Southern District of New York
Press releases recorded for this federal judicial district.
Third Founder of Cryptocurrency Exchange Pleads Guilty to Bank Secrecy Act ViolationsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that SAMUEL REED, one of three co-founders and a high-ranking executive of purportedly “off-shore” cryptocurrency derivatives exchange the Bitcoin Mercantile Exchange or “BitMEX,” pled guilty today to violating the Bank Secrecy Act (the “BSA”) by willfully failing to establish, implement, and maintain an anti-money laundering (“AML”) program at BitMEX. Under the terms of his plea agreement, REED agreed to separately pay a $10 million criminal fine representing pecuniary gain derived from the offense. REED pled guilty today before Chief U.S. District Judge Laura T. Swain, and will be sentenced by U.S. District Judge John G. Koeltl. The other two founders of BitMEX, Arthur Hayes and Benjamin Delo, previously pled guilty to the same offense in February 2022.
U.S. Attorney Damian Williams said: “Samuel Reed has now joined his co-founders, Arthur Hayes and Benjamin Delo, in admitting that they caused BitMEX to commit criminal violations of the anti-money laundering laws that govern financial institutions operating in the United States. As today’s guilty plea reflects, this Office will not permit cryptocurrency exchanges to operate as a shadow financial system that enables criminal actors to move their illicit proceeds without detection, and will vigorously investigate and prosecute the operators of such exchanges who deliberately flout U.S. law.”
According to the Indictment, public court filings, and statements made in court:[1]
REED, together with Arthur Hayes and Benjamin Delo, was one of the three co-founders and the long-time Chief Technology Officer of BitMEX. BitMEX is an online cryptocurrency derivatives exchange that, during the relevant time period, had U.S.-based operations and served thousands of U.S. customers, notwithstanding false representations to the contrary by the company. From at least September 2015, and continuing at least through the time of the Indictment in September 2020, REED willfully caused BitMEX to fail to establish and maintain an AML program, including a program for verifying the identify of BitMEX’s customers (or a “know your customer” or “KYC” program). As a result of its willful failure to implement AML and KYC programs, BitMEX was in effect a money laundering platform. For example, in about May 2018, REED was notified of allegations that BitMEX was being used to launder the proceeds of a cryptocurrency hack. Neither REED nor the company filed a suspicious activity report thereafter (indeed, BitMEX filed no suspicious activity reports at all between 2014 and September 2020), nor did BitMEX implement an AML or KYC program in response.
REED failed to institute AML or KYC programs at BitMEX despite closely following U.S. regulatory developments that made clear his legal obligation to do so if BitMEX operated in the United States, which it did. Despite repeatedly stating that BitMEX did not serve U.S. customers, including to individuals outside of BitMEX, REED knew that BitMEX’s purported withdrawal from the U.S. market in or about September 2015 was a sham, and that purported “controls” BitMEX put in place to prevent U.S. trading were an ineffective facade that did not, in fact, prevent users from accessing or trading on BitMEX from the United States. REED not only understood that U.S. customers continued to trade on BitMEX, but derived substantial profits from BitMEX as a result of U.S.-based trading.
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REED, 32, of Massachusetts, pled guilty to one count of violating the Bank Secrecy Act, which carries a maximum penalty of 5 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 investigative work of the FBI’s New York Money Laundering Investigation Squad, and thanked the attorneys and investigators at the Commodity Futures Trading Commission whose expertise and diligence were integral to the development of this investigation.
The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Jessica Greenwood, Samuel Raymond, and Thane Rehn are in charge of the prosecution.
[1] Two of REED’s co-defendants, Arthur Hayes and Benjamin Delo, pled guilty to violating the BSA in February 2022. As to REED’s remaining co-defendant, 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.
Texas Man Sentenced to 48 Months in Prison for Laundering Proceeds of Multimillion Dollar Business Email Compromise SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that TERRY FORMER was sentenced this afternoon to 48 months in prison in connection with the laundering of more than $2.2 million in proceeds of a business email compromise scheme. FORMER pled guilty to conspiring to commit wire fraud on April 2, 2021, before U.S. District Judge P. Kevin Castel, who imposed today’s sentence.
U.S. Attorney Damian Williams said: “Terry Former played an essential role in a scheme to defraud businesses, by organizing a team of co-conspirators to open shell company bank accounts to accept the victims’ funds and clandestinely transfer them to the fraudsters. Today’s sentence demonstrates the severe consequences that will befall those who facilitate criminal conduct by laundering its proceeds.”
According to the Indictment and other public filings in the case:
From at least in or about October 2018 through at least in or about October 2019, TERRY FORMER participated in a scheme to defraud businesses and by impersonating individuals and businesses in the course of otherwise ordinary financial transactions, thereby fraudulently inducing counterparties to those transactions to transfer funds to bank accounts controlled by FORMER and his co-conspirators (the “Scheme”). FORMER was one of the primary individuals responsible for coordinating the money side of the Scheme. In particular, he directed co-conspirators to open up bank accounts in the names of shell companies, which were purposefully chosen to mirror the names of the true counterparties in the business transactions that were targeted by the Scheme. FORMER also coordinated between the individuals involved in impersonating the true counterparties and the individuals holding the bank accounts to let them know when the accounts would be funded and to funnel the money out of those accounts once received .
In reliance on the foregoing false and misleading misrepresentations, one of the victims of the Scheme wired more than $2.2 million into a fraudulent bank account opened at FORMER’s direction. FORMER and his co-conspirators, knowing the money represented fraud proceeds, transferred a portion of those fraud proceeds out of the fraudulent bank account in transactions designed to conceal and disguise their source, ownership, and control. FORMER’s efforts to drain the account completely were stopped only when the bank froze the funds.
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FORMER, 46, of Texas, was also sentenced to three years of supervised release.
Mr. Williams praised the work of Homeland Security Investigations for their investigative efforts and ongoing support and assistance with the case. The prosecution of this case is being handled by the Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Emily Deininger and Tara La Morte are in charge of the prosecution.
John Barksdale Charged with Cryptocurrency Securities Fraud in Connection with Sale of Ormeus CoinRead 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 JOHN ALBERT LOAR BARKSDALE was arrested abroad on conspiracy, securities fraud, and wire fraud charges. The charges arise from a scheme perpetrated by BARKSDALE to sell a cryptocurrency token called Ormeus Coin (asset symbol “ORME”) through false representations regarding the size, value, and purported profitability of Ormeus Coin’s cryptocurrency mining assets. In particular, through a series of marketing materials designed to sell Ormeus Coin, BARKSDALE and others falsely represented, among other things, that Ormeus Coin was secured by a $250 million cryptocurrency mining operation, which would have been one of the largest such operations in the world, and that its mining revenues exceeded $5 million on a monthly basis.
U.S. Attorney Damian Williams said: “As alleged, John Barksdale perpetrated a scheme to sell the cryptocurrency Ormeus Coin to investors around the world through a web of lies, which he spread through in-person roadshows, social media, and even a jumbotron in Times Square. Among other allegedly false statements he made, Barksdale lied that Ormeus Coin was secured by a $250 million cryptocurrency mining operation that had revenues exceeding $5 million per month, when in fact Ormeus’s mining operations never approached such a value or had such revenues. Together with our law enforcement partners here and abroad, we will work tirelessly to prosecute those who commit frauds against the public in connection with the sale of cryptocurrencies.”
Acting HSI New York Special Agent in Charge Ricky J. Patel: “As alleged, Barksdale operated like a traveling salesman and peddled lies, overstatements, and misrepresentations regarding a cryptocurrency called Ormeus Coin, which resulted in duping thousands of investors throughout the world and took in over $70 million. The men and women of HSI will not allow fraudsters to sell dreams of inflated and unrealistic revenues to innocent investors with the goal of lining their own pockets. By leveraging federal and international partnerships, Barksdale is now facing prosecution in the Southern District of New York for his alleged criminal acts.”
According to the Indictment unsealed in Manhattan federal court:[1]
From in or about 2017 through at least in or about October 2021, BARKSDALE and his relative (“CC-1”) perpetrated a scheme to sell Ormeus Coin, an ERC-20 compliant smart contract-based token on the Ethereum blockchain, through false representations. Ormeus Coin was offered to investors throughout the world, including in the United States and the Southern District of New York, through enrollment packages sold by Ormeus Global, a multi-level marketing company controlled by BARKSDALE and CC-1, various digital currency exchanges, and directly from BARKSDALE and his associates.
Through a series of white papers, in-person roadshows, online webinars and videos, social media platforms, and other marketing materials approved by BARKSDALE and CC-1, BARKSDALE and CC-1 falsely represented, among other things, that Ormeus Coin was a digital money system secured by a $250 million cryptocurrency mining operation, which would have been one of the largest such operations in the world. In order to backstop the false representations regarding the size and value of cryptocurrency mining assets that purportedly secured the value of Ormeus Coin, BARKSDALE, among other things: (i) approved marketing materials that falsely depicted photos of a purported Ormeus Coin mining facility; (ii) deceptively referenced an “Ormeus Reserve Vault” (“ORV”) that stored over 3,000 Bitcoin purportedly derived from Ormeus Coin’s mining operations, which was represented as securing the value of Ormeus Coin; and (iii) falsely stated that Ormeus Coin’s mining revenues exceeded $5 million on a monthly basis. For example, on or about February 9, 2018, Ormeus Coin ran an advertisement on a jumbotron in Times Square in Manhattan, New York, which proclaimed, in a caption above a giant ORME symbol, “$250 Million Cryptocurrency Mining Farm Revealed in Legal Audit by Ormeus Coin.” On or about February 12, 2018, a photograph of the Times Square advertisement was posted to Ormeus Global’s Twitter account with the caption “Live from New York City, Ormeus Coin Advertising its $250 million Cryptocurrency Mining Farm in Times Square, Manhattan!” In truth, Ormeus’s mining operations never approached a value close to $250 million and never produced revenues exceeding one million dollars in any month, and the Bitcoin stored in the “Ormeus Reserve Vault” belonged to a third party.
Numerous investors purchased enrollment packages through Ormeus Global and purchased Ormeus Coin through digital currency exchanges or directly from BARKSDALE and his associates. Investors made these purchases based at least in part on BARKSDALE’s false representations regarding the size, value, and purported profitability of the cryptocurrency mining assets controlled by Ormeus Global and Ormeus Coin, as well as the purported security that the ORV provided to the value of Ormeus Coin. Through this scheme, from in or about June 2017 through at least in or about April 2018, Ormeus Global raised at least approximately $70 million from the sale of enrollment packages to more than 8,000 investors around the world. From in or about June 2017 through at least in or about October 2021, Ormeus Coin was sold to at least approximately 12,000 investors, including at least 200 U.S.-based investors. At its peak, Ormeus Coin had a market capitalization of approximately $52 million in or about January 2018.
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BARKSDALE, 40, is charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. Conspiracy to commit securities fraud carries a maximum sentence of five years in prison. All other charges each carry a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Any individuals who believe they may have been the victim of the alleged crimes perpetrated in connection with Ormeus Global or Ormeus Coin can contact HSI at https://www.ice.gov/webform/ice-tip-form or [email protected].
Mr. Williams praised the outstanding investigative work of HSI and USPIS, and thanked the United States Securities and Exchange Commission, which today filed a parallel civil action, for its assistance. Mr. Williams also thanked the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division, the U.S. Department of State, and the U.S. Marshals Service, who all provided significant assistance in this investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah Lai, Sagar Ravi, and Olga I. Zverovich 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.
Dual U.S.-Russian National Charged with Acting Illegally as a Russian Agent in United StatesRead the Press Release
A federal court in New York unsealed a complaint today charging a dual Russian and U.S. citizen with acting and conspiring to act in the United States illegally as an agent of the Russian government, willfully failing to register under the Foreign Agents Registration Act (FARA), as well as conspiring to commit visa fraud and making false statements to the FBI.
According to court documents, Elena Branson, 61, beginning in at least 2011, worked on behalf of the Russian government and Russian officials to advance Russian interests in the United States, including by coordinating meetings for Russian officials to lobby U.S. political officials and businesspersons, and by operating organizations in the United States for the purpose of publicly promoting Russian government policies. Branson never notified the Attorney General as she was required to, including by registering under FARA.
“As alleged, Branson engaged in a wide-ranging influence and lobbying scheme with funding and direction from the Russian government – all while deliberately leaving the American people in the dark,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “The department will continue to expose these serious crimes and shine a light on foreign malign influence.”
“As alleged, Elena Branson, a dual U.S. - Russian national, actively subverted foreign agent registration laws in the United States in order to promote Russian policies and ideology,” said U.S. Attorney Damian Williams for the Southern District of New York. “The Russian government at its highest levels, up to and including President Vladimir Putin, have made known that aggressive propaganda and recruitment of the Russian diaspora around the world is a Russian priority. In connection with this pursuit, Branson is alleged to have corresponded with Putin himself and met with a high-ranking Russia minister before founding a Russian propaganda center here in New York City, the Russian Center New York. Branson’s promotional outreach, including an ‘I Love Russia’ campaign aimed at American youths, exemplifies her attempts to act at the behest of the Russian government to illegally promote its interests in the United States. All the while, Branson knew she was supposed to register as an agent of the Russian government but chose not to do so and, instead, instructed others regarding how to illegally avoid the same. Particularly given current global events, the need to detect and hinder attempts at foreign influence is of critical importance, and the Southern District of New York is proud to do its part in the fight against tyranny.”
“The evidence gathered in the Branson case shows she is a serial offender in violating the Foreign Agents Registration Act in order to promote Russian interests,” said Assistant Director Alan E. Kohler Jr. of the FBI’s Counterintelligence Division. “While living in the United States for nearly a decade, she allegedly took money and direction from Russian government officials – including some at the Russian Embassy in Washington, D.C. – as she arranged meetings for Russian officials to lobby U.S. officials. The FBI and our partners will continue to investigate and stop individuals who hide their work for foreign governments, like the one in Moscow.”
According to court documents, the Russian government has sought to spread Russian propaganda and to use Russian citizens in the United States and elsewhere to make connections with U.S. community leaders, politicians and businesspersons, in order to advance Russian government objectives. Russian leaders, including President Vladimir Putin, have made public statements acknowledging this foreign policy strategy of the Russian government.
As part of that Russian government effort, beginning in at least approximately 2011, Branson, a native of Russia, acted illegally as an agent of the Russian government while living in the United States, by not registering pursuant to FARA or otherwise notifying the Attorney General as required by a separate statute. Among other things, in or about 2012, after receiving approval from the highest levels of the Russian government, Branson incorporated an organization headquartered in Manhattan, New York, named the Russian Center New York (RCNY). She sent correspondence to then-Prime Minister Putin and met with a high-ranking Russian government minister in connection with the initiation of her activities for the Russian government in the United States.
Branson received tens of thousands of dollars in funding from the Russian government for the RCNY and used the RCNY to host events and engage in public messaging at the direction of the Russian government and Russian officials. Branson was directed to, among other things, host events designed to consolidate the Russian-speaking youth community in the United States in exchange for funding. For example, Branson and the RCNY hosted an annual youth forum which was funded in part by an entity controlled by the government of Moscow.
Throughout her work as a Russian agent in the United States, Branson received funding and direction from the Russian government, including from the Russian Embassy in Washington, D.C., and received tasking from high-level Russian government officials and Russian government-run organizations. At the same time, however, Branson actively sought to hide that the Russian government was providing her with tasking and funding her activity, and she instructed her co-conspirators to do the same. She also cautioned others against using language in describing their activities that would draw attention to FARA registration obligations for herself and the organizations.
As alleged, in or about 2019, Branson coordinated through the RCNY a campaign to lobby Hawaiian officials not to change the name of a fort located on the Hawaiian island of Kauai, which is the last remaining formerly Russian fort in the Hawaiian-islands and is significant to the Russian government. Among other things, Branson provided Hawaiian officials with messages from Russian government officials and organized a trip to Moscow for Hawaiian officials responsible for the potential name change to meet with high-ranking Russian government personnel.
In addition to the RCNY, Branson served as a chairperson of the Russian Community Council of the USA (KSORS), which is funded at least in part by various Russian government-run entities. Among other things, KSORS coordinated an “I Love Russia” campaign in the United States and organized youth forums focused on the promotion of Russian history and culture to American youths. Branson used the KSORS website to promote messages from the Russian Embassy and organized KSORS events approved by the Russian Ambassador to the United States. When Branson sought financial support from a government of Moscow official for the KSORS website, Branson reported that the purpose of the KSORS website was to spread information “about the activities of organizations created by Russian compatriots to form a positive image of Russia and Moscow among Americans.”
According to the complaint, Branson’s work on behalf of the Russian government also included arranging meetings for herself and other Russian officials with U.S. government officials and executives at businesses based in the United States. For example, in March 2016, Branson worked to arrange meetings for the head of the Department of Foreign Economic Activity and International Relations for the Government of Moscow with, among others, a New York state senator and the management of certain U.S. companies.
Branson also participated in a scheme to obtain fraudulent visas for Russian officials and their associates, by providing information about RCNY events to those individuals for using as false pretenses to obtain visas to enter the United States.
The FBI interviewed Branson on Sept. 29, 2020. During this interview, among other things, Branson falsely claimed that she was never asked by Russian officials to coordinate any meetings between U.S. business leaders or politicians and officials from the government of Moscow. Branson subsequently left the United States for Russia. On or about Oct. 15, 2021, during an interview on a Russian government-controlled television station, Branson stated that she left the United States because she thought it was likely that she would be arrested.
Branson is charged with: (1) conspiring to act as an agent of a foreign government without notifying the Attorney General, which carries a maximum sentence of five years in prison; (2) acting as an agent of a foreign government without notifying the Attorney General, which carries a maximum sentence of 10 years in prison; (3) conspiring to evade FARA registration, which carries a maximum sentence of five years in prison; (4) willfully failing to register under FARA, which carries a maximum sentence of five years in prison; (5) conspiring to commit visa fraud, which carries a maximum sentence of five years in prison; and (6) making false statements to the FBI, 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.
Branson left the United States for Russia in 2020 and remains at large.
The FBI’s New York Field Office are investigating the case.
Assistant U.S. Attorney Jason A. Richman for the Southern District of New York and Trial Attorney Scott Claffee 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.
Dual U.S. / Russian National Charged with Acting Illegally as A Russian Agent 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 filing of a Complaint charging ELENA BRANSON, a dual Russian and U.S. citizen, with acting and conspiring to act in the United States illegally as an agent of the Russian government, willfully failing to register under the Foreign Agents Registration Act (“FARA”), as well as conspiring to commit visa fraud and making false statements to the FBI. As alleged, beginning in at least 2011, BRANSON worked on behalf of the Russian government and Russian officials to advance Russian interests in the United States, including by coordinating meetings for Russian officials to lobby U.S. political officials and businesspersons, and by operating organizations in the United States for the purpose of publicly promoting Russian government policies, and BRANSON never notified the Attorney General as she was required to, including by registering under FARA.
U.S. Attorney Damian Williams said: “As alleged, Elena Branson, a dual U.S. / Russian national, actively subverted foreign agent registration laws in the United States in order to promote Russian policies and ideology. The Russian government at its highest levels, up to and including President Vladimir Putin, have made known that aggressive propaganda and recruitment of the Russian diaspora around the world is a Russian priority. In connection with this pursuit, Branson is alleged to have corresponded with Putin himself and met with a high-ranking Russia minister before founding a Russian propaganda center here in New York City, the Russian Center New York. Branson’s promotional outreach, including an ‘I Love Russia’ campaign aimed at American youths, exemplifies her attempts to act at the behest of the Russian government to illegally promote its interests in the United States. All the while, Branson knew she was supposed to register as an agent of the Russian government but chose not to do so and, instead, instructed others regarding how to illegally avoid the same. Particularly given current global events, the need to detect and hinder attempts at foreign influence is of critical importance, and the Southern District of New York is proud to do its part in the fight against tyranny.”
Assistant Attorney General Matthew G. Olsen said: “As alleged, Branson engaged in a wide-ranging influence and lobbying scheme with funding and direction from the Russian government – all while deliberately leaving the American people in the dark. The Department will continue to expose these serious crimes and shine a light on foreign malign influence.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “As alleged, Branson worked as an illegal agent of the Russian government in circumvention of FARA requirements. At the direction of the Russian government, she led a years long campaign to identify the next generation of American leaders, cultivate information channels, and shape US policy in favor of Russian objectives. This case highlights the breadth of Russia's relentless intelligence and malign influence activities targeting the United States. The FBI will continue to be just as aggressive in uncovering and dismantling these Russian government networks who seek to harm our national security.”
According to the allegations contained in the Complaint filed today in Manhattan federal court[1]:
The Russian government has sought to spread Russian propaganda and to use Russian citizens in the United States and elsewhere to make connections with U.S. community leaders, politicians, and businesspersons, in order to advance Russian government objectives. Russian leaders, including President Vladimir Putin, have made public statements acknowledging this foreign policy strategy of the Russian government.
As part of that Russian government effort, beginning in at least approximately 2011, BRANSON, a native of Russia, acted illegally as an agent of the Russian government while living in the United States, by not registering pursuant to FARA or otherwise notifying the Attorney General as required by a separate statute. Among other things, in or about 2012, after receiving approval from the highest levels of the Russian government, BRANSON incorporated an organization headquartered in Manhattan, New York, named the Russian Center New York (“RCNY”). BRANSON sent correspondence to then-Prime Minister Putin and met with a high-ranking Russian government Minister in connection with the initiation of her activities for the Russian government in the United States. BRANSON received tens of thousands of dollars in funding from the Russian government for the RCNY and has used the RCNY to host events and engage in public messaging at the direction of the Russian government and Russian officials. BRANSON was directed to, among other things, host events designed to consolidate the Russian-speaking youth community in the United States. For example, BRANSON and the RCNY hosted an annual youth forum, funded in part by an entity controlled by the Government of Moscow. Throughout her work as a Russian agent in the United States, BRANSON received funding and direction from the Russian government, including from the Russian Embassy in Washington, D.C., and received tasking from high-level Russian government officials and Russian government-run organizations. At the same time, however, BRANSON actively sought to hide that the Russian government was providing her with tasking and funding her activity and she instructed her co-conspirators to do the same. She also cautioned others against using language in describing their activities that would draw attention to FARA registration obligations for herself and the organizations.
