honduran National Police between approximately 1998 and approximately 2016. During his tenure, he held high-ranking positions, including Regional Police Chief with authority over locations in western Honduras that were strategically important to drug traffickers, and Chief of the Honduran National Police for all of Honduras between approximately 2012 and approximately 2013. BONILLA VALLADARES corruptly exploited these official positions to facilitate cocaine trafficking, and used violence, including murder, to protect the particular cell of politically connected drug traffickers he aligned with, including former Honduran congressman Hernandez Alvarado and former president of Honduras Juan Orlando Hernandez (“Hernandez”), who is referred to in the Complaint charging BONILLA VALLADARES as “CC-4.”
For example, in exchange for bribes paid in drug proceeds, BONILLA VALLADARES directed members of the Honduran National Police, who were armed with machine guns, to let cocaine shipments pass through police checkpoints without being inspected or seized. BONILLA VALLADARES, in coordination with Hernandez Alvarado and others, also provided members of their conspiracy with sensitive law enforcement information to facilitate cocaine shipments, including information regarding aerial and maritime interdiction operations.
In or about 2010, Hernandez Alvarado told a cooperating witness (“CW-1”) that Hernandez Alvarado and Hernandez helped BONILLA VALLADARES advance his position within the Honduran National Police, and that BONILLA VALLADARES protected their drug-trafficking activities in return. Hernandez Alvarado also told CW-1 that BONILLA VALLADARES was very violent, and that Hernandez Alvarado and Hernandez trusted BONILLA VALLADARES with special assignments, including murder. For example, in or about July 2011, BONILLA VALLADARES participated in the murder of a rival drug trafficker at the request of Hernandez Alvarado and others because the rival trafficker had attempted to prevent Hernandez Alvarado and other members of the conspiracy from transporting cocaine through a region of western Honduras near the border with Guatemala.
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The Complaint charges BONILLA VALLADARES, 62, with: (1) conspiring to import cocaine into the United States, (2) using and carrying machine guns and destructive devices during and in relation to, and possessing machine guns and destructive devices in furtherance of, the cocaine-importation conspiracy; and (3) conspiring to use and carry machine guns and destructive devices during and in relation to, and to possess machine guns and destructive devices in furtherance of, the cocaine-importation conspiracy. If convicted, BONILLA VALLADARES faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, a mandatory minimum sentence of 30 years in prison and a maximum term of life in prison on Count Two, and a maximum term of life in prison on Count Three.
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 DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and the Tegucigalpa Country Office. The Justice Department’s Office of International Affairs provided valuable assistance in securing BONILLA VALLADARES’s arrest and extradition.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation. OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.
This case is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorneys Jacob H. Gutwillig, Michael D. Lockard, Jason A. Richman, and Elinor L. Tarlow are in charge of the prosecution.
The charges in the Complaint are merely accusations, and BONILLA VALLADARES 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.
Cryptocurrency Trader Sentenced to 42 MonthsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that defendant JEREMY SPENCE, a/k/a “Coin Signals,” was sentenced to 42 months in prison for defrauding more than 170 victims in connection with various cryptocurrency funds that he operated. SPENCE previously pled guilty before U.S. District Judge Lewis A. Kaplan, who imposed today’s sentence.
According to the allegations contained in the Indictment and the Complaint, court filings, and statements made in court:
From November 2017 through April 2019, SPENCE solicited investors in various cryptocurrency investment pools that SPENCE had created and managed (the “Funds”). SPENCE solicited investments for several Funds, the largest and most active of which were the Coin Signals Bitmex Fund, a/k/a the “CS Mex Fund,” the Coin Signals Alternative Fund, a/k/a the “CS Alt Fund,” and the Coin Signals Long Term Fund. Investors who wanted to participate in a Fund would transfer cryptocurrency, such as Bitcoin and Ethereum, to SPENCE in order for SPENCE to invest it.
SPENCE solicited more than $5 million through false representations, including that SPENCE’s crypto trading had been extremely profitable when, in fact, SPENCE’s trading had been consistently unprofitable. For example, on January 28, 2018, SPENCE posted a message in an online chat group falsely claiming that his trading of investor funds over the past month had generated a return of more than 148%. As a result of this misrepresentation, investors transferred additional funds to SPENCE. In fact, over that same period of approximately one month, SPENCE’s trading resulted in net losses in the accounts in which he traded investor funds.
To forestall redemptions by investors, and to continue to raise money from investors to fund his scheme, SPENCE generated fictitious account balances, which he made available to investors online. Instead of accurately reporting the trading losses SPENCE was incurring, the account balances falsely indicated to investors that they were making money by investing with SPENCE. To hide his trading losses, SPENCE used new investor funds to pay back other investors in a Ponzi-like fashion. In total, SPENCE distributed cryptocurrency worth approximately $2 million to investors substantially from funds previously deposited by other investors.
* * *
In addition to his prison term, SPENCE, 25, of Bristol, Rhode Island, was sentenced to three years of supervised released and restitution in the amount of $2,847,743.00.
Mr. Williams praised the investigative work of the Federal Bureau of Investigation and thanked the Commodity Futures Trading Commission, which brought a separate civil action.
The case is being handled by the Office’s Securities and Commodities Fraud Unit. Assistant U.S. Attorney Christine I. Magdo is in charge of the prosecution.
Horse Doping Drug Seller Convicted in Manhattan Federal CourtRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced the conviction at trial of defendant LISA GIANNELLI, on one count of drug adulteration and misbranding, with intent to defraud and mislead, in connection with a nearly twenty-year scheme to create and distribute “untestable” performance enhancing drugs for use in professional horseracing. GIANNELLI was one of over thirty defendants charged in four separate cases in March 2020, each arising from this Office’s multi-year investigation of the abuse of racehorses through the use of performance enhancing drugs.
U.S. Attorney Damian Williams said: “For almost two decades, Lisa Giannelli peddled untestable performance-enhancing drugs to give racehorse trainers the tools to dope racehorses. As a former standardbred racehorse trainer, Giannelli knew firsthand the dangers of selling illegal, injectable performance-enhancing drugs to trainers who were recklessly injecting horses to gain a competitive edge. The jury’s swift conviction demonstrates the gravity of Giannelli’s criminal scheme. This Office remains committed to holding accountable those who would engage in the kind of fraud and animal abuse exemplified by Giannelli’s crimes.”
As established by the evidence at trial:[1]
GIANNELLI was charged in United States v. Navarro, 20 Cr. 160 (MKV), a case arising from an investigation of widespread schemes by racehorse trainers, veterinarians, PED distributors, and others to manufacture, distribute, and receive adulterated and misbranded PEDs and to secretly administer those PEDs to racehorses competing at all levels of professional horseracing. By evading PED prohibitions and deceiving drug regulators and horse racing officials, participants in these schemes sought to improve race performance and obtain prize money from racetracks throughout the United States and other countries, including in New York, New Jersey, Florida, Ohio, Kentucky, and the United Arab Emirates (“UAE”), all to the detriment and risk of the health and well-being of the racehorses. Trainers who participated in the schemes stood to profit from the success of racehorses under their control by earning a share of their horses’ winnings, and by improving their horses’ racing records, thereby yielding higher trainer fees and increasing the number of racehorses under their control. Indicted veterinarians profited from the sale and administration of these medically unnecessary, misbranded, and adulterated substances. GIANNELLI, a seller of customized PEDs designed specifically to evade anti-doping controls, personally earned hundreds of thousands of dollars in sales commissions from her sale and distribution of PEDs to trainers around the United States.
GIANNELLI marketed these drugs as “untestable” under typical anti-doping drug screens and extolled the virtues of these illegal drugs by describing their potency and untestability. In the course of over fifteen years during which Giannelli operated under the auspices of the company, Equestology, GIANNELLI deliberately lied to state investigators to cover up her crimes and sold vials with no or incomplete labels, with no hint as to the provenance of those unsafe and prohibited drugs.
The drugs GIANNELLI sold included intravenous and intramuscular injectables that she sold to laypeople for injection into the horses under their purported “care,” many of which were seized at premises throughout the country at the time of the original indictments in this case, including barns located in New York. Those included “blood building” drugs (for example, “BB3” and other Epogen-mimetic substances), vasodilators (for example, “VO2Max”), and bags filled with scores of “bleeder pills,” each designed to covertly increase performance in affected horses.
GIANNELLI was convicted of one count of conspiracy to commit misbranding and drug adulteration in connection with her work for Equestology. GIANNELLI faces up to five years in prison for her conviction.
The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of GIANNELLI will be determined by the judge.
* * *
Mr. Williams praised the outstanding investigative work of the FBI New York Office’s Eurasian Organized Crime Task Force and its support of the Bureau’s Integrity in Sports and Gaming Initiative. Mr. Williams also thanked Customs and Border Protection and the Food and Drug Administration for their assistance and expertise. This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Sarah Mortazavi, Benjamin A. Gianforti, and Anden Chow are in charge of the prosecution.
[1] As to Giannelli’s co-defendants, these facts, including the entirety of the texts of the Indictments and the descriptions of the Indictments set forth herein, constitute only allegations and every fact described should be treated as an allegation.
Three Sentenced in Loan Scheme to Defraud Four Churches and DeveloperRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JEFFERY N. CROSSLAND was sentenced yesterday to 51 months in prison, RAYMOND E. ROBINSON, a pastor, was sentenced on March 18, 2022 to 42 months in prison and STEPHEN C. PARENTE was sentenced on March 19, 2022 to 33 months in prison for conspiring to defraud four churches and a real estate development company out of more than $3.5 million.
U.S. Attorney Damian Williams said: “Crossland, Robinson, and Parente abused the trust of four churches and Crossland and Robinson victimized a real estate development company as well. All the victims were seeking financing for building projects. The defendants induced them to enter into loan agreements requiring the victims to transfer “deposit” money into a bank account by falsely representing that the deposit money would be safe from loss. Based on those false representations, the victims transferred their deposits. But the money did not remain in the account safe from loss. Instead, the victims lost their money and their ability to fund their building construction projects. For their crime, Crossland, Robinson, and Parente will serve a substantial sentence in prison.”
According to the allegations contained in the Indictment, court filings, and statements made during court proceedings:
CROSSLAND was a managing member of Crossland Capital Partners, LLC, a purported broker dealer focused on “real estate related capital raising,” located in Santa Monica, California. He also controlled JC Funding Group, also located in Santa Monica, which was represented to be a corporate entity overseeing various subsidiary lending companies under the JC Funding name. PARENTE controlled Eagle Capital Investment Partners, LP (“Eagle Capital”), a purported private financial advisory consultancy practice based in Georgia. ROBINSON was a minister. He was employed by a church-building company based in Missouri and he ran Ray Robinson Ministries – a purported consulting firm for churches. ROBINSON, along with PARENTE, had an ownership interest in Eagle Capital.
In or about early 2013, the defendants met in California and planned their strategy, which was to target churches and market to them by capitalizing on ROBINSON’s background as a minister and church builder. They represented that they were in the business of providing “unconventional loans” for churches and that CROSSLAND funded loans through capital he obtained from other clients who invested in his projects. To effectuate the scheme to defraud, the three defendants drafted and modified term sheets and loan agreements that required the Victims to provide “deposits” as security for their loans. To induce the Victims to enter into the loan agreements and provide these deposits, they agreed to and then made various other false representations about the Victims’ deposit money. Through their communications with the Victims and language they drafted together and included in loan documents, they led the Victims to believe the deposit money would be held in a bank account (the “Account”) and that it would be safe from loss. As the Victims ultimately learned, that was false and their money was not actually being used as the “deposit” they thought it was. Instead, it was being invested in what the defendants understood to be “trading programs” involving overseas investors.
In order to perpetuate the scheme and conceal the fraud, CROSSLAND had others transfer some of Victims’ deposit money to other Victims and falsely represented that these money transfers were loan draw payments. In actuality, CROSSLAND never had the money to fund the Victims’ loans. In addition to providing certain Victims with funds the defendants claimed to be loan draw payments, in order to perpetuate the scheme and conceal the fraud, CROSSLAND and ROBINSON had communications with the Victims, with the intention of (a) lulling them into believing that their loans would be funded and/or their deposits returned, and (b) preventing them from reporting their conduct to law enforcement authorities and/or taking legal action against them.
In this way, from April 2013 through March 2015, CROSSLAND, ROBINSON, and PARENTE fraudulently induced Victims to transfer more than $3.5 million to the Escrow Account. The purported loans were never funded and millions of dollars in deposits were lost.
* * *
In imposing CROSSLAND’S sentence, U.S. District Judge Kenneth M. Karas noted that the crime was “really serious and it required a great deal of planning and heartlessness.”
CROSSLAND, 65, of Glendale, California, ROBINSON, 70, of Leander, Texas, and PARENTE, 54, of Buford, Georgia, each pled guilty to a one count Indictment charging them with conspiracy to commit wire fraud. CROSSLAND previously pled guilty to the one count Indictment on September 17, 2021. ROBINSON and PARENTE previously pled guilty on September 8, 2021 and July 15, 2021, respectively.
In addition to the prison terms, CROSSLAND was sentenced to three years of supervised release and ordered to pay forfeiture of $37,873 and restitution of $3,226, 950. ROBINSON was also sentenced to three years of supervised release and ordered to pay forfeiture of $17,750 and restitution of $3,226, 950. PARENTE was sentenced to three years of supervised release and ordered to pay forfeiture of $33,230 and restitution of $2,986,950.
Mr. Williams praised the outstanding investigative work of the U.S. Postal Inspection Service and Special Agents of the United States Attorney’s Office. Mr. Williams also thanked the United States Attorney’s Office for the Eastern District of Tennessee, the Knoxville, Tennessee, field office of the Federal Bureau of Investigation, and the Westchester County District Attorney’s Office for their assistance.
The case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Margery Feinzig and Derek Wikstrom are in charge of the prosecution.
Former Bank Branch Manager Sentenced to Prison for Tech Support Fraud Scheme That Exploited the ElderlyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that defendant ARIFUL HAQUE was sentenced to one year and one day in prison for participating in a technical support fraud scheme. This conspiracy exploited victims, including elderly victims, by remotely accessing their computers and convincing victims to pay for computer support services that they did not need, and which were never actually provided. As part of this scheme, HAQUE registered a purported technical support company, which defrauded more than 100 victims located across the United States and Canada. HAQUE previously pled guilty before U.S. District Judge Paul A. Crotty, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “Ariful Haque participated in a conspiracy that caused pop-up windows to appear on victims’ computers—pop-up windows that claimed, falsely, that a virus had infected the victim’s computer. Through this and other misrepresentations, this fraud scheme deceived scores of victims across the country into paying hundreds or thousands of dollars to the perpetrators for computer support services they did not need. Thanks to our partners at Homeland Security Investigations, this scheme has been dismantled and another participant has been sentenced to prison.”
According to the allegations contained in the Superseding Information, court filings, and statements made in court:
From approximately November 2017 through June 2019, HAQUE was a member of a criminal fraud ring (the “Fraud Ring”) based in the United States and India that committed a technical support fraud scheme that exploited score of victims located across the United States and Canada, including in the Southern District of New York. The Fraud Ring’s primary objective was to trick victims into believing that their computers were infected with malware, in order to deceive them into paying hundreds or thousands of dollars for phony computer repair services.
The scheme generally worked as follows. First, the Fraud Ring caused pop-up windows to appear on victims’ computers. The pop-up windows claimed, falsely, that a virus had infected the victim’s computer. The pop-up window directed the victim to call a particular telephone number to obtain technical support. In at least some instances, the pop-up window threatened victims that, if they restarted or shut down their computer, it could “cause serious damage to the system,” including “complete data loss.” In an attempt to give the false appearance of legitimacy, in some instances the pop-up window included, without authorization, the corporate logo of a well-known, legitimate technology company. In fact, no virus had infected victims’ computers, and the technical support phone numbers were not associated with the legitimate technology company. Rather, these representations were false and were designed to trick victims into paying the Fraud Ring to “fix” a problem that did not exist. And while the purported “virus” was a hoax, the pop-up window itself did cause various victims’ computers to completely “freeze,” thereby preventing these victims from accessing the data and files in their computer—which caused some victims to call the phone number listed on the pop-up window. In exchange for victims’ payment of several hundred or thousand dollars (depending on the precise “service” victims purchased), the purported technician remotely accessed the victim’s computer and ran an anti-virus tool, which is free and available on the Internet. The Fraud Ring also re-victimized various victims, after they had made payments to purportedly “fix” their tech problems.
The Fraud Ring operated through at least 15 fraudulent entities. In November 2017, HAQUE registered one of these fraudulent entities in New York State. HAQUE’s entity defrauded more than approximately 100 victims as part of this scheme. As part of his involvement in the fraud, HAQUE opened U.S. bank accounts to receive funds from victims, deposited victim checks, received a victim complaint, and repeatedly provided a co-conspirator in India (“CC-1”) with authentication codes so that CC-1 could wire funds out of these bank accounts. HAQUE, a former bank branch manager in New York City, also tried to use his banking experience to further the scheme, including by advising CC-1 that it was “[n]ot a good idea to deposit” certain checks, some of which would risk the involvement of “the Feds.” Moreover, on occasion, HAQUE also assisted another co-conspirator (“CC-2”), who had registered a different fraudulent entity that was part of the Fraud Ring, as well. In total, as he admitted in his plea agreement, HAQUE is responsible for losses exceeding $600,000.
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In addition to his prison term, HAQUE, 36, of Queens, New York, was sentenced to three years of supervised release, forfeiture of $38,886.32, and restitution of $470,672.16.
HAQUE’s co-defendant, Romana Leyva, was previously sentenced to 100 months in prison, three years of supervised release, forfeiture of $4,679,586.93, and restitution of $2,707,882.91.
Mr. Williams praised the New York Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”)’s El Dorado Task Force, Cyber Intrusion/Cyber Fraud Group for its outstanding work on the investigation. Mr. Williams also thanked the New York City Police Department for its assistance on this case.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Michael D. Neff and Jilan J. Kamal are in charge of the prosecution.
Brooklyn-Based Manager of Money Laundering Operation Pleads Guilty in Connection with $5 Million Online Vehicle Sale ScamRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Ricky Patel, Acting Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced today that NATALIA KORZHA pled guilty today in Manhattan federal court to conspiracy to commit bank fraud in connection with a scheme to launder money derived from an online vehicle sale scam that generated at least $5.3 million from dozens of defrauded consumers. KORZHA pled guilty before U.S. District Judge Analisa Torres.
U.S. Attorney Damian Williams said: “As she admitted today, Natalia Korzha managed a group of co-conspirators who opened bank accounts that were used to launder millions of dollars in criminal proceeds from an online vehicle sale scam. Without her money laundering operation, online fraudsters would not be able to profit from their illegal schemes. Korzha will now face a term of imprisonment and be required to forfeit her ill-gotten gains.”
As alleged in the Complaint and the Indictments, and based on statements made in court:
From at least March 2019 through approximately March 2021, KORZHA managed a money laundering operation based in Brooklyn that included co-defendants VLADISLAV NECEAEV, ANASHON KAMALOV, KAROL KAMINSKI, STANISLAV TUNKEVIC, and SVETLANA VAIDOTIENE, among others. With KORZHA as coordinator, NECEAEV, KAMALOV, KAMINSKI, TUNKEVIC, VAIDOTIENE, and other co-conspirators opened numerous bank accounts in the name of shell companies for the purpose of laundering money stolen from consumers who were trying to buy vehicles online. In exchange, the defendants received a cut of the victims’ money.
Other members of the conspiracy, pretending to represent car dealerships, advertised vehicles that they did not own and were not authorized to sell on fake websites with domain names that sounded like legitimate car dealerships, or through online marketplaces like Craigslist and eBay. Victims who responded to those advertisements and negotiated a purchase price were instructed by the purported sellers to wire payment to accounts that NECEAEV, KAMALOV, KAMINSKI, TUNKEVIC, VAIDOTIENE, and other co-conspirators opened. Once the payments cleared, the defendants quickly withdrew the funds before the victims realized they had been defrauded. The victims never received the vehicles they thought they had bought or any refunds from the fake sellers. In total, dozens of victims were defrauded of a total of at least $5.3 million.
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KORZHA, 49, of Brooklyn, New York, pled guilty to one count of conspiracy to commit bank fraud and agreed to forfeiture of $5,386,538 and restitution of $5,386,538. KORZHA is scheduled to be sentenced by U.S. District Judge Analisa Torres on September 7, 2022.
NECEAEV, 28, of Brooklyn, New York, pled guilty to one count of conspiracy to commit bank fraud on March 14, 2022, before Magistrate Judge Robert W. Lehrburger. He has agreed to forfeit $526,000. NECEAEV is scheduled to be sentenced by Judge Torres on June 8, 2022.
TUNKEVIC, 47, was extradited to the United States from Lithuania on March 25, 2022, and presented in Manhattan federal court before United States Magistrate Judge Sarah L. Cave on March 28, 2022.
KAMINSKI, 32, was extradited to the United States from Lithuania on April 4, 2022, and presented in Manhattan federal court before United States Magistrate Judge Jennifer E. Willis on April 5, 2022.
VAIDOTIENE, 54, was extradited to the United States from Lithuania on April 8, 2022, and presented in Manhattan federal court before United States Magistrate Judge Ona T. Wang on April 11, 2022.
TUNKEVIC, KAMINSKI, and VAIDOTIENE are each charged with one count of conspiracy to commit bank fraud and one count of conspiracy to commit money laundering. The charges against each of them are pending. They have been ordered detained pending trial.
The offense of conspiracy to commit bank fraud carries a maximum sentence of 30 years in prison and a maximum fine of $1,000,000. The crime of conspiracy to commit money laundering carries a maximum sentence of 20 years in prison and a maximum fine of $500,000 or twice the value of the property involved in the transaction.
The maximum potential sentences in this case are prescribed by Congress and are 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 Homeland Security Investigations and the New York Police Department. He also thanked the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division, the United States Marshals Service, the Prosecutor General’s Office of the Republic of Lithuania, and the Lithuanian Criminal Police Bureau for their assistance in this investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Sarah Lai is in charge of the prosecution.
Idaho I.T. Professional Charged with Misappropriating Pre-Publication Investment Recommendations for Insider Trading SchemeRead 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 today the unsealing of a complaint charging DAVID STONE with securities fraud in connection with an insider trading scheme. STONE was arrested yesterday and will be presented today in the United States District Court for the District of Oregon.
U.S. Attorney Damian Williams said: “As alleged, David Stone used his computer skills to extract pre-publication stock picks from an investment advice service so he could beat the markets and generate millions in trading profits. Though Stone may have thought that he could hide his scheme behind IP addresses, other losing trades, and donations to his church, he was wrong. This prosecution reflects my office’s commitment to market integrity and a fair playing field for investors.”
FBI Assistant Director Michael J. Driscoll said: “As we allege here today, Mr. Stone exploited his unauthorized access to market-moving stock recommendations to make trades in advance of their release. In relaying tips to another individual, he acknowledged his actions might be illegal and even provided advice to the individual on avoiding detection. As today's action demonstrates, the FBI and our partners remain committed to protecting the integrity of our financial markets from the unscrupulous actions of those who seek to reap illegal gains from them.”
According to the allegations in the complaint unsealed today in Manhattan federal court:[1]
From 2020 up to his arrest in 2022, DAVID STONE exploited market-moving stock recommendations made by an investment recommendation service (“Advisor-1”) before those recommendations were released to paying subscribers. STONE, an information technology (“I.T.”) professional, accessed Advisor-1’s computing system without authorization and viewed information relating to Advisor-1’s recommendations before they were announced to Advisor-1’s paying subscribers.
Advisor-1’s stock recommendations typically, but not always, lead to higher closing prices for the recommended stock as compared to the prior day’s closing price. By trading on those recommendations before they were announced, STONE was able to obtain significant profits unavailable to other market participants. In fact, since in or about November 2020, brokerage accounts associated with STONE traded ahead of Advisor-1 recommendations on more than a dozen occasions for approximately $3 million in gross gains.
In addition to his own trading, STONE supplied trading tips to at least one other person (“Tipee-1”). Between on or about January 20, 2021 up to and including on or about March 17, 2022, on approximately 45 different days, STONE sent emails to Tipee-1 providing stock names and/or ticker symbols ahead of Advisor-1 announcements of stock recommendations to its paying subscribers. Since in or about January 2021, a brokerage account associated with Tipee-1 traded ahead of Advisor-1 recommendations on more than a dozen occasions. As a result of that trading, Tipee-1 profited more than approximately $2.7 million.
Before providing tips to Tipee-1, STONE provided Tipee-1 with “guidelines” for avoiding detection and for donating some of the trading profits to a church. Specifically, on or about January 16, 2021, STONE sent an email to Tipee-1 that included the following:
I’m ok with sharing the weekly trades with you. I have used it so far to generate a significant amount of money and I'm sure you will be able to as well. There is a small possibility that what we are doing could be considered insider trading. [Advisor-1] uses only public information about to make its recommendations and even the recommendations are behind a paywall so it is a stretch to call it insider trading but it certainly behaves like it because it almost guarantees favorable price moves at a certain time.
So with that in mind these are the guidelines I am following:
. . . .
* Purchase a [Service-1] subscription from [Advisor-1] . . . and open some long term position of some of the recommendation that appeal to you
* Do other trades besides just what I tell you. If all your trades are up 5x and you never make a loosing trade it may call attention of regulators. . . .
* Pay your taxes. These trades are short term capital gains and are taxed at your regular income tax rate. You may get a significant tax bill come April 15 2022.
* Pay your tithe. This extra income has been a subject of regular prayer for me. I anticipate I will not need to keep my regular job for long when we are on the mission field. I have opened a donor advised fund which make it easy to contribute large sums of money or stocks directly and then schedule donations to be made to my church and any other charity I choose. It makes it easier to make anonymous donations as well which I feel is important.
. . . .
With these guidelines in place I can email the recommendations as soon as I know. I feel [a particular email provider] will be a more secure form of communication if it works for you.
* * *
STONE, 36, of Nampa, Idaho is charged with one count of securities fraud, which carries a maximum sentence of 25 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 the judge.
Mr. Williams praised the outstanding work of the FBI. Mr. Williams also thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Samuel P. Rothschild and Andrew Thomas are 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 in this release constitute only allegations, and every fact described should be treated as an allegation.
U.S. Attorney Announces Settlement of Fraud Lawsuit Against Online Pharmacy for Overdispensing InsulinRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent-in-Charge of the U.S. Department of Health and Human Services Office of the Inspector General (“HHS-OIG”) New York Regional Office, announced today that the United States filed and settled a healthcare fraud lawsuit against online retail pharmacy PillPack, LLC (“PillPack”), a wholly-owned subsidiary of Amazon.com, Inc. The settlement resolves allegations that PillPack improperly billed Government healthcare programs (“GHPs”), including Medicare and Medicaid, for more insulin pens than patients needed according to their prescriptions and falsely under-reported the days-of-supply of insulin dispensed. Under the settlement, PillPack agreed to pay approximately $5.79 million to the United States and various States that were fraudulently overbilled for insulin. As part of the settlement, PillPack also admitted and accepted responsibility for certain conduct the Government alleged in its Complaint, including that it dispensed insulin pens that exceeded days-of-supply limits imposed by GHPs.
U.S. Attorney Damian Williams said: “Pharmacies are trusted to provide accurate information to Government healthcare programs and to prevent waste when dispensing medications to patients. PillPack abused this trust by dispensing insulin refills long before patients needed them and by falsely reporting the days-of-supply of insulin actually dispensed to prevent its claims for reimbursement from being denied. This Office will continue to hold pharmacies accountable when they submit false information and waste taxpayer dollars.”
Insulin pens (hard plastic pen-shaped cases containing syringes filled with insulin solution) are a common way for diabetic patients to self-administer insulin. Manufacturers most frequently distribute insulin pens in five-pen cartons with each pen containing 300 units (3 mL) of insulin solution. Pharmacies can dispense such pens to patients only with valid prescriptions from licensed prescribers. Valid insulin prescriptions must set forth the “directions for use,” which typically designate both how much insulin to administer and the frequency and/or timing of when to administer it.
When PillPack sought reimbursement from GHPs for insulin pens, it was required to report, among other data, the quantity dispensed and the days-of-supply. The “quantity dispensed” specifies the amount of medication being dispensed to a patient when the pharmacy fills the prescription, and the “days-of-supply” refers to the number of days that the dispensed medication should last if the patient uses it according to the directions for use in the prescription. Typically, to calculate days-of-supply, a pharmacist divides the total quantity of medication being dispensed to a particular patient by that patient’s “daily dose,” i.e., the amount of medication that the prescriber directs the patient to use each day.
GHPs impose dispensing limits for prescription drugs, including insulin pens, in terms of quantity and days-of-supply and will deny a claim if the reported days-of-supply exceeds those limits, unless an override is obtained. GHPs typically calculate the date on which a prescription refill would be needed (the “refill due date”) based on the date when a patient last filled a prescription and the days-of-supply reported by the pharmacy for that prior fill. GHPs also typically establish automated processes to deny claims for reimbursement for refills that are submitted too far in advance of the refill due dates. The reliability of these processes depends on the accuracy of the days-of-supply reported by pharmacies.
As alleged in the Government’s Complaint:
From April 2014 through November 2019 (the “Covered Period”), PillPack’s general practice was to dispense insulin pens to patients using full cartons. PillPack would dispense and bill for the full carton, and falsely under report the days-of-supply to make it appear that the dispensing did not violate the program’s days-of-supply limit.
The practice of under-reporting days-of-supply also led PillPack to dispense premature refills to program beneficiaries. Whenever PillPack recorded in its internal system the inaccurate lower days-of-supply that were submitted to conform with the GHP’s days-of-supply limit, the system would generate a premature refill due date. As a result, PillPack pharmacists frequently dispensed insulin pen refills days or weeks before patients actually needed them according to their prescriptions.
The settlement requires PillPack to pay $5,616,136.85 to the United States, and PillPack has agreed separately to pay $175,522.55 to state governments, for a total of $5,791,659.40. Under the settlement, PillPack admitted, among other things, that:
- During the Covered Period, PillPack’s insulin pen dispensing practice was to supply patients with a full carton of insulin pens. In many instances, this resulted in exceeding the GHP’s applicable days-of-supply limit. Instead of accurately reporting the days-of-supply and contacting the GHP or its agent to attain the requisite override, in many instances PillPack would dispense and bill for the full carton, and reduce the days-of-supply reported to the GHP to conform to the GHP’s days-of-supply limit. As a result, for those claims, PillPack reported days-of-supply data to GHPs that were different from, and lower than, the days-of-supply that should have been reported had PillPack calculated days-of-supply according to the typical pharmacy billing formula of dividing the quantity of insulin dispensed by the daily dose.
- Prior to April 2019, PillPack’s prescription management and dispensing software determined refill dates based on the reported days-of-supply. Thus, during this time period, when PillPack pharmacists reported inaccurate lower days-of-supply data to GHPs and payors working on their behalf, the software used this inaccurate data to generate premature refill due dates, causing PillPack pharmacists to dispense insulin pen refills to patients days or weeks before the patients actually needed them according to their prescriptions.
- During the Covered Period, PillPack received audit reports from pharmacy benefit managers, acting on behalf of GHPs, requesting that PillPack repay the overpayments it had received for insulin pen prescription claims due to inaccurate days-of-supply reporting.
- GHPs and payors working on their behalf approved and paid claims submitted by PillPack for insulin pen refills that they would not have approved if PillPack had accurately reported the days-of-supply for previous fills according to the typical pharmacy billing formula of dividing the quantity dispensed by the daily dose. Specifically, PillPack’s practice of dispensing and submitting reimbursement claims for insulin pen refills using inaccurate lower days-of-supply data prevented GHPs and payors working on their behalf from reliably calculating refill due dates and confirming that refills had not been prematurely dispensed before approving PillPack’s claims for reimbursement.
- In certain instances, over time, patients accumulated multiple extra insulin pens that they did not need according to their prescriptions.
In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.
Mr. Williams praised the outstanding investigative work of the Office of Inspector General, Department of Health and Human Services. He also thanked the Medicaid Fraud Control Units for Washington and Texas for their assistance in this case.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Danielle Levine and Pierre Armand are in charge of the case.
U.S. Attorney Announces Extradition of Colombian National for Narco-Terrorism, Firearms, and Drug-Trafficking ChargesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Anne Milgram, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced today the extradition of CARLOS FERNANDO MELO, for narco-terrorism, firearms, and drug-trafficking offenses. MELO, a Colombian national, was taken into custody by Colombian authorities on April 20, 2021 at the request of the United States, extradited to the United States, and arrived in the Southern District of New York yesterday from Colombia. MELO is expected to be presented later today before U.S. Magistrate Judge James L. Cott. The case is assigned to United States District Court Judge Sidney H. Stein.
U.S. Attorney Damian Williams said: “As alleged, Carlos Fernando Melo attempted to broker deals for machine guns with known narco-terrorist organizations, with the stated mission of murdering a DEA agent abroad as a ‘trophy.’ Unbeknownst to him, the individuals Melo believed to be arms traffickers were, in actuality, DEA confidential sources. Melo’s extradition today ensures that he’ll be held accountable on U.S. soil for allegedly targeting DEA Special Agents committed to fighting the illicit drug trade.”
DEA Administrator Anne Milgram said: “DEA’s central mission is targeting the most dangerous, most ruthless drug-traffickers who threaten our communities for their own profit. Carlos Fernando Melo is alleged to have not only supported and participated in violent narco-terrorism, but also sought to have a DEA agent murdered. DEA will relentlessly pursue narco-terrorists and drug traffickers who threaten the safety and health of Americans.”
According to the allegations contained in the Complaint and Indictment charging the defendant, which were unsealed today in Manhattan federal court:[1]
Between approximately September 2019 and December 2019, MELO attempted to purchase explosives and firearms, including machine guns, from individuals MELO understood to be arms traffickers for use by two organizations then designated by the Department of State as Foreign Terrorist Organizations: the Fuerzas Armadas Revolucionarias de Colombia (“FARC”) and the Ejército de Liberación Nacional (“ELN”). Unbeknownst to MELO, the arms traffickers with whom he was negotiating were, in actuality, DEA confidential sources.
During these meetings, a confidential source posing as a weapons broker introduced MELO to two other confidential sources who claimed to be weapons dealers. These confidential sources, in turn, introduced MELO to an undercover law enforcement officer who purported to be a member of the terrorist organization Hizballah with access to explosive material and firearms. In the meetings, MELO reiterated that he was seeking to broker weapons deals for the FARC and ELN, which he claimed to have done in the past. MELO provided the sources with a coded list of weapons that the FARC and ELN wanted to purchase. MELO also represented that he had spoken with leadership in the FARC and ELN regarding their interest in acquiring weapons and explosive material. Ultimately, MELO requested more than 300 machine guns for the FARC as well as explosive material and mercury for the ELN. While MELO initially suggested that the FARC would pay for their weapons in cocaine, MELO later told the confidential sources that the FARC would pay cash for their arms, and that MELO had another contact who would sell cocaine to the confidential sources for importation into the United States.
MELO also explained during these meetings that he sought to purchase the firearms and explosives because the FARC and ELN wanted to conduct attacks in Colombia. He detailed particulars of these planned attacks, which included the possible kidnapping and murder of a DEA agent in Colombia and the bombing of the U.S. Embassy in Bogota, Colombia. MELO said that killing a DEA agent would be a “trophy” for the FARC or ELN and that he had a particular assassin in mind who could carry out the murder.
In furtherance of these plans, MELO enlisted a co-conspirator to take photographs of the U.S. Embassy in Bogota. When this co-conspirator called MELO expressing concern about the security at the Embassy, MELO instructed the co-conspirator to take the photographs on a single day so as to not arouse any suspicion.
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MELO, 58, a Colombian national, is charged with: (1) participating in a narco-terrorism conspiracy, which carries a 20-year mandatory minimum sentence and a maximum of life in prison; (2) conspiring to import cocaine into the United States, which carries a 10-year mandatory minimum sentence and a maximum of life in prison; and (3) conspiring to possess machine guns and destructive devices during and in relation to the narco-terrorism and cocaine importation conspiracies, which carries a maximum of life in prison.
The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit. Mr. Williams also thanked the Department of Justice’s Office of International Affairs, Judicial Attachés in Bogotá, Colombia, and the Counterterrorism Section.
The case is being handled by the Office’s National Security and International Narcotics Unit. Assistant United States Attorneys Jason A. Richman, Kyle A. Wirshba, and Kaylan E. Lasky are in charge of the prosecution.
The charges contained in the Complaint and Indictment are merely allegations, 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 Complaint, and the description of the Indictment and the Complaint set forth herein, constitute only allegations and every fact described should be treated as an allegation.
Bronx Gang Member Sentenced to 21 Years for Two Attempted MurdersRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JOSE CABAN, a/k/a “Nene,” was sentenced today to 21 years in prison for committing violent crimes in aid of racketeering and firearms offenses. In June 2018, CABAN helped shoot and paralyze an 18-year-old victim and, then a few months later, in February 2019, CABAN fired a gun five times on a crowded street when attempting to murder a gang rival. CABAN was convicted in October 2021 after a jury trial before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “Today, Jose Caban was rightly sentenced to decades of imprisonment for participating in two shootings that paralyzed an 18-year-old victim and sent people, including children, running for their lives on a crowded street. We will continue to hold accountable those who plague our communities with senseless gun violence.”
According to the Superseding Indictment and the evidence at trial:
CABAN is a member of the Jack Boyz, a criminal enterprise involved in committing numerous acts of violence, including shootings, in and around the Bronx. Members and associates of the Jack Boyz engage in violence to retaliate against rival gangs, and to promote the standing and reputation of the Jack Boyz.
On June 19, 2018, near East 136th Street and Willis Avenue in the Bronx, CABAN helped another member of the Jack Boyz attempt to murder a rival, who was shot in the spine and paralyzed from the chest down.
On February 8, 2019, near East 135th Street and Willis Avenue in the Bronx, CABAN fired a gun five times on a street crowded with innocent bystanders, including children, in an attempt to murder a rival.
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In addition to his prison term, CABAN, 23, was sentenced to five years of supervised release.
Mr. Williams praised the outstanding investigative work of the New York City Police Department and Homeland Security Investigations.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Lindsey Keenan, Justin V. Rodriguez, and Jamie E. Bagliebter are in charge of the prosecution.
Robert Lenard Booth Convicted of Defrauding Investors of Nearly $2 MillionRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, announced today that ROBERT LENARD BOOTH, a/k/a “Trevor Nicholas,” was found guilty on all counts of a three-count Indictment that charged him with defrauding victim investors in countries around the world and laundering the proceeds of the fraud. The verdict followed a six-day jury trial in Manhattan Federal Court before U.S. District Judge Jed S. Rakoff.
U.S. Attorney Damian Williams said: “Robert Lenard Booth stole his victims’ lifesavings and moved the money around the world to hide his elaborate fraud. He thought he could get away with it. Today the jury showed him he was wrong.”
According to the Indictment and the evidence at trial:
From at least June 2019 through August 2021, BOOTH ran, and conspired with others to run, a boiler room operation that impersonated Manhattan-based brokerage firms and sold investors nearly $2 million in securities that they never received. To deceive investors, BOOTH and his co-conspirators created fake identities and false and misleading webpages, email addresses, and phone numbers. On phone calls with investors, BOOTH and others pretended to be licensed brokers, lied, and used high-pressure tactics to pitch stocks for American companies. They followed up by sending the victims false paperwork to confirm the alleged stock purchases and trades.
The victims were directed to wire payments—sometimes hundreds of thousands of dollars—to shell company accounts in New York, Hong Kong, and Singapore. The funds were laundered and distributed to BOOTH and his co-conspirators.
BOOTH was convicted of conspiracies to commit securities fraud, wire fraud and money laundering. He faces a maximum sentence of 45 years in prison and a maximum fine of $500,000 or twice the gross gain or gross loss from the offense.
Formerly a resident of Brooklyn, New York, BOOTH, 68, relocated overseas and spent years operating his scheme from Thailand and Panama. In August 2021, BOOTH flew from Thailand into JFK International Airport and was arrested on arrival. Pending trial, BOOTH resided in Brooklyn, where he lived until his conviction today. Judge Rakoff revoked his bail and remanded him following the conviction.
Mr. Williams praised the outstanding investigative work of the Special Agents of the United States Attorney’s Office, Homeland Security Investigations, and the Internal Revenue Service, Criminal Investigation and their partnership with the J5. The J5 works together to gather information, share intelligence and conduct coordinated operations against transnational financial crimes. The J5 includes the Australian Taxation Office, the Canadian Revenue Agency, the Dutch Fiscal Information and Investigation Service, Her Majesty's Revenue and Customs from the U.K. and IRS-CI from the U.S.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Andrew Jones, Jane Y. Chong, and Andrew Thomas are in charge of the prosecution.
Recidivist Sex Offender Sentenced to 20 Years in Prison for Attempted Enticement of 12-Year-Old and 9-Year-Old Girls and Attempted Receipt of Child PornographyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that STEVE ROSADO, a registered sex offender, was sentenced today by the Honorable Jed S. Rakoff to 20 years in prison for attempting to entice two minor girls to engage in illegal sexual activity, and for attempting to receive child pornography after having been previously convicted of sex offenses involving minors. ROSADO was arrested in December 2020 and pled guilty to the charges in November 2021.
U.S. Attorney Damian Williams said: “Steve Rosado tried to – and in some cases, did – prey on the most defenseless members of our community. He attempted to engage in repeated sexual activity with multiple children, some of whom he believed to be as young as 9 years old, even after having been twice before convicted of sex offenses and required to register as a sex offender. Crimes like this can have devastating and lasting effects on minor victims, and I once again thank the FBI and the NYPD for their work in investigating and arresting Rosado before he could harm any others.”
According to public court filings:
On November 29, 2020, an undercover FBI agent (the “UC”), posing as the mother of a 12-year-old girl and a 9-year-old girl, initiated a series of conversations with ROSADO, then 41 years old, via an online messaging service. The UC and ROSADO later exchanged telephone numbers, and they proceeded to communicate over the next week via the online messaging service, text message, and lengthy telephone conversations that were recorded by the UC.
In hundreds of text messages, and hours of calls, ROSADO repeatedly expressed, in graphic and unambiguous terms, his desire to engage in repeated sexual activity with both children – including both oral and vaginal sex – as part of their “new routine together.” To help alleviate any concerns the UC might have regarding ROSADO having sexual relations with her young children, ROSADO provided the UC with his recent test results for COVID-19 and HIV, and he discussed what he and the UC could do if he were to impregnate one of the children.
The UC and ROSADO arranged to meet at a bar in Manhattan on the evening of December 7, 2020, with the understanding that they would return to the UC’s apartment afterward and ROSADO would then engage in sexual activity with the children. On the evening in question, ROSADO met the UC at the agreed-upon location. After the two of them left the bar and began walking toward the UC’s purported apartment, law enforcement arrested ROSADO. ROSADO was at the time in possession of gifts for the children – including dolls and a stuffed animal – and an overnight bag containing, among other things, lubricant.
That same day, law enforcement seized multiple electronic devices belonging to ROSADO. Subsequent searches of those devices by law enforcement, pursuant to search warrants, revealed that ROSADO had for weeks been communicating online with several other individuals who purported to be minors – some purporting to be as young as 13 years old – in an ongoing effort not only to receive child pornography, but also to persuade the young victims to move to New York to live with him, so that he could engage in sexual activity with them, impregnate them, and eventually engage in sexual activity with their future children. ROSADO’s electronic devices further revealed that during this same period, ROSADO was engaged in an ongoing sexual relationship with a 16-year-old female victim.
At the time he committed the aforementioned offenses, ROSADO was a registered sex offender, having twice before been convicted of sex offenses involving minors. In 2004, ROSADO was convicted of possessing a sexual performance by a child, in violation of New York State Penal Law § 263.16; and in 2005, ROSADO was convicted of four counts of rape in the second degree, in violation of New York State Penal Law § 130.30(1), four counts of rape in the third degree, in violation of New York State Penal Law § 130.25(2), and two counts of endangering the welfare of a child, in violation of New York State Penal Law § 260.10(1). The 2004 conviction arose out of ROSADO’s stalking and attempted kidnapping of a 13-year-old female victim he met online, and the 2005 conviction arose out of ROSADO’s having had sexual intercourse approximately 24 times with a 14-year-old female victim. As a result of his prior convictions, ROSADO was incarcerated from December 2005 to October 2013.
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In addition to his prison term, ROSADO, 42, of the Bronx, New York, was sentenced to lifetime supervised release.
Mr. Williams praised the outstanding investigative work of the FBI-NYPD Child Exploitation and Human Trafficking Task Force.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Jonathan L. Bodansky, Jane Y. Chong, and Elinor L. Tarlow are in charge of the prosecution.
U.S. Attorney Announces Charges Against A Doctor, Dentist, and Former NBA Player for Defrauding the NBA Players’ Health and Welfare Benefit PlanRead 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 today the unsealing of a Superseding Indictment charging TERRENCE WILLIAMS, AAMIR WAHAB, WILLIAM WASHINGTON, ALAN ANDERSON, KEYON DOOLING, ANTHONY ALLEN, DESIREE ALLEN, SHANNON BROWN, WILLIAM BYNUM, RONALD GLEN DAVIS, CHRISTOPHER DOUGLAS-ROBERTS, a/k/a “Supreme Bey,” JAMARIO MOON, DARIUS MILES, MILTON PALACIO, RUBEN PATTERSON, EDDIE ROBINSON, SEBASTIAN TELFAIR, CHARLES WATSON JR., and ANTHONY WROTEN with conspiracy to commit health care fraud and wire fraud, in connection with a scheme to defraud the National Basketball Association’s (“NBA’s”) Health and Welfare Benefit Plan out of at least approximately $5 million. TERRENCE WILLIAMS and ALAN ANDERSON are also charged with aggravated identity theft in connection with the same scheme. TERRENCE WILLIAMS, ALAN ANDERSON, ANTHONY ALLEN, DESIREE ALLEN, SHANNON BROWN, WILLIAM BYNUM, RONALD GLEN DAVIS, CHRISTOPHER DOUGLAS-ROBERTS, a/k/a “Supreme Bey,” JAMARIO MOON, DARIUS MILES, MILTON PALACIO, RUBEN PATTERSON, EDDIE ROBINSON, SEBASTIAN TELFAIR, CHARLES WATSON JR., and ANTHONY WROTEN were charged in a prior Indictment and arrested, or surrendered, in October 2021. AAMIR WAHAB and WILLIAM WASHINGTON, both medical providers who allegedly facilitated the scheme, and KEYON DOOLING, a former NBA player who allegedly engaged in the scheme and recruited other co-conspirators to join the scheme, were added as defendants to the charged health care fraud and wire fraud conspiracy. WAHAB, WASHINGTON, and DOOLING were arrested today. WASHINGTON will be presented in the Western District of Washington. WAHAB will be presented in the Central District of California. DOOLING will be presented in the District of Utah. The case is assigned to U.S. District Judge Valerie E. Caproni.
U.S. Attorney Damian Williams said: “Today’s unsealing of additional charges in this case shows my office will investigate, and where appropriate charge, individuals involved in fraud schemes including medical providers who abuse their positions to defraud others. I thank our law enforcement partners in the FBI for their hard work uncovering more details of the defendants’ alleged pervasive scheme to attempt to defraud the NBA Health and Welfare Benefit Plan out of at least approximately $5,000,000.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “Today we’re charging additional defendants in this health care fraud scheme who attempted to defraud the National Basketball Association’s Health and Welfare Benefit Plan of at least approximately $5,000,000. Health care fraud causes serious problems for both the industry and consumers alike, and results in losses of tens of billions of dollars a year to fraud. Thanks to the work of our dedicated FBI agents and partners who continue to work tirelessly on this case.”
As alleged in the Superseding Indictment unsealed today[1]:
The National Basketball Association Players’ Health and Welfare Benefit Plan (the “Plan”) is a health care plan providing benefits to eligible active and former players of the NBA. From at least in or about 2017, up to and including at least in or about 2021, TERRENCE WILLIAMS, AAMIR WAHAB, WILLIAM WASHINGTON, ALAN ANDERSON, KEYON DOOLING, ANTHONY ALLEN, DESIREE ALLEN, SHANNON BROWN, WILLIAM BYNUM, RONALD GLEN DAVIS, CHRISTOPHER DOUGLAS-ROBERTS, a/k/a “Supreme Bey,” JAMARIO MOON, DARIUS MILES, MILTON PALACIO, RUBEN PATTERSON, EDDIE ROBINSON, SEBASTIAN TELFAIR, CHARLES WATSON JR., and ANTHONY WROTEN engaged in a widespread scheme to defraud the Plan by submitting and causing to be submitted fraudulent claims for reimbursement of medical and dental services that were not actually rendered. Over the course of the scheme, the defendants submitted and caused to be submitted to the Plan false claims totaling at least approximately $5 million.