As alleged, in or about 2019, BRANSON coordinated through the RCNY a campaign to lobby Hawaiian officials not to change the name of a fort located on the Hawaiian island of Kauai, which is the last remaining formerly Russian fort in the Hawaiian islands and is significant to the Russian government. Among other things, BRANSON provided Hawaiian officials with messages from Russian government officials and organized a trip to Moscow for Hawaiian officials responsible for the potential name change to meet with high-ranking Russian government personnel.
In addition to the RCNY, BRANSON has served as a Chairperson of the Russian Community Council of the USA (“KSORS”), which is funded at least in part by various Russian government-run entities. Among other things, KSORS has coordinated an “I Love Russia” campaign in the United States and organized youth forums focused on the promotion of Russian history and culture to American youths. BRANSON used the KSORS website to promote messages from the Russian Embassy and organized KSORS events approved by the Russian Ambassador to the United States. When BRANSON sought financial support from a Government of Moscow official for the KSORS website, BRANSON reported that the purpose of the KSORS website was to spread information “about the activities of organizations created by Russian compatriots to form a positive image of Russia and Moscow among Americans.”
According to the Complaint, BRANSON’s work on behalf of the Russian government also included arranging meetings for herself and other Russian officials with U.S. Government officials and executives at businesses based in the United States. For example, in March 2016, BRANSON worked to arrange meetings for the head of the Department of Foreign Economic Activity and International Relations for the Government of Moscow with, among others, a then-New York State Senator and the management of certain U.S. companies.
BRANSON also participated in a scheme to obtain fraudulent visas for Russian officials and their associates, by providing information about RCNY events to those individuals for using as false pretenses to obtain visas to enter the United States.
The FBI interviewed BRANSON on September 29, 2020. During this interview, among other things, BRANSON falsely claimed that she had never been asked by Russian officials to coordinate any meetings between U.S. business leaders or politicians and officials from the Government of Moscow. BRANSON subsequently left the United States for Russia. On or about October 15, 2021, during an interview on a Russian government-controlled television station, BRANSON stated that she had left the United States because she thought it was likely that she would be arrested.
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BRANSON, 61, is charged with (1) conspiring to act as an agent of a foreign government without notifying the Attorney General, which carries a maximum sentence of five years in prison; (2) acting as an agent of a foreign government without notifying the Attorney General, which carries a maximum sentence of ten years in prison; (3) conspiring to evade FARA registration, which carries a maximum sentence of five years in prison; (4) willfully failing to register under FARA, which carries a maximum sentence of five years in prison; (5) conspiring to commit visa fraud, which carries a maximum sentence of five years in prison; and (6) making false statements to the FBI, which carries a maximum sentence of five years in prison. The maximum statutory penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by a judge.
BRANSON left the United States for Russia in 2020 and remains at large.
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.
The case is being handled by the Office’s National Security and International Narcotics Unit. Assistant U.S. Attorney Jason A. Richman is in charge of the case, with assistance from Trial Attorney Scott Claffee of the Counterintelligence and Export Control Section.
The charges in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
California Man Pleads Guilty for Operating A Multi-Million Dollar Mortgage Modification FraudRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, and Daniel B. Brubaker, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced today that SERGIO LORENZO RODRIGUEZ, of Orange County, California, pled guilty to one count of wire fraud in connection with a fraudulent foreclosure rescue scheme that took in at least $5 million in prohibited advance fees from thousands of financially distressed homeowners. RODRIGUEZ pled guilty before U.S. Magistrate Judge Sarah Netburn.
U.S. Attorney Damian Williams said: “As he admitted today, for years, Sergio Lorenzo Rodriguez took advantage of desperate homeowners who were facing foreclosure and eviction to collect from them, in the aggregate, millions of dollars in advance fees based on promises that Rodriguez knew he could not, or would not, keep. He exploited the financial vulnerability of his victims and is now being held accountable for his crime.”
According to the Complaint, the Indictment,[1] and statements made in court, and publicly available documents:
From approximately mid-2015 through August 2020, SERGIO LORENZO RODRIGUEZ and a co-conspirator (the Defendants) owned and/or managed a series of mortgage modification companies through which they perpetrated a scheme to defraud and attempt to defraud financially distressed consumers who were facing or were at imminent risk of foreclosure through deceptive marketing practices. Those companies included American Home Servicing Center, National Advocacy Center, National Advocacy Group, and Capital Home Advocacy Center (collectively, the “Companies”). The Defendants tricked desperate homeowners into paying thousands of dollars each in prohibited advance fees through various misrepresentations, including: falsely claiming that the homeowners had been pre-approved by their lender or servicer for a mortgage modification; misrepresenting prohibited advance fees as closing costs or other non-prohibited costs; fraudulently claiming that the Companies achieved success rates of 95 percent or higher for mortgage modifications; and making empty promises of a no-risk money back guarantee. As a result of their intentional misrepresentations, and misrepresentations that they encouraged their subordinates to make, the Defendants induced thousands of homeowners to pay, in the aggregate, millions of dollars in prohibited advance fees to the Companies, including a large number of consumers who were ultimately denied mortgage modifications or who received modification offers that were less favorable than they had been led to expect at the time they paid advance fees.
In February 2018, the Federal Trade Commission brought a civil lawsuit against the Defendants, among others, in federal court in Santa Ana, California. That civil action resulted first in a temporary restraining order and then a permanent injunction barring the Defendants from marketing and selling all debt relief products and services. As alleged in the Indictment, the Defendants flouted those judicial orders by having a relative create another mortgage modification company named 1st Premier Asset Solutions, which the Defendants operated using aliases and some of the same deceptive practices.
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SERGIO LORENZO RODRIGUEZ, 47, of Laguna Niguel, California, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.
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 and persistent investigative work of the United States Postal Inspection Service and thanked the Federal Trade Commission for their assistance.
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.
[1] As to Rodriguez’s co-defendant Eva Christine Rodriguez, the entirety of the text of the Indictment, and the descriptions of the Indictment set forth herein constitute only allegations and every fact described should be treated as an allegation.
Man Pleads Guilty to Shooting at A Woman in A Bronx Apartment Building DoorwayRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that RAKIM BROWN, a/k/a “Rah,” pled guilty yesterday to firearms and narcotics offenses, including for his participation in a January 28, 2018 shooting at a woman in an apartment building vestibule in the University Heights neighborhood of the Bronx. BROWN pled guilty before U.S. District Judge Sidney H. Stein.
U.S. Attorney Damian Williams said: “For years, Rakim Brown was a violent drug dealer who sold crack cocaine on the streets of the Bronx. In order to protect his drug crew’s territory and reputation, Brown resorted to violence, including shooting at a woman associated with a rival drug crew in the vestibule of an apartment building in the Bronx. Brown now faces significant prison time for his crimes and the harm he inflicted on the victim and his community at large.”
According to the allegations in the Indictment and statements made in public court proceedings:
RAKIM BROWN, a/k/a “Rah,” was a member of a narcotics conspiracy that operated in and around 183rd Street and Davidson Avenue in the University Heights neighborhood of the Bronx. BROWN and others sold crack cocaine throughout the neighborhood. In 2017, a rivalry developed between BROWN’s drug crew and another drug crew when a member of the other drug crew shot and paralyzed BROWN’s brother. In retaliation, on January 28, 2018, BROWN and others chased an associate of the rival drug crew until they cornered her in the vestibule of an apartment building. BROWN then entered the vestibule, beat the victim, and shot at her multiple times. The victim sustained multiple injuries to her face and legs.
In connection with BROWN’s guilty plea, BROWN specifically admitted that he committed perjury at a pre-trial hearing before Judge Stein and that he possessed crack on particular occasions in 2016 and 2017 in connection with the narcotics trafficking conspiracy.
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BROWN, 26, pleaded guilty to narcotics conspiracy, which carries a maximum sentence of twenty years in prison, and using and carrying a firearm, which was brandished and discharged, in furtherance of a drug trafficking crime, which carries a maximum sentence of life and a mandatory minimum sentence of ten years in prison, which must be served consecutively to any other sentence imposed. BROWN will be sentenced before Judge Stein on June 6, 2022.
The statutory maximum penalties are prescribed by Congress and are 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 New York City Police Department and thanked the Special Agents of the U.S. Attorney’s Office for the Southern District of New York for their assistance with the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Mathew Andrews, Christopher Brumwell, Alexandra Rothman, and Danielle Sassoon are in charge of the prosecution.
TV Producer for Russian Oligarch Charged with Violating Crimea-Related SanctionsRead the Press Release
A federal court in the Southern District of New York today unsealed the first-ever criminal indictment charging a violation of U.S. sanctions arising from the 2014 Russian undermining of democratic processes and institutions in Ukraine.
According to court documents, John Hanick, aka Jack Hanick, 71, a U.S. citizen, is charged with violations of U.S. sanctions and false statements in connection with his years-long work for the sanctioned Russian oligarch Konstantin Malofeyev.
“The Justice Department will do everything it can to stamp out Russian aggression and interference,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “As alleged in the indictment, the Russian oligarch Konstantin Malofeyev was previously sanctioned for threatening Ukraine and providing financial support to the Donetsk separatist region. The defendant Hanick knowingly chose to help Malofeyev spread his destabilizing messages by establishing, or attempting to establish, TV networks in Russia, Bulgaria and Greece, in violation of those sanctions.”
“Konstantin Malofeyev is closely tied to Russian aggression in Ukraine, having been determined by OFAC to have been one of the main sources of financing for the promotion of Russia-aligned separatist groups operating in the sovereign nation of Ukraine,” said U.S. Attorney Damien Williams for the Southern District of New York. “The U.S. sanctions on Malofeyev prohibit U.S. citizens from working for or doing business with Malofeyev but as alleged, Hanick violated those sanctions by working directly for Malofeyev on multiple television projects over the course of several years. The indictment unsealed today shows this office’s commitment to the enforcement of laws intended to hamstring those who would use their wealth to undermine fundamental democratic processes. This office will continue to be a leader in the Justice Department’s work to hold accountable actors who would support flagrant and unjustified acts of war.”
“Sanctions imposed by the U.S. government are in place to protect our national interests, as well as the interests of our allies around the world,” said Assistant Director in Charge of the FBI’s New York Field Office. “As alleged, Mr. Hanick worked for the benefit of Konstantin Malofeyev, a Specially Designated National under Executive Order 13,660 who provided significant financing for Russians promoting separatism in Crimea in 2014. The action we have taken today should serve as an example to all that we will use all the resources at our disposal to aggressively enforce our nation's sanctions.”
According to court documents, in 2014 the President issued Executive Order 13,660, which declared a national emergency with respect to the situation in Ukraine. To address this national emergency, the President blocked all property and interest in property that came within the United States or the possession or control of any U.S. person, of individuals determined by the Secretary of the Treasury to be responsible for or complicit in, or who engaged in, actions or policies that threatened the peace, security, stability, sovereignty, or territorial integrity of Ukraine, or who materially assist, sponsor, or provide financial, material, or technological support for, or goods and services to, individuals or entities engaging in such activities. Executive Order 13,660, along with certain regulations issued pursuant to it (the Ukraine-Related Sanctions Regulations) prohibits, among other things, making or receiving any funds, goods, or services by, to, from, or for the benefit of any person whose property and interests in property are blocked.
On Dec. 19, 2014, OFAC designated Konstantin Malofeyev as a Specially Designated National (SDN) pursuant to Executive Order 13,660. OFAC’s designation of Malofeyev explained that he was one of the main sources of financing for Russians promoting separatism in Crimea, and materially assisted, sponsored, and provided financial, material or technological support for, or goods and services to or in support of the so-called Donetsk People’s Republic, a separatist organization in the Ukrainian region of Donetsk.
As alleged in the indictment, Hanick worked directly for and for the benefit of Malofeyev from at least in or about 2013 through at least in or about 2017, and continued to engage in this conduct after OFAC listed Malofeyev as a SDN, in violation of the Ukraine-Related Sanctions Regulations. Beginning in at least 2013, Malofeyev began planning to create a new Russian cable television news network (the Russian TV Network), and Hanick began traveling to Russian in early 2013 to meet with Malofeyev regarding these plans. In or about July 2013, Hanick moved to Russia to work for Malofeyev on the Russian television network, after negotiating the terms of his employment directly with Malofeyev, including the salary he would receive, payment for his housing in Moscow, and his Russian work visa.
Hanick continued to work for and report directly to Malofeyev after OFAC designated Malofeyev as a SDN in December 2014. For instance, in January 2015, Hanick wrote an email to Malofeyev that a draft policy for the Russian TV Network was meant “to implement your vision and to provide you with information for you to make decisions … You are the founder and chief architect of the project. We, as board members have the responsibility to direct the staff to implement your instructions.” The Russian TV Network went on the air in Russia in or about April 2015. Hanick played a leadership role at the network, described at various times in emails from 2015 through 2017 as “Board Chairman,” “General Producer,” “chairman of the HR committee,” and “General Advisor” for the Russian TV Network. Hanick reported directly to Malofeyev regarding the network’s operations and was listed on organizational charts directly below Malofeyev. Hanick was paid for his work through two Russian entities that were nominally separate from the Russian TV Network, but his compensation was overseen by Malofeyev, negotiated with Malofeyev, and was for his work for Malofeyev’s Russian TV Network. Hanick wired a portion of the payments he received from a Russian bank account to a bank account he held at a bank located in New York, New York.
Hanick also worked for Malofeyev on a project to establish and run a Greek television network and on efforts to acquire a Bulgarian television network. At Malofeyev’sdirection, Hanick traveled to Greece and to Bulgaria on multiple occasions in 2015 and 2016 to work on these initiatives, andreported directly back to Malofeyev on his work. For instance, in November 2015, Hanick wrote to Malofeyev that the Greek television network would be an “opportunity to detail Russia’s point of view on Greek TV.” In connection with Malofeyev’sefforts to acquire the Bulgarian television network, Hanick took steps to conceal Malofeyev’s role in the acquisition by arranging to travel to Bulgaria with another person identified by a Greek associate of Malofeyev, so that it would appear the buyer was a Greek national rather than Malofeyev.
In February 2021, FBI agents interviewed Hanick about his work for Malofeyev, and Hanick made false statements about his work for Malofeyev, including the false statements that Malofeyev had no involvement in Hanick’s travel to Bulgaria, and that Hanick did not know that Malofeyev had any connection to the attempt to acquire the Bulgarian television network until afterward.
Hanick is charged with violating the International Emergency Economic Powers Act, which carries a maximum penalty of 20 years in prison and making false statements which carries a maximum penalty of five years in prison. Pursuant to the request of the United States, Hanick was provisionally arrested on Feb. 3, in London, with a view toward extradition. A federal district judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FBI is investigating the case.
Assistant U.S. Attorneys Thane Rehn and Jessica Greenwood for the Southern District of New York are prosecuting the case.
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.
TV Producer for Russian Oligarch Charged with Violating Crimea-Related 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 Office of the Federal Bureau of Investigation, announced today the unsealing of the first-ever criminal indictment charging a violation of United States sanctions arising from the 2014 Russian undermining of democratic processes and institutions in Ukraine. JOHN HANICK, a/k/a “Jack Hanick,” a United States citizen, is charged with violations of United States sanctions and false statements in connection with his years-long work for the sanctioned Russian oligarch Konstantin Malofeyev. Pursuant to the request of the United States, HANICK was provisionally arrested on February 3, 2022, in London, the United Kingdom, with a view toward extradition.
U.S. Attorney Damian Williams said: “Konstantin Malofeyev is closely tied to Russian aggression in Ukraine, having been determined by OFAC to have been one of the main sources of financing for the promotion of Russia-aligned separatist groups operating in the sovereign nation of Ukraine. The United States sanctions on Malofeyev prohibit United States citizens from working for or doing business with Malofeyev but as alleged, Hanick violated those sanctions by working directly for Malofeyev on multiple television projects over the course of several years. The Indictment unsealed today shows this Office’s commitment to the enforcement of laws intended to hamstring those who would use their wealth to undermine fundamental democratic processes. This Office will continue to be a leader in the Justice Department’s work to hold accountable actors who would support flagrant and unjustified acts of war.”
“The Justice Department will do everything it can to stamp out Russian aggression and interference,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “As alleged in the indictment, the Russian oligarch Konstantin Malofeyev was previously sanctioned for threatening Ukraine and providing financial support to the Donetsk separatist region. The defendant Hanick knowingly chose to help Malofeyev spread his destabilizing messages by establishing, or attempting to establish, TV networks in Russia, Bulgaria, and Greece, in violation of those sanctions.”
FBI Assistant Director Michael J. Driscoll said: “Sanctions imposed by the United States government are in place to protect our national interests, as well as the interests of our allies around the world. As alleged, Mr. Hanick worked for the benefit of Konstantin Malofeyev, a Specially Designated National under Executive Order 13660 who provided significant financing for Russians promoting separatism in Crimea in 2014. The action we have taken today should serve as an example to all that we will use all the resources at our disposal to aggressively enforce our nation’s sanctions.”
According to the Indictment unsealed today in Manhattan federal court:[1]
In 2014, the President issued Executive Order 13,660, which declared a national emergency with respect to the situation in Ukraine. To address this national emergency, the President blocked all property and interest in property that came within the United States or the possession or control of any United States person, of individuals determined by the Secretary of the Treasury to be responsible for or complicit in, or who engaged in, actions or policies that threatened the peace, security, stability, sovereignty, or territorial integrity of Ukraine, or who materially assist, sponsor, or provide financial, material, or technological support for, or goods and services to, individuals or entities engaging in such activities. Executive Order 13,660, along with certain regulations issued pursuant to it (the “Ukraine-Related Sanctions Regulations”) prohibits, among other things, making or receiving any funds, goods, or services by, to, from, or for the benefit of any person whose property and interests in property are blocked.
On December 19, 2014, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) designated Konstantin Malofeyev as a Specially Designated National (“SDN”) pursuant to Executive Order 13,660. OFAC’s designation of Malofeyev explained that he was one of the main sources of financing for Russians promoting separatism in Crimea, and has materially assisted, sponsored, and provided financial, material, or technological support for, or goods and services to or in support of the so-called Donetsk People’s Republic, a separatist organization in the Ukrainian region of Donetsk.
As alleged in the Indictment, HANICK worked directly for and for the benefit of Malofeyev from at least in or about 2013 through at least in or about 2017, and continued to engage in this conduct after OFAC listed Malofeyev as a SDN, in violation of the Ukraine-Related Sanctions Regulations. Beginning in at least 2013, Malofeyev began planning to create a new Russian cable television news network (the “Russian TV Network”), and HANICK began traveling to Russian in early 2013 to meet with Malofeyev regarding these plans. In or about July 2013, HANICK moved to Russia to work for Malofeyev on the Russian television network, after negotiating the terms of his employment directly with Malofeyev, including the salary he would receive, payment for his housing in Moscow, and his Russian work visa.
HANICK continued to work for and report directly to Malofeyev after OFAC designated Malofeyev as a SDN in December 2014. For instance, in January 2015, HANICK wrote an email to Malofeyev that a draft policy for the Russian TV Network was meant “to implement your vision and to provide you with information for you to make decisions … You are the founder and chief architect of the project. We, as board members have the responsibility to direct the staff to implement your instructions.” The Russian TV Network went on the air in Russia in or about April 2015. HANICK played a leadership role at the network, described at various times in emails from 2015 through 2017 as “Board Chairman,” “General Producer,” “chairman of the HR committee,” and “General Advisor” for the Russian TV Network. HANICK reported directly to Malofeyev regarding the network’s operations and was listed on organizational charts directly below Malofeyev. HANICK was paid for his work through two Russian entities that were nominally separate from the Russian TV Network, but his compensation was overseen by Malofeyev, negotiated with Malofeyev, and was for his work for Malofeyev’s Russian TV Network. HANICK wired a portion of the payments he received from a Russian bank account to a bank account he held at a bank located in New York, New York.
HANICK also worked for Malofeyev on a project to establish and run a Greek television network and on efforts to acquire a Bulgarian television network. At Malofeyev’s direction, Hanick traveled to Greece and to Bulgaria on multiple occasions in 2015 and 2016 to work on these initiatives, and reported directly back to Malofeyev on his work. For instance, in November 2015, HANICK wrote to Malofeyev that the Greek television network would be an “opportunity to detail Russia’s point of view on Greek TV.” In connection with Malofeyev’s efforts to acquire the Bulgarian television network, HANICK took steps to conceal Malofeyev’s role in the acquisition by arranging to travel to Bulgaria with another person identified by a Greek associate of Malofeyev, so that it would appear the buyer was a Greek national rather than Malofeyev.
In February 2021, FBI agents interviewed HANICK about his work for Malofeyev, and HANICK made false statements about his work for Malofeyev, including the false statements that Malofeyev had no involvement in HANICK’s travel to Bulgaria, and that HANICK did not know that Malofeyev had any connection to the attempt to acquire the Bulgarian television network until afterward.
* * *
HANICK, 71, is a United States citizen who most recently has resided in London. The sanctions charge carries a maximum penalty of 20 years in prison. The false statements charge carries a maximum penalty of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
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.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation, and thanked the support and expertise of the Department of Justice’s Office of International Affairs in the conduct of this matter.
The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Thane Rehn and Jessica Greenwood are in charge of the prosecution.
[1] 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.
Rye Ophthalmologist Sentenced to 96 Months in Prison for Prolific Seven-Year Healthcare Fraud Scheme and Covid-19 Loan FraudRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that AMEET GOYAL, M.D., (“GOYAL”) an ophthalmologist in Rye, New York, was sentenced today to 96 months in prison for orchestrating a seven-year healthcare fraud scheme by falsely billing for millions of dollars of upcoded procedures, and also for fraudulently obtaining two Government-guaranteed loans intended to help small businesses during the COVID-19 pandemic while he was facing charges on pretrial release for the healthcare fraud scheme. In imposing the sentence today, U.S. District Judge Cathy Seibel noted, “Fraud doesn’t fully capture how blatant this was and how unjustified this was… This was not about need, it was about greed.” GOYAL previously pled guilty to all charges in a six-count superseding Indictment before Judge Seibel on September 13, 2021.