TERRENCE WILLIAMS orchestrated the scheme to defraud the Plan. WILLIAMS recruited other Plan participants to defraud the Plan by offering to provide them with false invoices to support their fraudulent claims. AAMIR WAHAB, a dentist in California, and WILLIAM WASHINGTON, a doctor in Washington State, provided WILLIAMS with fraudulent invoices that WILLIAMS sent to other co-conspirators. WILLIAMS, ALAN ANDERSON, and KEYON DOOLING each recruited other Plan participants to defraud the Plan by offering to supply them with false invoices to support their false and fraudulent claims to the Plan in exchange for payments to WILLIAMS and DOOLING. DOOLING also obtained fraudulent invoices from WAHAB, and others, which he used to submit his own fraudulent claims; based on those claims, DOOLING himself fraudulently obtained approximately $350,000 of Plan proceeds.
As described in the Superseding Indictment, WAHAB exchanged text messages with both WILLIAMS and DOOLING about the scheme.
For example, in or about March 2019, WILLIAMS requested that WAHAB produce additional fraudulent invoices, but WAHAB was hesitant to do so because they were having trouble collecting kickbacks from co-conspirators. WILLIAMS appeared to be upset and messaged WAHAB, in substance and in part, “YOUVE MADE THOUSANDS OF F[---]ING DOLLARS TO PRINT A INVOICE WITH A NAME AT THE TOP like you f[---]ing kidding me[?] We not gonna act like you doing dental work.” WILLIAMS also sent WAHAB messages containing the names, dates, and amounts to be listed on the fraudulent invoices.
In or about April 2018, WAHAB and DOOLING exchanged messages about the creation of fraudulent invoices for another former-NBA player. On or about April 30, 2018, WAHAB and DOOLING continued their discussion:
DOOLING: Let’s make this thing grow sir.
WAHAB: Lol I’m down bro[.] Get me the whole NBA [laughing emoji]
DOOLING: Yes we will[.]
DOOLING also messaged with another co-conspirator about transferring proceeds obtained from a transaction in the scheme. Specifically, on or about June 28, 2019, DOOLING messaged that co-conspirator and stated, in substance and in part, “Hey bro, here’s the breakdown: 5600 for you and me. Then 10800 for the guy. I fronted him 4200$ so you can put it with my 5600= 9800 to My [bank account information]. . . . That way everything is under 10k.”
The Plan also enabled eligible participants to use a Plan-issued debit card (the “Plan Debit Card”) to pay for eligible medical services and products at the point of service. WILLIAM WASHINGTON charged, and caused others to charge, the Plan Debit Cards of two co-conspirators for approximately $436,126. WILLIAMS also exchanged messages with WASHINGTON about WASHINGTON’s creation of fraudulent invoices in furtherance of the scheme. For example:
WILLIAMS: You have the card reader I have the [Plan Debit C]ards. Let’s work together . . . . Give me the bread I’ll get it to them. You still swiping. You getting your money back. . . . you gonna owe me. Ok.
WASHINGTON: We owe each other lol. . . .
To verify that certain services were medically necessary, the Plan sometimes requires participants to submit a letter of medical necessity from a medical provider establishing that necessity of the provided services. WILLIAMS fraudulently created, and transferred letters of medical necessity for three co-conspirators. ANDERSON also counseled, aided, and induced at least one co-conspirator to submit a forged letter of medical necessity to the Plan. These letters were unusual in several respects: they were not on letterhead, contained unusual formatting, had grammatical errors, and one of the letters misspelled a purported patient’s name.
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TERRENCE WILLIAMS, AAMIR WAHAB, WILLIAM WASHINGTON, ALAN ANDERSON, KEYON DOOLING, ANTHONY ALLEN, DESIREE ALLEN, SHANNON BROWN, WILLIAM BYNUM, RONALD GLEN DAVIS, CHRISTOPHER DOUGLAS-ROBERTS, a/k/a “Supreme Bey,” JAMARIO MOON, DARIUS MILES, MILTON PALACIO, RUBEN PATTERSON, EDDIE ROBINSON, SEBASTIAN TELFAIR, CHARLES WATSON JR., and ANTHONY WROTEN are each charged with one count of conspiracy to commit health care fraud and wire fraud, which carries a maximum sentence of 20 years in prison. TERRENCE WILLIAMS is also charged with two counts of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison to run consecutively to any other sentence imposed. ALAN ANDERSON is also charged with one count of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison to run consecutively to any other sentence imposed.
The maximum potential sentences in this case are prescribed by Congress and are 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 FBI. In addition to the New York Field Office, Mr. Williams praised the work of the Seattle, Los Angeles, and Salt Lake City field offices.
The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Ryan B. Finkel and Kristy J. Greenberg are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Second Gang Member Pleads Guilty to Firearms Offenses and Admits to Participating in Fatal October 2019 RobberyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that DERRICK CASADO, a/k/a “Big Bank,” a/k/a “Papa D,” pled guilty today to conspiring to distribute 28 grams and more of crack cocaine and using, carrying, possessing, brandishing, and discharging a firearm in connection with a crime of violence—namely, the May 17, 2019 shooting of a rival gang member near Sheridan Avenue and Marcy Place in the Bronx. CASADO was the fourteenth defendant to plead guilty in the case and the second to admit his participation in an October 5, 2019 robbery near 20 East 116th Street in Manhattan, during which CARLOS ROSARIO, a/k/a “Baby Bottle,” shot and killed Jonathan Rodriguez, who tried to intervene in the robbery. On February 9, 2022, ROSARIO pled guilty to conspiring to commit assault with a dangerous weapon and murder in a gang-related incident on July 18, 2019, and two counts of discharging a firearm during gang-related incidents on July 20, 2019 and October 5, 2019. ROSARIO also admitted his role in causing Rodriguez’s death. All of the defendants pled guilty before U.S. District Judge J. Paul Oetken.
According to allegations in the Indictment and Superseding Indictments filed in this case, as well as statements by the Government and defense at plea proceedings in this case:
Between 2017 and 2019, DARRELL LAWRENCE, a/k/a “Capo,” and DAVON MCCULLOUGH, a/k/a “Yung,” a/k/a “Dayday,” were leaders and suppliers of a narcotics conspiracy that operated principally on and around East 176th Street and Anthony Avenue in the Bronx, as well as in Maine and Virginia. Many members of the conspiracy—including CASADO and ROSARIO—were also members of the Mac Ballers gang. Members of the conspiracy trafficked in significant quantities of crack cocaine, heroin, fentanyl, and other dangerous drugs; and they routinely used, carried, and possessed firearms to protect their drug operations and advance their gang interests. For example, on May 17, 2019, CASADO traveled from the area of East 175th Street to Sheridan Avenue near East 169th Street and shot at a member of a rival gang who had insulted CASADO’s gang set on social media. On July 18, 2019, ROSARIO attempted to shoot at other rival gang members in the vicinity of East 178th Street and Anthony Avenue; and two days later, on July 20, 2019, ROSARIO fired shots into the courtyard of an apartment complex at 2000 Valentine Avenue. Then, on September 13, 2019, MCCULLOUGH drove two co-conspirators to commit a robbery of marijuana at a store near 2163 Second Avenue in Manhattan, knowing that at least one of the robbers would use a gun to commit the robbery. During the ensuing robbery, both co-conspirators brandished guns and stole marijuana and proceeds of marijuana sales, among other things. On October 5, 2019, CASADO, ROSARIO, and a third co-conspirator approached and robbed personal property from two individuals near 20 East 116th Street in Manhattan while ROSARIO brandished a firearm and assaulted one of the victims with the firearm. Jonathan Rodriguez attempted to intervene, and as he approached ROSARIO from behind, ROSARIO turned and fired a shot, causing Rodriguez’s death.
CASADO pled guilty today to conspiring to distribute 28 grams and more of crack cocaine and using, carrying, and possessing firearms in connection with a crime of violence, which carry a combined mandatory minimum sentence of fifteen years in prison and a maximum sentence of life in prison. ROSARIO pled guilty to conspiring to commit assault with a dangerous weapon and murder, and two counts of using, carrying, possessing, brandishing, and discharging a firearm during gang related incidents, which carry a combined mandatory minimum sentence of twenty years in prison and a maximum sentence of life in prison.
Among the other defendants to plead guilty in this case, LAWRENCE pled guilty to conspiring to distribute 280 grams and more of crack cocaine, heroin, fentanyl, cocaine, oxycodone, and marijuana, which carries a mandatory minimum sentence of ten years in prison and a maximum sentence of life in prison; and on February 14, 2022, MCCULLOUGH pled guilty to using, carrying, and possessing a firearm in connection with a drug trafficking crime; using, carrying, and possessing a firearm that was brandished in connection with a robbery on September 13, 2019, and conspiring to retaliate against a cooperating witness, which carry a combined mandatory minimum sentence of twelve 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 defendants will be determined by the judge.
ROSARIO is scheduled to be sentenced at 11:30 a.m. on May 26, 2022. MCCULLOUGH is scheduled to be sentenced at 11:00 a.m. on June 30, 2022. LAWRENCE is scheduled to be sentenced at 12:00 p.m. on July 12, 2022. CASADO is scheduled to be sentenced at 11:00 a.m. on October 27, 2022. Each of the defendants will be sentenced by U.S. District Judge J. Paul Oetken.
Mr. Williams praised the outstanding work of the New York City Police Department and Department of Homeland Security-Homeland Security Investigations.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Frank Balsamello, Jamie Bagliebter, and Peter Davis are in charge of the prosecution.
Four Charged in Connection with Multibillion-Dollar Collapse of Archegos Capital ManagementRead the Press Release
An indictment was unsealed today charging Sung Kook (Bill) Hwang, the founder and head of a private investment firm known as Archegos, and Patrick Halligan, Archegos’s Chief Financial Officer, with racketeering conspiracy, securities fraud, and wire fraud offenses in connection with interrelated schemes to unlawfully manipulate the prices of publicly traded securities in Archegos’s portfolio and to defraud many leading global investment banks and brokerages. Deputy Attorney General Lisa O. Monaco, U.S. Attorney Damian Williams for the Southern District of New York and Assistant Director-in-Charge Michael J. Driscoll of the FBI's New York Field Office made the announcement. Both defendants were arrested earlier today and will be presented this afternoon before U.S. Magistrate Judge Jennifer E. Willis. The case has been assigned to U.S. District Judge Andrew L. Carter, Jr.
Also unsealed today are the guilty pleas of Scott Becker and William Tomita in connection with their participation in the conspiracy. Becker pleaded guilty pursuant to an information before U.S. District Judge Laura Taylor Swain on April 21. Tomita pleaded guilty pursuant to an information before Judge Swain on April 21. Both are cooperating with the government.
“Today’s announcement demonstrates the department’s unwavering commitment to hold accountable individuals who distort and defraud our financial markets, including those who occupy the C-Suite,” said Deputy Attorney General Monaco. “That is especially true for this kind of crime — the kind that leaves a financial crater in its wake.”
“We allege that these defendants and their co-conspirators lied to banks to obtain billions of dollars that they then used to inflate the stock price of a number of publicly-traded companies,” said U.S. Attorney Williams. “The lies fed the inflation, and the inflation led to more lies. Round and round it went. In one year, Hwang allegedly turned a $1.5 billion portfolio and pumped it up into a $35 billion portfolio. But last year, the music stopped. The bubble burst. The prices dropped. And when they did, billions of dollars of capital evaporated nearly overnight.”
“As alleged, Hwang and his co-conspirators convinced major financial institutions to enter into agreements with them based on lies, the result of which ultimately led to a massive market manipulation scheme,” said FBI Assistant Director-in-Charge Michael J. Driscoll. “We allege the defendants caused harm to U.S. financial markets and ordinary investors alike, causing significant losses to banks, market participants and Archegos employees. Today’s charges highlight our commitment to making sure the investment arena remains free from fraudulent activity of all kinds.”
According to the allegations in the indictment unsealed today in Manhattan federal court:
Sung Kook (Bill) Hwang is the founder and owner of Archegos Capital Management and its related business entities, which are collectively known as Archegos. As alleged, Hwang, along with Patrick Halligan, Scott Becker and William Tomita lied to banks to obtain billions of dollars that they then used to artificially inflate the stock price of a number of publicly traded companies.
Hwang and his co-conspirators invested in stocks mostly through special contracts with banks and brokers called “swaps.” As alleged, these swaps allowed Hwang to cause massive buying of certain stocks, including at carefully selected days and times, to artificially pump up stock prices. Hwang, Halligan and their co-conspirators lied to banks and used a series of manipulative trading techniques to keep those prices high and prevent them from falling. This led to inflation of these stock prices. In one year, Hwang turned a $1.5 billion portfolio and fraudulently pumped it up into a $35 billion portfolio.
Last year, when the prices fell, Hwang’s positions were sold off and he could no longer manipulate the prices, and billions of dollars of capital evaporated nearly overnight.
As alleged, the defendants committed this fraud in secret. Since 2014, Hwang has run Archegos as a private hedge fund or “family office,” meaning that Archegos, unlike other large hedge funds, was not required to tell regulators information about its holdings and debt that might have shined a light on the fraud and allowed the crisis to be averted.
And because Hwang traded mostly through swaps, he was able to do the buying alleged in the indictment without anyone knowing that Archegos was actually behind all the trading. Regular market participants, and even the companies themselves, were duped into thinking the price increases were caused by the normal interplay of supply and demand when, instead, as alleged, they were the artificial result of Hwang’s manipulative trading.
For example, as alleged, by March 24, 2021, Hwang effectively controlled more than 50% of the freely trading shares of Viacom – and no one outside of Archegos knew about it — not investors purchasing Viacom in the market, or the executives at Viacom itself, or even the banks and brokerages who held the stock as part of the swaps. Because, as alleged, by using various banks and brokerages for his swaps, Hwang made sure that no single institution would have any idea that he was behind all of this trading.
The indictment further alleges that in order to get the billions of dollars Archegos needed to sustain this market manipulation scheme, Hwang and his co-conspirators lied to and misled some of Wall Street’s leading banks about how big Archegos’s investments had become, how much cash Archegos had on hand and the nature of the stocks that Archegos held. As alleged, they told those lies so that the banks would have no idea what Archegos was really up to, how risky the portfolio was, and what would happen if the market turned.
As alleged, just over a year ago, the market turned and the stock prices Hwang and his co-conspirators had artificially inflated crashed, causing immense damage to U.S. financial markets and ordinary investors. In a matter of days, the companies at the center of Archegos’s trading scheme lost more than $100 billion in market capitalization, Archegos owed billions of dollars more than it had on hand, and Archegos collapsed. Market participants who purchased the relevant stocks at artificial prices lost the value they believed their investments held, the banks lost billions of dollars, and Archegos employees, many of whom were required to invest 25% or more of their bonuses with Archegos as deferred compensation, lost millions of dollars.
* * *
A chart containing the names, ages, residences, charges and maximum penalties for the defendants is attached. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
This case was investigated by the U.S. Attorney’s Office for the Southern District of New York and the FBI. The Justice Department’s Organized Crime and Gang Section provided valuable assistance. The U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission, each of which today filed a parallel civil action, assisted and cooperated in this investigation.
If you think you are a victim of the scheme alleged in this press release, you are encouraged to contact law enforcement at [email protected].
This case is being handled by the office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrew Thomas, Matthew Podolsky and Alex Rossmiller are in charge of the prosecution.
An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Defendant
Age
Residence
Charges
Maximum Potential Sentence(s)
United States v. Sung Kook (Bill) Hwang and Patrick Halligan, 22 Cr. 240
HWANG
58
Tenafly, NJ
Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Counts Two and Ten)
Market Manipulation, 15 U.S.C. §§ 78i & 78ff (Counts Two through Nine)
Wire Fraud,
18 U.S.C. § 1343 (Count Eleven)
20 years
20 years (on each count)
20 years (on each count)
20 years
HALLIGAN
45
Syosset, NY
Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Ten)
Wire Fraud,
18 U.S.C. § 1343 (Count Eleven)
20 years
20 years
20 years
United States v. Scott Becker and William Tomita, 22 Cr. 231 (LTS)
BECKER
38
Goshen, NY
Conspiracy to Commit Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
Wire Fraud,
18 U.S.C. § 1343 (Count Three)
20 years
20 years
20 years
TOMITA
38
Greenwich, CT
Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Counts Two and Four)
Market Manipulation, 15 U.S.C. §§ 78i & 78ff (Count Three)
Wire Fraud,
18 U.S.C. § 1343 (Count Five)
20 years
20 years (on each count)
20 years
20 years
Four Charged in Connection with Multi-Billion Dollar Collapse of Archegos Capital ManagementRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Deputy United States Attorney General Lisa O. Monaco, and Michael J. Driscoll, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging SUNG KOOK (BILL) HWANG, the founder and head of a private investment firm known as Archegos, and PATRICK HALLIGAN, Archegos’s Chief Financial Officer, with racketeering conspiracy, securities fraud, and wire fraud offenses in connection with interrelated schemes to unlawfully manipulate the prices of publicly traded securities in Archegos’s portfolio and to defraud many leading global investment banks and brokerages. Both defendants were arrested earlier today and will be presented this afternoon before U.S. Magistrate Judge Jennifer E. Willis. The case has been assigned to U.S. District Court Judge Andrew L. Carter, Jr..
Also unsealed today are the guilty pleas of SCOTT BECKER and WILLIAM TOMITA in connection with their participation in the conspiracy. BECKER pled guilty pursuant to an Information before U.S. District Judge Laura Taylor Swain on April 21, 2022. TOMITA pled guilty pursuant to an Information before Judge Swain on April 21, 2022. Both are cooperating with the Government.
U.S. Attorney Damian Williams said: “We allege that these defendants and their co-conspirators lied to banks to obtain billions of dollars that they then used to inflate the stock price of a number of publicly-traded companies. The lies fed the inflation, and the inflation led to more lies. Round and round it went. In one year, Hwang allegedly turned a $1.5 billion portfolio and pumped it up into a $35 billion portfolio. But last year, the music stopped. The bubble burst. The prices dropped. And when they did, billions of dollars of capital evaporated nearly overnight.”
Deputy Attorney General Lisa O. Monaco said: “Today’s announcement demonstrates the department’s unwavering commitment to hold accountable individuals who distort and defraud our financial markets, including those who occupy the C-Suite. That is especially true for this kind of crime—the kind that leaves a financial crater in its wake.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “As alleged, Hwang and his co-conspirators convinced major financial institutions to enter into agreements with them based on lies, the result of which ultimately led to a massive market manipulation scheme. We allege the defendants caused harm to U.S. financial markets and ordinary investors alike, causing significant losses to banks, market participants, and Archegos employees. Today’s charges highlight our commitment to making sure the investment arena remains free from fraudulent activity of all kinds.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]
SUNG KOOK (BILL) HWANG is the founder and owner of Archegos Capital Management and its related business entities, which are collectively known as Archegos. As alleged, HWANG, along with PATRICK HALLIGAN, SCOTT BECKER, and WILLIAM TOMITA lied to banks to obtain billions of dollars that they then used to artificially inflate the stock price of a number of publicly traded companies.
HWANG and his co-conspirators invested in stocks mostly through special contracts with banks and brokers called “swaps.” As alleged, these swaps allowed HWANG to cause massive buying of certain stocks, including at carefully selected days and times, to artificially pump up stock prices. HWANG, HALLIGAN, and their co-conspirators lied to banks and used a series of manipulative trading techniques to keep those prices high and prevent them from falling. The lies fed the inflation, and the inflation led to more lies. The scale of this alleged fraud was stunning. In one year, Hwang turned a $1.5 billion portfolio and fraudulently pumped it up into a $35 billion portfolio.
Last year, the music stopped. The prices dropped and HWANG was unable to keep the prices propped up. When the prices fell, HWANG’s positions were sold off and he could no longer manipulate the prices, and billions of dollars of capital evaporated nearly overnight.
As alleged, the defendants committed this fraud in secret. Since 2014, HWANG has run Archegos as a private hedge fund or “family office,” meaning that Archegos, unlike other large hedge funds, was not required to tell regulators information about its holdings and debt that might have shined a light on the fraud and allowed the crisis to be averted.
And because HWANG traded mostly through swaps, he was able to do the massive buying alleged in the Indictment without anyone knowing that Archegos was actually behind all the trading. Regular market participants, and even the companies themselves, were duped into thinking the price increases were caused by the normal interplay of supply and demand when, instead, as alleged, they were the artificial result of HWANG’s manipulative trading.
To take just one example, as alleged, by March 24, 2021, HWANG effectively controlled more than 50% of the freely trading shares of Viacom – and no one outside of Archegos knew about it—not investors purchasing Viacom in the market, or the executives at Viacom itself, or even the banks and brokerages who held the stock as part of the swaps. Because, as alleged, by using various banks and brokerages for his swaps, HWANG made sure that no single institution would have any idea that he was behind all of this trading.
The Indictment further alleges that in order to get the billions of dollars Archegos needed to sustain this massive market manipulation scheme, HWANG and his co-conspirators lied to and misled some of Wall Street’s leading banks. They lied about how big Archegos’s investments had become. They lied about how much cash Archegos had on hand. They lied about the nature of the stocks that Archegos held. And, as alleged, they told those lies for a purpose: so that the banks would have no idea what Archegos was really up to, how risky the portfolio was, and what would happen if the bubble burst one day.
As alleged, that day ultimately came. Just over a year ago, the market turned and the stock prices HWANG and his co-conspirators had artificially inflated crashed, causing immense damage to U.S. financial markets and ordinary investors. In a matter of days, the companies at the center of Archegos’s trading scheme lost more than $100 billion in market capitalization, Archegos owed billions of dollars more than it had on hand, and Archegos collapsed. Market participants who purchased the relevant stocks at artificial prices lost the value they believed their investments held, the banks lost billions of dollars, and Archegos employees, many of whom were required to invest 25% or more of their bonuses with Archegos as deferred compensation, lost millions of dollars.
* * *
A chart containing the names, ages, residences, charges, and maximum penalties for the defendants is attached. The maximum potential sentences in this case 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 thanked the Department of Justice’s Organized Crime and Gang Section for its assistance. Mr. Williams further thanked the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission, each of which today filed a parallel civil action.
If you think you are a victim of the scheme alleged in this press release, beginning tomorrow, April 28th, you are encouraged to contact law enforcement at [email protected].
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Andrew Thomas, Matthew Podolsky, and Alex Rossmiller 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.
Defendant
Age
Residence
Charges
Maximum Potential Sentence(s)
United States v. Sung Kook (Bill) Hwang and Patrick Halligan, 22 Cr. 240
HWANG
58
Tenafly, NJ
Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Counts Two and Ten)
Market Manipulation, 15 U.S.C. §§ 78i & 78ff (Counts Two through Nine)
Wire Fraud,
18 U.S.C. § 1343 (Count Eleven)
20 years
20 years (on each count)
20 years (on each count)
20 years
HALLIGAN
45
Syosset, NY
Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Ten)
Wire Fraud,
18 U.S.C. § 1343 (Count Eleven)
20 years
20 years
20 years
United States v. Scott Becker and William Tomita, 22 Cr. 231 (LTS)
BECKER
38
Goshen, NY
Conspiracy to Commit Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Count Two)
Wire Fraud,
18 U.S.C. § 1343 (Count Three)
20 years
20 years
20 years
TOMITA
38
Greenwich, CT
Racketeering Conspiracy, 18 U.S.C. § 1962(d) (Count One)
Securities Fraud, 15 U.S.C. §§ 78j(b) & 78ff (Counts Two and Four)
Market Manipulation, 15 U.S.C. §§ 78i & 78ff (Count Three)
Wire Fraud,
18 U.S.C. § 1343 (Count Five)
20 years
20 years (on each count)
20 years
20 years
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
Financial Advisor Charged in White Plains Federal Court with Embezzlement from ClientRead 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 Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in White Plains federal court charging ADAM BELARDINO, the Chief Executive Officer of the Maddox Group, a financial advisory firm in New York City and elsewhere, with wire fraud in connection with his embezzlement of more than $313,000 from a Maddox client, a 64 year old New Rochelle resident. BELARDINO was arrested this morning and will be presented in White Plains federal court later today.
U.S. Attorney Damian Williams said: “Adam Belardino abused the trust his client placed in him by stealing more than $313,000 the client gave him to be invested. Clients like the victim in this case need to be able to entrust their money to financial advisors with confidence that the money will be invested in a manner that is appropriate for them. This Office will aggressively pursue financial advisors and others who steal money entrusted to them by clients.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “Belardino is charged today for allegedly stealing several hundred thousand dollars from a client in an illegal investment fraud scheme. Financial crimes of this nature can cause significant disruptions to the lives of those who are victimized. We urge everyone to exercise their due diligence when investing their money and to report suspicious activity to authorities as soon as possible.”
According to the Indictment unsealed today in White Plains federal court[1]:
BELARDINO had managed the victim’s investments at another firm before he founded Maddox in July 2019. In August 2019, BELARDINO convinced the victim to liquidate some of her portfolio and to transfer the liquidated funds to Maddox for investment. The victim then transferred more than $313,000 to Maddox in eight separate transactions between August 2019 and October 2020. Instead of investing the victim’s money as he had promised, BELARDINO used the victim’s money to pay the operating expenses of Maddox, including payroll and office rent; to pay down prior debt; to pay credit card charges, which consisted primarily of personal items; and to pay for personal travel.
In September 2021, the victim directed BELARDINO to transfer her portfolio at Maddox to her brokerage account at another firm. From September 2021 to February 2022, BELARDINO sent the victim and members of her family emails and texts in which he said he was liquidating the portfolio and would return the funds shortly. BELARDINO also provided the victim’s family with documents suggesting that a wire transfer of the funds to the victim’s bank account was imminent or pending. BELARDINO also deposited checks drawn on a checking account held by Maddox into the victim’s bank account for what he claimed was the full value of the victim’s portfolio.
The victim never received any funds by wire and the checks BELARDINO deposited into her bank account were returned because the Maddox account did not have sufficient funds to cover the checks. BELARDINO sent members of the victim’s family emails and texts in which he said in substance and in part that he was working with bank officials to resolve the problem and that his family would repay the victim if he was unable to do so. BELARDINO also sent members of the victim’s family a document that falsely stated that the Maddox bank account had sufficient funds to repay the victim.
BELARDINO, 37, of New York City, 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 the judge.
* * *
Mr. Williams praised the investigative work of the FBI.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney James McMahon 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 should be treated as an allegation.
Four Members and Two Associates of the Genovese Organized Crime Family Charged with RacketeeringRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Letitia James, New York State Attorney General, and Eric Gonzalez, Brooklyn District Attorney, announced today the unsealing of a Superseding Indictment charging four members and two associates of the Genovese Organized Crime Family with racketeering.
The Superseding Indictment charges NICHOLAS CALISI and RALPH BALSAMO, alleged Captains in the Family, MICHAEL MESSINA and JOHN CAMPANELLA, alleged Soldiers in the Family, and MICHAEL POLI and THOMAS POLI, alleged associates of the Family, with racketeering conspiracy involving illegal gambling and extortion.
MESSINA was previously arrested and presented before U.S. Magistrate Judge Ona T. Wang on April 12, 2022. BALSAMO, CAMPANELLA, MICHAEL POLI, and THOMAS POLI were arrested today and will be presented in Manhattan federal court before U.S. Magistrate Judge Robert W. Lehrburger this afternoon. CALISI was arrested in Boca Raton, Florida and presented before a U.S. Magistrate Judge in the Southern District of Florida. The case is assigned to United States District Judge John G. Koeltl.
U.S. Attorney Damian Williams said: “From extortion to illegal gambling, the Mafia continues to find ways to prey on others to fill its coffers. Our office and our law enforcement partners remain committed to putting organized crime out of business.”
New York State Attorney General Letitia James said: “For years, members of the Genovese crime family have terrorized New York communities with violence and illegal businesses. These individuals allegedly made their money through illegal gambling and loan sharking — saddling victims with incredible debt that they cannot repay. Today’s indictment makes clear that we will continue to root out organized crime wherever it exists, and I thank U.S. Attorney Damian Williams and Brooklyn District Attorney Eric Gonzalez for their partnership in taking down these criminal enterprises.”
Brooklyn District Attorney Eric Gonzalez said: “Organized crime, and the illegal conduct that flows from its activities, remain a problem in Brooklyn and beyond. My Office is committed to continue working together with our law enforcement partners to investigate these criminal organizations, as we’ve done in this case. I thank the United States Attorney for the Southern District of New York and the New York State Office of the Attorney General for their partnership and cooperation.”
According to the allegations in the Superseding Indictment, which was unsealed today[1]:
The Genovese Organized Crime Family is part of a nationwide criminal organization known by various names, including La Cosa Nostra (“LCN”) and the “Mafia,” which operates through entities known as “Families.”
Like other LCN Families, the Genovese Organized Crime Family operates through groups of individuals known as “crews”. Each “crew” has as its leader a person known as a “Captain” and consists of “made” members, known as “Soldiers.” Soldiers are aided in their criminal endeavors by other trusted individuals, known as “associates,” who sometimes are referred to as “connected” or identified as “with” a Soldier or other member of the Family. Associates participate in the various activities of the crew and its members. In order for an associate to become a made member of the Family, the associate typically needs to demonstrate the ability to generate income for the Family, and/or that the associate is capable of committing acts of violence.
A Captain is responsible for supervising the criminal activities of his crew, resolving disputes between and among members of the Family, resolving disputes between members of the Family and members of other Families and other criminal organizations, and providing Soldiers and associates with support and protection. In return, the Captain typically receives a share of the illegal earnings of each of his crew’s Soldiers and associates.
At times relevant to the charges in the Superseding Indictment, NICHOLAS CALISI and RALPH BALSAMO were Captains in the Genovese Family, MICHAEL MESSINA and JOHN CAMPANELLA were Soldiers in the Genovese Family, and MICHAEL POLI and THOMAS POLI were associates of the Genovese Family.
Members of the Genovese Family, including CALISI, BALSAMO, MESSINA, CAMPANELLA, MICHAEL POLLI, and THOMAS POLLI, engaged in or agreed that others would engage in certain crimes, including making extortionate extensions of credit, financing extortionate extensions of credit, collecting extensions of credit by extortion, extortion, operating illegal gambling businesses, and transmission of gambling information.
* * *
A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties they face is attached. The maximum penalties are prescribed by Congress and are 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 Office of the New York Attorney General’s Organized Crime Task Force and the Kings County District Attorney’s Office and thanked the Federal Bureau of Investigation for its assistance in this investigation.
Assistant U.S. Attorneys Celia V. Cohen, Rushmi Bhaskaran, and Justin Rodriguez, as well as Special Assistant U.S. Attorney Pamela Murray, are in charge of the prosecution. The case is being handled by the Office’s Violent and Organized Crime Unit.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
United States v. Michael Messina, et al., S1 22 Cr. 212 (JGK)
DEFENDANT
AGE
CITY OF RESIDENCE
CHARGES
MAX SENT.
Messina, Michael
69
New Fairfield, CT
18 U.S.C. § 1962(d)
20 years
Calisi, Nicholas
63
Boca Raton, FL
18 U.S.C. § 1962(d)
20 years
Balsamo, Ralph
51
Tuckahoe, NY
18 U.S.C. § 1962(d)
20 years
Campanella, John
47
Bronx, NY
18 U.S.C. § 1962(d)
20 years
Poli, Michael
37
Hawthorne, NY
18 U.S.C. § 1962(d)
20 years
Poli, Thomas
64
Bronx, NY
18 U.S.C. § 1962(d)
20 years
[1] As the introductory phrase signifies, the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
U.S. Attorney Announces Charges Against Two European Citizens for Conspiring with A U.S. Citizen to Assist North Korea in Evading U.S. SanctionsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Matthew G. Olsen, the Assistant Attorney General for National Security, 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 a Superseding Indictment charging ALEJANDRO CAO DE BENOS, a citizen of Spain, and CHRISTOPHER EMMS, a citizen of the United Kingdom, with conspiring to violate United States sanctions on the Democratic People’s Republic of Korea (“DPRK” or “North Korea”) by working with U.S. citizen Virgil Griffith to illegally provide cryptocurrency and blockchain technology services to the DPRK. Both CAO DE BENOS and EMMS remain at large. Griffith previously pled guilty to conspiring to assist North Korea in evading sanctions in violation of the International Emergency Economic Powers Act (“IEEPA”), and was sentenced to 63 months in prison and a $100,000 fine by U.S. District Judge P. Kevin Castel.
U.S. Attorney Damian Williams said: “As alleged, Alejandro Cao de Benos and Christopher Emms conspired with Virgil Griffith, a cryptocurrency expert convicted of conspiring to violate economic sanctions imposed on North Korea, to teach and advise members of the North Korean government on cutting-edge cryptocurrency and blockchain technology, all for the purpose of evading U.S. sanctions meant to stop North Korea’s hostile nuclear ambitions. In his own sales pitch, Emms allegedly advised North Korean officials that cryptocurrency technology made it ‘possible to transfer money across any country in the world regardless of what sanctions or any penalties that are put on any country.’ The sanctions imposed against North Korea are critical in protecting the security interests of Americans, and we continue to aggressively enforce them with our law enforcement partners both here and abroad.”
Assistant Attorney General Matthew G. Olsen said: “The United States will not allow the North Korean regime to use cryptocurrency to evade global sanctions designed to thwart its goals of nuclear proliferation and regional destabilization. This indictment, along with the successful prosecution of co-conspirator, Virgil Griffith, makes clear that the Department will hold anyone, wherever located, accountable for conspiring with North Korea to violate U.S. sanctions.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “The two subjects charged here today, as alleged, conspired to provide financial services to the DPRK in direct violation of sanctions against North Korea imposed by the United States government. Our government puts sanctions in place to protect our national interests, and today's action demonstrates our commitment to enforcing them both domestically and globally.”
According to the allegations contained in the Superseding Indictment unsealed today in Manhattan federal court,[1] as well as other documents in the public record and statements made in public court proceedings in connection with the Griffith prosecution:
Pursuant to the IEEPA and Executive Order 13466, United States persons are prohibited from exporting any goods, services, or technology to the DPRK without a license from the Department of the Treasury, Office of Foreign Assets Control (“OFAC”) and it is illegal to conspire with U.S. persons to do the same.
Beginning in or about early 2018, CAO DE BENOS, the founder of the “Korean Friendship Association,” a pro-DPRK affinity organization, and EMMS, a cryptocurrency businessman, partnered to jointly plan and organize the “Pyongyang Blockchain and Cryptocurrency Conference” (the “DPRK Cryptocurrency Conference”) for the benefit of the DPRK. CAO DE BENOS and EMMS recruited Griffith, an American cryptocurrency expert, to provide services to the DPRK at the DPRK Cryptocurrency Conference and arranged Griffith’s travel to the DPRK in April 2019 for this purpose, in contravention of U.S. sanctions. CAO DE BENOS coordinated approval from the DPRK government for Griffith’s participation in the Conference. EMMS confirmed for Griffith that “the dprk will not stamp your passport,” which could risk revealing Griffith’s travel to U.S. authorities, and that EMMS had “obtained a rare full permission” from the DPRK “for US citizens to enter the country” for the DPRK Cryptocurrency Conference.[2]
At the DPRK Cryptocurrency Conference, EMMS and Griffith provided instruction on how the DPRK could use blockchain and cryptocurrency technology to launder money and evade sanctions. EMMS and Griffith’s presentations at the DPRK Cryptocurrency Conference had been approved by DPRK officials and tailored to the DPRK audience. For example, EMMS opened the DPRK Cryptocurrency Conference by stating that it was a “great honor” to be “leading this delegation” to “explain to you a lot about Blockchain . . . and how you can use this technology here in the DPRK.” EMMS introduced Griffith as an “early scientist” behind blockchain technology, which, according to EMMS, made it “possible to transfer money across any country in the world regardless of what sanctions or any penalties that are put on any country.”
EMMS and Griffith answered specific questions about blockchain and cryptocurrency technologies for the DPRK audience, including individuals whom they understood worked for the North Korean government, proposed plans to create specialized “smart contracts” to serve the DPRK’s unique interests, and mapped out cryptocurrency transactions designed to evade and avoid U.S. sanctions, including by diagramming such transactions on a whiteboard for the North Korean audience. In one question-and-answer session, EMMS described how North Koreans could use over-the-counter cryptocurrency providers in transactions to evade and avoid U.S. sanctions.
After the DPRK Cryptocurrency Conference, CAO DE BENOS and EMMS continued to conspire with Griffith to provide additional cryptocurrency and blockchain technology services to the DPRK, including by seeking to develop potential cryptocurrency infrastructure and equipment inside North Korea, attempting to broker introductions for DPRK Cryptocurrency Conference attendees, through Griffith, to other cryptocurrency service providers, and recruiting others through Griffith’s contacts, including Americans, to provide expert services relating to cryptocurrency to the DPRK. As part of these efforts, CAO DE BENOS, EMMS, and Griffith planned to hold a second cryptocurrency conference in the DPRK in 2020.
CAO DE BENOS and EMMS took steps in an effort to conceal their activity, and Griffith’s role in the conspiracy, from U.S. authorities. Griffith was arrested by U.S. authorities in November 2019, disrupting CAO DE BENOS, EMMS, and Griffith’s scheme and the second conference planned for 2020. At no time did CAO DE BENOS, EMMS, or Griffith obtain permission from OFAC to provide goods, services, or technology to the DPRK.
* * *
CAO DE BENOS, 47, of Spain, and EMMS, 30, of the United Kingdom, are charged with one count of conspiring to violate and evade U.S. sanctions, in violation of IEEPA, which carries a maximum sentence of 20 years in prison.
The maximum potential sentence is prescribed by Congress and is 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 FBI and its New York Field Office, Counterintelligence Division, and thanked the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, the Department of Justice’s Office of International Affairs, U.S. Department of Commerce’s Office of Export Enforcement, and the Singapore Police Force for their assistance.
The case is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorneys Kimberly J. Ravener and Kyle A. Wirshba are in charge of the case, with assistance from Trial Attorney Matthew J. McKenzie of the Counterintelligence and Export Control Section.
The charges in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
[2] The communications described and quoted herein are set forth in substance and in part.
Two European Citizens Charged for Conspiring with a U.S. Citizen to Assist North Korea in Evading U.S. SanctionsRead the Press Release
Two individuals are charged in a superseding indictment, unsealed today in the Southern District of New York, with conspiring to violate U.S. sanctions on the Democratic People’s Republic of Korea (DPRK or North Korea) by working with U.S. citizen Virgil Griffith to illegally provide cryptocurrency and blockchain technology services to the DPRK.
According to court documents, Alejandro Cao De Benos, 47, a citizen of Spain, and Christopher Emms, 30, a citizen of the United Kingdom, partnered to jointly plan and organize the Pyongyang Blockchain and Cryptocurrency Conference (the DPRK Cryptocurrency Conference) for the benefit of the DPRK. Both Cao De Benos and Emms remain at large. Griffith pleaded guilty to conspiring to assist North Korea in evading sanctions in violation of the International Emergency Economic Powers Act (IEEPA), and was sentenced on April 12 to 63 months in prison and a $100,000 fine by U.S. District Judge P. Kevin Castel.
“The United States will not allow the North Korean regime to use cryptocurrency to evade global sanctions designed to thwart its goals of nuclear proliferation and regional destabilization,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “This indictment, along with the successful prosecution of co-conspirator, Virgil Griffith, makes clear that the department will hold anyone, wherever located, accountable for conspiring with North Korea to violate U.S. sanctions.”
“As alleged, Alejandro Cao de Benos and Christopher Emms conspired with Virgil Griffith, a cryptocurrency expert convicted of conspiring to violate economic sanctions imposed on North Korea, to teach and advise members of the North Korean government on cutting-edge cryptocurrency and blockchain technology, all for the purpose of evading U.S. sanctions meant to stop North Korea’s hostile nuclear ambitions,” said U.S. Attorney Damian Williams for the Southern District of New York. “In his own sales pitch, Emms allegedly advised North Korean officials that cryptocurrency technology made it ‘possible to transfer money across any country in the world regardless of what sanctions or any penalties that are put on any country.’ The sanctions imposed against North Korea are critical in protecting the security interests of Americans, and we continue to aggressively enforce them with our law enforcement partners both here and abroad.”
“Those contemplating evading U.S. sanctions against a foreign government should know the FBI and its partners will aggressively investigate these cases,” said Acting Assistant Director Bradley S. Benavides of the FBI’s Counterintelligence Division. “The FBI appreciates the partnership of the U.S. Department of Commerce and the Singapore Police Force, whose work helped secure this indictment.”
Pursuant to the IEEPA and Executive Order 13466, U.S. persons are prohibited from exporting any goods, services or technology to the DPRK without a license from the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and it is illegal to conspire with U.S. persons to do the same.
As alleged in the superseding indictment, beginning in or about early 2018, Cao De Benos, the founder of the Korean Friendship Association, a pro-DPRK affinity organization, and Emms, a cryptocurrency businessman, partnered to jointly plan and organize the DPRK Cryptocurrency Conference for the benefit of the DPRK. Cao De Benos and Emms recruited Griffith, an American cryptocurrency expert, to provide services at the DPRK Cryptocurrency Conference and arranged Griffith’s travel to the DPRK in April 2019 for this purpose, in contravention of U.S. sanctions. Cao De Benos coordinated approval from the DPRK government for Griffith’s participation in the conference. Emms confirmed for Griffith that “the DPRK will not stamp your passport,” which could risk revealing Griffith’s travel to U.S. authorities, and that Emms had “obtained a rare full permission” from the DPRK “for U.S. citizens to enter the country” for the DPRK Cryptocurrency Conference.
According to court documents, at the DPRK Cryptocurrency Conference, Emms and Griffith provided instruction on how the DPRK could use blockchain and cryptocurrency technology to launder money and evade sanctions, and Emms’ and Griffith’s presentations were approved by DPRK officials and tailored to the DPRK audience. For example, Emms opened the DPRK Cryptocurrency Conference by stating that it was a “great honor” to be “leading this delegation” to “explain to you a lot about blockchain . . . and how you can use this technology here in the DPRK.” Emms introduced Griffith as an “early scientist” behind blockchain technology, which, according to Emms, made it “possible to transfer money across any country in the world regardless of what sanctions or any penalties that are put on any country.”
Emms and Griffith answered specific questions about blockchain and cryptocurrency technologies for the DPRK audience, including individuals whom they understood worked for the North Korean government; proposed plans to create specialized “smart contracts” to serve the DPRK’s unique interests; and mapped out cryptocurrency transactions designed to evade and avoid U.S. sanctions, including by diagramming such transactions on a whiteboard for the North Korean audience. In one question-and-answer session, Emms described how North Koreans could use over-the-counter cryptocurrency providers in transactions to evade and avoid U.S. sanctions.
After the DPRK Cryptocurrency Conference, Cao De Benos and Emms continued to conspire with Griffith to provide additional cryptocurrency and blockchain technology services to the DPRK, including by seeking to develop potential cryptocurrency infrastructure and equipment inside North Korea, attempting to broker introductions for DPRK Cryptocurrency Conference attendees, through Griffith, to other cryptocurrency service providers, and recruiting others through Griffith’s contacts, including Americans, to provide expert services relating to cryptocurrency to the DPRK. As part of these efforts, Cao De Benos, Emms and Griffith planned to hold a second cryptocurrency conference in the DPRK in 2020.
As alleged, Cao De Benos and Emms took steps to conceal their activity, and Griffith’s role in the conspiracy from U.S. authorities. Griffith was arrested by U.S. authorities in November 2019, disrupting Cao De Benos, Emms and Griffith’s scheme and the second conference planned for 2020. At no time did Cao De Benos, Emms or Griffith obtain permission from OFAC to provide goods, services or technology to the DPRK.
Cao De Benos and Emms are charged with one count of conspiring to violate and evade U.S. sanctions, in violation of IEEPA, which carries a maximum statutory penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FBI is investigating the case, with valuable assistance provided by the National Security Division’s Counterintelligence and Export Control Section, the Justice Department’s Office of International Affairs, the Department of Commerce’s Office of Export Enforcement, and the Singapore Police Force.
Assistant U.S. Attorneys Kimberly J. Ravener and Kyle A. Wirshba for the Southern District of New York and Trial Attorney Matthew J. McKenzie of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.
An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Former Co-Owner of Vikings Pleads Guilty to Providing Shadow Banking Services to Cryptocurrency ExchangesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that earlier today, REGINALD FOWLER pled guilty to bank fraud, bank fraud conspiracy, operation of an unlicensed money transmitting business, conspiracy to operate an unlicensed money transmitting business, and wire fraud. FOWLER committed the bank fraud and unlicensed money transmitting business offenses in connection with his work for Crypto Capital, a payment processor that provided fiat-currency banking services to various cryptocurrency exchanges through a series of bank accounts opened under false pretenses. As part of the scheme, Crypto Capital and FOWLER fraudulently processed transactions equaling approximately $750 million in deposits and withdrawals from such exchanges. In addition, FOWLER defrauded the Alliance of American Football (“AAF”) by, among other things, claiming that millions of dollars belonging to Crypto Capital and/or Global Trading Solutions customers were instead his own assets, which he was free to use to secure his investments in the AAF. Based on those misrepresentations, FOWLER acquired a significant investment stake in the AAF yet was unable to fund that investment, which contributed to the AAF’s demise.
Two of FOWLER’s co-conspirators, OZ YOSEF and RAVID YOSEF, remain at large.
U.S. Attorney Damian Williams said: “Reginald Fowler helped process hundreds of millions of dollars of unregulated transactions on behalf of numerous cryptocurrency exchanges, skirting the anti-money laundering safeguards required of licensed institutions that ensure the U.S. financial system is not used for criminal purposes, and lying to U.S. banks whose own policies would otherwise have prevented it. As the trade in cryptocurrencies continues to grow, it is essential that it be conducted in a lawful and transparent manner that does not permit its use by criminal actors. Today’s guilty plea reflects this Office’s continued commitment to the investigation and prosecution of those in the cryptocurrency sector who seek to continue to operate in the shadows.”
According to the allegations in the Indictment, the Superseding Indictments, and statements made during the plea and other proceedings in the case[1]:
In or about February 2018, REGINALD FOWLER established Global Trading Solutions LLC (“GTS”) and began working with Crypto Capital and other related companies (the “Crypto Companies”) , which were operated by Israeli nationals OZ YOSEF and RAVID YOSEF, among others. The Crypto Companies marketed themselves as providing a seamless way for individuals to exchange government-backed, or “fiat,” currency for cryptocurrency. The Crypto Companies offered these services at a time when traditional banks were reluctant to handle cryptocurrency transactions. Because of the demand for the Crypto Companies’ services, a number of cryptocurrency exchanges began using the Crypto Companies to process their fiat-to-cryptocurrency transactions.
In reality, the Crypto Companies lied to banks in order to open accounts that were used to process cryptocurrency transactions without the banks’ knowledge. FOWLER opened dozens of such accounts in the United States and around the world. In general, he represented to banks that GTS and related companies were engaged in real estate and that funds coming into the GTS bank accounts represented real estate investments or rental payments from properties GTS developed. FOWLER did not disclose GTS’s involvement with the Crypto Companies and the fact that it was operating as a payment processor for hundreds of millions of dollars in cryptocurrency transactions.
Additionally, FOWLER directed other individuals to include false information on wire transfer instructions to further deceive banks about the nature of GTS’s business. These false statements would suggest that outgoing wires were related to real estate transactions. In email communications with RAVID YOSEF and others, the co-conspirators discussed the need to ensure that wire narratives were consistent with the false information FOWLER had provided banks at account opening. As banks became aware of FOWLER’s misrepresentations, they shut down GTS bank accounts and FOWLER would move the scheme to new banks. In less than ten months, FOWLER processed approximately $750 million in cryptocurrency transactions in various currencies, nearly $600 million in United States dollars.
Even though FOWLER was receiving and directing monetary transactions on behalf of third parties, neither he, GTS, nor any of the Crypto Companies were ever licensed as a money transmitting business in the United States, as required by federal law.