In addition to the prison term, GOYAL was sentenced today to five years of supervised release, and ordered to pay forfeiture of $3.6 million and restitution of $3.6 million. GOYAL has already paid approximately $1.79 million toward these obligations.
U.S. Attorney Damian Williams said: “A prominent ophthalmologist and oculoplastic surgeon who has now surrendered his medical license, AMEET GOYAL was blinded by greed. Over a seven-year period, he preyed on the trust placed in him and cheated patients and insurance companies of $3.6 million in false charges. To cover his tracks, he created fictitious operative reports, seeded across hundreds of patient files, violating the integrity of patients’ medical records and making it more difficult for subsequent doctors to evaluate their care. He sent patients who could not pay the upcoded bills to a collection agency, decimating their credit. He pressured other doctors to join the scheme and threatened to retaliate against their livelihood and careers. Even after being arrested for this scheme, GOYAL committed a breathtaking new fraud and stole $637,200 from the Paycheck Protection Program in the early days of a devastating pandemic. For his crimes, GOYAL will serve a substantial sentence in prison.”
According to the allegations contained in the Indictment, court filings, and statements made during court proceedings:
At all relevant times, GOYAL owned and operated the ophthalmology practice Ameet Goyal M.D. P.C., doing business as Rye Eye Associates, with offices in Rye, Mt. Kisco, and Wappingers Falls, New York, and Greenwich, Connecticut (the “Practice”). Between 2010 and 2017, GOYAL engaged in widespread healthcare fraud by consistently “upcoding” simpler, lower-paying surgical procedures and examinations as complex, higher-paying major operations in fraudulent billings submitted to Medicare, private insurance companies, and patients. As a result, GOYAL fraudulently obtained at least $3.6 million in payments for procedures he did not perform. GOYAL failed to obtain proper and, at times, any consent for the upcoded procedures he falsely claimed to have performed. As part of the scheme, GOYAL routinely falsified patient medical records, authoring fictitious templated operative reports that matched the complex operation he billed rather than the different minor procedure he actually performed. GOYAL also pressured other employees in his Practice to engage in the scheme, and threatened the livelihood of employees who refused to comply. GOYAL caused patients to pay thousands of dollars out of pocket for fraudulently billed charges, and initiated debt collection proceedings against patients who did not pay the full amounts of those false charges. As a result of his fraudulent billings, GOYAL was the highest-billing doctor in the tri-state area for several of his fraudulently billed codes, one of which he billed seven times more frequently than all doctors in the tri-state area combined. GOYAL was indicted for the healthcare fraud charges in November 2019 and was released on bail.
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 Paycheck Protection Program (“PPP”). Applicants with pending criminal charges are ineligible for PPP loans. The PPP also limits each eligible borrower to one loan, and a maximum loan amount calculated based on a business’s average monthly payroll expenses.
In or about April 2020, GOYAL applied to the SBA and Bank-1, a federally insured institution, for over $630,000 in Government-guaranteed loans through the PPP. Specifically, on or about April 21, 2020, GOYAL applied for a loan in the amount of $358,700 for the business “Ameet Goyal,” with his own social security number and e-mail address. On or about April 29, 2020, GOYAL applied for a second loan in the amount of $278,500, with a business name “Rye eye associates,” using the Employer Identification Number for Ameet Goyal, M.D. P.C and a different email address controlled by GOYAL. To substantiate each loan, however, GOYAL submitted the exact same underlying payroll expense report, showing the same employees and payroll costs.
On both applications, GOYAL falsely answered that he was not facing any pending criminal charges, and electronically placed his initials “AG” directly under his “No” response. GOYAL also falsely certified, among other things, that his business would not receive another PPP loan until the end of the year. After obtaining approval from Bank-1 and the SBA through his fraudulent misrepresentations, GOYAL executed loan notes for two loans. On May 4, 2020, GOYAL received the first loan of $358,700, and on May 11, 2021, GOYAL received the second loan of $278,500. GOYAL used the business checking account into which these funds were deposited to pay business and personal expenses, including by making a payment to a country club in Westchester, New York within days of receiving the first loan, as well as payments to a California vineyard and golf merchandise website.
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GOYAL, 58, of Rye, New York, pled guilty to all six counts in the Superseding Indictment. The first count charged healthcare fraud; the second count charged wire fraud; and the third count charged making false statements relating to health care matters. Counts four, five, and six charged that while on pretrial release, the defendant committed the following offenses, respectively: bank fraud, making false statements on a loan application, and making false statements in a matter within the jurisdiction of the executive branch of the Government of the United States.
Mr. Williams praised the work of the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, and the Office of the Inspector General of the SBA.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Vladislav Vainberg, David Felton, and Margery Feinzig are in charge of the prosecution. A civil fraud lawsuit relating to healthcare fraud under the False Claims Act is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the pending civil case.
Repeat Fraudster Sentenced for Fraudulent Loan and Bank Bribery SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that ADEDAYO ILORI, a recidivist fraudster with multiple prior fraud convictions and who continued to engage in fraudulent conduct even following his guilty plea, was sentenced today to 63 months’ imprisonment for his role in a commercial loan fraud and bank bribery scheme. ILORI’s sentence was imposed by United States District Judge Lewis J. Liman. Codefendants Herode Chancy and Michael Albarella, who at the time of offense were employed as managers at a Manhattan branch of a national bank (“Bank-1”), were previously sentenced to 30 months’ and six months’ imprisonment, respectively.
U.S. Attorney Damian Williams said: “Adedayo Ilori has a history of engaging in fraud using the identities of other people. Here, Ilori worked with bank insiders to obtain over $1 million in commercial loans for fake businesses. Ilori used stolen identities to apply for the loans and open bank accounts to receive the loan proceeds. His co-conspirators used a stolen identity provided by Ilori to launder a portion of the loan proceeds. Today’s sentence sends the message to Ilori and others engaged in fraud using stolen identities that such conduct will be seriously punished.”
According to the allegations in the Complaint, Indictment, and statements made in court:
From at least in or about March 2019 up to and including at least in or about March 2020, ILORI and Chancy conspired to fraudulently obtain business loans from a third-party commercial lender with the intent not to repay the loans – i.e., with the intent to “bust out” the loans. ILORI and Chancy together submitted eight fraudulent business loan applications for a total of $1,020,000 in business loans. The business loan applications submitted by ILORI and Chancy included doctored bank statements and listed the identities of other persons as the loan applicants, including stolen identities provided by ILORI. ILORI and Chancy also opened bank accounts using the identities of those other persons in order to receive the loan payments from the third-party commercial lender. ILORI and Chancy subsequently conspired with Albarella to open a bank account at Bank-1 using a stolen identity provided by ILORI to launder approximately $200,000 of the expected proceeds of the loan scheme. Albarella opened the bank account at Bank-1 using the stolen identity provided by ILORI and Chancy, and Albarella accepted a $10,000 bribe to open the bank account.
ILORI and Chancy believed that the underwriter for the third-party commercial lender was participating in the scheme and agreed to pay the underwriter a “commission” for the underwriter’s role in the scheme. In reality, however, the underwriter was an undercover law enforcement officer.
After pleading guilty in this case, ILORI continued to engage in fraudulent conduct using stolen identities by renting an apartment using a stolen identity, leasing a vehicle using a stolen identity, making purchases using a bank card in the name of a stolen identity, and possessing bank cards and identification cards in the names of several stolen identities. Separately, ILORI has been indicted in this District in 21 Cr. 746 for engaging in a multi-million dollar COVID-19 loan fraud scheme, and the case is pending before Judge Vyskocil. The charges contained in Indictment 21 Cr. 746 are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
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In addition to the prison term, ILORI, 43 of Queens, New York, was sentenced to three years of supervised release and ordered to forfeit $10,000 in fraudulent proceeds.
Mr. Williams praised the outstanding investigative work of the New York FBI’s Eurasian Organized Crime Task Force and the El Dorado Task Force of Homeland Security Investigations.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Tara M. La Morte and Cecilia E. Vogel are in charge of the prosecution.
Harness Trainer Christopher Oakes Sentenced to 3 Years in Federal Doping CaseRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that defendant CHRISTOPHER OAKES received a sentence of thirty-six months in prison today for his role in the felony drug misbranding and adulteration charges arising from this Office’s investigation of the abuse of animals through the use of performance enhancing drugs and as charged in United States v. Navarro et al., 20 Cr. 160 (MKV). OAKES’s sentence followed the February 24, 2022, sentencing of thoroughbred trainer MARCOS ZULUETA to a term of thirty-three months in prison, and the guilty plea of harness trainer RICK DANE, JR., on February 18, 2022. OAKES and ZULUETA were each sentenced by U.S. District Judge Mary Kay Vyskocil, who will preside over the sentencing of DANE on June 21, 2022.
U.S. Attorney Damian Williams said: “These three defendants, Christopher Oakes, Marcos Zulueta, and Rick Dane, Jr., each undertook a duty to care for and protect the health and safety of the animals under their control. Each man flagrantly violated that duty in pursuit of purse money. Oakes’s sentence today, like Zulueta’s sentence, reflects the callousness of their crimes, and the gravity with which this Office takes the kind of abuse that each practiced.”
According to the allegations contained in the Superseding Informations, prior charging instruments and other filings in this case[1], and statements during court proceedings:
The charges in the Navarro 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 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, like OAKES, ZULUETA, and DANE, 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. Veterinarians involved in the scheme profited from the sale and administration of these medically unnecessary, misbranded, and adulterated substances.
OAKES, ZULUETA, and DANE each operated their respective doping operations using customized, misbranded drugs that were intended to be untestable by racing officials. Through his fraud – and using a sham corporation, “Northfork,” to hide his actual financial interest in various horses – OAKES defrauded others of over a million dollars in purse winnings by training and racing horses that he had “doped” using a plethora of adulterated and misbranded performance-enhancing drugs (“PEDs”), including (among others) blood builders, vasodilators, “drenches,” “bleeder” pills, and other drugs not approved by the Food and Drug Administration (“FDA”). OAKES was also willing to engage in surreptitious delivery of drugs to notorious doper and co-defendant Jorge Navarro, who was previously sentenced to five years in prison in this matter.
ZULUETA, like OAKES, supported Navarro’s racehorse doping and likewise administered illegal drugs to his racehorses under his care and control. Navarro and ZULUETA routinely discussed their use of a particular “blood builder” PED they referred to as “Monkey.” On one recorded call between ZULUETA and Navarro, Navarro stated: “the Monkey—the Monkey hits the horses hard,” later confirming, “the Monkey and the orange one . . . As far as I’m concern[ed], the Monkey and the orange one has something similar which is hitting the horses a lot.” On another recorded call, Navarro informed ZULUETA that “‘the Monkey is breaking down the horses . . . It’s breaking down . . . it’s breaking down the horses. It’s making their blood very thick.’” Still, rather than dissuade Navarro from using the product, ZULUETA agreed with Navarro that he could simply lower the dosage he was administering to his horses, while risking the horses “breaking down.” Following that conversation, ZULUETA, too, continued to procure that blood builder for use on his own horses.
DANE was a New York-based trainer of standardbred horses who regularly obtained misbranded and adulterated PEDs from co-defendant Seth Fishman, and assisted in the distribution of Fishman’s products, including by “vouching” for potential clients of Fishman. Though Fishman was nominally a veterinarian, Fishman did not practice veterinary medicine, but rather used his license as a means of shielding clients, like DANE, from regulatory scrutiny – every drug that Fishman sold to DANE and others, including drugs obtained from various compounding pharmacies, were illegally misbranded, as DANE well knew. A jury convicted Fishman of two counts of misbranding conspiracy on February 2, 2022.
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In addition to the prison sentence, OAKES, 59 of Bear Creek Township, PA and ZULUETA, 54 of Bensalem, PA, were each ordered to pay a forfeiture penalty of $62,821 and $47,525, respectively.
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 expressed the Office’s appreciation for the Food and Drug Administration, the investigative support and substantive expertise of which was integral to the success of this case.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Sarah Mortazavi, Andrew C. Adams, Anden Chow, and Benet Kearney are in charge of the prosecution.
[1] As to Oakes’s, Zulueta’s, and Dane’s co-defendants, the entirety of the texts of the Indictments, Informations, and the descriptions of the Indictments and Informations set forth herein constitute only allegations and every fact described should be treated as an allegation.
Yonkers Man Sentenced to 18 Years in Prison for Robbery, Firearms, and Narcotics OffensesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that FERNANDO RA was sentenced to 18 years in prison today in connection with robbery, firearms, and narcotics offenses. RA previously pleaded guilty on June 2, 2021, before United States District Judge P. Kevin Castel.
U.S. Attorney Damian Williams said: “With today’s sentence, Fernando Ra will spend 18 years in federal prison for his admitted role in the brutal and violent kidnapping and torture of his victims. This case illustrates yet again how violence goes hand in hand with the illegal drug trade. We will continue to work with our law enforcement partners to bring to justice those who engage in drug trafficking and violence.”
According to the Superseding Indictment and other publicly filed documents, on October 3, 2020, RA and his co‑conspirators kidnapped, restrained, robbed, and savagely assaulted two victims, using firearms and baseball bats to beat them. RA also used a knife to carve the letter “Z” into the skin of one of victims, an apparent reference to Los Zetas, the notoriously violent Mexican drug cartel. RA claimed that the victims owed Los Zetas a narcotics debt, and that he was attacking the victims on behalf of Los Zetas.
In addition to the kidnapping and robbery, RA also participated in a related conspiracy to traffic between 15 and 50 kilograms of cocaine from May 2020 through November 2020.
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In addition to today’s prison sentence, RA, 26, of Yonkers, New York, was sentenced to five years of supervised release.
Mr. Williams praised the outstanding investigative work of Special Agents from the New York Division of the DEA, and Special Agents from the U.S. Attorney’s Office for the Southern District of New York. Mr. Williams also thanked the DEA Buffalo Resident Office and the Paterson (New Jersey) Police Department for their assistance with the investigation.
The case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Rushmi Bhaskaran, Christy Slavik, and Benjamin Woodside Schrier are in charge of the prosecution.
Two Florida Men Charged with $11 Million Medicare Fraud Scheme to Traffic in Prescriptions for Medical EquipmentRead 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 Inspector General (“HHS-OIG”) New York Regional Office announced today the arrest of ZACHARY S. SEID and ANTHONY CRACCHIOLO on charges of conspiracy, health care fraud, wire fraud, and unlawfully receiving kickbacks in connection with Medicare. As alleged in an Indictment unsealed today in Manhattan federal court, SEID and CRACCHIOLO, ran companies dedicated to illegally buying and selling prescriptions for durable medical equipment (“DME”) such as leg, arm, and back braces, and then using those prescriptions to file fraudulent Medicare claims for more than $11 million, as well as selling such prescriptions to other DME supply companies, so that those companies in turn could also file fraudulent Medicare claims. The case has been assigned to U.S. District Judge John P. Cronan. SEID and CRACCHIOLO, who were arrested this morning in Florida, will be presented tomorrow before magistrate judges in the Southern District of Florida.
U.S. Attorney Damian Williams said: “Medicare is an invaluable taxpayer-funded program dedicated to providing affordable health care to beneficiaries over 65 or with disabilities, not to enriching those who would defraud the program by buying and selling false prescriptions.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “These allegations describe a greed-fueled scheme that undermined our health care system and the people it serves. Such scams threaten patient health, waste taxpayer funds, and drive up healthcare costs for all of us. Working closely with our law enforcement partners, we will continue to aggressively root out health care fraud and bring criminals to justice.”
As alleged in the Indictment:[1]
From at least July 2019 through at least October 2020, SEID and CRACCHIOLO engaged in a scheme to defraud Medicare in at least three ways. First, SEID and CRACCHIOLO illegally paid kickbacks of more than $565,000 to purchase fraudulent DME prescriptions, including prescriptions “signed” by doctors who never in fact signed or authorized those prescriptions and were unaware that their names and identities were being so used. These DME prescriptions were for such equipment as braces for ankles, knees, elbows, wrists, and backs. Second, SEID and CRACCHIOLO unlawfully received more than $425,000 in kickbacks, reselling some of these prescriptions to DME suppliers, so that those suppliers in turn could fraudulently bill Medicare for the DME. Finally, in about May and June 2020, SEID and CRACCHIOLO acquired five of their own fraudulent DME supply companies, and used the bogus prescriptions to file more than $11 million in fraudulent Medicare claims, seeking payment to the DME suppliers that SEID and CRACCHIOLO controlled.
Together, SEID and CRACCHIOLO sold to multiple DME supply companies, and established control over at least five DME supply companies of their own, which they used to submit their fraudulent Medicare claims. Those companies were: 1 Medical Supplies Corp., Ameri Med Supplies Corp., One Medical Health Supplies Corp., Sun Med Equip Corp., and Sunrise Med Service Group Corp. In addition, Seid owned a company called Seid Services, Inc., while Cracchiolo owned a company called Dataco.
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SEID, 35, of Boynton Beach, Florida, and CRACCHIOLO, 42, of Parkland, Florida, are each charged in four counts with conspiracy to commit health care fraud and wire fraud, health care fraud, wire fraud, and receiving kickbacks in violation of the Anti-Kickback Statute. The conspiracy and wire fraud counts each carry a maximum potential prison sentence of 20 years; the health care fraud count carries a maximum potential prison sentence of 10 years; and the count charging violation of the Anti-Kickback statute carries a maximum potential prison sentence of five years. The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the investigative work of HHS-OIG.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney David Raymond Lewis is in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
CEO of Payment Protection Program Lender MBE Capital Arrested in Connection with Fraudulent Loan and Lender ApplicationsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Thomas Fattorusso, Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), Amaleka McCall-Brathwaite, Special Agent-in-Charge, U.S. Small Business Administration, Office of Inspector General, Eastern Region (“SBA-OIG”), and Stephen Donnelly, Acting Special Agent-in-Charge, Office of Inspector General for the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection, Eastern Region (“FRB-OIG”), announced today that RAFAEL MARTINEZ was arrested on multiple fraud charges and aggravated identity theft in connection with loan and lender applications submitted through the Paycheck Protection Program (the “PPP”) administered by the U.S. Small Business Administration (the “SBA”).
MARTINEZ used false representations and documents to fraudulently obtain the approval of the SBA for his company, MBE Capital Partners, LLC (“MBE”), to be a non-bank lender through the PPP. MARTINEZ then used that approval to obtain approximately $932 million in capital to issue PPP loans and earn over approximately $71 million in lender fees. In addition, MARTINEZ engaged in a scheme to obtain a PPP loan for MBE in the amount of approximately $283,764 through false statements regarding the number of employees of MBE and the wages paid to MBE employees and using the forged signature of MBE’s tax preparer. MARTINEZ was arrested yesterday and will be presented today in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.
U.S. Attorney Damian Williams said: “As alleged, Rafael Martinez faked his way into building his company MBE Capital Partners into an almost $1 billion PPP lender. Not only did Martinez allegedly lie to a financial institution to obtain almost $300,000 in PPP loan funding for MBE Capital, he then submitted fraudulent financial statements to get the SBA to approve MBE Capital and to obtain over $800 million to issue PPP loans. In doing so, Martinez and his company earned over $70 million in lender fees from the SBA, which among other luxury items, he audaciously spent on a villa in the Dominican Republic, a Ferrari, and private jets. Thanks to the incredible work of our law enforcement partners, our Office will continue to prosecute those who committed fraud through the PPP and other pandemic relief programs.”
IRS-CI Special Agent-in-Charge Thomas Fattorusso said: “American businesses and their employees have been struggling due to an unprecedented global pandemic, and the Paycheck Protection Program was created to serve as a safety net. Martinez is alleged to have fraudulently obtained funds through this program as both a recipient and a lender, and in effect, stole funds from his fellow Americans so he could purchase a New Jersey mansion, a villa abroad, and several luxury vehicles.”
SBA-OIG Special Agent-in-Charge Amaleka McCall-Brathwaite said: “OIG stands firm against fraudsters determined to steal SBA program funds meant to uplift and support the nation’s small businesses during the pandemic. OIG remains committed to rooting out bad actors and protecting the integrity of SBA programs. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”
FRB-OIG Acting Special Agent-in-Charge Stephen Donnelly said: “We are fully committed to bringing to justice wrongdoers who exploit and defraud financial institutions and the government’s response to the COVID-19 pandemic.”
According to the Complaint unsealed in Manhattan federal court:[1]
At all relevant times, MARTINEZ has been the CEO and primary owner of MBE, a New York limited liability company formed in or about March 2015. Republic Group, LLC, a/k/a Republic Group Parts, LLC (“Republic Group”), which is owned and controlled by MARTINEZ, serves as the holding company for MBE and conducts business as MBE. According to MBE’s website, “For over 20 years, MBE Capital Partners has been a leading provider of financing solutions for small and diverse businesses . . . . In 2019, we financed over $1.7 billion in public and private debt and we funded over 35,000 PPP loans worth $800M.”
On or about April 5, 2020, MARTINEZ applied to a financial institution for a government-guaranteed loan for Republic Group, d/b/a MBE through the SBA’s PPP. In connection with the loan application, MARTINEZ represented that MBE had as many as 15 employees and an average monthly payroll of approximately $119,390 in 2019. In fact, however, from in or about April 2018 through in or about April 2020, MBE had at most four employees who had a total average monthly payroll of no more $25,000. In order to support the false representations made by MARTINEZ in the loan application about the number of employees at and the wages paid by MBE, MARTINEZ submitted fraudulent and doctored tax records that contained the forged signature of a tax preparer located in Manhattan, New York (the “Tax Preparer”). Based on the false documentation provided by MARTINEZ, MBE was approved for a PPP loan in the amount of approximately $283,764, which was disbursed to a bank account controlled by MARTINEZ. A majority of the loan proceeds do not appear to have been used for payroll for employees of MBE or other business expenses.