Additionally, in 2018, FOWLER defrauded the AAF, a short-lived professional football league, in connection with his acquisition of a significant ownership stake in the league. In the course of negotiating his investment in the AAF, FOWLER falsely claimed personal ownership of GTS funds that in fact belonged to clients of FOWLER’s illegal money transmission service established in support of the Crypto Companies. As he did when opening bank accounts, FOWLER told AAF executives that the funds in the GTS bank accounts derived from real estate investments as well as government contracts and that the tens of millions of dollars in the GTS accounts were liquid assets he could use to invest in the AAF. FOWLER did not disclose his involvement with the Crypto Companies. Moreover, although FOWLER experienced account closures and government seizure of GTS funds in the month leading up to his investment in the AAF, FOWLER did not disclose those facts to the AAF. FOWLER acquired a significant investment stake in the AAF in November 2018, yet was unable to fund that investment.
* * *
FOWLER, 63, of Chandler, Arizona, pled guilty today to one count of bank fraud, one count of conspiracy to commit bank fraud, one count of operating an unlicensed money transmitting business, one count of conspiracy to operate an unlicensed money transmitting business, and one count of wire fraud. These offenses carry a total maximum sentence of 90 years in prison.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as FOWLER’s sentence will be determined by the judge.
FOWLER is scheduled to be sentenced by U.S. District Judge Andrew Carter at 2:00pm on August 30, 2022.
Mr. Williams praised the outstanding investigative work of Special Agents from Federal Bureau of Investigation’s New York Money Laundering Investigation Squad, and Special Agents from the Internal Revenue Service-Criminal Investigations.
The prosecution of this case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Jessica Fender, Jessica Greenwood, Samuel Raymond, Samuel Rothschild, and Sheb Swett are in charge of the prosecution.
[1] As to FOWLER’s co-defendants, the entirety of the text of the Indictments and the descriptions in the Indictments set forth below constitute only allegations, and every fact described should be treated as an allegation.
Putnam County Narcotics Dealer Arrested in Connection with the Murder of One of His CustomersRead the Press Release
Dwayne Pulliam Arrested for Participating in a Conspiracy to Distribute Crack Cocaine and for Traveling Interstate and Using Facilities of Interstate Commerce to Operate a Narcotics Business Enterprise, and Murdering a Customer He Believed Was Stealing from That Business
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Kevin McConville, the Sheriff of the Putnam County Sheriff’s Office, announced today the filing of a criminal complaint in White Plains federal court charging DWAYNE PULLIAM, a/k/a “Doc,” with: (1) participating in a crack-cocaine-distribution conspiracy; and (2) traveling between New York and Connecticut, and using cellphones, to operate a narcotics business enterprise—his business selling crack cocaine—and murdering Lori Lee Campbell, a customer he believed was stealing from his business. PULLIAM was arrested yesterday afternoon in the area of New Milford, Connecticut, and was presented yesterday before United States Magistrate Judge Andrew E. Krause. PULLIAM was ordered held without bail.
As alleged in the Complaint[1]:
In or about December 2020, PULLIAM was released from approximately 24 years of prison for murder. Not long afterward, from at least in or about January 2022, PULLIAM engaged with others in the business of selling crack cocaine, traveling between New York and Connecticut to do so, and using phones to do so.
On March 29, 2022, PULLIAM contacted a co-conspirator of his in the drug trade and asked him to help move an Acura that belonged to Lori Lee Campbell. PULLIAM told his co-conspirator that he suspected that Campbell was stealing drugs from him, that PULLIAM confronted Campbell, that Campbell tried to leave but PULLIAM did not let her do so, and that Campbell started screaming. PULLIAM then told his co-conspirator that he “stopped her from screaming” and that this was not the first time he had “done this.”
When the co-conspirator went with PULLIAM back to PULLIAM’s apartment in Patterson, New York, the co-conspirator saw Campbell’s dead body in the apartment, wrapped in a sheet. PULLIAM said “there’s the culprit,” and then directed his co-conspirator to help him move the body, threatening to kill the co-conspirator’s family if the co-conspirator did not do so. The co-conspirator helped PULLIAM move the body to PULLIAM’s Honda Accord, and they then drove to PULLIAM’s mother’s house in North Carolina. PULLIAM and his co-conspirator got shovels, a bag of lime, and plastic wrap from a shed by PULLIAM’s mother’s house, and drove Campbell’s body to a cul-de-sac, where her body was ultimately covered in lime and buried in a shallow grave.
On April 19, 2021, law enforcement officers found and recovered Campbell’s body from the area in North Carolina where PULLIAM’s co-conspirator said it was buried.
* * *
DWAYNE PULLIAM, a/k/a “Doc,” 59, of Patterson, New York is charged with one count of traveling in interstate commerce, and using a facility in interstate commerce, with intent to engage in a business enterprise involving narcotics, and thereafter committing murder to further that unlawful activity, and one count of participating in a conspiracy to distribute and possess with intent to distribute 28 grams and more of crack cocaine. The travel act count carries a maximum sentence of life in prison. The narcotics conspiracy count carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 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 a judge.
Mr. Williams praised the outstanding work of the FBI Safe Streets Task Force, the FBI Charlotte Division, the DEA New York Division, the Putnam County Sheriff’s Office, the Alamance County Sherriff’s Office, the Connecticut State Police, and the Putnam County District Attorney’s Office. Mr. Williams noted that the investigation is ongoing.
The case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Michael D. Maimin and T. Josiah Pertz 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, constitutes only allegations, and every fact described therein should be treated as an allegation.
Two Leaders of ‘We Build the Wall’ Online Fundraising Campaign Plead Guilty to Defrauding Hundreds of Thousands of DonorsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that BRIAN KOLFAGE and ANDREW BADOLATO pled guilty today in connection with their roles in defrauding hundreds of thousands of donors to an online crowdfunding campaign known as “We Build the Wall.” Both defendants pled guilty before United States District Judge Analisa Torres.
According to the Indictment filed in the case:
Starting in approximately December 2018, BRIAN KOLFAGE, ANDREW BADOLATO, and others orchestrated a scheme to defraud hundreds of thousands of donors, including donors in the Southern District of New York, in connection with an online crowdfunding campaign ultimately known as “We Build The Wall” that raised more than $25,000,000 to build a wall along the southern border of the United States. In particular, to induce donors to donate to the campaign, KOLFAGE repeatedly and falsely assured the public that he would “not take a penny in salary or compensation” and that “100% of the funds raised . . . will be used in the execution of our mission and purpose.”
Those representations were false. In truth, KOLFAGE, BADOLATO, and others received hundreds of thousands of dollars in donor funds from We Build the Wall, which they each used in a manner inconsistent with the organization’s public representations. For example, KOLFAGE covertly took for his personal use more than $350,000 in funds that donors had given to We Build the Wall. To conceal the payments to KOLFAGE from We Build the Wall, KOLFAGE, BADOLATO, and others devised a scheme to route those payments from We Build the Wall to KOLFAGE indirectly. They did so by using fake invoices and sham “vendor” arrangements, among other ways, to ensure, as KOLFAGE noted in a text message to BADOLATO, that his pay arrangement remained “completely confidential” and kept on a “need to know” basis.
* * *
KOLFAGE, 39, and BADOLATO, 57, both residents of Florida, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. In the same proceeding, KOLFAGE also pled guilty to tax and wire fraud charges filed by the United States Attorney’s Office for the Northern District of Florida.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Both KOLFAGE and BADOLATO are scheduled to be sentenced at 1:00 pm on September 6, 2022, by Judge Torres.
Mr. Williams praised the outstanding investigative work of the United States Postal Inspection Service and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Nicolas Roos, Alison G. Moe, and Robert B. Sobelman are in charge of the prosecution.
Two Georgia Residents Charged with Conspiring to Traffic FirearmsRead 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 Office of the Federal Bureau of Investigation (“FBI”), and Police Commissioner John Mueller, Yonkers Police Department, announced charges today against BRYCE MARTIN and XAVIER SIMMS for conspiring to traffic firearms from Georgia to New York. The defendants traveled together with a third co-conspirator who opened fire on a FBI Federal Task Force Officer after law enforcement attempted to interdict in Yonkers, New York on April 20, 2022. The defendants were presented in White Plains federal court this afternoon before United States Magistrate Andrew E. Krause.
U.S. Attorney Damian Williams said: “Gun crime is plaguing our communities, and the actions of the criminals using them are putting lives in danger. Our law enforcement partners are out doing all they can to get illegal weapons and ‘ghost guns’ off the streets before more people get killed. The violence has to stop, and we have to hold accountable those who are breaking the law.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “As we allege today, Mr. Martin and Mr. Simms conspired to illegally traffic firearms, and, when law enforcement attempted to intervene, one of their co-conspirators shot and critically wounded one of our task force officers. Subsequent investigation resulted in the recovery of several firearms, including a "ghost gun," an untraceable type of weapon that continues to pose a significant threat in our communities. We are grateful for the survival of our partner, and our thoughts remain with him and his loved ones as he continues to recover from his injuries.”
Commissioner Mueller said: “The Yonkers Police and our fantastic federal, state and local partners will never stop from providing a safe and secure environment for our beloved residents. What took place in this incident is yet another example of the hard work and commitment to mission and heroism. These efforts occur each and every day and will continue for as long as is needed to make our communities safe.”
As alleged in the Complaint[1]:
On April 20, 2022, members of the FBI Westchester Safe Streets Task Force and the Yonkers Police Department were investigating illegal firearms activity in the vicinity of Elm and Linden streets in Yonkers, New York. During the course of their investigation, they attempted to interdict members of the conspiracy, including Bryce MARTIN and Xavier SIMMS. A third co-conspirator (“CC-1”) shot and critically wounded an FBI Task Force Officer, at close range, after law enforcement approached members of the conspiracy, including MARTIN and SIMMS.
Law enforcement recovered at least four firearms from members of the conspiracy, including a “Ghost Gun”—a type of firearm that is designed to evade law enforcement detection. Later investigation revealed that SIMMS and MARTIN traveled together with CC-1 from Georgia with several firearms to sell. Evidence recovered from their cellphones showed that SIMMS and MARTIN both had access to specialized firearms, including machinegun-style weapons.
* * *
MARTIN, 23, of Hampton, Georgia, is charged with one count of conspiring to traffic firearms, which carries a maximum sentence of five years’ imprisonment.
SIMMS, 22, of Covington, Georgia, is charged with one count of conspiring to traffic firearms, which carries a maximum sentence of five years’ imprisonment.
The maximum potential sentences in this case are prescribed by Congress and are 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 FBI and the Yonkers Police Department.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Shiva H. Logarajah and Kevin T. Sullivan are 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 Indictment and Complaint and the descriptions of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Juan Orlando Hernández, expresidente de Honduras, acusado por narcotráfico y armas de fuego, extraditado a los Estados Unidos desde HondurasRead the Press Release
Juan Orlando Hernández, alias JOH, de 53 años, expresidente de Honduras, tendrá su comparecencia inicial mañana, 22 de abril, ante el juez de primera instancia Stewart D. Aaron en un tribunal federal en Nueva York luego de ser extraditado hoy desde Honduras. Un tribunal federal reveló hoy los cargos de tráfico de drogas y armas en una acusación enmendada contra Hernández.
La acusación formal alega que desde al menos alrededor de 2004, hasta alrededor de 2022, inclusive, Hernández, que fue presidente de Honduras durante dos mandatos, participó en una conspiración corrupta y violenta de narcotráfico para facilitar la importación de cientos de miles de kilogramos de cocaína a los Estados Unidos. Hernández supuestamente recibió millones de dólares para usar su cargo público, las fuerzas del orden público y el ejército para apoyar a las organizaciones de narcotráfico en Honduras, México y otros lugares.
“El Departamento de Justicia está adoptando un enfoque integral para proteger a nuestras comunidades y nuestro país de los delitos violentos,” señaló el fiscal general Merrick B. Garland. “El Departamento está comprometido a desarticular todo el ecosistema de las redes de tráfico de drogas que dañan al pueblo estadounidense, sin importar cuán lejos o cuán alto debamos llegar.”
“Juan Orlando Hernández, el reciente expresidente de Honduras, supuestamente se asoció con algunos de los narcotraficantes más prolíficos del mundo para construir un imperio corrupto y brutalmente violento basado en el tráfico ilegal de toneladas de cocaína a los Estados Unidos,” expresó el fiscal federal para el Distrito Sur de Nueva York, Damian Williams. “Se alega que Hernández usó sus vastos poderes políticos para proteger y ayudar a los narcotraficantes y líderes de cárteles, alertándolos sobre posibles interdicciones y permitiendo la violencia fuertemente armada para apoyar su tráfico de drogas. Felicito a los fiscales de carrera del Distrito Sur de Nueva York por sus incansables esfuerzos para desarticular todo el ecosistema del tráfico de drogas ilícitas, desde traficantes callejeros hasta un exlíder mundial, y todo lo demás.”
“La extradición de hoy muestra claramente que la DEA no se detendrá ante nada para perseguir a los actores políticos más poderosos que participan en el tráfico de drogas, la violencia y la corrupción,” sentenció la administradora de la DEA, Anne Milgram. “La investigación de varios años de la DEA reveló que Juan Orlando Hernández, el ex presidente de Honduras, fue una figura central en una de las mayores y más violentas conspiraciones de tráfico de cocaína del mundo. Hernández usó las ganancias del narcotráfico para financiar su ascenso político y, una vez elegido Presidente, aprovechó los recursos policiales, militares y financieros del gobierno de Honduras para promover su plan de narcotráfico. Este caso debería enviar un mensaje, a todos los líderes políticos del mundo que comercian con posiciones de influencia para fomentar el crimen organizado transnacional, de que la DEA no se detendrá ante nada para investigar estos casos y desmantelar las organizaciones de narcotraficantes que amenazan la seguridad y la salud del pueblo estadounidense.”
Según la acusación enmendada, Hernández protegió a algunos de los mayores narcotraficantes del mundo, incluido su hermano y ex miembro del Congreso Nacional de Honduras, Juan Antonio Hernández Alvarado (Hernández Alvarado), alias Tony Hernández, contra la investigación, el arresto y la extradición; hizo que se proporcionara información confidencial militar y policial a los traficantes de drogas para ayudarlos a transportar toneladas de cocaína a través de Honduras con destino a los Estados Unidos; ordenó a miembros fuertemente armados de la Policía Nacional de Honduras y del ejército hondureño que protegieran los cargamentos de drogas mientras transitaban por Honduras; y permitió la violencia brutal.
Como congresista, luego Presidente del Congreso Nacional de Honduras y finalmente Presidente de Honduras durante dos mandatos, Hernández supuestamente recibió millones de dólares en ganancias de la cocaína que usó para enriquecerse, financiar sus campañas políticas y cometer fraude electoral mientras el pueblo de Honduras soportaba condiciones de pobreza y violencia desenfrenada.
Desde por lo menos 2004, las organizaciones de tráfico de drogas en Honduras han trabajado para recibir toneladas de cocaína enviadas a Honduras desde, entre otros lugares, Colombia y Venezuela, a través de rutas marítimas y aéreas. Estas organizaciones luego transportaron la cocaína hacia el oeste en Honduras hacia su frontera con Guatemala y, finalmente, al norte hacia los Estados Unidos. Durante este tiempo, los miembros de esta conspiración transportaron más de 500,000 kilogramos de cocaína a través de Honduras y hacia los Estados Unidos. Para garantizar que estos envíos masivos de cocaína pasaran con seguridad por Honduras, las mayores organizaciones de tráfico de drogas de la región obtuvieron el apoyo y la protección directa de ciertos funcionarios públicos hondureños prominentes, incluido Hernández. A cambio, estos traficantes pagaron millones de dólares en sobornos a Hernández y otros funcionarios públicos.
Según se alega, como congresista y luego Presidente de Honduras, Hernández se asoció con el exlíder del Cártel de Sinaloa, Joaquín Guzmán Loera (Guzmán Loera), alias El Chapo, entre otros individuos. Aproximadamente en 2013, mientras Hernández estaba haciendo campaña para convertirse en Presidente, aceptó aproximadamente 1 millón de dólares en ganancias del narcotráfico de Guzmán Loera. Hernández envió a Hernández Alvarado y un asociado, armados con ametralladoras, a cobrar el soborno de 1 millón de dólares de Guzmán Loera. A cambio, Hernández prometió seguir protegiendo las actividades de narcotráfico del Cártel de Sinaloa en Honduras.
Como se alega, aproximadamente en 2013 y 2014, Hernández se asoció con el traficante hondureño de cocaína a gran escala y violento, Geovanny Fuentes Ramírez. Durante múltiples reuniones entre Hernández y Fuentes Ramírez, Fuentes Ramírez sobornó a Hernández para obtener protección y seguridad para sus actividades de narcotráfico. Hernández informó a Fuentes Ramírez, en parte, que Hernández quería que Fuentes Ramírez se asociara con Hernández Alvarado, quien estaba manejando actividades de narcotráfico en Honduras, y que Hernández iba a “meter la droga en las narices de los gringos.”
Además de Guzmán Loera y Fuentes Ramírez, otros narcotraficantes prolíficos en Honduras y Guatemala pagaron a Hernández sobornos provenientes de las ganancias de las drogas para apoyar su carrera política a cambio de la protección y la colaboración de Hernández en su narcotráfico. Hernández usó estos sobornos estimulados por la cocaína para asegurar su continuo ascenso en la política hondureña, incluida su elección como Presidente en 2013 y 2017. En relación con las elecciones de 2013 y 2017, Hernández ordenó a los miembros de esta conspiración que sobornaran a políticos y funcionarios electorales con ganancias de las drogas para garantizar que Hernández ganara la presidencia.
En 2018, Hernández Alvarado fue imputado en el Distrito Sur de Nueva York en relación con su participación en esta conspiración, y posteriormente fue condenado tras el juicio el 18 de octubre de 2019. Mientras el caso de Hernández Alvarado estaba pendiente, Hernández continuó coordinando de cerca con traficantes a gran escala, incluido Fuentes Ramírez, quien continuó pagando sobornos a Hernández por protección. Además, durante el juicio de Hernández Alvarado, se introdujeron como prueba libros de contabilidad de drogas pertenecientes a otro exnarcotraficante hondureño y cómplice, mencionado en la acusación formal como “CC-2”. Estos libros de contabilidad contenían, entre otras cosas, anotaciones con el nombre de Hernández Alvarado y “JOH”, las iniciales de Hernández, junto con los asientos correspondientes que reflejaban grandes pagos a Hernández y Hernández Alvarado.
Aproximadamente una semana después de la condena de Hernández Alvarado, presos armados con machetes y un arma de fuego asesinaron a CC-2 en una prisión de Honduras para evitar la posible cooperación de CC-2 contra, entre otros, Hernández.
El 27 de enero de 2022, Hernández fue imputado en la acusación sdustitutiva y se emitió una orden de arresto en su contra.
El 15 de febrero de 2022, Hernández fue arrestado y detenido por las autoridades hondureñas a petición de los Estados Unidos. Posteriormente, los Estados Unidos presentaron una solicitud formal de extradición, que fue concedida por el juez de primera instancia de Honduras. Hernández apeló la decisión de extradición ante el Tribunal Supremo de Justicia de Honduras. El 28 de marzo, el Tribunal Supremo de Honduras rechazó su apelación. El 6 de abril, el Tribunal Ad Hoc de la Sala Constitucional del Tribunal Supremo de Justicia de Honduras determinó que la apelación final de Hernández era inadmisible. El 13 de abril, el gobierno de Honduras certificó la finalización de los procedimientos de extradición de conformidad con las órdenes judiciales anteriores, lo que resultó en la entrega de Hernández a los Estados Unidos el 21 de abril.
Hernández está imputado de tres cargos: (1) conspiración para importar cocaína a los Estados Unidos, lo que conlleva una sentencia mínima obligatoria de 10 años y una sentencia máxima de cadena perpetua; (2) usar y portar ametralladoras y dispositivos destructivos durante la conspiración para importar cocaína, y poseer ametralladoras y dispositivos destructivos para promover la conspiración de importación de cocaína, que conlleva una sentencia mínima obligatoria de 30 años y una sentencia máxima de cadena perpetua; y (3) conspiración para usar y portar ametralladoras y dispositivos destructivos durante la conspiración de importación de cocaína, y poseer ametralladoras y dispositivos destructivos para promover la conspiración de importación de cocaína, que conlleva una sentencia máxima de cadena perpetua. Un juez de un tribunal de distrito federal determinará la sentencia después de considerar las Pautas de sentencia de los EE. UU. y otros factores legales.
La División de Operaciones Especiales de la DEA, la Fuerza de Ataque de Nueva York y la Oficina Regional de Tegucigalpa investigaron el caso. La Oficina de Asuntos Internacionales del Departamento de Justicia brindó una valiosa asistencia para asegurar el arresto y la extradición de Hernández.
Este enjuiciamiento es parte de una operación de las Fuerzas de Tarea contra la Delincuencia Organizada y los Delitos Asociados al Narcotráfico (OCDETF, por sus siglas en inglés). Se puede encontrar información adicional sobre el Programa OCDETF en https://www.justice.gov/OCDETF.
Los fiscales federales adjuntos Jacob H. Gutwillig, Michael D. Lockard, Jason A. Richman y Elinor L. Tarlow del Distrito Sur de Nueva York procesan el caso.
Los cargos en la acusación enmendada son simplemente acusaciones, y se presume inocente al acusado hasta que se pruebe su culpabilidad más allá de toda duda razonable en un tribunal de justicia.
English
Juan Orlando Hernández, Former President of Honduras, Indicted on Drug-Trafficking and Firearms Charges, Extradited to the United States from HondurasRead the Press Release
Juan Orlando Hernández, aka JOH, 53, the former President of Honduras, will make his initial appearance tomorrow, April 22, before Magistrate Judge Stewart D. Aaron in federal court in New York after being extradited today from Honduras. A federal court unsealed drug-trafficking and weapons charges today in a superseding indictment against Hernández.
The indictment charges that from at least in or about 2004, up to and including in or about 2022, Hernández, the former two-term President of Honduras, participated in a corrupt and violent drug-trafficking conspiracy to facilitate the importation of hundreds of thousands of kilograms of cocaine into the United States. Hernández allegedly received millions of dollars to use his public office, law enforcement, and the military to support drug-trafficking organizations in Honduras, Mexico, and elsewhere.
“The Justice Department is taking a comprehensive approach to protecting our communities and our country from violent crime,” said Attorney General Merrick B. Garland. “The Department is committed to disrupting the entire ecosystem of drug trafficking networks that harm the American people, no matter how far or how high we must go.”
“Juan Orlando Hernández, the recent former President of Honduras, allegedly partnered with some of the world’s most prolific narcotics traffickers to build a corrupt and brutally violent empire based on the illegal trafficking of tons of cocaine to the United States,” said U.S. Attorney Damian Williams for the Southern District of New York. “Hernández is alleged to have used his vast political powers to protect and assist drug traffickers and cartel leaders by alerting them to possible interdictions, and sanctioning heavily armed violence to support their drug trade. I commend the career prosecutors of the Southern District of New York for their tireless efforts to disrupt the entire illicit drug trafficking ecosystem, from street-level dealers to a former world leader, and everything in-between.”
“Today’s extradition clearly shows that the DEA will stop at nothing to pursue the most powerful political actors who engage in drug trafficking, violence, and corruption,” said Administrator Anne Milgram of the Drug Enforcement Administration (DEA). “DEA’s multi-year investigation revealed that Juan Orlando Hernández, the former President of Honduras, was a central figure in one of the largest and most violent cocaine trafficking conspiracies in the world. Hernández used drug trafficking proceeds to finance his political ascent and, once elected President, leveraged the Government of Honduras’ law enforcement, military, and financial resources to further his drug trafficking scheme. This case should send a message – to all political leaders around the world that trade on positions of influence to further transnational organized crime – that the DEA will stop at nothing to investigate these cases and dismantle drug trafficking organizations that threaten the safety and health of the American people.”
According to the superseding indictment, Hernández protected some of the largest drug traffickers in the world, including his brother and former member of the Honduran National Congress, Juan Antonio Hernández Alvarado (Hernández Alvarado), aka Tony Hernández, from investigation, arrest, and extradition; caused sensitive law enforcement and military information to be provided to drug traffickers to aid them in transporting tons of cocaine through Honduras bound for the United States; directed heavily-armed members of the Honduran National Police and Honduran military to protect drug shipments as they transited Honduras; and sanctioned brutal violence.
As a congressman, then President of the Honduran National Congress, and finally the two-term President of Honduras, Hernández was allegedly paid millions of dollars in cocaine proceeds which he used to enrich himself, finance his political campaigns, and commit voter fraud while the people of Honduras endured conditions of poverty and rampant violence.
Since at least 2004, drug-trafficking organizations in Honduras have worked to receive tons of cocaine sent to Honduras from, among other places, Colombia and Venezuela, via maritime and air routes. These organizations then transited the cocaine westward in Honduras toward its border with Guatemala and eventually north to the United States. During this time, members of this conspiracy transported more than 500,000 kilograms of cocaine through Honduras and into the United States. In order to ensure that these massive cocaine shipments safely passed through Honduras, the largest drug-trafficking organizations in the region obtained the support and direct protection of certain prominent Honduran public officials, including Hernández. In return, these traffickers paid millions of dollars in bribes to Hernández and other public officials.
As alleged, as a congressman and then President of Honduras, Hernández partnered with the former leader of the Sinaloa Cartel, Joaquín Guzman Loera (Guzman Loera), aka El Chapo, among other people. In or about 2013, as Hernández was campaigning to become president, he accepted approximately $1 million in drug-trafficking proceeds from Guzman Loera. Hernández sent Hernández Alvarado and an associate, armed with machine guns, to collect the $1 million bribe from Guzman Loera. In exchange, Hernández promised to continue protecting the Sinaloa Cartel’s drug-trafficking activities in Honduras.
As alleged, in or about 2013 and 2014, Hernández partnered with violent and large-scale Honduran cocaine trafficker Geovanny Fuentes Ramirez. During multiple meetings between Hernández and Fuentes Ramirez, Fuentes Ramirez bribed Hernández for protection and security for his drug-trafficking activities. Hernández informed Fuentes Ramirez, in part, that Hernández wanted Fuentes Ramirez to partner with Hernández Alvarado, who was managing drug-trafficking activities in Honduras, and that Hernández was going to “stuff the drugs right up the noses of the gringos.”
In addition to Guzman Loera and Fuentes Ramirez, other prolific traffickers in Honduras and Guatemala provided Hernández with bribes from drug proceeds to support his political career in exchange for Hernández’s protection and partnership in their drug trafficking. Hernández used these cocaine-fueled bribes to ensure his continued ascendancy in Honduran politics, including his election as President in 2013 and 2017. In connection with both the 2013 and 2017 elections, Hernández directed members of this conspiracy to bribe politicians and election officials with drug proceeds to ensure that Hernández won the presidency.
In 2018, Hernández Alvarado was charged in the Southern District of New York in connection with his participation in this conspiracy, and he was subsequently convicted after trial on Oct. 18, 2019. While Hernández Alvarado’s case was pending, Hernández continued to coordinate closely with large-scale traffickers, including Fuentes Ramirez, who continued to pay Hernández bribes for protection. Further, during Hernández Alvarado’s trial, drug ledgers belonging to another former Honduran drug trafficker and co-conspirator, referred to in the superseding indictment as “CC-2,” were introduced into evidence. These ledgers contained, among other things, notations with Hernández Alvarado’s name and “JOH,” Hernández’s initials, along with corresponding entries reflecting large payments to Hernández and Hernández Alvarado. Approximately one week after Hernández Alvarado was convicted, prisoners armed with machetes and a firearm murdered CC-2 in a Honduran prison to prevent CC-2’s potential cooperation against, among others, Hernández.
On Jan. 27, 2022, Hernández was charged in the superseding indictment and a warrant was issued for his arrest.
On Feb. 15, 2022, Hernández was arrested and detained by Honduran authorities at the request of the United States. The United States thereafter submitted a formal extradition request, which the Honduran Magistrate Judge granted. Hernández appealed the extradition decision to the Honduran Supreme Court. On March 28, the Honduran Supreme Court denied his appeal. On April 6, the Ad Hoc Tribunal of the Constitutional Chamber of the Honduran Supreme Court determined Hernández’s final appeal was inadmissible. On April 13, the Government of Honduras certified the completion of the extradition proceedings consistent with the previous court orders, resulting in Hernández’s surrender to the United States on April 21.
Hernández is charged with three counts: (1) conspiring to import cocaine into the United States, which carries a mandatory minimum sentence of 10 years and a maximum sentence of life in prison; (2) using and carrying machine guns and destructive devices during, and possessing machine guns and destructive devices in furtherance of, the cocaine importation conspiracy, which carries a mandatory minimum sentence of 30 years and a maximum sentence of life in prison; and (3) conspiring to use and carry machine guns and destructive devices during, and to possess machine guns and destructive devices in furtherance of, the cocaine importation conspiracy, which carries a maximum sentence of life in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The DEA’s Special Operations Division, New York Strike Force, and Tegucigalpa Country Office investigated the case. The Justice Department’s Office of International Affairs provided valuable assistance in securing Hernández’s arrest and extradition.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation. Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.
Assistant U.S. Attorneys Jacob H. Gutwillig, Michael D. Lockard, Jason A. Richman, and Elinor L. Tarlow for the Southern District of New York prosecuting the case.
The charges in the superseding indictment are merely accusations, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
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Juan Orlando Hernandez, Former President of Honduras, Extradited to the United States on Drug-Trafficking and Firearms ChargesRead the Press Release
Merrick Garland, the Attorney General of the United States, Damian Williams, the United States Attorney for the Southern District of New York, and Anne Milgram, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced today the unsealing of drug-trafficking and weapons charges contained in a Superseding Indictment against JUAN ORLANDO HERNANDEZ, a/k/a “JOH,” the former President of Honduras. The case is pending before U.S. District Judge P. Kevin Castel. HERNANDEZ, 53, a Honduran national, is expected to arrive in the Southern District of New York today and will have his initial appearance tomorrow, April 22, 2022, before Magistrate Judge Stewart D. Aaron.
From at least in or about 2004, up to and including in or about 2022, HERNANDEZ, the former two-term President of Honduras, allegedly participated in a corrupt and violent drug-trafficking conspiracy to facilitate the importation of hundreds of thousands of kilograms of cocaine into the United States. HERNANDEZ allegedly received millions of dollars to use his public office, law enforcement, and the military to support drug-trafficking organizations in Honduras, Mexico, and elsewhere.
Attorney General Merrick B. Garland said: “The Justice Department is taking a comprehensive approach to protecting our communities and our country from violent crime. The Department is committed to disrupting the entire ecosystem of drug trafficking networks that harm the American people, no matter how far, or how high we must go.”
U.S. Attorney Damian Williams said: “Juan Orlando Hernandez, the recent former President of Honduras, allegedly partnered with some of the world’s most prolific narcotics traffickers to build a corrupt and brutally violent empire based on the illegal trafficking of tons of cocaine to the United States. Hernandez is alleged to have used his vast political powers to protect and assist drug traffickers and cartel leaders by alerting them to possible interdictions, and sanctioning heavily-armed violence to support their drug trade. I commend the career prosecutors of the Southern District of New York for their tireless efforts to disrupt the entire illicit drug-trafficking ecosystem, from street-level dealers to a former world leader, and everything in-between.”
DEA Administrator Anne Milgram said: “Today’s extradition clearly shows that the DEA will stop at nothing to pursue the most powerful political actors who engage in drug trafficking, violence, and corruption. DEA’s multi-year investigation revealed that Juan Orlando Hernandez, the former President of Honduras, was a central figure in one of the largest and most violent cocaine-trafficking conspiracies in the world. Hernandez used drug-trafficking proceeds to finance his political ascent and, once elected President, leveraged the Government of Honduras’ law enforcement, military, and financial resources to further his drug-trafficking scheme. This case should send a message—to all political leaders around the world that trade on positions of influence to further transnational organized crime—that the DEA will stop at nothing to investigate these cases and dismantle drug-trafficking organizations that threaten the safety and health of the American people.”
According to the allegations contained in the Superseding Indictment, other court filings, and statements made during court proceedings[1]:
HERNANDEZ protected some of the largest drug traffickers in the world, including his brother and former member of the Honduran National Congress, Juan Antonio Hernandez Alvarado (“Hernandez Alvarado”), a/k/a “Tony Hernandez,” from investigation, arrest, and extradition; caused sensitive law enforcement and military information to be provided to drug traffickers to aid them in transporting tons of cocaine through Honduras, bound for the United States; directed heavily-armed members of the Honduran National Police and Honduran military to protect drug shipments as they transited Honduras; and sanctioned brutal violence.
As a Congressman, then the President of the Honduran National Congress, and finally the two-term President of Honduras, HERNANDEZ was allegedly paid millions of dollars in cocaine proceeds, which he used to enrich himself, finance his political campaigns, and commit voter fraud while the people of Honduras endured conditions of poverty and rampant violence.
Since at least in or about 2004, drug-trafficking organizations in Honduras have worked together to receive tons of cocaine sent to Honduras from, among other places, Colombia and Venezuela, via maritime and air routes. These organizations then transited the cocaine westward in Honduras toward its border with Guatemala and eventually north to the United States. During this time, members of this conspiracy transported more than 500,000 kilograms of cocaine through Honduras and into the United States. In order to ensure that these massive cocaine shipments safely passed through Honduras, the largest drug-trafficking organizations in the region obtained the support and direct protection of certain prominent Honduran public officials, including HERNANDEZ. In return, these traffickers paid millions of dollars in bribes to HERNANDEZ and other public officials.
As a Congressman and then President of Honduras, HERNANDEZ partnered with, among others, the former leader of the Sinaloa Cartel, Joaquín Guzman Loera (“Guzman Loera”), a/k/a “El Chapo.” In or about 2013, as HERNANDEZ was campaigning to become President, he accepted approximately $1 million in drug-trafficking proceeds from Guzman Loera. HERNANDEZ sent Hernandez Alvarado and an associate, armed with machine guns, to collect the $1 million bribe from Guzman Loera. In exchange, HERNANDEZ promised to continue protecting the Sinaloa Cartel’s drug-trafficking activities in Honduras.
In or about 2013 and 2014, HERNANDEZ partnered with a violent and large-scale Honduran cocaine trafficker named Geovanny Fuentes Ramirez (“Fuentes Ramirez”). During multiple meetings between HERNANDEZ and Fuentes Ramirez, Fuentes Ramirez bribed HERNANDEZ for protection and security for his drug-trafficking activities. HERNANDEZ informed Fuentes Ramirez, in part, that HERNANDEZ wanted Fuentes Ramirez to partner with Hernandez Alvarado, who was managing drug-trafficking activities in Honduras, and that HERNANDEZ was going to “stuff the drugs right up the noses of the gringos.”
In addition to Guzman Loera and Fuentes Ramirez, some of the most prolific traffickers in Honduras and Guatemala provided HERNANDEZ with bribes from drug proceeds to support his political career in exchange for HERNANDEZ’s protection and partnership in their drug trafficking. HERNANDEZ used these cocaine-fueled bribes to ensure his continued ascendancy in Honduran politics, including his election as President in 2013 and 2017. In connection with both the 2013 and 2017 elections, HERNANDEZ directed members of this conspiracy to bribe politicians and election officials with drug proceeds to ensure that HERNANDEZ won the presidency.
In 2018, Hernandez Alvarado was charged in the Southern District of New York in connection with his participation in this conspiracy, and he was subsequently convicted after trial on October 18, 2019. While Hernandez Alvarado’s case was pending, HERNANDEZ continued to coordinate closely with large-scale traffickers, including Fuentes Ramirez, who continued to pay HERNANDEZ bribes for protection. Further, during Hernandez Alvarado’s trial, drug ledgers belonging to another former Honduran drug trafficker and co-conspirator, referred to in the Superseding Indictment as “CC-2,” were introduced into evidence. These ledgers contained, among other things, notations with Hernandez Alvarado’s name and “JOH,” HERNANDEZ’s initials, along with corresponding entries reflecting large payments to HERNANDEZ and Hernandez Alvarado. Approximately one week after Hernandez Alvarado was convicted, prisoners armed with machetes and a firearm murdered CC-2 in a Honduran prison to prevent CC-2’s potential cooperation against, among others, HERNANDEZ.
On the afternoon of January 27, 2022, HERNANDEZ was charged in the Superseding Indictment and a warrant was issued for his arrest.
On February 15, 2022, HERNANDEZ was arrested and detained by Honduran authorities at the request of the United States. The United States thereafter submitted a formal extradition request, which the Honduran Magistrate Judge granted. HERNANDEZ appealed the extradition decision to the Honduran Supreme Court. On March 28, the Honduran Supreme Court denied his appeal. On April 6, the Ad Hoc Tribunal of the Constitutional Chamber of the Honduran Supreme Court determined HERNANDEZ’s final appeal was inadmissible. On April 13, the Government of Honduras certified the completion of the extradition proceedings consistent with the previous court orders, resulting in HERNANDEZ’s surrender to the United States on April 21.
* * *
HERNANDEZ is charged with three counts: (1) conspiring to import cocaine into the United States, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; (2) using and carrying machine guns and destructive devices during, and possessing machine guns and destructive devices in furtherance of, the cocaine-importation conspiracy, which carries a mandatory minimum sentence of 30 years in prison and a maximum sentence of life in prison; and (3) conspiring to use and carry machine guns and destructive devices during, and to possess machine guns and destructive devices in furtherance of, the cocaine importation conspiracy, which carries a maximum sentence of life in prison.
The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and 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 DEA’s Special Operations Division, New York Strike Force, and Tegucigalpa Country Office, as well as the assistance of the Office of International Affairs of the Justice Department’s Criminal Division in the arrest and extradition of HERNANDEZ.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation. OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.
This case is being handled by the U.S. Attorney’s Office’s National Security and International Narcotics Unit. Assistant U.S. Attorneys Jacob H. Gutwillig, Michael D. Lockard, Jason A. Richman, and Elinor L. Tarlow are in charge of the prosecution.
The charges in the Superseding 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 Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Chinese National Sentenced to 52 Months for $20 Million Covid-19 Pandemic Loan Fraud SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that MUGE MA, a/k/a “Hummer Mars,” was sentenced to 52 months in prison in connection with a fraudulent scheme to obtain over $20 million in Government-guaranteed loans designed to provide relief to small businesses during the novel coronavirus/COVID-19 pandemic. In connection with loan applications for relief available from the Paycheck Protection Program (“PPP”) and the Economic Injury Disaster Loan (“EIDL”) Program, MA falsely represented to the U.S. Small Business Administration (“SBA”) and six financial institutions that his companies, New York International Capital LLC (“NYIC”) and Hurley Human Resources LLC (“Hurley”), had hundreds of employees and paid millions of dollars in wages to those employees, when, in fact, MA appears to have been the only employee of his companies. MA previously pled guilty to bank fraud and aggravated identity theft before U.S. District Judge Richard M. Berman, who imposed today’s sentence. MA was arrested on May 21, 2020 and has been detained since his arrest.
U.S. Attorney Damian Williams said: “Within days of Congress authorizing billions of dollars to help small businesses struggling to make ends meet during the COVID-19 pandemic, Muge Ma saw it as an opportunity to enrich himself by applying for millions of dollars in funds to pay wages to hundreds of employees that never existed. Today’s sentence demonstrates that this Office and our law enforcement partners will work tirelessly to prosecute those who sought to commit pandemic relief fraud.”
According to public filings in Manhattan federal court:
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 SBA’s PPP. Pursuant to the CARES Act, the amount of PPP funds a business is eligible to receive is determined by the number of employees employed by the business and their average payroll costs. Businesses applying for a PPP loan must provide documentation to confirm that they have previously paid employees the compensation represented in the loan application. The CARES Act also expanded the separate EIDL Program, which provided small businesses with low-interest loans of up to $2 million that can provide vital economic support to help overcome the temporary loss of revenue they are experiencing due to COVID-19.
From at least in or about March 2020 through at least on or about May 15, 2020, MA applied to the SBA and at least six banks for a total of over $20 million in Government-guaranteed loans for his companies NYIC and Hurley (together, the “Ma Companies”) through the SBA’s PPP and EIDL Program. In connection with these loan applications, MA represented, among other things, that he was the sole owner and executive director of the Ma Companies, that the Ma Companies were located on the sixth floor of his luxury condominium building in New York, New York, and that NYIC and Hurley together had hundreds of employees and paid millions of dollars in wages to those employees on a monthly basis. In fact, however, MA appears to have been the only employee of NYIC since at least in or about 2019, and Hurley does not appear to have any employees. In order to support the false representations made by MA in the loan applications about the number of employees at, and the wages paid by, the Ma Companies, MA submitted fraudulent and doctored bank records, tax records, insurance records, payroll records, and/or audited financial statements to six different banks, and also provided links to the Ma Companies’ websites, which describe them as purportedly “global” companies. MA also used the name and identity of another person in connection with the submission of a fraudulent loan application and supporting documentation to at least one financial institution.
Before the discovery of the fraudulent conduct by MA, the SBA approved a $500,000 EIDL Program loan for NYIC and a $150,000 EIDL Program loan for Hurley, and $20,000 in loans advances were provided to MA by the SBA. In addition, a bank approved and disbursed over approximately $800,000 in PPP loan funds for Hurley, which were frozen in connection with this investigation. MA thereafter withdrew his loan applications from the banks and returned the funds.
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Mr. Williams praised the investigative work of the FBI’s Financial Cybercrimes Task Force, SBA-OIG, and IRS-CI. Mr. Williams also thanked the Office of the New York State Comptroller, the New York State Department of Labor, and the New York City Police Department for their assistance with the investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
Man Charged with Defrauding Customers Who Sought to Buy Cryptocurrency-Mining Computers and Miner-Hosting ServicesRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, and Michael J. Driscoll, Assistant Director-in-Charge, New York Division of the Federal Bureau of Investigation (“FBI”), announced the arrest today of CHET STOJANOVICH, a/k/a “Chester J. Stojanovich,” on charges of defrauding more than a dozen victims of more than $1.8 million, through fraudulent misrepresentations that he would provide the victims with specialized cryptocurrency-mining computers (“Miners”), and that he would provide Miner-hosting services that would provide the victims with a lucrative stream of “hash power” convertible into cryptocurrency. Instead, as alleged, STOJANOVICH deceived his victims, misappropriated his victims’ money, and provided them with almost no Miners, Miner-hosting services, or hash power. The defendant was arrested early this morning after crossing from Canada into the United States at Champlain, New York. He is expected to appear tomorrow before U.S. Magistrate Judge Stewart D. Aaron in the Southern District of New York.
U.S. Attorney Damian Williams said: “A great deal of excitement and ‘buzz’ has been generated in recent years about the ‘new world’ of cryptocurrency mining. But new financial frontiers can also generate fresh opportunities for old-fashioned fraud. Here, Chet Stojanovich is charged with using those time-worn fraud techniques on a new frontier.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “As alleged, Mr. Stojanovich induced his victims to invest in his fraudulent cryptocurrency mining schemes, and caused them to incur losses approaching $2 million. Today's action should serve as an example of the FBI's commitment to rooting out financial fraud, as well as our focus on identifying and investigating emerging threats as they evolve.”
According to the allegations contained in the Complaint, and publicly available information:[1]
Since at least 2019, STOJANOVICH has controlled various companies, including Chet Mining Co. LLC (“Chet Mining”). Starting in or about March 2019, STOJANOVICH engaged in a scheme to defraud people who were seeking to purchase Miners and Miner-hosting services through which they expected to obtain “hash power” convertible into cryptocurrency and money. STOJANOVICH defrauded these victims by falsely telling them that: (1) he would purchase, and had purchased, Miners on their behalf; and (2) he would provide them with Miner-hosting services and had already obtained such Miner-hosting services for them. In fact, STOJANOVICH failed to deliver the promised Miners and Miner-hosting services.
In all, STOJANOVICH induced more than a dozen customer-victims to pay a total of more than $1.84 million to STOJANOVICH and his companies, ostensibly in return for Miners and Miner-hosting services. Despite fraudulent representations to the contrary, STOJANOVICH: (1) failed to provide many of the Miners that he told customers he had acquired; (2) failed to provide the hosting services and cryptocurrency hash power that he represented that he would provide; (3) employed deceptive practices to create the illusion that such Miners had been acquired and were being used to provide hash power to those customers; and (4) misappropriated his customers’ funds and spent the funds on unrelated and personal expenditures, including by spending a substantial portion those funds on personal expenses, including chartered air flights, hotel rooms, limousines, and private parties.
Defrauding at Least 10 Victims in 2019
In the spring and early summer of 2019, STOJANOVICH fraudulently induced at least 10 customers to pay a total of more than $1.66 million to STOJANOVICH and Chet Mining, in return for Miners and Miner-hosting services. Between March and July 2019, based on these and other misrepresentations, STOJANOVICH issued at least 15 invoices to these 10 victims, with instructions to make payment to STOJANOVICH or one of his companies. As directed by STOJANOVICH, these 10 customers paid STOJANOVICH a total of approximately $1,618,000 in bank wires and cryptocurrency transfers. However, STOJANOVICH failed to provide the Miners and Miner-hosting services that he had agreed to provide and for which he had been paid.
Defrauding 3 More Victims in 2021
In or about August and September 2021, STOJANOVICH induced at least three additional customer-victims to pay him a total of approximately $179,880, as payment for a total of 127 Miners. Ultimately, STOJANOVICH provided those customers with only 3 of the 127 Miners they had paid for and repaid those customers only approximately $61,000 of the $179,880 they had paid.
The March 2022 Deposition
Several of the victims of the scheme described in the Complaint brought lawsuits against STOJANOVICH in federal court in Manhattan. In one such lawsuit, Holmes et al. v. Chet Mining, Chet Stojanovich, et ano., Case No. 1:20-CV-04448-LJL (S.D.N.Y.), STOJANOVICH was ordered by the court to appear for a deposition on March 4, 2022. During that deposition, STOJANOVICH testified falsely on a number of subjects. For example, in response to several questions, STOJANOVICH testified that he did not know the answers without looking in his personal cellphone, and falsely testified that his phone was downstairs in his rental car or in storage. The deposition was thereupon adjourned for a half-hour, and STOJANOVICH was instructed to retrieve his cellphone and return to the deposition. Instead, STOJANOVICH left the deposition and loitered in the vicinity of his car until after everyone else participating in the deposition had left. Shortly thereafter, he returned to Canada, where he has been residing in recent weeks.
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STOJANOVICH, 37, previously of Manhattan but in recent months apparently residing in Canada, is charged with one count of wire fraud, which carries a maximum penalty 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 work of the FBI for its assistance in this investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney David Raymond Lewis 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 therein should be treated as an allegation.
Israeli Corporate Lawyer Charged in Insider Trading SchemeRead 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 today the unsealing of a criminal indictment charging MOSHE STRUGANO, an Israeli lawyer specializing in the creation of offshore companies, with securities fraud and conspiracy to commit securities fraud in connection with a scheme to commit insider trading based on material, nonpublic information regarding the upcoming public announcement that Ormat Technologies Inc. (“Ormat”), a renewable energy company, would be acquiring U.S. Geothermal, Inc. (“U.S. Geothermal”). The United States intends to seek the extradition of STRUGANO.
U.S. Attorney Damian Williams said: “As alleged, Moshe Strugano, a corporate lawyer, traded on nonpublic information for personal gain. His charged actions show a brazen disregard for laws intended to keep a level playing field for investors.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “Time and again, we see greedy, unscrupulous actors trade securities based upon their access to material non-public information. As alleged, Mr. Strugano is another in a long series of similar illegal actors. Today's action is an example of our commitment to insuring our financial markets are fair for all investors.”
According to the allegations in the Indictment unsealed today in Manhattan federal court[1]:
Ormat is a publicly traded renewable energy company headquartered in Nevada with offices and facilities in Yavne, Israel.
U.S. Geothermal was a publicly traded renewable energy company that operated geothermal power projects in Oregon, Nevada, and Idaho. U.S. Geothermal’s common stock traded under the symbol “HTM” on the NYSE American.
Between in or about September 2017 and January 2018, Ormat engaged in merger negotiations with U.S. Geothermal. A co-conspirator not named in the Indictment (“CC-1”) served as Ormat’s Head of Mergers and Acquisitions and was one of Ormat’s principal negotiators for the deal. In that role, CC-1 had access to material, nonpublic information about the deal. CC-1 and STRUGANO, who both lived in the vicinity of Tel Aviv, Israel, maintained a personal relationship and friendship.