On or about April 9, 2020, within five days of applying for the PPP loan referenced above, MARTINEZ submitted an application to the SBA for MBE to become a non-bank PPP lender. As part of the PPP lender application process, MARTINEZ represented that MBE had originated and serviced over $3.8 billion in business loans or other commercial financial receivables for the three-year period from in or about 2017 through in or about 2019 and submitted fraudulent financial statements that purported to be audited by the Tax Preparer’s firm for the years 2018 and 2019. Based on the false information provided by MARTINEZ to the SBA, MBE was approved as a non-bank lender for PPP loans.
On or about April 27, 2020, MARTINEZ submitted various documents, including the same fraudulent audited financial statements for 2019 provided to the SBA, to a life insurance company (the “Company”) as part of a proposed partnership to fund PPP loans for minority and women-owned small businesses. On or about May 13, 2020, the Company provided MBE with $100 million to fund PPP loans, which MBE in turn used as collateral to borrow additional capital of approximately $832 million through the Payment Protection Program Liquidity Facility (“PPPLF”) with the Federal Reserve.
As a result of the above fraudulent misrepresentations, MARTINEZ, through his company MBE, became an approved PPP lender and issued approximately $823 million in PPP loans to approximately 36,600 businesses. These loans earned MARTINEZ a total of approximately $71.3 million in fees. MARTINEZ spent the proceeds from his criminal conduct on, among other things, the purchase of a villa in the Dominican Republic for over $10 million, a $3.5 mansion located in Franklin Lakes, New Jersey, a chartered jet service, and several luxury vehicles, including a 2018 Porsche 911 Turbo, a 2017 Ferrari 488 Spider, a 2017 Bentley Continental GT, a BMW 750, and a 1962 Mercedes Benz 190.
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MARTINEZ, 56, of Franklin Lakes, New Jersey, was charged with one count of bank fraud, two counts of wire fraud, and one count of making false statements to a bank, each of which carries a maximum sentence of 30 years in prison; one count of making false statements, which carries a maximum sentence of two years in prison; one count of making false statements to the SBA, which carries a maximum sentence of two years in prison; and one count of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison, which must be served consecutively to any other sentence imposed. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding investigative work of IRS-CI, SBA-OIG, and FRB-OIG. Mr. Williams also thanked Homeland Security Investigations and U.S. Customs and Border Protection for their assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Sagar K. Ravi is 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.
Devon Archer Sentenced to A Year and A Day in Prison for the Fraudulent Issuance and Sale of More Than $60 Million of Tribal BondsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that DEVON ARCHER was sentenced today by the Honorable Ronnie Abrams to a year and a day in prison for defrauding a Native American tribal entity and various investment advisory clients of tens of millions of dollars in connection with the issuance of bonds by the tribal entity and the subsequent sale of those bonds through fraudulent and deceptive means.
As established by the evidence at trial:
From March 2014 through April 2016, ARCHER, Bevan Cooney, John Galanis, Jason Galanis, Gary Hirst, Michelle Morton, Hugh Dunkerley, and others engaged in a fraudulent scheme that involved (a) causing the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity, to issue a series of bonds (the “Tribal Bonds”) through lies and misrepresentations; (b) deceptively causing clients of asset management firms controlled by Hirst, Morton, and others to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market; and (c) misappropriating the proceeds resulting from those bond sales.
The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by John Galanis. Simultaneously, Jason Galanis, with the backing of ARCHER and others, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser. Morton and Hirst were installed as Hughes’ Chief Executive Officer and Chief Investment Officer, respectively. Within weeks of taking control of Hughes, Morton and Hirst placed the entire $28 million first series of Tribal Bonds with Hughes clients but failed to disclose material facts about the Tribal Bonds, including the fact that the Tribal Bonds fell outside of the investment parameters set forth in the investment advisory contracts of certain Hughes clients. In addition, Hughes’ clients were not told about substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf.
The defendants and their co-conspirators then misappropriated the proceeds of first Tribal Bond issuance. Specifically, although the Tribal Bonds were supposed to be invested in an annuity, Dunkerley, at the direction of Jason Galanis, transferred significant amounts of the bond proceeds to support the defendants’ business and personal interests. John Galanis, for example, secretly received $2.35 million in proceeds of the first bond issuance, which he spent on a variety of personal expenses and luxury items, including cars, jewelry, and hotel expenses. Similarly, Jason Galanis used a portion of the proceeds of the first Tribal Bond issuance to finance the purchase of a $10 million luxury apartment in Tribeca, which, with ARCHER’s consent, he purchased in ARCHER’s name.
In addition, after John Galanis induced the WLCC to issue a second round of Tribal Bonds, ARCHER and others used $20 million of bond proceeds from the first issuance to buy the entirety of the second issuance. As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase. In order to deposit the bonds at a bank, ARCHER misrepresented the source of the money used to purchase the bonds, falsely claiming that he had obtained it through real estate sales. The bonds purchased by ARCHER and others were then used to meet net capital requirements at two broker dealers in which ARCHER and others had interests. In addition, millions of dollars in bond proceeds from the first and second issuances were used finance the acquisition of companies which the defendants and their co-conspirators acquired as part of a strategy to build a financial services conglomerate, which ARCHER expected to control.
In the spring of 2015, John Galanis induced the WLCC to issue an additional $16 million worth of Tribal Bonds. Simultaneously, Jason Galanis, and others purchased a second investment adviser, Atlantic Asset Management (“Atlantic”), and installed Morton as the Chief Executive Officer. Within days of obtaining control of Atlantic, Morton placed the entirety of the $16 million Tribal Bond issuance with an Atlantic client, without the client’s consent and without disclosing the fact that the Tribal Bonds were outside the client’s investment parameters and that numerous conflicts of interest existed. The proceeds of the $16 million issuance were again not invested in an annuity as promised, but instead were diverted to, among other things, finance the defendants’ acquisition of another company in furtherance of their plan to build a financial services conglomerate, and make payments to one of the broker dealers in which ARCHER and others had interests.
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In addition to the prison term, ARCHER, 47, was sentenced to a year of supervised release. ARCHER was also ordered to forfeit $15,700,513 and to make restitution in the amount of $43,427,436.
Jason Galanis, who pled guilty to conspiracy to commit securities fraud, securities fraud, and investment adviser fraud, was sentenced to a term of 173 months in prison on August 11, 2017. Gary Hirst, who pled guilty to securities fraud, conspiracy to commit securities fraud, investment adviser fraud, and conspiracy to commit investment adviser fraud, was sentenced to 84 months in prison on September 7, 2018. John Galanis, who was convicted after trial of securities fraud and conspiracy to commit securities fraud, was sentenced to 120 months in prison on March 8, 2019. Bevan Cooney, who was convicted after trial of securities fraud and conspiracy to commit securities fraud, was sentenced to 30 months in prison on July 31, 2019. Michelle Morton, who pled guilty to conspiracy to commit securities fraud and investment adviser fraud, was sentenced to 15 months in prison on November 18, 2020. Hugh Dunkerley, who pled guilty to conspiracy to commit securities fraud, two counts of securities fraud, bankruptcy fraud and falsification of records with the intent to obstruct a government investigation, is also awaiting sentencing.
Mr. Williams praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein and Negar Tekeei are in charge of the prosecution.
Brooklyn Man and Yonkers Woman Charged with Production, Receipt and Distribution of Child PornographyRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Miriam E. Rocah, Westchester County District Attorney, Michael J. Driscoll, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and John Mueller, the Commissioner of the Yonkers Police Department (“YPD”), announced today that JONATHAN RIVERA and DILICIA AGUIRRE-ORELLANA were charged with production and receipt and distribution of child pornography. AGUIRRE-ORELLANA was also charged with possession of child pornography.
RIVERA was arrested on or about February 26 in Manhattan, and will be presented today in federal court in White Plains. AGUIRRE-ORELLANA was arrested on or about February 22 in Yonkers, presented on local charges on or about February 23, and detained; she will be presented on the federal charges at a later date.
U.S. Attorney Damian Williams said: “Allegedly at the behest of Jonathan Rivera, Dilicia Aguirre-Orellana is accused of one of the most heinous acts imaginable – the sexual assault of prepubescent children – including the sexual abuse and video recording of her four-year-old son. The harm that child sex abuse can inflict on the most innocent of victims is something no child should bear. We believe there may be more victims of these alleged crimes, and implore anyone who may have information helpful to law enforcement to please call 1-800-CALL-FBI.”
FBI Assistant Director Michael J. Driscoll said: “The level of depravity alleged in the charges filed today against Mr. Rivera are nearly unfathomable. The FBI and our partners remain committed to bringing to justice all those who would seek to harm our society’s most vulnerable members. We are asking anyone with information about Mr. Rivera or his alleged activity to contact us at 1-800-CALL-FBI (225-5324) or online at tips.fbi.gov.”
Westchester County District Attorney Miriam E. Rocah said: “Crimes committed against children, especially ones perpetrated by a parent or caretaker, are deeply disturbing and those who prey upon and sexually exploit children will be aggressively prosecuted. As alleged in this case, Dilicia Aguirre-Orellana sexually violated and exploited her own child in unspeakable ways. This case shows how law enforcement at the federal, state and local levels can work together to protect the most vulnerable victims. My office is proud to have partnered with the Yonkers Police Department, Federal Bureau of Investigation and United States Attorney’s Office for the Southern District of New York on this remarkable collaborative effort which put an end to the alleged abuse of a young victim, and will help any other potential victims come forward.”
YPD Commissioner John Mueller said: “It is at the core of every law enforcement officer to protect the vulnerable and innocent, most of all children. We must hold these alleged criminals accountable to the maximum extent of the law for the abuse they inflicted on the smallest members of our society; the Yonkers Police will always continue to put victims first. I am grateful for the sustained multi-agency collaboration on the County, State, and Federal levels that ensures safe communities in Westchester and the City of Yonkers, and applaud the efforts of the investigators and attorneys who worked this case.”
According to the Complaint[1] filed on February 28, 2022, in White Plains federal court:
In or about December 2021, RIVERA communicated online with AGUIRRE-ORELLANA and persuaded AGUIRRE-ORELLANA to make videos of herself performing sex acts on her four-year-old child (“Victim-1”). At RIVERA’s direction, AGUIRRE-ORELLANA made videos of herself touching Victim’s genitals and herself performing oral sex on Victim-1, and sent them to RIVERA over a social media messaging application. In conversations with law enforcement, RIVERA stated that he engaged in similar conversations with other women online. RIVERA may have used various social media platforms to communicate with victims, including WhatsApp, Badoo, Telegram, and Facebook. The usernames of some of RIVERA’s various accounts include:
Jriv3ra718
Jriv3ra11
Jaid3nrivera718
Thebrimbrothers
Jano59fifty
Nathan
On or about February 23, 2022, AGUIRRE-ORELLANA was charged in Westchester County with sexual abuse in the first degree and criminal sexual act in the first degree. The Westchester County District Attorney’s Office will be prosecuting these charges.
Anyone who may have encountered JONATHAN RIVERA (or someone who may have been using the social media usernames identified above), is asked to contact the FBI at 1-800-CALL-FBI (1-800-225-5324).
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RIVERA, 33, of Brooklyn, New York, is charged with one count of production of child pornography, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of life in prison, and one count of receipt and distribution of child pornography, which carries a mandatory minimum sentence of 5 years in prison and a maximum sentence of 40 years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
AGUIRRE-ORELLANA, 22, of Yonkers, New York, is charged with one count of production of child pornography, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of life in prison, one count of receipt and distribution of child pornography, which carries a mandatory minimum sentence of 5 years in prison and a maximum sentence of 40 years in prison, and one count of possession of child pornography involving images of a minor who had not yet attained the age of 12, which carries a maximum sentence of 20 years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the efforts of the FBI Westchester Safe Streets Task Force which includes Special Agents and Task Force Officers from the FBI, US Probation, New York State Police, New York State Department of Corrections and Community Supervision, Westchester County PD, Westchester County DA's Office, Putnam County Sheriff's Office, Rockland County DA's Office, the NYPD and the Yonkers, Mount Vernon, Peekskill, Greenburgh, New Rochelle, White Plains, Clarkstown and Ramapo Police Departments. This investigation is ongoing.
This case began as an investigation in the YPD Special Victim’s Unit, working jointly with the Special Prosecutions Division Child Abuse Bureau of the Westchester County District Attorney’s Office, including Bureau Chief Christine Hatfield and Acting Deputy Bureau Chief Owein Levin. The federal prosecution is being handled by the White Plains Division of the U.S. Attorney’s Office. Assistant United States Attorney Stephanie Simon is 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.
Ohio-Based Stock Trader Pleads Guilty to Securities FraudRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that STEVEN GALLAGHER pled guilty to one count of securities fraud. GALLAGHER, using the alias “Alex DeLarge,” created a stock promotion account on Twitter that gained over 70,000 followers, and used that account to tout certain over-the-counter penny stocks. GALLAGHER disseminated false and misleading information about at least one of those stocks in order to induce his followers to purchase that stock and drive up its price, while he secretly sold his holdings. GALLAGHER pled guilty in front of United States District Judge Valerie E. Caproni.
According to the Information, the Complaint, and other statements made in court:
STEVEN GALLAGHER is an active day trader in over-the-counter securities, or “OTC securities.” Those securities typically do not trade on centralized exchanges such as the New York Stock Exchange or the NASDAQ Stock Exchange. OTC securities often trade for less than one dollar per share, and thus are often referred to as “penny stocks.” Many OTC securities are thinly traded, and therefore are particularly susceptible to stock manipulation schemes.
In September 2019, GALLAGHER created a Twitter account using the alias “Alex DeLarge,” a character from the Anthony Burgess novel A Clockwork Orange and the Stanley Kubrick film of the same name (the “DeLarge Twitter Account”). As of October 19, 2021, the DeLarge Twitter Account had over 70,000 followers. GALLAGHER regularly used the DeLarge Twitter Account to tout various penny stocks in which he personally held substantial positions. GALLAGHER also regularly posted images of his brokerage account balances and trading gains on the DeLarge Twitter Account in order to bolster his reputation and induce his followers to trade in accordance with his suggestions.
From approximately December 2020 through February 2021, GALLAGHER used the DeLarge Twitter Account to operate a fraudulent pump-and-dump scheme with respect to penny stock issued by a public company known as SpectraScience, Inc. (“SCIE”). As part of his fraudulent scheme, GALLAGHER began acquiring a substantial volume of SCIE shares in December 2020. As he acquired shares, GALLAGHER and a few close associates discussed their plans to push the stock price up after they obtained substantial holdings at relatively cheap prices. GALLAGHER then used the DeLarge Twitter Account to artificially “pump” SCIE stock. This included both re-tweeting posts that purported to announce potentially positive news for SCIE, such as FDA approvals for their products, and making materially false and misleading statements about GALLAGHER’s own position in SCIE stock. For example, in or about January 2021, GALLAGHER repeatedly tweeted that he planned on holding and had not sold any of his shares of SCIE. These statements, however, were false and GALLAGHER had in fact sold millions of shares of SCIE at heightened prices.
While GALLAGHER was engaged in this scheme, he knew or purposely avoided learning that SCIE was a shell company with no actual operations or prospects for success. For example, in direct messages with some of his followers, GALLAGHER received information suggesting that SCIE was really just a “shell with not guts.” Nevertheless, GALLAGHER engaged in his Twitter-based pump and dump scheme, thereby earning tens of thousands of dollars in illicit profit.
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GALLAGHER, 51, of Maumee, Ohio, plead guilty to one count of securities fraud, which carries a maximum sentence of twenty 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.
GALLAGHER is scheduled be sentenced on June 27, 2022, by Judge Caproni.
U.S. Attorney Williams praised the work of the HSI. Mr. Williams further thanked the Securities and Exchange Commission for their cooperation and assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard Cooper, Daniel Tracer, and Allison Nichols are in charge of the prosecution.
New York City Man Convicted of Threatening to Kill U.S. Senator Joe Manchin and Fox News Hosts Laura Ingraham and Greg GutfeldRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that RICKEY JOHNSON was convicted yesterday of threatening a federal official and making interstate threats, following a one-week jury trial before the Honorable Lewis A. Kaplan. JOHNSON threatened to kill United States Senator Joe Manchin and Fox News television hosts Greg Gutfeld and Laura Ingraham in direct messages and publicly posted videos on Instagram.
U.S. Attorney Damian Williams said: “Rather than express his political differences constructively, Rickey Johnson escalated his discord by instilling fear. Johnson's attempts to scare and stifle a U.S. Senator and two Fox News hosts were federal crimes for which he has now been convicted by a New York jury.”
According to court documents and the evidence at trial:
On January 30, 2021, JOHNSON sent direct private messages to Mr. Gutfeld that threatened, “you will be killed.” On February 3, 2021, JOHNSON posted public videos in which he threatened to kill Senator Manchin, Mr. Gutfeld, and Ms. Ingraham. Among other things, JOHNSON declared that Senator Manchin was “dead” and would be “executed”; told Mr. Gutfeld that he was “going to take [his] life”; and said that he would “kill” Ms. Ingraham with his “bare hands.”
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JOHNSON, 48, of New York, New York, was convicted of two counts of transmitting threatening interstate communications, which each carry a maximum sentence of five years in prison, and one count of threatening a federal official, which carries a maximum sentence of ten years in prison. JOHNSON was also acquitted of one count of threatening a federal official. The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
JOHNSON is scheduled to be sentenced by Judge Kaplan on May 25, 2022.
Mr. Williams praised the outstanding investigative work of the New York City Police Department (“NYPD”), the NYPD’s Intelligence Bureau, Leads Investigation Unit, and the NYPD’s 23rd Precinct Field Intelligence Team.
The case is being handled by the Office’s National Security and International Narcotics Unit. Assistant United States Attorneys Patrick R. Moroney, Kyle A. Wirshba, and Andrew J. DeFilippis are in charge of the prosecution.
Founders of Cryptocurrency Exchange Plead Guilty to Bank Secrecy Act ViolationsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that Arthur Hayes and BENJAMIN DELO, founders and executives of purportedly “off-shore” cryptocurrency derivatives exchange the Bitcoin Mercantile Exchange or “BitMEX,” pled guilty today to violating the Bank Secrecy Act (the “BSA”) by willfully failing to establish, implement, and maintain an anti-money laundering (“AML”) program at BitMEX. Under the terms of their respective plea agreements, HAYES and DELO each agreed to separately pay a $10 million criminal fine representing pecuniary gain derived from the offense. HAYES and DELO pled guilty today before U.S. District Judge John G. Koeltl.
U.S. Attorney Damian Williams said: “As cryptocurrencies and technologies designed to facilitate their trade proliferate, companies engaged in the virtual currency economy have become critical gatekeepers in efforts to ensure that U.S. markets are fair, efficient, and secure. The opportunities and advantages of operating in the United States are legion, but they carry with them the obligation for those businesses to do their part to help in driving out crime and corruption. Arthur Hayes and Benjamin Delo built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies. They allowed BitMEX to operate as a platform in the shadows of the financial markets. Today’s guilty pleas reflect this Office’s continued commitment to the investigation and prosecution of money laundering in the cryptocurrency sector.”
According to the Indictment, public court filings, and statements made in court:[1]
HAYES, together with DELO and indicted co-defendant Sam Reed, was one of the three co-founders and the long-time CEO of BitMEX. DELO was both a co-founder and, during the period from September 2015 up to and including September 2020, held various executive roles at BitMEX, including Chief Operating Officer. BitMEX is an online cryptocurrency derivatives exchange that, during the relevant time period, had U.S.-based operations and served thousands of U.S. customers, notwithstanding false representations to the contrary by the company. From at least September 2015, and continuing at least through the time of the Indictment in September 2020, HAYES and DELO willfully caused BitMEX to fail to establish and maintain an AML program, including a program for verifying the identify of BitMEX’s customers (or a “know your customer” or “KYC” program). As a result of its willful failure to implement AML and KYC programs, BitMEX was in effect a money laundering platform. For example, in May 2018, HAYES was notified of allegations that BitMEX was being used to launder the proceeds of a cryptocurrency hack. Neither HAYES, DELO, nor their company filed a suspicious activity report thereafter (indeed, BitMEX filed no suspicious activity reports at all between 2014 and September 2020), nor did they implement an AML or KYC program in response. Unsurprisingly, BitMEX was also a vehicle for sanctions violations: HAYES and DELO both communicated directly with BitMEX customers who self-identified as being based in Iran, an OFAC-sanctioned jurisdiction, but did nothing to implement an AML or KYC program after doing so.
HAYES and DELO failed to institute AML or KYC programs at BitMEX despite closely following U.S. regulatory developments that made clear their legal obligation to do so if BitMEX operated in the United States, which it did. Despite repeatedly stating that BitMEX did not serve U.S. customers, including to members of the press and others outside of BitMEX, HAYES and DELO both knew that BitMEX’s purported withdrawal from the U.S. market in or about September 2015 was a sham, and that purported “controls” BitMEX put in place to prevent U.S. trading were an ineffective facade that did not, in fact, prevent users from accessing or trading on BitMEX from the United States. HAYES and DELO not only understood that U.S. customers continued to trade on BitMEX, but derived substantial profits from BitMEX as a result of U.S.-based trading. HAYES and DELO actively sought out U.S. customers by using U.S.-based cryptocurrency “influencers” to market to new customers through BitMEX’s so-called “Affiliate Program.” HAYES also conducted U.S. television appearances and marketing stunts that promoted BitMEX’s products in the United States. DELO allowed a customer to continue to access a BitMEX trading account despite this customer explicitly being “US based,” merely because that customer was “famous in Bitcoin.” DELO falsely changed internal tracking information to reflect that customer’s country of residence as being other than the United States, despite knowing that to be false.
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HAYES, 36, of Miami, Florida, and DELO, 38, of the United Kingdom and Hong Kong, pled guilty to one count each of violating the Bank Secrecy Act, which carries a maximum penalty of 5 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 investigative work of the FBI’s New York Money Laundering Investigation Squad, and thanked the attorneys and investigators at the Commodity Futures Trading Commission whose expertise and diligence were integral to the development of this investigation.
The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Jessica Greenwood, Samuel Raymond, and Thane Rehn are in charge of the prosecution.
[1] As to HAYES’ and DELO’s co-defendants, 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.
Former President of Law Enforcement Union Edward Mullins Charged with Defrauding Union and Its MembersRead 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”), and Keechant Sewell, Commissioner of the New York City Police Department (“NYPD”), announced today that EDWARD D. MULLINS, the former President of the Sergeants Benevolent Association (“SBA”), the union that represents all current and former Sergeants of the New York City Police Department, was charged with one count of wire fraud in connection with a scheme to steal hundreds of thousands of dollars from the SBA, through the submission of fraudulent expense reports. MULLINS surrendered to the FBI in Manhattan this morning, and was presented before U.S. Magistrate Judge Gabriel W. Gorenstein. The case has been assigned to United States District Judge John G. Koeltl.
U.S. Attorney Damian Williams said: “As alleged, Edward Mullins, the former President of the SBA, abused his position of trust and authority to fund a lavish lifestyle that was paid for by the monthly dues of the thousands of hard-working Sergeants of the NYPD. Mullins submitted hundreds of phony expense reports to further his scheme, stealing hundreds of thousands of dollars from the SBA. This Office is committed to rooting out corruption at all levels of government, and that includes public officials like Mullins who use their positions of power to line their own pockets to the detriment of others.”
FBI New York Assistant Director-in-Charge Michael J. Driscoll said: “As public servants, members of the SBA pay dues to a union that’s supposed to represent their best interests. As SBA president, Mullins allegedly went above and beyond to best serve his own interests. Our NYPD sergeants expect and deserve more from their union leadership than they received. Today, thanks to the joint efforts of those on the FBI/NYPD Public Corruption Task Force, we’re righting that wrong.”
NYPD Commissioner Keechant L. Sewell said: “Ed Mullins allegedly violated the ethics and rules of this department, the trust of 13,000 Sergeants, active and retired whom he represented, and the laws of the United States. The NYPD’s Internal Affairs Bureau, has detectives assigned to the FBI’s Public Corruption Unit and works as a team with agents on matters involving the NYPD.”
According to the allegations in the Information[1] filed today in Manhattan federal court:
Overview
For nearly two decades, from in or about 2002 until in or about October 2021, EDWARD D. MULLINS served as President of the SBA, which is the union that represents all current and former Sergeants of the NYPD. As President, MULLINS was responsible for promoting the general welfare of the SBA’s membership. Instead, MULLINS orchestrated a scheme to steal hundreds of thousands of dollars from the SBA and its members.
Between in or around 2017 and in or around October 2021, MULLINS defrauded the SBA by using his personal credit card to pay for meals at high-end restaurants and to purchase luxury personal items, among other things, and then submitting false and inflated expense reports to the SBA, seeking reimbursement for those bills as legitimate SBA expenditures when in fact they were not. Altogether, MULLINS was reimbursed for over $1 million dollars in expenses from the SBA, the majority of which was fraudulently obtained.
The SBA
The SBA is the fifth-largest police union in the United States with its headquarters located in lower Manhattan. The SBA’s membership consists of all active and retired sergeants of the NYPD, with approximately 13,000 members as of October 2021. All members are required to pay dues to the SBA. For active members, dues are deducted bi-weekly from their paychecks, totaling approximately $1,300 annually for each member. For retired members, dues are required to be paid in a one-time payment of $600 within ninety days of retirement.
The SBA has a Contingent Fund, which is used to pay for the SBA’s “regular, fiscal, and miscellaneous expenses necessary for the transaction of the [SBA’s] business.” The Contingent Fund is funded primarily through member dues. Ninety cents of each dollar of member dues are deposited into the Contingent Fund, where they are supposed to be used for the benefit of the SBA and its members. The President of the SBA is authorized to use the Contingent Fund to “defray miscellaneous expenses incurred in the performance of duties, e.g., travel, lodgings, meals, et cetera.”
The SBA has a written expense reimbursement policy (the “Policy”). The Policy provides, among other things, that “the SBA will reimburse actual and reasonable meal expenses required to conduct SBA business or fulfill the SBA’s mission.” In order to be “reimbursable,” expenses “must be closely related to SBA business.” The Policy further provides that “[r]eceipts are required for any meal,” and that “[r]equests for reimbursement for meals in excess of $50.00 must be accompanied by an attendee list and the subject matter discussed.”
The SBA is governed by a Board of Officers, consisting of nine officers, including the President, Vice President, and Treasurer, among others, and fourteen directors. Beginning in or around 2002, MULLINS ran for and was elected President of the SBA for five successive four-year terms. After the 2014 election, the individual who had been elected Vice President of the SBA assumed responsibility for reviewing and approving the expense reports submitted by SBA officers, including MULLINS. The Vice President routinely scrutinized expense reimbursement requests and rejected certain expenses if they were too high or were not supported by receipts.
In or around 2017, the then-Vice President retired as an officer of the SBA. The Treasurer assumed primary responsibility for reviewing and approving expense reports submitted for reimbursement by SBA officers, including MULLINS. The Treasurer did not scrutinize the expense reports in the same manner as the prior Vice President had, and, in particular, did not regularly require receipts for MULLINS’s reimbursements in particular. As set forth below, between 2017 and 2021, the Treasurer approved hundreds of expense reports for MULLINS, totaling more than $1 million dollars.
The Scheme To Defraud the SBA
Beginning in 2017, MULLINS devised a scheme to fund his personal expenses through SBA dollars. Specifically, MULLINS charged his personal credit card for, among other things, hundreds of high-end meals, clothing, jewelry, home appliances, and a relative’s college tuition. MULLINS then submitted, typically by email, fraudulent and inflated expense reports to the Treasurer of the SBA, seeking reimbursement for such items purporting to be legitimate SBA expenditures when in fact they were not. MULLINS rarely included receipts.
The Treasurer processed the expense reports once they were received – almost always without obtaining any receipts – and issued SBA reimbursement checks to MULLINS from the Contingent Fund – i.e., the fund that was made up almost entirely of member dues. MULLINS then deposited the checks into his bank account or enlisted an individual at the SBA to deposit the checks on MULLINS’s behalf at a bank branch near the SBA’s headquarters in lower Manhattan. MULLINS then, usually immediately thereafter, paid down his credit card bills with the deposited funds.
As part of this fraudulent scheme, MULLINS made at least three types of misstatements on his expense reports. First, MULLINS included meals on his expense reports that were not SBA-related. Second, MULLINS inflated the costs of his meals – whether SBA-related or not. For example, if the actual cost of a meal was $522.55, MULLINS would seek reimbursement from the SBA for $822.55, and pocket the difference. At times, MULLINS would even write out these changes on his personal credit card statements that he maintained at his home – i.e., crossing off “522.55” and writing in “822.55”, thereby documenting his false statements. Third, MULLINS would take personal expenses like supermarket bills and claim them on his expense reports as SBA-related meals for which he also sought reimbursement.
For example, in November 2019, MULLINS submitted expense reports to the Treasurer for more than $3,000 at a high-end restaurant in Greenwich Village in Manhattan (“Restaurant-1”). Those charges, however, were not related to any work for the SBA. Instead, as reflected in text messages that MULLINS exchanged with an employee of Restaurant-1 (the “Employee”), MULLINS was paying, on two separate occasions, for his family members and personal associates to dine at Restaurant-1. Specifically, MULLINS, purchased two $300 gift cards for Restaurant-1 and then sought reimbursement from the SBA for the gift cards. Two weeks later, MULLINS texted the Employee to inform the Employee that a relative (“Relative-1”) and Relative-1’s partner “are coming in for dinner tonight” and “I gave [Relative-1] a gift card that I grabbed 2 weeks ago.” MULLINS sent a similar text message to the Employee the following night when a personal associate (“Associate-1”) was planning to dine at Restaurant-1 and use the other gift card that MULLINS had purchased with SBA funds.
As another example, in October 2020, MULLINS sent a text message to another personal associate (“Associate-2”) asking Associate-2, “Going to place an order at [the Steakhouse] what do u want[?]” Associate-2 responded by providing MULLINS with a list of several items on the menu. MULLINS’s October 2020 credit card statement in turn reflected a $744.59 expense at the Steakhouse on the same day. MULLINS later submitted this fraudulent $744.59 expense, without a receipt, to the Treasurer for reimbursement, claiming the expense as an SBA-related meal when in fact it was not.
In addition to submitting personal expenses for reimbursement, MULLINS inflated and altered his actual expenses in order to steal more money from the SBA. MULLINS maintained two copies of his credit card statements in his home office. The first copy, often labeled with a sticky note bearing the words “Clean Copy,” had no annotations or markings. The second copy, often labeled with a sticky note bearing the words “Work Copy” or “Work Sheet,” had MULLINS’s handwritten annotations and markings throughout. In the Work Copy, MULLINS changed the amount and, at times, the type of expense, from a lower amount to a larger amount, or from an item that could not be reimbursed – such as a supermarket bill – to a restaurant name, which would then be reflected in MULLINS’s reimbursement forms submitted to the Treasurer and the SBA.
For example, in April 2021, MULLINS changed a $45.92 charge to an $845.92 charge at a wine bar in New Jersey; a $609.89 charge to a $909.89 charge at the Steakhouse; and a $185.88 charge at a supermarket on Long Island to a $685.88 charge at an Italian restaurant in Manhattan. MULLINS then submitted those fraudulent expenses, without receipts, to the Treasurer for reimbursement. Likewise, in August 2021, MULLINS changed a $49.60 charge to a $89.60 charge for a diner on Long Island; a $53.56 charge to a $153.56 charge for a restaurant on Long Island; a $96.16 charge at a supermarket to a $396.16 charge at a restaurant on Long Island; a $152.42 charge to a $352.42 charge at a deli on Long Island; and a $464.00 charge to a $664.00 charge at a pizza place on Long Island. Once again, MULLINS submitted these fraudulent expenses, without receipts, to the Treasurer, who approved the reimbursements.
Altogether, as a result of the scheme, MULLINS received more than $1 million dollars in expense reimbursements from the SBA, the majority of which was fraudulently obtained.
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MULLINS, 60, of Port Washington, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the New York FBI and the FBI/NYPD Public Corruption Task Force.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys David Robles, Alexandra Rothman, and Andrew Rohrbach are in charge of the prosecution.
The charge contained in the Information 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 Information, and the description of the Information set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Nigerian National Pleads Guilty to Participating in Scheme to Conduct Cyber Intrusions to Steal Payroll DepositsRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that CHARLES ONUS pled guilty to computer fraud in connection with a scheme to conduct cyber intrusions in order to steal payroll deposits from multiple user accounts maintained by a company that provides human resources and payroll services to employers across the United States. ONUS was previously arrested on April 14, 2021 in San Francisco while traveling to the United States from Nigeria and has been detained since his arrest. ONUS pled guilty today before U.S. District Judge Paul G. Gardephe.
U.S. Attorney Damian Williams said: “Charles Onus admitted to participating in a scheme to steal hundreds of thousands of hard-earned dollars from workers across the United States by hacking into a payroll company’s system and diverting payroll deposits to prepaid debit cards he controlled. Our Office will continue to work with our law enforcement partners to zealously arrest and prosecute those who seek to commit cybercrimes targeting Americans from behind a keyboard abroad.”
According to the Indictment, public court filings, and statements made in court:
From at least in or about July 2017 through at least in or about 2018, ONUS participated in a scheme to conduct cyber intrusions of multiple user accounts maintained by a company that provides human resources and payroll services to employers across the United States (the “Company”), in order to steal payroll deposits processed by the Company.
During the course of the scheme, unauthorized access was obtained to over 5,500 Company user accounts through a cyber intrusion technique referred to as “credential stuffing.” During a credential stuffing attack, a cyber threat actor collects stolen credentials, or username and password pairs, obtained from other large-scale data breaches of other companies. The threat actor then systematically attempts to use those stolen credentials to obtain unauthorized access to accounts held by the same user with other companies and providers, to compromise accounts where the user has maintained the same password.
After a Company user account was compromised, the bank account information designated by the user of the account was changed so that ONUS would receive the user’s payroll to a prepaid debit card that was under ONUS’s control.
From at least in or about July 2017 through at least in or about 2018, at least approximately 5,500 Company user accounts were compromised and more than approximately $800,000 in payroll funds were fraudulently diverted to prepaid debit cards, including those under the control of ONUS. The compromised Company user accounts were associated with employers whose payroll was processed by the Company, including employers located in the Southern District of New York.
ONUS was arrested on April 14, 2021 at San Francisco International Airport after arriving on a flight from Abuja, Nigeria. According to statements ONUS made to U.S. Customs and Border Protection at the airport, ONUS was traveling to the United States for a two-week vacation in Las Vegas.
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ONUS, 34, a resident and national of the Federal Republic of Nigeria, pled guilty to one count of computer fraud for unauthorized access to a protected computer to further intended fraud, which carries a maximum sentence of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
ONUS is scheduled be sentenced on May 12, 2022, by Judge Gardephe.
Mr. Williams praised the outstanding investigative work of the FBI and IRS-CI. Mr. Williams also thanked the New York City Police Department, the FBI New York Cyber Task Force, U.S. Customs and Border Protection, and the FBI Field Office in San Francisco for their assistance in the investigation of this case.
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.
Former Owner of Tax Preparation Business Convicted of Fraud, Identity Theft, and Money Laundering CrimesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that ARIEL JIMENEZ, a/k/a “Melo,” was convicted today following a two-week jury trial before the Honorable Sidney H. Stein. As the jury found, between in or about 2009 through in or about 2015, JIMENEZ, the owner of a tax preparation business in the Bronx, New York (the “Business”), sold the stolen identities of minors to his customers so that his customers could claim inflated tax refunds. The jury convicted JIMENEZ of four counts: conspiracy to defraud the United States, conspiracy to commit wire fraud, aggravated identity theft, and money laundering.
U.S. Attorney Damian Williams said: “Ariel Jimenez’s tax and identity theft crimes cruelly forced his victims to endure bureaucratic snafus and agonizing delays for their much-needed tax refunds. Jimenez now stands convicted, and now faces years in federal prison. Today’s conviction is a stark reminder that tax fraud results in real-world victims and real-life consequences.”
According to the Indictment, evidence presented during trial, court documents, and statements in open court:
Beginning in or about 2007, JIMENEZ founded the Business. From the outset, JIMENEZ obtained hundreds of stolen minor identities and, working with his co-conspirators, sold those identities, as fraudulent dependents, to his customers for between $1,000 and $1,500 in cash. JIMENEZ personally received $1,000 in cash for every identity sold. JIMENEZ and his co-conspirators callously referred to these stolen identities as “pollitos,” meaning little chickens. In some years, JIMENEZ sold more than a thousand identities, resulting in personal profits to him of more than $1 million per year. In addition, JIMENEZ also made hundreds of thousands of dollars every year in the tax fees that his Business charged just to prepare fraudulent tax returns. In return for their participation in this scheme, the customers received thousands of dollars in inflated tax refunds.
JIMENEZ’s use of stolen identities harmed the actual caretakers of the fraudulently claimed children. In some cases, the people actually taking care of these children had much-needed tax refunds delayed and were required to prove their actual connection to their own dependent children.
JIMENEZ used the profits from his tax preparation business to acquire millions of dollars of real estate, in addition to funding his lavish lifestyle. By his own admission, JIMENEZ spent more than $5.5 million of the Business’s proceeds on properties in the United States and abroad, jewelry, cars, and gambling. In or about March 2016, JIMENEZ transferred several properties purchased with fraud proceeds to his parents, for little to no value, in order to conceal the criminal source of the funds used to purchase the properties.
One of the primary credits claimed by JIMENEZ and the Business for their clients was the Earned Income Tax Credit (“EITC”). The EITC is intended to provide tax relief or tax refunds for qualifying low and moderate income working individuals and families. Between tax years 2009 and 2014, the Business filed approximately 14,199 personal income tax returns claiming the EITC. In total, these returns claimed approximately $37,910,246 in the EITC alone. During these years, between 54% and 62% of all personal income tax returns filed by the Business claimed the EITC. By comparison, approximately 41% of all returns filed by tax preparers in the Bronx and approximately 20% of all returns filed by tax prepares nationwide claimed the EITC.
JIMENEZ was first arrested in November 2018, along with eight of his co-conspirators. JIMENEZ is the last of the defendants charged to be convicted. The remaining eight defendants have pleaded guilty to fraud and other offenses.
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ARIEL JIMENEZ, 38, of Bronx, New York was convicted at trial of one count of conspiracy to defraud the United States with respect to tax returns, which carries a maximum sentence of 10 years; conspiracy to commit wire fraud, which carries a maximum sentence of 20 years; aggravated identity theft, which carries a mandatory consecutive sentence of 2 years; and money laundering, which carries a maximum sentence of 20 years. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. JIMENEZ is scheduled to be sentenced by Judge Stein on June 6, 2022.
Mr. Williams praised the outstanding work of the IRS-Criminal Investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Daniel G. Nessim, Ni Qian, Marguerite Colson, and Dina McLeod are in charge of the prosecution.
Damian Williams, the United States Attorney for the Southern District of New York, announced that ARIEL JIMENEZ, a/k/a “Melo,” was convicted today following a two-week jury trial before the Honorable Sidney H. Stein. As the jury found, between in or about 2009 through in or about 2015, JIMENEZ, the owner of a tax preparation business in the Bronx, New York (the “Business”), sold the stolen identities of minors to his customers so that his customers could claim inflated tax refunds. The jury convicted JIMENEZ of four counts: conspiracy to defraud the United States, conspiracy to commit wire fraud, aggravated identity theft, and money laundering.
U.S. Attorney Damian Williams said: “Ariel Jimenez’s tax and identity theft crimes cruelly forced his victims to endure bureaucratic snafus and agonizing delays for their much-needed tax refunds. Jimenez now stands convicted, and now faces years in federal prison. Today’s conviction is a stark reminder that tax fraud results in real-world victims and real-life consequences.”
According to the Indictment, evidence presented during trial, court documents, and statements in open court:
Beginning in or about 2007, JIMENEZ founded the Business. From the outset, JIMENEZ obtained hundreds of stolen minor identities and, working with his co-conspirators, sold those identities, as fraudulent dependents, to his customers for between $1,000 and $1,500 in cash. JIMENEZ personally received $1,000 in cash for every identity sold. JIMENEZ and his co-conspirators callously referred to these stolen identities as “pollitos,” meaning little chickens. In some years, JIMENEZ sold more than a thousand identities, resulting in personal profits to him of more than $1 million per year. In addition, JIMENEZ also made hundreds of thousands of dollars every year in the tax fees that his Business charged just to prepare fraudulent tax returns. In return for their participation in this scheme, the customers received thousands of dollars in inflated tax refunds.
JIMENEZ’s use of stolen identities harmed the actual caretakers of the fraudulently claimed children. In some cases, the people actually taking care of these children had much-needed tax refunds delayed and were required to prove their actual connection to their own dependent children.
JIMENEZ used the profits from his tax preparation business to acquire millions of dollars of real estate, in addition to funding his lavish lifestyle. By his own admission, JIMENEZ spent more than $5.5 million of the Business’s proceeds on properties in the United States and abroad, jewelry, cars, and gambling. In or about March 2016, JIMENEZ transferred several properties purchased with fraud proceeds to his parents, for little to no value, in order to conceal the criminal source of the funds used to purchase the properties.
One of the primary credits claimed by JIMENEZ and the Business for their clients was the Earned Income Tax Credit (“EITC”). The EITC is intended to provide tax relief or tax refunds for qualifying low and moderate income working individuals and families. Between tax years 2009 and 2014, the Business filed approximately 14,199 personal income tax returns claiming the EITC. In total, these returns claimed approximately $37,910,246 in the EITC alone. During these years, between 54% and 62% of all personal income tax returns filed by the Business claimed the EITC. By comparison, approximately 41% of all returns filed by tax preparers in the Bronx and approximately 20% of all returns filed by tax prepares nationwide claimed the EITC.
JIMENEZ was first arrested in November 2018, along with eight of his co-conspirators. JIMENEZ is the last of the defendants charged to be convicted. The remaining eight defendants have pleaded guilty to fraud and other offenses.
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ARIEL JIMENEZ, 38, of Bronx, New York was convicted at trial of one count of conspiracy to defraud the United States with respect to tax returns, which carries a maximum sentence of 10 years; conspiracy to commit wire fraud, which carries a maximum sentence of 20 years; aggravated identity theft, which carries a mandatory consecutive sentence of 2 years; and money laundering, which carries a maximum sentence of 20 years. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. JIMENEZ is scheduled to be sentenced by Judge Stein on June 6, 2022.
Mr. Williams praised the outstanding work of the IRS-Criminal Investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Daniel G. Nessim, Ni Qian, Marguerite Colson, and Dina McLeod are in charge of the prosecution.
Recidivist Defendant Charged in Connection with Fraudulent Eyewear Website for the Third TimeRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, and Darnell D. Edwards, Acting Inspector in Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the arrest of VITALY BORKER, the operator of “EyeglassesDepot.com,” an online retailer of purported designer eyewear. BORKER was arrested pursuant to a complaint charging him with mail and wire fraud and aggravated identity theft in connection with a scheme to defraud customers by misrepresenting the authenticity and condition of eyeglasses sold through the website. BORKER was arrested this morning and will be presented later today before U.S. Magistrate Judge Stewart D. Aaron.
U.S. Attorney Damian Williams said: “Upon Vitaly Borker’s second conviction by this Office for fraud-related offenses, my predecessor posed the rhetorical question of whether ‘federal prison will impress upon this shady businessman that seeking to make money by fraud and intimidation is a path to prison...’ Apparently, it has not. As alleged, just after his release from federal prison, serial fraudster Vitaly Borker reverted back to his illegal conduct connected to online eyewear businesses.”
USPIS Acting Inspector in Charge Edwards said: “Mr. Borker is allegedly up to his old tricks of bilking those looking for online eyewear. Make no mistake, each time Mr. Borker breaks the law, Postal Inspectors have no problem with bringing him to justice for his continued criminal activity.”