On or about December 19, 2017, the Ormat board approved acquiring U.S. Geothermal at a price of up to $5.50 per share, which was U.S. Geothermal’s asking price prior to the Ormat board meeting. Almost immediately after the Ormat board meeting ended, CC-1 tipped off STRUGANO that the Ormat-U.S. Geothermal deal was going to close through a coded WhatsApp message. Within minutes of receiving that message, STRUGANO placed a failed WhatsApp call to his broker (the “Broker”) for a bank account he controlled at a Swiss bank (“Bank-1”). STRUGANO then tried to call the Broker another four times over the next four minutes. Minutes later, STRUGANO placed a telephonic order with Bank-1 to purchase over $20,000 in U.S. Geothermal shares. This was the first time STRUGANO had ever asked Bank-1 to purchase U.S. Geothermal stock for his accounts.
Over the next several weeks, STRUGANO directed the Broker to purchase large blocks of U.S. Geothermal shares. By January 18, 2018, STRUGANO had purchased over $2.7 million in U.S. Geothermal shares, for an approximately 3.8% equity stake in the company. For the time period from December 19, 2017 through January 18, 2018, STRUGANO was responsible for approximately one third of the total trading volume in U.S. Geothermal stock.
On January 18, 2018, STRUGANO was informed that his account at Bank-1 was in shortfall. STRUGANO asked the Broker to buy him time to cover the shortfall, asking for a few days, and then on January 24, 2018, for a few more hours. Less than an hour later, Ormat and U.S. Geothermal announced their merger. When the market opened that day, the U.S. Geothermal stock price jumped. After the deal was announced, STRUGANO sold all of his shares and realized profits of approximately $1.2 million.
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STRUGANO, 52, of Caesarea, Israel, is charged with one count of conspiracy to commit securities fraud, which has a maximum sentence of five years in prison, and two counts of securities fraud, which have maximum sentences of 20 and 25 years in prison, respectively.
The statutory maximum sentences are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Williams praised the outstanding work of the FBI. Mr. Williams further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action against the defendant, for its assistance and cooperation in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Matthew R. Shahabian and Jordan Estes 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 Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former Brooklyn Supreme Court Justice Sentenced to 15 Months in Prison for Obstructing Federal Investigation of Misconduct at Municipal Credit UnionRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, announced that SYLVIA ASH, a former justice of the New York State Supreme Court and chair of the Board of Directors of Municipal Credit Union (“MCU”), was sentenced today in Manhattan federal court to 15 months in prison for conspiracy to obstruct justice, obstruction of justice, and making a false statement to a federal agent. These charges arose from a scheme to impede the federal criminal investigation into fraud and corruption at MCU, a non-profit, multibillion-dollar financial institution, including misconduct committed by Kam Wong, the former chief executive officer (“CEO”), and Joseph Guagliardo, a former New York City Police Department Officer and member of MCU’s Supervisory Committee. Wong and Guagliardo were charged separately and previously pled guilty to embezzlement from MCU. ASH was convicted in December 2021 after a two-week jury trial before U.S. District Judge Lewis A. Kaplan, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “While serving as a sitting state judge, Sylvia Ash took repeated steps, over multiple months, to seek to obstruct the federal criminal investigation into misconduct at MCU that took place during Ash’s tenure as chair of its Board of Directors. Ash agreed to do so with the now imprisoned former CEO of the credit union, who provided her with a steady stream of benefits from MCU, including after she was directed to resign from MCU’s board. Today’s sentence sends a clear message that those who attempt to thwart a federal investigation face serious consequences for that corrosive conduct.”
In pronouncing the sentence, Judge Kaplan said ASH’s “crimes struck at the heart of the criminal justice system.”
According to the Complaint, Indictment, Superseding Indictment, publicly available information, court filings, and evidence presented during the trial in Manhattan federal court:
Municipal Credit Union
MCU is a non-profit financial institution headquartered in New York, New York, which is federally insured by the National Credit Union Administration (“NCUA”). MCU is the oldest credit union in New York State and one of the oldest and largest in the country, providing banking services to more than 590,000 members, and with more than $4.2 billion in member accounts, each of which is insured for at least $250,000 by the National Credit Union Share Insurance Fund, which is administered by the NCUA. Membership in MCU is generally available to employees of New York City and its agencies, employees of the federal and New York state governments who work in New York City, and employees of hospitals, nursing homes, and similar facilities located within New York State.
At all relevant times, MCU was overseen by a Board of Directors (the “Board”) and a Supervisory Committee, each of which was composed of members of MCU, who were not supposed to be compensated. As a result of severe deficiencies in the Board’s and the Supervisory Committee’s oversight of the credit union, which came to light in connection with the federal investigation, the New York Department of Financial Services (“DFS”) removed the members of the Supervisory Committee in May 2018 and the Board in June 2018. Subsequently, DFS appointed NCUA as the conservator for the credit union. In or about February 2022, MCU successfully emerged from conservatorship under new leadership.
ASH
ASH served as a judge in the New York State court system from approximately 2006 through March 2022, first as a Kings County Civil Court Judge, and then, starting in 2011, as a Kings County Supreme Court Justice. In or about January 2016, ASH was appointed as the presiding judge in the Kings County Supreme Court’s Commercial Division. After the charges in this case were unsealed, ASH was suspended from her position. In or about March 2022, after ASH was convicted, she vacated her judicial office.
ASH served on MCU’s Board from in or about May 2008 until on or about August 15, 2016, when she resigned. From in or about May 2015 until her resignation, ASH served as the chair of the Board. ASH resigned after a complaint was filed against her by the New York State Commission on Judicial Conduct arising from a conflict of interest between her position as a state judge and her membership on MCU’s Board. More than a year before her resignation, ASH had been instructed to resign from MCU’s Board by the Advisory Committee on Judicial Ethics, which instruction she disregarded.
From at least in or about 2012 through 2016, while serving as an MCU Board member and while Wong was CEO, ASH received annually tens of thousands of dollars in reimbursements and other benefits from MCU, many of which were personal in nature, and not business-related, including airfare, hotels, food and entertainment expenses for her and a guest to attend conferences both domestically and abroad, annual birthday parties at a minor league baseball stadium, payment for phone and cable bills, and electronic devices. Even after her resignation from the Board, Wong continued to provide or cause MCU to provide ASH with benefits, such as Apple devices and sports tickets. As a sitting state judge, ASH was required to report both her board service and gifts and benefits she received from any outside sources on an annual state disclosure form. But between at least 2012 and 2018, ASH never reported her board service nor any gifts or benefits from MCU.
ASH’s Obstruction of Justice
In January 2018, after Wong, MCU’s then-CEO, had been approached by federal law enforcement agents investigating apparent financial misconduct by Wong, in an attempt to protect Wong, ASH agreed to and did sign a false and misleading memorandum purporting to explain and justify millions of dollars Wong had received from MCU. Wong subsequently provided that false and misleading memorandum to federal agents in an attempt to demonstrate that the millions of dollars had purportedly been orally approved for him to receive by ASH in June 2015, when she was chair of the Board. However, in truth, neither ASH nor the Board had approved the payment of those funds.
On March 1, 2018, shortly after Wong was placed on administrative leave by MCU, ASH was interviewed about the memorandum she signed for Wong. During that interview, ASH admitted that the memorandum was not accurate, but attempted to justify the money that Wong received by stating that MCU’s then-current general counsel had told her that Wong’s employment contract gave him the option of receiving such money. That statement was false.
On March 13, 2018, ASH was served with a federal grand jury subpoena (the “First Subpoena”), which required the production of documents related to various matters, including Wong’s compensation, and any communications with Wong through the date of the First Subpoena. On April 6, 2018, during a telephonic interview with a federal agent, ASH falsely stated that she did not have any materials responsive to the First Subpoena.
On June 8, 2018—after Wong was charged with embezzlement from MCU and the Government executed a judicially-authorized search of the residence of Guagliardo—ASH was interviewed by telephone for a second time about the First Subpoena. During that interview, ASH again falsely stated that she did not have any materials responsive to the First Subpoena.
On June 18, 2018, ASH was served with a second federal grand jury subpoena (the “Second Subpoena”), which required the production of, among other things, all correspondence with Wong and Guagliardo; all documents regarding any criminal investigation, internal investigation, or audit related to Wong; and all documents regarding items of value ASH received from MCU, Wong, or Guagliardo. Shortly afterward, ASH went to an Apple store and wiped an iPhone X that Wong had provided her in January 2018. In addition, ASH deleted emails from her Gmail account, including all of her emails with Guagliardo, none of which she produced in response to either of the two federal grand jury subpoenas directed to her. ASH also later wiped two MCU-issued iPads she had received.
On July 6, 2018, on ASH’s behalf, her then-counsel produced materials to the Government in response to the Second Subpoena. This production was materially incomplete, and did not contain text messages, emails, and other documents ASH possessed or had under her custody or control that were responsive to the Second Subpoena.
On July 9, 2018, ASH attended a voluntary interview with the U.S. Attorney’s Office. During this interview, while accompanied by her then-counsel, ASH made multiple false statements, including repeating false statements regarding her purported conversations with MCU’s former general counsel about Wong’s receipt of cash payments and falsely claiming that she and her aunt took a trip to Las Vegas paid for by MCU, including airfare, lodging, and entertainment expenses, after she resigned because all of her travel arrangements were paid for by MCU before she resigned, when in truth all of the expenses were paid for after she resigned.
On or about October 11, 2019, ASH was arrested, and her cellphone was seized. After obtaining a judicially authorized search warrant, ASH’s phone was searched, which revealed, among other things, numerous text messages, including with Wong and Guagliardo, that were concealed in response to the First and Second Subpoenas.
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In addition to her prison term, ASH, 64, of Brooklyn, New York, was sentenced to a $80,000 fine, and two years of supervised release, including a special condition of twenty hours of community service per week while on supervised release. The court reserved the decision on restitution to MCU.
On June 4, 2019, Wong was sentenced to 66 months’ imprisonment for embezzlement from MCU and was ordered to forfeit $9,890,375 and to pay restitution in the same amount to MCU.
On July 23, 2020, Guagliardo was sentenced to 27 months’ imprisonment for embezzlement from MCU and was ordered to forfeit $425,514 and to pay $468,189 in restitution to MCU.
U.S. Attorney Williams praised the outstanding work of the Special Agents of the United States Attorney’s Office. Mr. Williams also thanked the New York County District Attorney’s Office and DFS for their assistance.
The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Eli J. Mark, Daniel C. Richenthal, and Jonathan Rebold are in charge of the prosecution, with the assistance of Special Assistant U.S. Attorney Alona S. Katz from the New York County District Attorney’s Office.
“Diamond Enterprise” Boss Sentenced to 51 Months in Prison in Connection with Criminal Acts Including Racketeering, Threats, Money Laundering, Fraud, and GamblingRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that ABDURAMAN ISENI, a/k/a “Diamond” was sentenced to 51 months in prison, based on his leadership of a multi-year racketeering enterprise from in or about 2017 through 2020, and criminal offenses related to threats, money laundering, bank fraud, false statements to a bank, and illegal gambling. ISENI committed these offenses despite two prior federal convictions in the Southern District of New York for racketeering and money laundering. ISENI previously pled guilty before U.S. District Judge Andrew L. Carter, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “Serving more than a decade in federal prison should have demonstrated to Abduraman Iseni the consequences of serious crimes. But instead, after his release he went back to racketeering, threats, money laundering, and other offenses. Today’s sentence should send a message that this Office will make every effort to hold dangerous, recidivist felons to account.”
According to the Indictment, public court filings, and statements made in court:
ISENI oversaw a racketeering enterprise referred to in the Indictment as the “Diamond Enterprise”. The Diamond Enterprise was an organized criminal group operating under ISENI’s direction. ISENI offered his protection, connections, and substantial influence in the criminal underworld to other members of the racketeering enterprise, in exchange for a share of their illegal profits. The Diamond Enterprise thrived in part on the revenues generated by a network of illegal gambling parlors – “Sports Café,” “Friendly Café,” and “Oasis Café” – located throughout Brooklyn, that hosted underground poker games and hosted illegal sports books. Some of these revenues, in turn, were laundered through a series of bank accounts in an effort to conceal and facilitate the Enterprise’s continued operations.
In addition to the Enterprise’s operations, ISENI separately admitted to threatening a victim with physical violence, including an incident where he held a fork close to a co-defendant’s eye and threatened to jab it in, and a host of additional crimes, including money laundering, bank fraud conspiracy, and making false statements to a bank for the purpose of inducing the bank to release funds to which ISENI was not entitled.
Prior to this more recent conduct, Iseni was twice convicted of federal offenses in the Southern District of New York – a 1996 conviction for racketeering and a 2012 conviction for money laundering – and served over a decade in federal prison.
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In addition to his prison term, ISENI, 56, of Staten Island, was sentenced to three years of supervised release. He was also ordered to forfeit $349,000 and to pay a $5,000 fine.
Mr. Williams praised the outstanding work of FBI New York’s Balkans and Middle East Organized Crime Squad, the FBI’s Newark Office, the United States Customs and Border Protection, the Department of State Diplomatic Security Service, the Small Business Administration Office of the Inspector General, the Social Security Administration Office of the Inspector General, the New York State Liquor Authority, and the New York City Police Department, 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 Samuel L. Raymond and David R. Felton are in charge of the case.
Recidivist Fraudster Indicted in Connection with at Least $40 Million Ponzi Scheme, SBA Loan Fraud, and Another Fraud SchemeRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, and Michael J. Driscoll, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (FBI), announced the indictment of FRANKLIN RAY for conspiracy to commit wire fraud, wire fraud, and aggravated identity theft, in connection with various fraud schemes relating to his operation of a trucking business known as CSA Business Solutions LLC. RAY, who was previously convicted of wire fraud and bank fraud in the Eastern District of Michigan and was released from prison in 2010, and a co-defendant, JOSEPH WINGET, were arrested in connection with certain of these schemes pursuant to a criminal complaint in early March.
U.S. Attorney Damian Williams said: “We allege Ray used his purported trucking companies as vehicles for fraud, including by submitting fraudulent applications for small business loans during the Covid-19 pandemic, and by fleecing investors into giving him tens of millions of dollars to participate in a business that was a scam. Ray knew that his actions were illegal, having been convicted of similar crimes more than a decade ago. Ray may not learn a lesson from his latest actions, but he will face justice for them.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “As we allege today, Mr. Ray, who was previously convicted of federal wire and bank fraud charges, operated a Ponzi scheme that defrauded hundreds of investors of more than $40 million. Mr. Ray was even bold enough to continue his alleged activity subsequent to his most recent arrest. Today's charges will force him - yet again - to face the consequences of his illegal activity in the federal criminal justice system.”
As alleged in the Indictment and previously filed Complaint:[1]:
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, for each $20,000 contributed by the investor, CSA Business Solutions LLC would procure and operate a truck in its trucking business. 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. 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. In truth and fact, 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. RAY ultimately induced approximately 275 investors to purchase over 2,000 trucks, totaling at least $40 million in fraudulent investments.
RAY is also charged with 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 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 SBA and commercial lenders. RAY claimed that these businesses engaged in significant trucking business, but they had minimal revenues and trucking activity. A co-defendant, JOSEPH WINGET, is charged with participating in one of the SBA Loan Fraud Schemes, on behalf of CSA Business Solutions LLC, resulting in $1.1 million in fraudulently obtained loans.
Finally, RAY is charged with fraudulently inducing a New York City based real estate company to pay a $175,000 deposit in order to pay for startup costs associated with setting up a joint venture between the company and CSA Business Solutions LLC (the “Joint Venture Fraud”). RAY induced the company to enter into the Joint Venture by misrepresenting CSA Business Solutions LLC and his own personal business experience. RAY spent the funds on personal expenses, including private airplane trips. The Joint Venture was never formed.
RAY and WINGET were arrested in early March 2022, and a CSA Business Solutions LLC bank account was seized at that time. After his arrest, RAY continued to operate the Truck Investment Scheme. RAY misled investors about why he did not make expected payments after his arrest and hid the fact of his arrest and the seizure of the bank account. During this period, RAY caused the opening of new bank accounts on behalf of CSA Business Solutions LLC and continued to solicit and accept investor funds for trucks that did not exist.
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RAY, 50, of Canton, Michigan, is charged with conspiracy to commit wire fraud, four counts of wire fraud, and two counts of aggravated identity theft. The conspiracy to commit wire fraud and three counts of wire fraud each carry a maximum sentence of 20 years in prison. One of the wire fraud counts relates to a fraud affecting a financial institution, and therefore carries a maximum sentence of 30 years in prison. The charges for aggravated identity theft each carry an additional mandatory consecutive two-year sentence.
WINGET, 70, of Imlay City, Michigan, is charged with conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison, and one count of aggravated identity theft, which carries an additional mandatory consecutive two-year sentence.
Mr. Williams praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s General Crimes Unit. Assistant United States 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].
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and Complaint and the description of the Indictment and Complaint set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
Ten Members of International Stock Manipulation Ring Charged in Manhattan Federal CourtRead 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 three indictments charging ten individuals with engaging in a long-running “pump-and-dump” stock manipulation scheme involving the stocks of numerous companies traded on United States-based stock exchanges. The scheme spanned the globe and the ten defendants charged were residents of Canada, the United Kingdom, Bulgaria, Spain, Monaco, Turkey and the Bahamas. RONALD BAUER was arrested in the United Kingdom. CURTIS WILLIAM LEHNER, COURTNEY VASSEUR, and JULIUS CSURGO were arrested in Canada. ANTHONY KORCULANIC was arrested in Spain. PETAR MIHAYLOV was arrested in Bulgaria. Finally, DOMENIC CALABRIGO was arrested in the Bahamas. The United States intends to seek the extradition of BAUER, LEHNER, VASSEUR, CSURGO, KORCULANIC, MIHAYLOV, and CALABRIGO to the United States. CRAIG AURINGER, a citizen of Canada and resident of the United Kingdom, HASAN SARIO, a citizen and resident of Turkey, and DANIEL FERRIS, a citizen of the United Kingdom and resident of Monaco, were also charged and remain at large.
U.S. Attorney Damian Williams said: “As alleged, for years, the defendants, collectively, made over $100 million by orchestrating ‘pump-and-dump’ stock manipulation schemes of publicly traded shares of U.S.-based issuers. These pernicious ‘pump-and-dump’ schemes made the defendants rich while causing real harm to ordinary, retail investors who were left swallowing the losses. These defendants used a web of nominee entities and shell companies located all over the world attempting to disguise their own orchestration of these schemes. Today’s charges should send a clear message to all of those who think they can make millions running ‘pump-and-dump’ schemes --- no matter where in the world you are located, and no matter how many fake accounts and offshore shell companies you try to hide behind, our Office will vigorously pursue and prosecute you.”
FBI Assistant Director Michael J. Driscoll said: “Stock manipulation schemes such as the one charged here today serve to undermine confidence in our financial markets and create a playing field designed to illegally benefit a greedy few fraudsters at the expense of many honest investors. As alleged, the 10 charged defendants operated a global scheme that reaped more than $100 million in illicit proceeds. Our action today should serve as a reminder of our commitment to insure free and fair markets for all investors.”
As alleged in the three Indictments unsealed in Manhattan federal court[1]:
The Defendants
United States v. Ronald Bauer et al., 22 Cr. 155
RONALD BAUER, CRAIG AURINGER, PETAR MIHYALOV, and DANIEL FERRIS participated in a conspiracy that, collectively, involved “pump-and-dump” stock manipulation schemes of the securities of at least 12 United States-based issuers, resulting collectively in at least approximately $75 million in total proceeds.
RONALD BAUER, a/k/a “Patek,” a citizen of Canada and the United Kingdom who resided in the United Kingdom, orchestrated numerous “pump-and-dump” schemes. BAUER controlled the various aspects of the schemes.
CRAIG AURINGER, a citizen of Canada who resided in the United Kingdom, participated in multiple “pump-and-dump” schemes including by coordinating stock promotion campaigns and by providing funding in furtherance of the stock manipulation schemes.
PETAR MIHAYLOV, a/k/a “Petar the Bulgarian,” a/k/a “PDM,” a citizen and resident of Bulgaria, participated in multiple “pump-and-dump” schemes by coordinating stock manipulation promotion campaigns and providing funding in furtherance of the stock manipulation schemes.
DANIEL FERRIS, a citizen of the United Kingdom who resided in Monaco, participated in multiple “pump-and-dump” stock manipulation schemes including by opening accounts that were then used to trade shares and transfer funds in furtherance of the schemes and by taking various actions necessary to prepare the publicly traded companies that were used as the vehicles for the stock manipulation schemes. FERRIS also served as the Chief Executive Officer of at least one of the companies whose shares the group thereafter manipulated.
United States v. Curtis Lehner et al., 21 Cr. 121
CURTIS LEHNER, COURTNEY VASSEUR, HASAN SARIO, and DOMENIC CALABRIGO participated in a conspiracy that, collectively, involved “pump-and-dump” stock manipulation schemes of the securities of at least 9 United States-based issuers, resulting collectively in at least approximately $35 million in total proceeds.
CURTIS LEHNER, a/k/a “Santa,” a citizen and resident of Canada, and COURTNEY VASSEUR, a/k/a “Black Water Resource Management,” a/k/a “Black Water,” a/k/a “Cyrill Vetsch,” a/k/a “Arctic Shark,” a/k/a “Oscar Devries,” a citizen and resident of Canada, both orchestrated numerous “pump-and-dump” schemes.
HASAN SARIO, a/k/a “Ali,” a/k/a “H,” a citizen of Germany and Turkey who resided in Turkey, furthered the stock manipulation schemes by, among other things, acting as a designated “trading specialist” who directed the group’s stock trading across various nominee entity accounts that the group controlled. SARIO also utilized a network of nominee entities and nominee entity bank accounts that he controlled in order to both trade shares and transfer funds in furtherance of the schemes.
DOMENIC CALABRIGO, a/k/a “Raider,” a citizen of Canada who resided in the Bahamas, furthered the stock manipulation schemes by, among other things, coordinating stock promotion campaigns.
United States v. Julius Csurgo and Anthony Korculanic, 22 Cr. 190
JULIUS CSURGO and ANTHONY KORCULANIC participated in a conspiracy that collectively, involved “pump-and-dump” stock manipulation schemes of the securities of at least 19 United States-based issuers, resulting collectively in at least approximately $35 million in total proceeds.
JULIUS CSURGO, a/k/a “Gyula Karoly Csurgo,” a citizen of Canada and Hungary who resided in Canada, orchestrated numerous “pump-and-dump” stock manipulation schemes. In connection with the schemes, CSURGO owned and operated an entity called Antevorta Capital Partners, Ltd. (“Antevorta”), which CSURGO used as a vehicle for the “pump-and-dump” schemes. CSURGO, directly and through Antevorta, furthered the schemes by purchasing and selling numerous stocks in connection with the scheme and funding certain fraudulent stock promotion campaigns that were used to drive up the share prices as CSURGO and his co-conspirators sold off the shares that they controlled.
ANTHONY KORCULANIC, a/k/a “Remy,” a/k/a “Viper,” a citizen of Canada and Croatia who resided, at certain relevant times, in Spain, participated in multiple “pump-and-dump” schemes including by coordinating stock promotion campaigns and by providing funding in furtherance of the stock manipulation schemes.
Overview of the “Pump-and-Dump” Stock Manipulation Schemes
As alleged, the defendants participated in “pump-and-dump” schemes that followed a typical pattern. First, the defendants and their co-conspirators secretly amassed control of the vast majority of the stock of certain publicly traded companies that were traded on the over-the-counter (“OTC”) market in the United States. Second, the defendants and their co-conspirators then manipulated the price and trading volume for these stocks, causing the share price and trading volume to become artificially inflated, through coordinated trading and false and misleading promotional campaigns that they funded. Third, and finally, the defendants sold out of their secretly amassed positions at these inflated values at the expense of the investing public.
In furtherance of the scheme, the defendants used a network of nominee entities to trade shares and funnel proceeds of these schemes back to the defendants and their co-conspirators. Holding the shares through the network of nominee entities allowed the defendants and their co-conspirators to conceal the fact that, in reality, they controlled the vast majority of the shares of the issuer.
The securities that the defendants and their co-conspirators sought to manipulate were issued by small companies, were thinly traded, and typically traded at less than $2 per share. These publicly traded shell companies frequently had few, if any, actual assets or actual business operations. While on paper the defendants and their co-conspirators had no connection to these companies, in reality they exercised substantial control, including installing management at the companies, financing the companies’ operations, and funding payments for attorneys in order to prepare public filings with OTC Markets Group, Inc. and the Securities and Exchange Commission (the “SEC”). In order to attract investor interest, the defendants and their co-conspirators, at times, caused private businesses to be merged or “vended” into the publicly traded shell companies. The private businesses were often in industries likely to attract the investing public’s interest.