As alleged in the Complaint unsealed today[1]:
Beginning in at least June 2020, after being released from federal custody and entering a Residential Reentry Center, VITALY BORKER operated an eyewear sales and repair services website called EyeglassesDepot.com. EyeglassesDepot.com claims, among other things, that it sells “brand new and 100% authentic designer eyeglasses and sunglasses” and that it has “thousands of pairs of glasses in stock…ready for shipping as early as TODAY.” In truth, however, the eyewear sold to customers of EyeglassesDepot.com was often used and/or counterfeit. Rather than carrying a large inventory of “brand new and 100% authentic eyewear,” EyeglassesDepot.com filled its customers’ orders by purchasing comparable items on a third-party online marketplace (the “Marketplace”). The eyewear purchased by EyeglassesDepot.com from the Marketplace was often used and/or counterfeit, but EyeglassesDepot.com passed off the glasses as new and authentic. In addition, while EyeglassesDepot.com claims to be a “leader in the repair of sunglasses and eyeglasses” and able to “fit any eyeglasses or sunglasses with your custom prescriptions,” customers who sent eyewear to EyeglassesDepot.com either did not have their eyewear repaired at all and/or otherwise received unsatisfactory work.
In order to conceal his role in operating EyeglassesDepot.com, BORKER – who has twice previously been convicted in this District of crimes relating to his operation of eyewear websites – assumed the identities of two other individuals in connection with the operation of EyeglassesDepot.com.
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BORKER, 45, of Brooklyn, New York, is charged with mail fraud and wire fraud, each of which carries a maximum sentence of 20 years in prison, and one count of aggravated identity theft, which carries a additional mandatory consecutive two year sentence. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of these defendants would be determined by a judge.
Mr. Williams praised the outstanding investigative work of the USPIS.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Matthew Weinberg is in charge of the prosecution.
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.
Man Charged with Illegally Possessing “Ghost” Gun and Multiple Other Guns in Bronx ApartmentRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Keechant L. Sewell, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of a three-count Indictment charging ERIC LESANE with firearms and drug trafficking offenses. LESANE was initially charged by Complaint after his arrest on February 1, 2022. LESANE’s case has been assigned to the Honorable U.S. District Judge Alison J. Nathan.
U.S. Attorney Damian Williams said: “As alleged, the defendant illegally possessed multiple guns, including an untraceable ‘ghost’ gun. Illegally possessed and untraceable guns pose a serious public safety threat. Thanks to our law enforcement partners, the defendant’s weapons are now in safe hands.”
Michael J. Driscoll, FBI Assistant Director-in-Charge said: “Mr. Lesane was aware of the conditions attached to his release from prison – he was not allowed to purchase or maintain a firearm. We allege he possessed several, one of which was an untraceable ghost gun - a class of weapon that poses an increasing threat to our communities. Our goal is to work with our law enforcement partners to get criminals and their weapons off our streets.”
NYPD Commissioner Keechant L. Sewell said: “Convicted previously in a firearms possession case, Eric Lesane now faces federal indictment for allegedly amassing a stockpile of weapons — including an untraceable ghost gun — while on supervised release. Our NYPD investigators, working with our partners and prosecutors in the United States Attorney’s Office, will never stop pursuing these kinds of cases in our continuing effort to eradicate gun violence in New York.”
Michael Fitzpatrick, Chief U.S. Probation Officer said: “On February 1, Probation Officers from the Southern District of New York performed a search of Eric Lesane’s address. These officers seized several firearms and a large amount of ammunition. This search exemplifies the importance of communication between law enforcement agencies.”
According to the allegations in the Indictment unsealed today in Manhattan federal court and in the Complaint and statements made in open Court:
On February 1, 2022, the United States Marshals Service arrested LESANE, who was previously convicted of a felony related to illegal firearms possession, after an arrest warrant issued for violations of supervised release. Following LESANE’s arrest, Probation Officers from the United States Probation Office for the Southern District of New York conducted a search of LESANE’s apartment. In the course of the search, Probation Officers found:
(1) a Ruger Precision Rifle,
(2) a Mossberg Rifle,
(3) a SWD Model M-11 9mm pistol,
(4) a Typhoon 12 Gauge Semiautomatic Shotgun, and
(5) a black pf940c polymer 80 privately made handgun with no serial number—in other words, a “ghost” gun.
A photograph of the guns is below:
In the course of the search, Probation Officers also recovered multiple high-capacity magazines each containing more than 15 rounds of ammunition, approximately 75 buckshot shotgun shells, additional ammunition, and a quantity of marijuana.
Probation Officers also found large amounts of paraphernalia that appears to be associated with the “Crips” street gang, including blue clothing and signs, literature that discusses the Crips, and a black and blue baseball bat with a black and blue bandana tied around it, wrapped in barbed wire.
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LESANE, 34, of the Bronx, New York, is charged with: (1) possession of firearms following a felony conviction, which carries a maximum sentence of ten years in prison, (2) marijuana trafficking, which carries a maximum sentence of five years in prison, and (3) possessing firearms in furtherance of a drug trafficking offense, which carries a mandatory minimum sentence of five years in prison, to be served consecutively to any other sentence imposed, and a maximum sentence of life 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 defendants will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the FBI and the NYPD. Mr. Williams also thanked the United States Probation Office for the Southern District of New York, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the United States Marshals Service for their assistance in this case.
The prosecution is being handled by the Office’s Violent & Organized Crime Unit. Assistant United States Attorney Elizabeth A. Espinosa 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.
Leader of Bronx Violent Drug Crew Sentenced to 27 Years in Prison for Agreeing to Commit Murder for Hire, Gun Crimes, and Drug SellingRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, announced that SYDNEY SCALES was sentenced today to 27 years in prison for his role as the leader of a violent drug distribution organization that operated in the West Farms neighborhood of the Bronx, including his use of guns and participation in a murder-for-hire conspiracy in June 2017. SCLAES was sentenced by U.S. District Judge Jed S. Rakoff, after being convicted at trial in August 2021 of conspiring to distribute controlled substances, conspiring to commit murder for hire, and related firearms offenses.
U.S. Attorney Damian Williams said: “Sydney Scales was the leader of a violent drug crew. He caused at least one drug-related shooting, and he hired a hitman in an attempt to murder rival drug dealers who were having a barbecue in front of a neighborhood barbershop in the Bronx. Today’s sentence sends a powerful message that people who would commit violent crimes will be arrested, prosecuted, and face serious consequences.”
According to the Superseding Indictment and the evidence at trial:
Between in or about 2016 and in or about 2019, SCALES participated in a conspiracy to distribute crack cocaine, powder cocaine, heroin, fentanyl, and marijuana in the Bronx and elsewhere. SCALES also used, carried, and possessed firearms, which were brandished and discharged, in connection with the narcotics conspiracy, and aided and abetted such firearms offenses. For example, the Government offered evidence that on December 1, 2016, SCALES caused a shooting at rival drug dealers standing in front of a convenience store located next to the entrance of the West Farms subway station.
In addition, in or about June 2017, SCALES conspired to commit murder for hire, agreeing to pay another person for locating and killing at least one rival drug dealer.
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Mr. Williams praised the outstanding investigative work of the Department of Homeland Security, Homeland Security Investigations, and the New York City Police Department.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Frank Balsamello, Mathew Andrews, and Andrew K. Chan are in charge of the prosecution.
Founder and Former Chief Investment Officer of New York Based Investment Adviser Charged with Securities Fraud and Obstruction of JusticeRead the Press Release
Damian Williams, 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 that JAMES VELISSARIS, the founder and former chief investment officer of Infinity Q Capital Management (“Infinity Q”), a New York based investment adviser that ran a mutual fund and a hedge fund that purported to have approximately $3 billion in assets under management, was charged with securities fraud and obstruction of justice for orchestrating a scheme to lie to investors and falsify documents. VELISSARIS made false and misleading statements to investors and others concerning Infinity Q’s process for valuing certain over-the-counter (“OTC”) derivative positions that made up a substantial portion of the holdings of the mutual and hedge funds, and also fraudulently mismarked those securities in ways that did not reflect their fair value. VELISSARIS committed the mismarking scheme in order to inflate the value of the investment funds as reported to investors, to attract and retain capital, and to increase his own compensation. In order to avoid detection of the scheme, VELISSARIS provided both Infinity Q’s auditor and the Securities and Exchange Commission (“SEC”) with falsified or altered documents, including providing the auditor with altered term sheets that served to provide fabricated support for the fraudulently inflated values. VELISSARIS surrendered to FBI agents in Atlanta, Georgia this morning and is expected to be presented later today.
U.S. Attorney Damian Williams said: “As alleged, James Velissaris violated his obligation to put the interests of his investors before his own profits. In order to attract and retain investments in the funds that he operated, Velissaris lied about the independence of the process that he used to value fund assets, and he manipulated that process to convince investors that the funds were performing much better than they were. He then tried to cover his tracks by submitting fabricated or altered documents to the funds’ auditor and the SEC. This case further demonstrates the Office’s continued commitment to stamping out financial fraud, whether it be in private funds or the public markets.”
FBI Assistant Director Michael J. Driscoll said: "Investment fraud schemes may seem like a tried and true way to get rich quick, but the perpetrators are often too confident in their abilities to hide their illegal activity from investigators. As was the case with Velissaris, the truth caught up with him, and his alleged lies were exposed. Today he faces the consequences of his actions."
According to the allegations contained in a six-count Indictment unsealed today in Federal court and other publicly-available information:[1]
Background
VELISSARIS was the founder and chief investment officer of Infinity Q, an investment adviser that ran both a mutual fund (the “Mutual Fund”), started in about 2014, and a hedge fund (the “Hedge Fund,” and collectively the “Investment Funds”), started in about 2017. As of 2021, the two funds purported to have approximately $3 billion in assets under management. Infinity Q was headquartered in New York, New York, and employed a small staff including a chief compliance and chief risk officer (“Employee-1”).
A major component of both the Mutual Fund and the Hedge Fund’s holdings were over-the-counter (“OTC”) derivative positions that involved customized contracts that allowed the counterparties to take positions on the volatility, or price movement, of underlying assets or indices. VELISSARIS, through Infinity Q, represented to its investors that it valued these OTC derivative positions based on fair value, and that in order to do so, it utilized the services of an independent third-party provider. In particular, Infinity Q represented to investors and other stakeholders that it used Bloomberg Valuations Service (“BVAL”) to independently calculate the fair value of these positions, in accordance with the terms of the underlying derivative contracts. These OTC derivative positions comprised hundreds of millions of dollars of the Investment Funds’ portfolios.
Velissaris’ Scheme to Lie to Investors and Inflate Derivative Swap Positions
In fact, however, VELISSARIS defrauded Infinity Q’s investors by taking an active role in the valuation of Infinity Q’s positions, and by modeling the positions in ways that were not based on the actual terms of the underlying contracts and were inconsistent with fair value. VELISSARIS’ input into the BVAL valuation process was inconsistent with Infinity Q’s representations about the independence of the process and allowed VELISSARIS to fraudulently mismark positions in BVAL. VELISSARS engaged in the mismarking of positions in BVAL by making false entries in BVAL’s system including by secretly altering the computer code employed by BVAL that caused BVAL to alter and disregard certain critical terms. Altering and disregarding terms in this fashion caused BVAL to report values that were artificially inflated and, often, much higher than fair value.
By manipulating OTC derivative positions in BVAL in this way, VELISSARIS caused numerous positions in the Investment Funds to have anomalous and, at times, impossible valuations. For example, at times, VELISSARIS made manipulations in either the Mutual Fund and/or the Hedge Fund that caused certain identical positions that were held by both the Mutual Fund and the Hedge Fund (namely, a position where all the material terms are the same) to have substantially divergent values. In other cases, some of VELISSARIS’ manipulations caused certain positions held by the Investment Funds to have impossible values, such as where under the true terms of the swap, the value adopted by VELISSARIS could only be true if volatility were negative – a condition which is mathematically impossible.
Ultimately, after VELISSARIS’ mismarking scheme was uncovered in or about February 2021, Infinity Q liquidated the Investment Funds and sold its OTC derivative positions. These positions were sold for hundreds of millions of dollars less than their purported market values in BVAL thereby resulting in substantial losses to the investors in the Investment Funds.
Velissaris Lies to Auditors and Obstructs the SEC’s Investigation
In order to hide this scheme and prevent its detection, VELISSARIS lied to numerous outside stakeholders and regulators. First, in order to prevent Infinity Q’s outside auditor (the “Auditor”) from discovering the fraud VELISSARIS provided the Auditor with falsified term sheets from counterparties that he had altered to change the true terms of certain OTC derivative positions. In particular, in connection with a number of audits, the Auditor selected certain OTC positions that it would independently value in order to confirm the reasonableness of Infinity Q’s values from BVAL. In order to ensure that the Auditor would not arrive at materially different results when independently valuing positions that VELISSARIS had manipulated in BVAL, VELISSARIS altered the terms of certain deal documents and provided them to the Auditor. After receiving these falsified documents and relying on them in its independent evaluation, the Auditor confirmed the reasonableness of VELISSARIS’ valuations in BVAL.
Furthermore, beginning in May 2020, the SEC opened an inquiry and later an investigation into Infinity Q’s valuation practices. In connection with that investigation, VELISSARIS provided false and misleading information to the SEC. For example, when the SEC asked for original documents that had been provided to investors, VELISSARIS altered the documents before providing them to the SEC, including certain alterations that would help hide his mismarking scheme. For example, Infinity Q’s original investor materials stated that “[o]nce a price is established for a portfolio security, it shall be used for all Funds that hold the security.” As explained above, this was untrue and on numerous occasions, manipulations in BVAL made by VELISSARIS caused the same positions in the Mutual Fund and the Hedge Fund to have substantially different values. To conceal the falsity of Infinity Q’s disclosures, VELISSARIS along with Employee-1 removed this line from investor documents that were provided to the SEC.
In June 2020, the SEC requested that Infinity Q provide additional materials, including documents regarding Infinity Q’s valuation committee and all of its meeting minutes. Infinity Q’s investor materials had represented that Infinity Q had a valuation committee, including VELISSARIS, that the committee would meet monthly or more often, and that VELISSARIS would be responsible for preparing minutes of such meetings. In fact, however, VELISSARIS had not kept notes of any such meetings. Accordingly, days before responding to the SEC, VELISSARIS made up notes purporting to be from valuation committee meetings in 2019 and 2020 and submitted them to the SEC.
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VELISSARIS, 37, of Atlanta, Georgia, is charged with securities fraud, wire fraud, lying to auditors, and obstruction of justice, each of which carries a maximum sentence of 20 years in prison; and investment adviser fraud and conspiracy to obstruct justice, each of which carries a maximum sentence of 5 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 work of the Federal Bureau of Investigation. He further thanked the Securities and Exchange Commission and the Commodity Futures Trading Commission for their cooperation and assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Daniel Loss and Daniel Tracer are in charge of the prosecution.
[1]As the introductory phrase signifies, the entirety of the text of the Indictments and the description of the Indictments set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
Former Founder and Ceo of Nanotechnology Company Convicted of Multimillion-Dollar Securities Fraud SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that JAMES JEREMY BARBERA was convicted today following a one-week jury trial before the Honorable John G. Koeltl. As the jury found, between 2013 and 2020, BARBERA, the founder and former chief executive officer of a New York-based nanotechnology company, Nanobeak Biotech, Inc. (“Nanobeak”), lied to investors and misappropriated investors’ funds. The jury convicted BARBERA of three counts: securities fraud, wire fraud, and conspiracy.
U.S. Attorney Damian Williams said: “As the jury unanimously determined, James Jeremy Barbera lied to investors about his company’s technology and stole millions of dollars of investor funds intended for research and development. Barbera then tried to cover up his misconduct by providing false financial information to investors and the company’s board of directors. Now he awaits sentencing for his crimes.”
According to the Indictment, evidence presented during trial, court documents, and statements in open court:
From in or about 2013 and in or about 2019, BARBERA was the founder and CEO of Nanobeak, a privately held nanotechnology company that represented to investors that the company had developed a breathalyzer sensor technology that could detect cancer and narcotics in human breath.
From at least in or about 2013 through in or about 2020, BARBERA and others perpetrated a scheme to defraud dozens of investors out of at least approximately $8.4 million (i) by soliciting investments through false and misleading statements, (ii) by failing to use investors’ funds as promised, and (iii) by converting investors’ money to his own use. BARBERA and others made false and misleading representations to actual and potential investors, including as set forth below:
BARBERA falsely represented that Nanobeak had developed a breathalyzer sensor that could detect narcotics and cancer in a person’s breath, and that the company was expected to earn millions of dollars in sales revenue through distribution contracts. In truth and in fact, Nanobeak never developed the purported technology, and it was impossible for the company to generate revenue because there was no breathalyzer device to sell and accordingly, no distribution contracts.
BARBERA also falsely represented that Nanobeak would soon have an initial public offering (“IPO”), which would result in large profits to investors. In truth and in fact, the company was not close to an IPO, and BARBERA was permanently barred from serving as the CEO of a public company as a result of a prior, unrelated proceeding brought by the U.S. Securities and Exchange Commission (“SEC”).
BARBERA falsely represented that he had undergraduate and graduate degrees in physics from New York University, and that he had a business degree from the Massachusetts Institute of Technology. In truth and in fact BARBERA never finished college and never attended MIT.
BARBERA converted to his own use at least approximately $3.3 million of the approximately $8.4 million in investor funds in the form of cash withdrawals and to pay personal expenses, including private school and college tuition for his children, mortgage payments on his Central Park West apartment, and for his other personal items, such as credit card bills, jewelry, automobiles, and daily living expenses.
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BARBERA, 65, of New York, New York, was convicted at trial of one count of securities fraud, one count of wire fraud, and one count of conspiracy to commit securities fraud and wire fraud. BARBERA faces a maximum sentence of 20 years in prison on each of the securities and wire fraud counts and a maximum sentence of five years in prison on the conspiracy count. The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentence imposed upon BARBERA will be determined by the judge. BARBERA is scheduled to be sentenced by Judge Koeltl on June 15, 2022.
Mr. Williams praised the outstanding work of the Federal Bureau of Investigation and NASA’s Office of Inspector General, and also thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Kiersten A. Fletcher, Daniel Loss, and Joshua A. Naftalis are in charge of the prosecution.
Virginia Man Pleads Guilty to Laundering Millions from Fraud Schemes Targeting Victims Across the United States Perpetrated by Ghana-Based Criminal EnterpriseRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that FRED ASANTE pled guilty to conspiracy to commit money laundering for his role in a criminal enterprise based in the Republic of Ghana (“Ghana”) involving the theft of tens of millions of dollars. ASANTE was arrested on February 17, 2021 in Virginia and pled guilty today before U.S. District Judge Jed S. Rakoff. ASANTE has been detained since his arrest.
U.S. Attorney Damian Williams said: “Fred Asante admitted today to laundering money from victims of various fraud schemes, including cruel scams targeting elderly online daters searching for companionship. Compounding the disappointment of learning their potential soulmate was indeed nonexistent, Asante’s victims later found they were also targets of a Ghana-based criminal enterprise netting over $35 million in illegal proceeds. We implore the millions of Americans looking for someone special online to use extra caution, and be especially beware if solicited for money or other personal information.”
According to the Indictment, public court filings, and statements made in court:
From at least in or about 2013 through at least in or about 2020, ASANTE was a member of a criminal enterprise (the “Enterprise”) based in Ghana that committed a series of frauds against individuals and businesses located across the United States, including in the Southern District of New York. The frauds perpetrated by the Enterprise have consisted of, among other frauds, business email compromises, romance scams, and fraud schemes related to the novel coronavirus/COVID-19 pandemic. First, the objective of the Enterprise’s business email compromise fraud scheme was to trick and deceive businesses into wiring funds into accounts controlled by the Enterprise through the use of email accounts that “spoofed” or impersonated employees of a victim company or third parties engaged in business with a victim company. Second, the Enterprise conducted the romance scams by using electronic messages sent via email, text messaging, or online dating websites that deluded victims, many of whom were vulnerable older men and women who lived alone, into believing the victim was in a romantic relationship with a fake identity assumed by members of the Enterprise. Once members of the Enterprise had gained the trust of the victims using the fake identity, they used false pretenses to cause the victims to wire money to bank accounts the victims believed were controlled by their romantic interests, when in fact the bank accounts were controlled by members of the Enterprise. Finally, the Enterprise submitted fraudulent loan applications through a loan program of the United States Small Business Administration (the “SBA”) designed to provide relief to small businesses during the COVID-19 pandemic, namely the Economic Injury Disaster Loan (“EIDL”) Program. The Enterprise submitted fraudulent EIDL applications in the names of actual companies to the SBA and when an EIDL loan was approved, the funds were ultimately deposited in bank accounts controlled by members of the Enterprise.
ASANTE and other members of the Enterprise received fraud proceeds from victims of the Enterprise in dozens of business bank accounts that they controlled in New York, New Jersey, and Virginia. The business bank accounts were opened in the names of companies formed by ASANTE and other members of the Enterprise that were purportedly involved in, among other things, automobile sales, food imports and exports, and freight trucking and shipping. Once ASANTE received fraud proceeds in bank accounts under his control, he withdrew, transported, and laundered those fraud proceeds to other members of the Enterprise abroad. The defendant primarily laundered the fraud proceeds through his business by using the proceeds to purchase automobiles, food products, and other goods from U.S.-based suppliers and distributors of such products and shipping those products to Ghana and elsewhere. The defendant’s transactions had the appearance of legitimate business transactions when, in fact, the products had been purchased using the proceeds of fraud schemes. This trade-based money laundering scheme was designed to obscure the origin of the fraud proceeds as well as the identity of the ultimate beneficiaries of these schemes. In total, from in or about 2016 through in or about 2020, the defendant controlled over a dozen business bank accounts with deposits totaling over $35 million.
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FRED ASANTE, 36, of Fredericksburg, Virginia, pled guilty to one count of conspiracy to commit money laundering, 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.
Under the terms of his plea agreement, ASANTE agreed to pay a money judgment of $647,488 and to forfeit his interest in approximately $323,646 seized by the Government from his bank accounts as well as a 2021 Mercedes-Benz GLE AMG seized by the Government.
ASANTE will be sentenced on May 18, 2022, by Judge Rakoff. ASANTE’s co-conspirator, LORD ANING, pled guilty to conspiracy to commit wire fraud on October 15, 2021, and will be sentenced on February 28, 2022 at 4:30 p.m. before Judge Rakoff.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Sagar K. Ravi, Katherine Reilly, and Mitzi Steiner are in charge of the prosecution.
Eight Defendants Charged in Manhattan Federal Court for Distributing Fentanyl Linked to Multiple Overdose Deaths in the BronxRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, Timothy Foley, the Acting Special Agent in Charge of the Drug Enforcement Administration’s New York Division (“DEA”), and Keechant L. Sewell, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of a Superseding Indictment today charging JESUS CABRERA, a/k/a “Gee,” MICHAEL AMAYA, a/k/a “Miz,” and ALBERTO CONCEPCION, a/k/a “Chino,” with participating in a conspiracy to distribute fentanyl that resulted in the August 25, 2021, death of Malik Rahman in the Bronx, New York. HUMBERTO BORGES, a/k/a “Berto,” FRANKIE CAPELLAN, a/k/a “Nitty,” WILLIE HARRIS, a/k/a “Light,” LUIS RAMIREZ, a/k/a “Flaco Construction,” a/k/a “Lou,” and JOSE FIGUEROA, a/k/a “Chelo,” were also charged in the Superseding Indictment as members of the conspiracy. CABRERA, CONCEPCION, and BORGES were arrested today in the Bronx, FIGUEROA was arrested today in Brooklyn, and RAMIREZ was arrested today in West New York, New Jersey. AMAYA, who was charged in the original Indictment, was already in federal custody. CAPELLAN and HARRIS remain at large. The defendants who were arrested today will likely be presented this afternoon before United States Magistrate Judge Gabriel W. Gorenstein.
U.S. Attorney Damian Williams said: “As alleged, the defendants operated a network for the distribution of highly addictive and dangerous drugs. Despite knowing about the deadly effects of fentanyl, Cabrera and his crew continued to sell countless doses throughout the Bronx. As alleged, glassines stamped with the defendants’ logo were found at the scene of multiple overdoses over the past year. Today’s arrests are part of our continued commitment, along with our law enforcement partners, to stop the flow of fentanyl onto the streets of New York City and to bring to justice the dealers and suppliers who push this poison.”
DEA Acting Special Agent in Charge Timothy Foley said: “Zeroing in on drug trafficking organizations responsible for fueling the increasing overdose death rates is our focus. This action marks the first arrests in New York under DEA's newly announced Operation Overdrive, which targets drug-related violence and overdose deaths across the United States. Allegedly, Jesus Cabrera and his criminal network built a foothold for drug distribution in the Bronx adding fentanyl to their fire and branded their drugs for distribution throughout the Bronx with labels like ‘Supreme,’ ‘Off-White,’ and ‘Thriller,’ to not only highlight the potency of their drugs, but to appeal to users. DEA will continue our important work with our law enforcement partners to remove these dangerous criminals from our streets and restore the safety and health of our communities.”
NYPD Commissioner Keechant L. Sewell said: “When you allegedly brazenly peddle illegal narcotics that threaten the lives of innocent New Yorkers, the collective vigor of our law enforcement assets will find you and stop you — no matter who you are, where you operate, or who your illicit operations harm. This is critically important work and I praise our partners, and the leadership of the prosecutors in the United States Attorney’s Office in the Southern District of New York, for working together to achieve some measure of justice for the many victims affected in this case.”
As alleged in the Superseding Indictment unsealed today in Manhattan federal court and in other court papers and proceedings[1]:
CABRERA, AMAYA, CONCEPCION, BORGES, CAPELLAN, HARRIS, RAMIREZ, and FIGUEROA are members of a drug trafficking organization (“DTO”) that operates principally from a block on 142nd Street between Brook Avenue and St. Ann’s Avenue in the Bronx (the “Set”), where its members sell glassines of fentanyl in bulk to dealers who then re-distribute the DTO’s product on the Set and in other areas of the Bronx. Members of the DTO also sell individual glassines to users who line up on the Set on an almost daily basis. CABRERA is the leader of the DTO, and, until recently, AMAYA managed and oversaw the DTO’s various street-level dealers, baggers, and lookouts, including the other charged defendants. In the fall and winter of 2021 alone, the DTO distributed an estimated five to six kilograms of fentanyl per month.
The DTO has frequently used a signature “stamp” on the glassines of fentanyl it sells. For many months, the DTO stamped its glassines with a “Supreme” logo. Starting in or around December 2021, the DTO began using an “Off White” logo, and, recently, the DTO switched to a “Thriller” logo.
Despite the DTO’s leadership’s awareness of the potential deadly impact of fentanyl, members of the DTO continued pushing the DTO’s product. Indeed, as early as on or about January 2019, CABRERA sent AMAYA a link to a news article that described law enforcement’s crackdown on heroin dealers in the Bronx who were “pushing a deadly cut of heroin . . . using a new drug known as fentanyl,” which had led to a rash overdose deaths.
On or about August 25, 2021, CONCEPCION sold a quantity of loose “Supreme”-stamped glassines to an individual on the Set (“Individual-1”), who subsequently provided one of those glassines to Rahman. Rahman died from an overdose shortly after ingesting the substances in the “Supreme”-stamped glassine, the residue of which later tested positive for, among other things, fentanyl. Both CABRERA and AMAYA were directly involved in overseeing CONCEPCION’s narcotics sales at that time. Indeed, in the days leading up to Rahman’s fatal overdose, AMAYA and CABRERA exchanged text messages referencing certain quantities of narcotics that were going to CONCEPCION for resale on the Set.
Including Rahman’s fatal overdose, between in or around March 2021 and in or around December 2021, there were at least six confirmed fatal overdoses in the Bronx at which “Supreme”-stamped glassines were found on the scene and two additional suspected overdose deaths at which the “Supreme”-stamped glassines were found on the scene. In or around January 2022, there was a ninth fatal suspected overdose in the Bronx at which a “Thriller”-stamped glassine was found on the scene.
During the course of this morning’s arrests and pursuant to judicially authorized search warrants and consent searches, law enforcement recovered, among other items, approximately 1.5 kilograms of mixtures and substances containing suspected fentanyl, numerous “Thriller” glassines, ledgers reflecting the DTO’s weekly drug inventory, a firearm, and over $120,000 in cash.
* * *
JESUS CABRERA, a/k/a “Gee,” 42, MICHAEL AMAYA, a/k/a “Miz,” 40, ALBERTO CONCEPCION, a/k/a “Chino,” 50, HUMBERTO BORGES, a/k/a “Berto,” 45, FRANKIE CAPELLAN, a/k/a “Nitty,” 40, WILLIE HARRIS, a/k/a “Light,” 52, LUIS RAMIREZ, a/k/a “Flaco Construction,” a/k/a “Lou,” 36, and JOSE FIGUEROA, a/k/a “Chelo, 57, are each charged with conspiracy to distribute and possess with intent to distribute 400 grams and more of fentanyl, which carries a mandatory minimum sentence of ten years in prison and a maximum sentence of life in prison. CABRERA, AMAYA, and CONCEPCION are also charged with causing the deaths of a victim in connection with the narcotics conspiracy, which carries a mandatory minimum sentence of twenty years in prison and a maximum sentence of life in prison. The statutory minimum and 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 NYPD and DEA, and the New York/New Jersey High Intensity Drug Trafficking Area (“HIDTA”) Intelligence Analysts for their support and assistance in this matter. He also thanked the Bronx District Attorney’s Office for its assistance in the case.
The case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys David J. Robles and Kaylan E. Lasky are in charge of the prosecution.
The charge contained in the Superseding Indictment is merely an allegation, 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 other court papers and proceedings, and the description of the Superseding Indictment Superseding Indictment and other court papers and proceedings set forth herein, constitute only allegations and every fact described should be treated as an allegation.
Disbarred Attorney Pleads Guilty to $5 Million Cryptocurrency FraudRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today announced that PHILIP REICHENTHAL, a disbarred attorney, pled guilty in Manhattan federal court today to conspiracy to commit wire fraud, in connection with a scheme to defraud investors who believed they were purchasing Bitcoin. Reichenthal engaged in the scheme with Randy Craig Levine, a/k/a “Viktor Lapin,” a/k/a “Andre Santiago Santos Galindo,” a/k/a “Alexander Martinez Lavrov,” a/k/a “Alexander Kozlov,” a/k/a “Hristo Danielov Marinov,” an international fugitive who fraudulently induced victims to send millions of dollars to REICHENTHAL, who was a licensed attorney at the time of the fraud. REICHENTHAL falsely represented that he would act as an escrow agent for the transactions, but instead, he sent a substantial portion of the money to Levine, before any Bitcoin was provided by Levine to investors. Neither Levine nor REICHENTHAL ever provided any Bitcoin or refunded the investors’ money.
REICHENTHAL was arrested on September 14, 2020, and pled guilty today before U.S. Magistrate Judge Debra Freeman.
U.S. Attorney Damian Williams said: “As a licensed attorney and escrow agent, Philip Reichenthal was entrusted to keep investors’ money safe. But as he admitted today, he betrayed that trust by siphoning millions of dollars of investor money. Now he stands guilty of wire fraud and awaits sentencing for his crime.”
As alleged in the Complaint and Indictment filed against REICHENTHAL, as well as his co-conspirator Levine,[1] and other statements made in open court:
The charges against Levine and REICHENTHAL involve two fraudulent schemes. In the first fraudulent scheme, in approximately June and July 2018, Levine induced another individual, the principal of a purported cryptocurrency escrow firm (“Individual-1”), to wire to REICHENTHAL over $3 million of funds from an over-the-counter cryptocurrency broker (“Company-1”) to fund the purchase of Bitcoin after falsely telling Individual-1 that Levine would sell thousands of Bitcoin, when in truth and in fact, Levine never intended to sell Bitcoin. After receiving the $3 million, REICHENTHAL, in turn, wired over $2 million to bank accounts in Guatemala held in the name of one of Levine’s aliases. Levine then lied to Individual-1 for days about why the deal had not worked out, the status of the purported Bitcoin, and the location of Company-1’s money, which was never returned.
In the second fraudulent scheme, from approximately February 2019 to May 2019, Levine induced a Florida resident involved in brokering Bitcoin transactions (“Individual-2”) to cause investors to send to REICHENTHAL over $2 million of the investors’ money to fund the purchase of Bitcoin. Again, Levine told Individual-2 that Levine would sell Bitcoin, when in truth and in fact, Levine never had any intention of selling Bitcoin to the investors. After receiving the funds from the investors, REICHENTHAL, in turn, sent over $1.9 million to bank accounts in Mexico controlled by Levine; the money was then wired to a bank account in Russia held in the name of one of Levine’s aliases. Levine then lied to Individual-2 and an investor about the status of the investors’ funds, which were never returned.
In connection with the above transactions, Levine used, among other things, various false aliases to communicate with the individuals sending funds to REICHENTHAL and foreign bank accounts held in his false names. REICHENTHAL used bank accounts held in the name of his law firm and an attorney trust account to receive the funds and the pass them to Levine, before he or investors received the Bitcoin, contrary to REICHENTHAL’s and Levine’s promises.
* * *
REICHENTHAL, 78, of Homestead, Florida, pled guilty to one count of conspiracy to commit wire fraud. This charge carries a maximum term of twenty 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.
REICHENTHAL will be sentenced at a later date by the Honorable Lewis A. Kaplan.
Extradition proceedings against Levine are pending.
Mr. Williams praised the investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jordan Estes and Drew Skinner are in charge of the prosecution
[1] As the introductory phrase signifies, as to Levine, 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.
Nine Members of “Downtown Mafia” Indicted for Cocaine TraffickingRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, Ricky J. Patel, Special Agent in Charge of Homeland Security Investigations (“HSI”) in New York, and Keechant L. Sewell, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an indictment today charging QUINCY HILLIARD, a/k/a “Tut,” CURTIS HILLIARD, a/k/a “Curt,” GARY BROWN, a/k/a “Gleme,” TERRENCE TURNER, a/k/a “Storm,” KASIEN ADDERLEY, a/k/a “Kaz,” TIRAN BRANCH, PEDRO RIVERA, a/k/a “Dro,” DERRICK LATIMORE, a/k/a “Derrick Lattimore,” a/k/a “Cone,” and ANTWAN ANDREWS, a/k/a “Antawan Andrews,” a/k/a “Twan,” with participating in a conspiracy to distribute cocaine in New York and New Jersey.
U.S. Attorney Damian Williams said: “As alleged in the Indictment, the defendants distributed vast quantities of cocaine in New York and New Jersey. Thanks to the extraordinary work of our partners at NYPD and HSI, the defendants now face federal charges for their crimes.”
HSI Acting Special Agent in Charge Ricky J. Patel said: “The individuals arrested today were allegedly part of an organization that coordinated a cocaine pipeline to pour directly into the streets of New York City. HSI and the NYPD stand together in the fight to rid our communities of individuals responsible for dangerous narcotics flooding the streets with blatant disregard for the ripple effect that drug addiction has on millions of Americans. Working with our law enforcement partners, HSI will continue to prevent the flow of harmful drugs coming into our neighborhoods.”
NYPD Commissioner Keechant L. Sewell said: “Today’s federal indictment highlights how our NYPD investigators stop at nothing in their work to swiftly arrest anyone accused of distributing illegal narcotics in our city and region. I would like to thank the United States Attorney’s Office in the Southern District of New York, and all of our law enforcement partners, for their outstanding work in this important case.”
As alleged in the Indictment unsealed today in Manhattan federal court and in other court papers and proceedings:
From at least in or about 2020 to in or about February 2022, QUINCY HILLIARD, a/k/a “Tut,” CURTIS HILLIARD, a/k/a “Curt,” GARY BROWN, a/k/a “Gleme,” TERRENCE TURNER, a/k/a “Storm,” KASIEN ADDERLEY, a/k/a “Kaz,” TIRAN BRANCH, PEDRO RIVERA, a/k/a “Dro,” DERRICK LATIMORE, a/k/a “Derrick Lattimore,” a/k/a “Cone,” and ANTWAN ANDREWS, a/k/a “Antawan Andrews,” a/k/a “Twan,” operated a large-scale cocaine trafficking organization. This organization, which its members dubbed the “Downtown Mafia,” distributed wholesale quantities of cocaine in New Jersey and in the New York City area, including Harlem and the Bronx.
* * *
QUINCY HILLIARD, a/k/a “Tut,” 39, CURTIS HILLIARD, a/k/a “Curt,” 44, GARY BROWN, a/k/a “Gleme,” 43, TERRENCE TURNER, a/k/a “Storm,” 43, TIRAN BRANCH, 38, PEDRO RIVERA, a/k/a “Dro,” 38, DERRICK LATIMORE, a/k/a “Derrick Lattimore,” a/k/a “Cone,” 42, and ANTWAN ANDREWS, a/k/a “Antawan Andrews,” a/k/a “Twan,” 36, were arrested today and will be presented before United States Magistrate Judge Debra Freeman. KASIEN ADDERLEY, a/k/a “Kaz,” 39, remains at large. This case is assigned to United States District Judge Colleen McMahon.
All defendants are charged with conspiracy to distribute and possess with intent to distribute five kilograms and more of cocaine and 28 grams and more of cocaine base, which carries a minimum sentence of ten years and a maximum sentence of life 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 a defendant would be determined by the judge.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) investigation. OCDETF identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.
Mr. Williams praised the outstanding investigative work of the Department of Homeland Security, Homeland Security Investigations, and the New York City Police Department. Mr. Williams also thanked the Drug Enforcement Administration, the Drug Enforcement Administration’s New York – John F. Kennedy Airport Group, the United States Secret Service’s New York Field Office, the United States Marshals Service, United States Customs and Border Protection, the New York State Police, the New York City Department of Investigation, and the New York City Housing Authority for their assistance in the investigation.
The prosecution of this case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Alexander Li, Andrew Rohrbach, and Ashley Nicolas 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.
Money Launderer Sentenced to 84 Months in PrisonRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that VICTOR AHAIWE was sentenced to 84 months in prison today for participating in a multi-million-dollar conspiracy to launder the proceeds of business email compromise frauds targeting businesses and non-profit organizations and romance frauds targeting individual victims. AHAIWE was convicted by a jury in June 2021 of bank fraud conspiracy, money laundering conspiracy, and aggravated identity theft in a trial presided over by U.S. District Judge Denise L. Cote, who also imposed today’s sentence.
U.S. Attorney Damian Williams said: “The defendants in this case were part of a wide-reaching conspiracy to launder over $10 million stolen from businesses and individuals. The sentences imposed on the ten defendants send a message: that this type of activity will be prosecuted and punished to the full extent of the law.”
According to court filings and statements made in court proceedings, including the trial at which AHAIWE was convicted:
From at least in or about March 2018 up to and including at least in or about January 2020, AHAIWE and his coconspirators conspired to launder the proceeds of numerous business email compromise schemes and romance schemes, in which corporate, organizational, and individual victims were fraudulently induced to send over $10 million to bank accounts controlled by members of the conspiracy, in the mistaken belief that those accounts belonged to the intended recipients of the funds. Members of the conspiracy received the victim funds by opening bank accounts in the names of the intended recipients, transferred the funds through additional accounts to hide the origin and fraudulent nature of the proceeds, and ultimately transferred most of those proceeds to foreign bank accounts or withdrew them in cash.
AHAIWE participated in the scheme by stealing the identity of a recently deceased friend and using that identity to open and operate bank accounts to launder a portion of the proceeds from a $500,000 business email compromise fraud against a foreign public agency that provides health insurance and pension benefits. AHAIWE also previously laundered hundreds of thousands of dollars of proceeds from other business email compromise frauds and, in connection with those activities, stole and used the identities of several other individuals. In imposing today’s sentence, Judge Cote also found that AHAIWE engaged in obstruction of justice in connection with his sentencing by submitting fabricated sentencing letters.
AHAIWE was the tenth defendant to be sentenced for participating in the money laundering conspiracy. The nine previously sentenced defendants, each of whom pleaded guilty, received the following sentences:
Defendant
Age
Hometown
Sentence
PRINCE UKO
46
Jonesboro, GA
41 months (prison)
SUNDAY OKORO
41
Jonesboro, GA
41 months (prison)
IKECHUKWU ELENDU
41
San Leandro, CA
41 months (prison)
ARINZE OBIKA
33
Queens, NY
33 months (prison)
BRITT JACKSON
43
Columbus, GA
33 months (prison)
HERMAN BASS
37
Hawthorne, CA
30 months (prison)
JACOB SAGIAO
47
Oxnard, CA
30 months (prison)
MARYLYNN PENEUETA
46
Oxnard, CA
12 months (prison)
JOSHUA FITTEN
25
Hacienda Heights, CA
5 years (probation)
* * *
In addition to the prison sentence, AHAIWE was ordered to pay restitution in the amount of $514,063, as recompense to the victims affected, and to pay forfeiture in the amount of $590,123, reflecting criminal proceeds that he received in connection with his money laundering and identity theft.
Mr. Williams praised the outstanding investigative work of the Secret Service and its Electronic Crimes Task Force, the FBI, CBP, and special agents of the United States Attorney’s Office for the Southern District of New York. The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Jun Xiang, Kevin Mead, and Michael McGinnis are in charge of the prosecution.
Final Defendant Sentenced to 28 Years in Prison for 2011 Murder of Joshua RubinRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that KEVIN TAYLOR was sentenced by U.S. District Court Judge Jed S. Rakoff to 28 years in prison for his role in the October 31, 2011, murder of Joshua Rubin in Brooklyn, New York. Judge Rakoff previously sentenced co-defendants GARY ROBLES and MICHAEL MAZUR to 28 and 18 years in prison, respectively, for their roles in Rubin’s murder.
U.S. Attorney Damian Williams said: “Today’s sentencing brings long-awaited closure to the family of Joshua Rubin for the horrific events from more than a decade ago when Taylor, Robles and Mazur killed Rubin during a planned drug robbery, and then burned and abandoned Rubin’s body in a deserted field in Pennsylvania. This case is another example of this Office’s commitment to seeking justice for victims, even if the road to justice is long. I want to thank our law enforcement partners and the Special Agents of the U.S. Attorney’s Office for persevering in this case until justice was achieved for the victim’s family.”
According to the allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings:
On or about October 31, 2011, KEVIN TAYLOR, GARY ROBLES, and MICHAEL MAZUR planned to rob Joshua Rubin of a pound of marijuana. ROBLES agreed to bring a firearm to the robbery. TAYLOR lured Rubin to a Brooklyn apartment where, under the guise of purchasing the marijuana, the trio planned to rob Rubin of the drugs. On the night of the robbery, TAYLOR and ROBLES waited inside the apartment while MAZUR was positioned outside to serve as a lookout. After Rubin entered the apartment, TAYLOR and ROBLES demanded that Rubin surrender the marijuana. When Rubin refused, ROBLES shot and killed him.
After the murder, TAYLOR, ROBLES, and MAZUR placed Rubin’s body into the trunk of a car and drove to rural Pennsylvania. Once there, TAYLOR, ROBLES, and MAZUR placed Rubin’s body in a garbage can, doused it with an accelerant, and set the body on fire. TAYLOR, ROBLES, and MAZUR then drove back to New York in the early morning hours of November 1, 2011. After the murder, TAYLOR arranged to have Rubin’s credit cards used to purchase items from retail establishments in Orange County, New York.
In addition, in 2019 and 2020, TAYLOR attempted to impede the federal murder investigation by paying thousands of dollars to a potential witness, and offering another witness hundreds of thousands of dollars if that witness refused to speak with law enforcement.