In connection with the scheme, the defendants and their co-conspirators frequently engaged in manipulative trading activity in order to artificially increase the trading volume and share price of the stocks. This manipulative trading included, at times, coordinated “match” trades in which the defendants and their co-conspirators caused one nominee entity or other brokerage account subject to their control to sell a certain quantity of shares while causing another nominee entity or brokerage account subject to their control to buy a similar quantity of shares that same day. These match trades, which often occurred on days when there was low trading volume, had the effect of artificially increasing the share price and trading volume of the stock.
As part of the “pump-and-dump” schemes, the defendants and their co-conspirators financed and coordinated promotional campaigns through which promotional materials touting the stocks were distributed to the investing public. These stock promotional materials frequently contained false and misleading claims about the issuer, as well as omitting material information, with the objective of inducing retail investors to purchase the shares of the issuer, which allowed the defendants and their co-conspirators to sell of their substantial positions for a profit. The defendants and their co-conspirators often expended hundreds of thousands of dollars on these stock promotion campaigns. Furthermore, certain of the defendants used a “boiler room” to solicit investors, including investors based in the United States, to purchase shares of certain of the companies. These “boiler rooms” involved multiple individuals working in a coordinated effort to contact potential investors, often through unsolicited “cold calls,” and providing investors with false, misleading, unfounded, and/or exaggerated information about the relevant issuer in order to induce the potential investors to purchase shares.
The defendants and their co-conspirators profited from the scheme by selling their shares into the market at the artificially high prices they had created through their manipulative activities. By selling their shares while the share price was artificially inflated, the defendants and their co-conspirators were able to realize millions of dollars in illicit profits. Once the defendants and their co-conspirators had sold off their shares and ceased the stock promotion campaign and their manipulative trading tactics, the share price of the relevant companies typically dropped precipitously. The defendants and their co-conspirators then laundered the proceeds of the schemes back to themselves in a manner designed to conceal the source of the funds and/or the identity of the recipients. Such laundering was frequently accomplished through the use of fabricated invoices, contracts and agreements.
* * *
Each of the defendants is charged with conspiracy to commit securities fraud, which carries a statutory maximum sentence of five years in prison. Each of the defendants is further charged with conspiracy to commit wire fraud, which carries a statutory maximum sentence of 20 years in prison. Each of the defendants is further charged with multiple counts of securities fraud pursuant to Title 15 of the United States Code, which carry a statutory maximum sentence of 20 years in prison per count. Each of the defendants is further charged with wire fraud, which carries a statutory maximum sentence of 20 years in prison. Finally, each of the defendants is charged with conspiracy to commit money laundering, which carries a statutory maximum sentence of 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 defendants will be determined by a judge.
Mr. Williams praised the investigative work of the FBI. He further thanked the Justice Department’s Office of International Affairs of the Department’s Criminal Division, as well as authorities in the United Kingdom (in particular the National Extradition Unit), Canada (in particular the Royal Canadian Mounted Police, the Alberta Securities Commission, and the Toronto Police Service Fugitive Squad), Spain (in particular the Spanish National Police), Bulgaria (in particular the National Police Service), and the Bahamas (in particular the Royal Bahamas Police Force). Finally, Mr. Williams also thanked the Securities and Exchange Commission, which initiated civil proceedings against nine of the ten defendants today.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Noah Solowiejczyk, Jason Richman, and Vladislav Vainberg are in charge of the prosecution.
The allegations in the Indictments 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 Indictments, and the description of the Indictments set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Russian Legislator and Two Staff Members Charged with Conspiring to Have U.S. Citizen Act as an Illegal Agent of the Russian Government in the United StatesRead the Press Release
Russian Legislator Aleksandr Mikhaylovich Babakov and Staff Members Aleksandr Nikolayevich Vorobev and Mikhail Alekseyevich Plisyuk, Allegedly Conspired to Violate U.S. Sanctions, Have a U.S. Citizen Act as an Illegal Agent of Russia, and Fraudulently Obtain Visas to Enter the U.S. in Furtherance of a Global Foreign Influence Scheme for the Russian Government
Three citizens of the Russian Federation (Russia) are charged in an indictment, which was unsealed today, with conspiring to use an agent of Russia in the United States without prior notice to the Attorney General, conspiring to violate U.S. sanctions and conspiring to commit visa fraud.
According to court documents, beginning in or around January 2012 through at least June 2017, Aleksandr Mikhaylovich Babakov, 59; Aleksandr Nikolayevich Vorobev, 52; and Mikhail Alekseyevich Plisyuk, 58, operated an international foreign influence and disinformation network to advance the interests of Russia.
“The indictment alleges that a high-ranking Putin-aligned legislator and his closest staffers, all three of whom are sanctioned, engaged in a global campaign to influence and gain access to U.S. elected officials,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “The Department will not hesitate to prosecute those who seek to covertly influence the American political process and evade U.S. sanctions.”
“Russian legislator Aleksandr Babakov and two of his staffers allegedly orchestrated a covert Russian propaganda campaign in the United States in order to advance Russia’s malevolent political designs against Ukraine and other countries, including the United States.,” said U.S. Attorney Damian Williams for the Southern District of New York. “Today’s indictment demonstrates that Russia’s illegitimate actions against Ukraine extend beyond the battlefield, as political influencers under Russia’s control allegedly plotted to steer geopolitical change in Russia’s favor through surreptitious and illegal means in the United States and elsewhere in the West. Such malign foreign interference will be exposed, and we will pursue justice against its perpetrators.”
“This FBI investigation highlights the lengths the Russian government will go to undermine our rule of law,” said Assistant Director Alan E. Kohler Jr. of the FBI’s Counterintelligence Division. “The FBI is committed to protecting the United States from foreign malign influence and upholding the sanctions in place to keep our democracy safe.”
As alleged in the indictment, Babakov, a member of the Russian legislature, Vorobev, his Chief of Staff, and Plisyuk, another member of Babakov’s staff, used a nonprofit organization based in Russia, the Institute for International Integration Studies, as a front for this global foreign influence campaign to advance Russia’s foreign policy objectives. Through these operations aimed at influencing the course of international affairs, the defendants worked to weaken U.S. partnerships with European allies, undermine Western sanctions and promote Russia’s illicit actions designed to destroy the sovereignty of Ukraine. The defendants schemed to affect U.S. policy towards Russia through staged events, paid propaganda and the recruitment of at least one American citizen (CC-1) to do their bidding in an unofficial capacity and without notice to the Attorney General, as required by law. In pursuit of these goals, the defendants sought to co-opt U.S. and European politicians and to influence public opinion in their favor, using American and European citizens as their proxies to validate them, bring them access to power, evade sanctions and obscure their true objective to advance Russia’s foreign policy.
Among other things, the defendants contacted members of the U.S. Congress from 2012 into 2017 to seek meetings and to offer free travel to at least one Congressmember on behalf of Babakov, as well as other foreign officials aligned and associated with Babakov. For example, in 2012, at the direction of the defendants, CC-1 sought to secure a meeting for Babakov with multiple members of Congress, including by offering an “all expenses paid” trip to a particular Congressmember to meet with European politicians and receive “an award.” Congressmembers rebuffed these efforts.
In March 2017, the defendants sought to arrange a meeting for Babakov with a member of the U.S. Congress in pursuit of the objective of “strengthen[ing] the ties of cooperation between” Russia and the United States. To secure that meeting, the defendants, through CC-1, transmitted a letter drafted by CC-1 and signed by Babakov to a particular Congressmember.
Also in March 2017, the defendants contacted at least one member of the U.S. Congress to offer free travel to a Babakov-affiliated conference in Yalta, part of Russia-controlled Crimea, as a service to benefit the purported “Prime Minister of Crimea,” Sergey Aksyonov. Aksyonov was organizing and attending the conference, and had been sanctioned by the Department of Treasury’s Office of Foreign Assets Control (OFAC) as a Specially Designated National (SDN) since 2014 based on his role in actions and policies threatening the sovereignty of Ukraine. The defendants worked together and with their associates to organize, facilitate and promote the Yalta conference, including by soliciting Americans to attend and present at the conference and receive funding from Aksyonov’s organizing committee, for the benefit of Akysonov and his Russia-backed purported government of Crimea. The Congressmember did not accept the offer.
In connection with these foreign influence activities, the defendants also submitted fraudulent visa applications in February 2017 seeking to travel to the United States under the false pretense of each traveling alone for a “vacation,” when in fact they planned to conduct unofficial meetings with U.S. politicians and advisors to further their influence objectives. In June 2017, OFAC sanctioned the three defendants as SDNs. The defendants’ visa applications were ultimately denied in January 2018, disrupting the defendants’ planned meetings in the United States.
Babakov currently serves as the Deputy Chairman of the State Duma, the lower house of the Russian legislature. From approximately September 2014 to October 2021, Babakov served as a member of the Russian Federation Council, the upper house of the Russian legislature, and therefore had the title of Senator. From approximately 2003 to 2014, Babakov served as a member of the State Duma, where he held prominent roles such as Chair of the State Duma Commission on Legislative Provisions for Development of the Military-Industrial Complex of the Russian Federation. In or around 2011, Babakov joined the United Russia party, which is the political party of Russian President Vladimir Putin. On or around June 17, 2012, Putin appointed Babakov to be the Russian Federation’s Special Representative for Cooperation with Organizations Representing Russians Living Abroad. Babakov has become a leader in the “For Truth” party formed in or about 2021, which supports Putin. At all times relevant to the indictment, Vorobev has held the position of Chief of Staff for Babakov, and Plisyuk has served on Babakov’s staff.
Babakov, Vorobev and Plisyuk are charged with one count of conspiring to have a U.S. citizen act as a Russian agent in the United States without notifying the Attorney General, which carries a maximum sentence of five years in prison; one count of conspiring to violate and evade U.S. sanctions, in violation of the International Emergency Economic Powers Act, which carries a maximum sentence of 20 years in prison; and one count of conspiring to commit visa fraud, which carries a maximum sentence of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The case is being investigated by the FBI’s New York Field Office with valuable assistance provided by the National Security Division’s Counterintelligence and Export Control Section.
Assistant U.S. Attorneys Kimberly J. Ravener and Kyle A. Wirshba for the Southern District of New York are prosecuting the case, with assistance from Trial Attorney Scott Claffee of the National Security Division’s Counterintelligence and Export Control Section.
On March 2, the Attorney General announced the launch of Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions and economic countermeasures that the United States has imposed, along with allies and partners, in response to Russia’s unprovoked military invasion of Ukraine. The task force will leverage all the Department’s tools and authorities against efforts to evade or undermine the economic actions taken by the U.S. government in response to Russian military aggression.
An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
This press release has been modified to reflect precise statutory language.
Russian Legislator and Two Staff Members Charged with Conspiring to Have A U.S. Citizen Act as an Illegal Agent of the Russian Government in the United StatesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Matthew G. Olsen, the Assistant Attorney General for National Security, 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 charging ALEKSANDR MIKHAYLOVICH BABAKOV, ALEKSANDR NIKOLAYEVICH VOROBEV, and MIKHAIL ALEKSEYEVICH PLISYUK, citizens of the Russian Federation (“Russia”), with conspiring to act in the United States as an illegal agent of Russia, conspiring to violate United States sanctions, and conspiring to commit visa fraud. BABAKOV, a Deputy Chairman in the Russian legislature, VOROBEV, and PLISYUK are based in Russia and remain at large.
U.S. Attorney Damian Williams said: “Russian legislator Aleksandr Babakov and two of his staffers allegedly orchestrated a covert Russian propaganda campaign in the U.S. in order to advance Russia’s malevolent political designs against Ukraine and other countries, including the U.S. Today’s indictment demonstrates that Russia’s illegitimate actions against Ukraine extend beyond the battlefield, as political influencers under Russia’s control allegedly plotted to steer geopolitical change in Russia’s favor through surreptitious and illegal means in the U.S. and elsewhere in the West. Such malign foreign interference will be exposed, and we will pursue justice against its perpetrators.”
Assistant Attorney General Matthew G. Olsen said: “The indictment alleges that a high-ranking Putin-aligned legislator and his closest staffers, all three of whom are sanctioned, engaged in a global campaign to influence and gain access to U.S. elected officials. The Department will not hesitate to prosecute those who seek to covertly influence the American political process and evade U.S. sanctions.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “Beginning as far back as 2012, Aleksandr Babakov, an oligarch who has served as a leader in the Russian legislature along with two of his deputies, operated a nonprofit organization as a subterfuge for an international foreign influence and disinformation network to advance the interests of the Russian Government. As alleged, Babakov sought to undermine Western sanctions - including those imposed against him - promote Russia’s illicit actions designed to destroy Ukrainian sovereignty, and co-opt and cultivate relationships with U.S. politicians to advance Russia’s malign foreign policy objectives. Today’s action demonstrates the FBI’s unwavering commitment to the identification and disruption of Russian Government schemes to target the national security and foreign policy of the United States.”
According to the allegations contained in the Indictment unsealed today in Manhattan federal court[1]:
Beginning in or around January 2012 and continuing into at least June 2017, Babakov, a member of the Russian legislature, Vorobev, his Chief of Staff, and Plisyuk, another member of Babakov’s staff, operated an international foreign influence and disinformation network to advance the interests of Russia. The defendants used a nonprofit organization based in Russia, the “Institute for International Integration Studies,” as a front for this global foreign influence campaign to advance Russia’s foreign policy objectives. Through these operations aimed at influencing the course of international affairs, the defendants worked to weaken U.S. partnerships with European allies, undermine Western sanctions, and promote Russia’s illicit actions designed to destroy the sovereignty of Ukraine. The defendants schemed to affect U.S. policy towards Russia through staged events, paid propaganda, and the recruitment of at least one American citizen (“CC-1”) to do their bidding in unofficial capacities. In pursuit of these goals, the defendants sought to co-opt U.S. and European politicians and to influence public opinion in their favor, using American and European citizens as their proxies in an effort to validate them, bring them access to power, evade sanctions, and obscure their true objective to advance Russia’s foreign policy.
Among other things, the defendants contacted members of the U.S. Congress from 2012 into 2017 to seek meetings and to offer free travel to at least one Congressmember on behalf of BABAKOV, as well as other foreign officials aligned and associated with BABAKOV. For example, in 2012, at the direction of the defendants, CC-1 sought to secure a meeting for BABAKOV with multiple members of Congress, including by offering a trip to a particular Congressmember “all expenses paid” to meet with European politicians and receive “an award.” Congressmembers rebuffed these efforts.
In March 2017, the defendants sought to arrange a meeting for BABAKOV with a member of the U.S. Congress in pursuit of the objective of “strengthen[ing] the ties of cooperation between” Russia and the United States. To secure that meeting, the defendants, through CC-1, transmitted a letter drafted by CC-1 and signed by BABAKOV to a particular Congressmember.
Also in March 2017, the defendants contacted at least one member of the U.S. Congress to offer free travel to a BABAKOV-affiliated conference in Yalta, part of Russia-controlled Crimea, as a service to benefit the purported “Prime Minister of Crimea,” Sergey Aksyonov, who was organizing and attending the conference, and had been sanctioned by the United States Department of Treasury’s Office of Foreign Assets Control (“OFAC”) as a Specially Designated National since 2014 based on his role in actions and policies threatening the sovereignty of Ukraine. The defendants worked together and with their associates to organize, facilitate, and promote the Yalta conference, including by soliciting Americans to attend and present at the conference and receive funding from Aksyonov’s organizing committee, for the benefit of Akysonov and his Russia-backed purported government of Crimea. The Congressmember did not accept the offer.
In connection with these foreign influence activities, the defendants also submitted fraudulent visa applications in February 2017 seeking to travel to the United States under the false pretense of each traveling alone for a “vacation,” when in fact they planned to conduct unofficial meetings with U.S. politicians and advisors to further their influence objectives. In June 2017, OFAC sanctioned the three defendants as Specially Designated Nationals. The defendants’ visa applications were ultimately denied in January 2018, disrupting the defendants’ planned meetings in the U.S.
BABAKOV currently serves as the Deputy Chairman of the State Duma, the lower house of the Russian legislature. From approximately September 2014 to October 2021, BABAKOV served as a member of the Russian Federation Council, the upper house of the Russian legislature, and therefore had the title of “Senator.” From approximately 2003 to 2014, BABAKOV served as a member of the State Duma, where he held prominent roles such as Chair of the State Duma Commission on Legislative Provisions for Development of the Military-Industrial Complex of the Russian Federation. In or about 2011, BABAKOV joined the United Russia party, which is the political party of Russian President Vladimir Putin. On or about June 17, 2012, Putin appointed BABAKOV to be the Russian Federation’s Special Representative for Cooperation with Organizations Representing Russians Living Abroad. BABAKOV has become a leader in the “For Truth” party formed in or about 2021, which supports Putin. At all times relevant to the Indictment, VOROBEV has held the position of Chief of Staff for BABAKOV, and PLISYUK has served on BABAKOV’s staff.
* * *
BABAKOV, 59, VOROBEV, 52, and PLISYUK, 58, of Russia, are charged with one count of conspiring to have a U.S. citizen act as an illegal agent in the United States for Russia and Russian officials without notifying the Attorney General, which carries a maximum sentence of five years in prison; one count of conspiring to violate and evade U.S. sanctions, in violation of the International Emergency Economic Powers Act, which carries a maximum sentence of 20 years in prison; and one count of conspiring to commit visa fraud, 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 defendants will be determined by a judge.
Mr. Williams praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division, and thanked the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, for their assistance.
On March 2, 2022, the Attorney General announced the launch of Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners, in response to Russia’s unprovoked military invasion of Ukraine. The task force will leverage all the Department’s tools and authorities against efforts to evade or undermine the economic actions taken by the U.S. government in response to Russian military aggression.
The case is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorneys Kimberly J. Ravener and Kyle A. Wirshba are in charge of the case, with assistance from Trial Attorney Scott Claffee of the Counterintelligence and Export Control Section.
The charges in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
This press release has been modified to reflect precise statutory language
Peekskill Man Who Identifies as an “Incel” or “Involuntary Celibate” Is Sentenced to 30 Months in Prison for Stalking, Threatening, and Harassing Multiple VictimsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that DAVID KAUFMAN, a/k/a “David Khalifa,” a/k/a “John Morray,” a/k/a “Big Man,” a self-identified “Incel,” was sentenced to 30 months in prison, after pleading guilty to stalking multiple victims between October 2019 and August 2020. U.S. District Judge Nelson S. Román imposed today’s sentence.
U.S. Attorney Damian Williams said: “David Kaufman, a self-described ‘Incel,’ or ‘Involuntary Celibate,’ expressed his hatred of women by terrorizing and harassing his victims though threats of violence. The Court’s sentence sends a clear message to the public that perpetrators of violence against women will be held accountable for their crimes.”
According to the Complaint, Indictment, other documents in the public record, as well as statements made in public court proceedings:
KAUFMAN self-identifies as an “Incel” or “Involuntary Celibate,” which refers to a group of domestic extremists who adhere to a violent and misogynist ideology of male supremacy. Incels believe they are entitled to sex with women and to women’s bodies, and they blame women for refusing to have sex with them. Incels have an active online community and over the last eight years, Incels also have committed acts of violence against women around the world, including in the United States. For example, in 2014, a self-proclaimed Incel named Elliot Rodger declared a “War on Women” and killed six people and injured fourteen others near a college campus in California. Prior to these attacks, Rodger posted a video manifesto online, in which he explained that he planned his attack to punish women for rejecting him and for depriving him of sex, and to punish sexually active men because he envied them.
In or about 2019 and 2020, KAUFMAN harassed, threatened, and stalked numerous victims. In or about February 2019, KAUFMAN sent a bomb, rape, and death threat to a female victim. A few months later, beginning in or about October 2019, KAUFMAN sent two victims (“Victim-1” and “Victim-2”), among others, violent and threatening messages using over 50 social media accounts. In these messages, KAUFMAN self-identified as an Incel, expressed his hatred of women, and threatened to commit acts of violence. For example:
- On or about June 24, 2020, KAUFMAN sent the following message to Victim-1: “Hey wanna hear a joke? What’s worse than 10 Stacy’s nailed to one tree? One Stacy nailed to ten trees [laughing crying face emoji].” “Stacy” is an Incel term that refers to an attractive female who rejects or refuses to have sex with an Incel, is hated by Incels, and is targeted by Incels for harassment, vitriol, humiliation, and violence.
- On or about June 29, 2020, KAUFMAN sent a series of messages to Victim-2. These messages included an image of one of Elliot Rodger’s victims, a deceased female who had been stabbed to death, accompanied by the following message: “This is what happened when a woman said ‘no’ to Elliot Rodger . . . . Hopefully [Victim-1] never said no to someone just like Elliot Rodger.”
- In or about July 2020, KAUFMAN posted the following messages: “Don’t piss off BIG MAN” and “When [Victim-1] and I are dead, we’ll be in heaven together forever.”
- On or about July 11, 2020, KAUFMAN sent the following message to Victim-1: “Women have done nothing but spit in my face. Soon I’ll be getting a gun.”
- On or about July 12, 2020, KAUFMAN posted the following messages: “A beautiful environment is the darkest hell, if you have to experience it all alone . . . –Elliot Rodger” and “I don’t think [Victim-1] will be laughing too much later on."
KAUFMAN also created social media accounts using the first and last names of Victim-1 and Victim-2, respectively, and impersonated Victim-1 and Victim-2 online.
In the summer of 2020, law enforcement officers approached KAUFMAN and told him to stop harassing Victim-1 and Victim-2. On or about July 14, 2020, KAUFMAN was arrested on state criminal charges and an order of protection was issued in Westchester County prohibiting KAUFMAN from, among other things, communicating or contacting Victim-1 or Victim-2.
Notwithstanding the court order of protection, state charges, and multiple warnings by law enforcement, KAUFMAN continued to harass, threaten, and stalk Victim-1 and Victim-2 until he was federally charged and arrested in August 2020. KAUFMAN also conducted online surveillance of Victim-1’s residence and researched how to illegally purchase a gun and assemble a semi-automatic rifle.
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In addition to the prison sentence, KAUFMAN, 28, of Peekskill, New York, was sentenced to 3 years supervised release, with first six months of home detention, the conditions of which include orders of protection prohibiting KAUFMAN from, among other things, contacting certain victims and their family members.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation’s New York Joint Terrorism Task Force. Mr. Williams also thanked the New York State Police, the U.S. Postal Inspection Service, the Cortlandt County Police Department, the Stamford Police Department, the Peekskill Police Department, the Mt. Pleasant Police Department, and the Westchester County District Attorney’s Office for their assistance and cooperation.
This prosecution is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorney Jane Kim is in charge of the prosecution.
Dark Web User Known as “the Bull” Admits Guilt and Is Sentenced in Insider Trading SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that APOSTOLOS TROVIAS, a/k/a “The Bull,” pled guilty and was sentenced earlier today to time served, following approximately eleven months in custody, in connection with his scheme to solicit and sell confidential, pre-release earnings, deal, and other information regarding public companies.
According to the allegations in the Indictment, Complaint, statements made in court, and court filings:
Since at least in or about December 2016, APOSTOLOS TROVIAS, who identified himself by the pseudonym “The Bull,” had used websites on the Dark Web and encrypted messaging services to solicit and sell confidential, non-public information about publicly traded companies (“Inside Information”) to enrich himself. TROVIAS’s scheme consisted of multiple related efforts to obtain and monetize confidential nonpublic business information, including the sale of pre-release earnings reports and deal information misappropriated from publicly traded companies.
Further, in or about 2020, TROVIAS took steps to design and build a website to facilitate the purchase and sale of material, non-public information for use in stock trading (the “Inside Information Auction Site”). TROVIAS planned to use the Inside Information Auction Site to enrich himself by charging membership fees and commissions from individuals using the Inside Information Auction Site to engage in the unlawful trade of Inside Information.
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TROVIAS, 30, of Athens, Greece, had been arrested in the Republic of Peru in May 2021 and arrived in the United States by extradition on March 25, 2021. TROVIAS was ordered to pay forfeiture in the amount of $6,700.
Mr. Williams praised the outstanding work of the FBI. Mr. Williams further thanked the U.S. Securities and Exchange Commission and the Internal Revenue Service for their cooperation and assistance in this investigation.
The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Matthew Podolsky and Andrew Thomas are in charge of the case.