* * *
TAYLOR, 29, pled guilty to one count of robbery, in violation of 18 U.S.C. §§ 1951 and 2, one count of conspiracy to commit robbery, in violation of 18 U.S.C. § 371, and one count of conspiracy to commit witness tampering, in violation of 18 U.S.C. § 371. In connection with his guilty plea, TAYLOR admitted to his role in the murder. In addition to his prison sentence, TAYLOR, was sentenced to three years of supervised release.
ROBLES, 39, pled guilty to one count of robbery, in violation of 18 U.S.C. §§ 1951 and 2, one count of conspiracy to commit robbery, in violation of 18 U.S.C. § 371, and one count of narcotics conspiracy, in violation of 21 U.S.C. §§ 846 and 841(b)(1)(D). In connection with his guilty plea, ROBLES admitted to his role in the murder. In addition to his prison sentence, ROBLES, was sentenced to three years of supervised release.
MAZUR, 27, pled guilty to one count of Hobbs Act robbery, in violation of 18 U.S.C. § 1951, and in connection with his guilty plea admitted to his role in the murder. In addition to his prison sentence, MAZUR, was sentenced to three years of supervised release.
Mr. Williams praised the outstanding work of the Federal Bureau of Investigation, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York. He also thanked the Lehigh County District Attorney’s Office, the Pennsylvania State Police, and the South Whitehall Township Police Department for their assistance in the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Alexandra N. Rothman, Mollie Bracewell, and Dominic A. Gentile are in charge of the prosecution.
Defendant Pleads Guilty to April 2020 MurderRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that Andres Bello pled guilty today in Manhattan federal court to the April 18, 2020 murder of Jorge Miguel Cabrera. U.S. District Judge P. Kevin Castel accepted the defendant’s guilty plea.
U.S. Attorney Damian Williams said: “In the early morning of April 18, 2020, Andres Bello was involved in a shooting that ultimately killed Miguel Cabrera in connection with a failed drug transaction. This case is yet another tragic reminder of the violence that often accompanies narcotics trafficking. We continue our daily work with our law enforcement partners to keep our communities safe by vigorously investigating and prosecuting acts of violence and drug trafficking.”
According to the allegations in the Second Superseding Indictment and other documents filed in federal court, as well as statements made in public court proceedings:
On or about April 18, 2020, BELLO and other members of a Bronx-based narcotics trafficking organization, including Humberto Rodriguez, a/k/a “El Bori,” and Jason Tavarez, a/k/a “RATATAA,” attempted to purchase one kilogram of cocaine on East 175th Street in the Bronx. After obtaining the buyers’ money, the sellers attempted to flee the scene. At that point, BELLO passed a firearm to Humberto Rodriguez who fired the gun at the sellers’ vehicles, striking Cabrera in the spine. Cabrera ultimately died from the gunshot wound.
* * *
BELLO, 32, pled guilty to one count of murder through the use of a firearm, in violation of Title 18, United States Code, Sections 924(j) and 2, which carries a maximum term of life in prison and a mandatory minimum term of five years’ imprisonment.
On February 9, 2022, co-defendant Jason Tavarez, a/k/a “RATATAA,” 38, pled guilty to one count of conspiring to distribute five kilograms and more of mixtures and substances containing a detectable amount of cocaine, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.
On November 22, 2021, co-defendant Humberto Rodriguez, a/k/a “El Bori,” pled guilty to one count of murder through the use of a firearm. On July 27, 2021, co-defendant, Alex Melendez, pled guilty to narcotics and firearms offenses. On November 11, 2021, co-defendant, Sharone Lewis pled guilty to a narcotics offense.
The maximum and minimum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Williams praised the outstanding investigative work of Homeland Security Investigations, the Drug Enforcement Administration, the New York City Police Department, and the Organized Crime Drug Enforcement Task Force. 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.
The prosecution is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Peter J. Davis, Nicholas W. Chiuchiolo, and Kevin Mead are in charge of the prosecution.
Leader of Newburgh Street Gang “Southside” Charged with Murder and Firearms OffensesRead 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”), today announced the unsealing of an indictment charging ARDAE HINES, a/k/a “Young Money,” a/k/a “YM,” a leader of a street and drug gang known as “Southside” in the City of Newburgh, New York, with the August 2016 murder of Deandric Little. HINES is currently in federal custody serving a 2019 sentence for racketeering and narcotics conspiracy, and was presented in White Plains federal court today. The case is assigned to U.S. District Judge Cathy Seibel.
U.S. Attorney Williams said: “Ardae Hines, a leader of the violent street gang, ‘Southside,’ is alleged to have engaged in and promoted violence in furtherance of Southside’s activities, including directing a fellow gang member to commit murder. We thank our FBI partners for their continued efforts in eliminating gang violence, which affects everyone in communities where it exists, victimizing innocent New Yorkers by instilling fear and apprehension in many going about their daily lives.”
FBI Assistant Director Michael J. Driscoll said: "Levels of criminal street gang activity in Newburgh, NY remain high, similar to other areas in this country recently. Unfortunately, shootings, drugs, and murders have become all too familiar for the community, which has been battling the rise in violence for years. We work daily with our partners at the Newburgh City Police Department and other members of the Hudson Valley Safe Streets Task Force, to ensure those responsible for the violence face justice.”
As alleged in the Indictment filed today in White Plains federal court[1]:
From at least 2014 through June 2017, the Southside Gang was a criminal enterprise centered in and around the intersection of South Street and Chambers Street in an area of Newburgh known as the “Southside.” In order to gain funds for the gang, protect the gang’s territory, and promote the gang’s standing, members of Southside engaged in, among other things, narcotics trafficking, robbery, and acts involving murder. To that end, Southside members sold heroin, crack cocaine, and marijuana in the gang’s territory, promoted their gang affiliation on social media sites such as Facebook, possessed firearms, and engaged in shootings as part of their gang membership. As alleged in the Indictment, on or about August 1, 2016, ARDAE HINES argued with Deandric Little in Newburgh, and in the course of that argument, instructed another person (“CC-1”) to shoot and kill Little, which CC-1 did.
* * *
ARDAE HINES, 33, is charged with (1) murder in aid of racketeering, which carries a mandatory sentence of life in prison, (2) murder in connection with a drug crime, which carries a mandatory minimum sentence of twenty years in prison and maximum sentence of life imprisonment, and (3) murder through use of a firearm, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of life in prison. The mandatory minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Williams praised the outstanding investigative work of the FBI and the City of Newburgh Police Department. Mr. Williams thanked the Orange County District Attorney’s Office for its invaluable ongoing assistance in the case. Mr. Williams also thanked the Bureau of Alcohol, Tobacco, Firearms, and Explosives, Town of Newburgh Police Department, the New York State Police, the Orange County Sheriff’s Department, the Town of New Windsor Police Department, and the New York Department of Corrections and Community Supervision for their assistance in the case.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Lindsey Keenan, Jacqueline Kelly, and Samuel Raymond are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
Former Director of Accounting and Human Resources Charged in White Plains Federal Court with Embezzlement from Employer and Aggravated Identity TheftRead 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 SUSANA RIVERA, the former Director of Accounting and Human Resources for a kitchen remodeling firm located in Westchester County and Greenwich, Connecticut, with wire fraud and aggravated identity theft in connection with her embezzlement of more than $550,000 from her employer. RIVERA was arrested this morning and will be presented in White Plains federal court later today.
U.S. Attorney Damian Williams said: “Susana Rivera abused the trust her employer placed in her by stealing more than $500,000 in hundreds of individual thefts over 22 months. She stole and used her employer’s identity to further her scheme. She will now be held accountable for her thefts.”
FBI Assistant Director Michael J. Driscoll said: “No more than one month after joining the company she allegedly defrauded, Susana Rivera started down a path of embezzlement that would eventually result in more than half a million dollars in losses to her victim. Spending this money on a variety of luxury and personal items, she jumped headfirst into this scheme with seemingly no signs of slowing down—until we showed up to levy the charge. Financial fraud schemes wreak havoc on private businesses and the economy alike. Any attempt to defraud a victim in this way will most certainly be met with consequences in our justice system.”
According to the Indictment unsealed today in White Plains federal court:[1]
In October 2019, RIVERA was hired as the Director of Accounting and Human Resources at the victim company, a family owned kitchen design and remodeling business in Mamaroneck, Bedford and Greenwich, Connecticut. Starting in November 2019, RIVERA made hundreds of unauthorized charges in a total amount exceeding $175,000 to the victim company’s credit cards for personal expenses, including jewelry, beauty treatments, laser treatments, travel, pets, cosmetic surgery, clothing and cars, including a partial payment on a $100,000 Corvette. RIVERA also caused the victim company’s payroll company to make unauthorized payments in a net amount of more than $370,000 to a fake vendor that RIVERA created to receive the money. RIVERA also caused unauthorized transfers from the victim company’s bank account in an amount exceeding $2,900 to pay her personal utility bills. To get restrictions on the use of the victim company’s credit cards removed, RIVERA posed as an owner of the victim company in telephone calls with the company’s credit card company. RIVERA also sent the credit card company photographs of the owner’s driver’s license to cause credit card company personnel to believe she was the owner.
RIVERA, 40, of the Bronx, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison. The maximum potential sentences in this case are prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
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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.
Five Defendants Charged in $8.4 Million “Boiler Room” Fraud and Money Laundering SchemeRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, Thomas Fattorusso, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and John Condon, Special Agent in Charge of the Tampa Office of Homeland Security Investigations (“HSI”), announced today the unsealing of an Indictment charging ROBERT LENARD BOOTH, a/k/a “Trevor Nicholas,” MICHAEL D’URSO, ALYSSA D’URSO, JAY GARNOCK, and ANTONELLA CHIARAMONTE with conspiracy to commit securities fraud and operate unlicensed money transmitting businesses, conspiracy to commit wire fraud, conspiracy to commit money laundering, and operation of unlicensed money transmitting businesses, in connection with a scheme to defraud victim investors in countries around the world and launder the proceeds of the fraud. The case is assigned to U.S. District Judge Jed S. Rakoff.
BOOTH was arrested in August 2021 at John F. Kennedy International Airport and was previously indicted for his role in the scheme. MICHAEL D’URSO, ALYSSA D’URSO, and CHIARAMONTE were arrested in Glen Cove, New York this morning and will be presented before the Honorable Debra Freeman, United States Magistrate Judge for the Southern District of New York, later today. GARNOCK was arrested in West Palm Beach, Florida this morning and will be presented before the Honorable Bruce E. Reinhart, United States Magistrate Judge for the Southern District of Florida later today.
U.S. Attorney Damian Williams said: “Hiding behind fake investment firms and a network of shell companies, these defendants preyed on victims around the world and cheated them of their hard-earned savings. In selling their victims fake investments in American companies, the defendants abused the confidence and trust that investors worldwide have in American securities and American banks. Thanks to the tireless efforts of our law enforcement partners, these defendants now find themselves in hot water, being held accountable for their crimes.”
HSI Tampa SAC John Condon said: “This case is an example of how HSI is uniquely positioned to disrupt transnational criminal organizations allegedly profiting from cross-border crime. Thanks to the partnership with HSI and IRS-CI, an international criminal conspiracy has been stopped.”
IRS-CI SAC Thomas Fattorusso said: “Criminals have become extremely sophisticated in preying on unsuspecting victims, and this alleged boiler room scheme is no exception. This team of fraudsters allegedly went to great lengths to create fake marketing materials, fake contact information, and fake companies to dupe victim-investors and then laundered the funds for personal gain. This case demonstrates that IRS-CI, and its law enforcement partners like Homeland Security Investigations, will work across the globe to track down perpetrators of financial crimes.”
As alleged in the Indictment unsealed today[1]:
Beginning in at least June 2019 and lasting through August 2021, ROBERT LENARD BOOTH, a/k/a “Trevor Nicholas,” MICHAEL D’URSO, ALYSSA D’URSO, JAY GARNOCK, and ANTONELLA CHIARAMONTE participated in a sophisticated international mass-marketing investment fraud scheme to defraud investors from around the world of millions of dollars, and to launder the fraud proceeds and distribute those proceeds among the conspirators.
BOOTH ran a boiler room operation in Thailand that lied to investors and told them the boiler room was in fact a Manhattan-based investment firm. BOOTH and his co-conspirators propped up their lies with fake identities and false and misleading webpages, email addresses, and phone numbers. While purporting to sell investors from around the world securities in privately held and publicly traded American companies, BOOTH stole more than $1 million from victim-investors, depriving them of their savings.
MICHAEL D’URSO, ALYSSA D’URSO, GARNOCK, and CHIARAMONTE (the “D’URSO Crew”) ran a network of shell companies and associated bank accounts in New York. Using these shell companies, the D’URSO Crew partnered with multiple boiler rooms, including BOOTH’s, to receive the stolen “investment” funds from victims and then launder the money and distribute it to the various conspirators. All told, the D’URSO Crew used its shell companies to receive more than $8.4 million that was stolen from victims of the scheme. They then used their shell companies to launder more than $4.6 million of the stolen money and send it back overseas.
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BOOTH, 68, of Brooklyn, New York, MICHAEL D’URSO, 54, of Glen Cove, New York, ALYSSA D’URSO, 28, of Glen Cove, New York, GARNOCK, 75, of Glen Cove, New York, and CHIARAMONTE, 36, of Glen Cove, New York, are each charged with one count of conspiracy to commit securities fraud and operate unlicensed money transmitting businesses, in violation of 18 U.S.C. § 371, which carries a maximum sentence of 5 years in prison; one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956, which carries a maximum sentence of 20 years in prison. MICHAEL D’URSO is further charged with three counts, and ALYSSA D’URSO, GARNOCK, and CHIARAMONTE are further charged with one count each, of operating an unlicensed money transmitting business, in violation of 18 U.S.C. § 1960, which carries a maximum sentence of 5 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of these defendants would be determined by a judge.
Mr. Williams praised the outstanding investigative work of HSI and IRS-CI. Mr. Williams further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action, for its assistance and cooperation in this investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Andrew Jones and Jane Y. Chong are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Indictments and the description of the Indictments set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
Serbian-Hungarian Dual Citizen Pleads Guilty in Manhattan Federal Court to Multi-Million Dollar Business Email Compromise SchemeRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that DEJAN MEDIC pled guilty to participating in a business email compromise scheme that stole over $3.7 million from 15 victim companies in the United States and Europe. MEDIC pled guilty to one count of wire fraud before U.S. District Judge Gregory Woods, to whom his case is assigned.
U.S. Attorney Damian Williams said: “As he admitted in court today, Dejan Medic participated in a scheme to defraud Americans, and others worldwide, from thousands of miles away. Medic’s plea today should serve as a warning to those who think they can victimize others and hide behind the anonymity of the internet at a safe distance: the United States and its international partners will find you and hold you accountable.”
According to the Indictment and other documents filed in the case, including the defendant’s statements under oath during his guilty plea:
From in or about July 2018, until approximately March 2019, the defendant engaged in a business email compromise scheme that used fraudulent phone calls and spoofed email accounts to obtain money from at least 15 victim businesses in the United States (the “Victim Companies”). The scheme was typically initiated through a telephone call placed to the U.S.-based Victim Company from a European telephone number. During this call, the caller posed as either a senior executive or a board member of the Victim Company’s Europe-based parent company. During the call, the caller requested the Victim Company’s assistance with a purportedly urgent wire transfer of funds regarding purported debts of the parent company. After the call, the Victim Company then received an initial follow-up email from an email address with a domain name that was either the same, or misleadingly similar to, the Victim Company’s foreign parent company email—a process known as email “spoofing.” The members of the scheme would continue conversations using the spoofed and other email accounts regarding the payment of the alleged debt by the Victim Company’s European parent. The members of the scheme then provided wire transfer information and worked to fraudulently induce the Victim Company into wiring funds to accounts controlled by a member of the scheme.
At least 15 Victim Companies suffered a total loss of approximately $3.7 million through the course of the scheme. In addition, the investigation revealed that the scheme also attempted to obtain approximately $6.8 million in additional fraudulent payments from U.S.-based Victim Companies that were unsuccessful.
As part of the scheme, at least several Victim Companies were fraudulently induced to send funds directly to Hungarian bank accounts opened and controlled by MEDIC. In addition, some of the Victim Companies sent proceeds to other European bank accounts that were converted to gold. Thereafter, on or about April 27, 2019, MEDIC was arrested by Hungarian authorities attempting to cross the border into Serbia in possession of, among other things, three serialized gold bars that were proceeds of the fraud scheme.
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MEDIC, 49, a resident of Szabadk, Serbia, pled guilty to one count of wire fraud, which carries a maximum prison term of 20 years. 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 FBI for their outstanding investigative work on this case.
The Justice Department’s Office of International Affairs provided significant assistance in the investigation and securing the extradition of MEDIC from Hungary.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Jilan Kamal and Louis A. Pellegrino are in charge of the prosecution.
Honduran National Geovanny Fuentes Ramirez Sentenced to Life in Prison and Ordered to Forfeit $151.7 Million for Distributing Tons of Cocaine and Related Firearms OffensesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that GEOVANNY FUENTES RAMIREZ was sentenced today to life in prison for cocaine-importation and weapons offenses. A jury convicted FUENTES RAMIREZ in March 2021 after a two-week trial. The sentence was imposed by the Honorable P. Kevin Castel, who also presided over the trial.
U.S. Attorney Damian Williams said: “Geovanny Fuentes Ramirez was convicted of importing tons of cocaine into the United States and protecting his illicit drug business with machineguns. In committing his narcotics crimes, Fuentes Ramirez bribed high-ranking Honduran officials and was responsible for brutal acts of violence and murder. Fuentes Ramirez’s path of destruction, both in violence and flooding the United States with cocaine, has finally come to an end, and he will now spend his life in federal prison.”
As reflected in the Superseding Indictment, public filings, and the evidence presented at trial:
Beginning in or about 2009, FUENTES RAMIREZ and others established and operated a cocaine laboratory in the Cortés Department of Honduras, where they produced hundreds of kilograms of cocaine each month. FUENTES RAMIREZ worked with others to receive cocaine shipments sent to Honduras over air and maritime routes, and to transport cocaine that he produced at the laboratory. FUENTES RAMIREZ provided security for the facility, and for the transportation of cocaine, using heavily armed workers and Honduran police and military personnel. On several occasions between approximately 2010 and 2013, FUENTES RAMIREZ helped arrange or directly participated in drug-related violence. In or about 2012, for example, after FUENTES RAMIREZ’s cocaine laboratory was raided by law enforcement, FUENTES RAMIREZ beat and tortured a law enforcement official who FUENTES RAMIREZ believed to have been involved in the investigation of the laboratory. FUENTES RAMIREZ murdered the officer by shooting him in the head with what FUENTES RAMIREZ described as “mercy shots.” FUENTES RAMIREZ also furthered his drug trafficking operation by bribing high-ranking Honduran officials.
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In addition to the prison term, FUENTES RAMIREZ, 52, was sentenced to five years of supervised release.
Mr. Williams praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Tegucigalpa Country Office, as well as the U.S. Department of Justice’s Office of International Affairs.
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 Michael D. Lockard, Jacob H. Gutwillig, Jason A. Richman, and Elinor L. Tarlow are in charge of the prosecution.
Former Godfather of Black Stone Gorilla Gang Pleads Guilty to Racketeering, Narcotics, and Firearms OffensesRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that ALEXANDER ARGUEDAS, a/k/a “Reckless,” pled guilty today before U.S. Magistrate Judge Debra Freeman in connection with his role as a Godfather of the Black Stone Gorilla Gang (“BSGG”), a violent Bloods street gang whose members and associates had engaged in murders, assaults, robberies, narcotics trafficking, fraud, and witness tampering. ARGUEDAS also admitted that he participated in the December 9, 2012 murder of Gary Rodriguez.
U.S. Attorney Damian Williams said: “For years, Alexander Arguedas stood at the top of a violent gang that flooded the streets of New York City with violence, drugs, shootings, assaults, and murder. Now, Arguedas faces significant prison time for his crimes and the harm he inflicted on the community, including his role in murdering Gary Rodriguez. We continue our daily work with our law enforcement partners to keep our communities safe and to vigorously investigate acts of gang violence.”
As alleged in the Indictment and statements made in open court:
ALEXANDER ARGUEDAS, a/k/a “Reckless,” was previously one of the Godfathers of the Black Stone Gorilla Gang, a racketeering enterprise that operated principally in the New York City metropolitan area and in the jails and prisons of New York City and the State of New York. In order to enrich the enterprise, preserve and protect the power of the enterprise, and enhance its criminal operations, BSGG members and associates committed, conspired, attempted, and threatened to commit acts of violence, including murder and assaults; distributed and possessed with intent to distribute narcotics; committed robberies; engaged in bank fraud and wire fraud; and obtained, possessed, and used firearms. BSGG members also evaded prosecution by law enforcement authorities through acts of intimidation and violence against potential witnesses to crimes committed by the gang.
On December 9, 2012, ARGUEDAS shot and killed Gary Rodriguez in the vicinity of 3089 Decatur Avenue in the Bronx, New York.
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ARGUEDAS, 32, of the Bronx, pleaded guilty to racketeering conspiracy, which carries a maximum sentence of life; narcotics conspiracy, which carries a maximum sentence of life and a mandatory minimum sentence of 10 years in prison; and using and carrying a firearm in furtherance of drug trafficking, which carries a maximum sentence of life and a mandatory minimum sentence of 5 years in prison, which must be served consecutively to any other sentence imposed. ARGUEDAS will be sentenced before Judge Rakoff later this year.
The statutory maximum penalties are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendant would be determined by Judge Rakoff.
Mr. Williams praised the outstanding investigative work of the Special Agents of the U.S. Attorney’s Office for the Southern District of New York, the New York City Police Department, and the Drug Enforcement Administration. Mr. Williams also thanked Homeland Security Investigations and the New York City Department of Corrections for their assistance in the investigation.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Andrew K. Chan, Brandon D. Harper, Emily A. Johnson, Danielle R. Sassoon, and Special Assistant United States Attorney Jaclyn M. Wood, are in charge of the prosecution.
CEO of Private Equity Fund Pleads Guilty to Scheme to Defraud Banks of $140 MillionRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced that ELLIOT SMERLING pled guilty today to a bank fraud scheme that caused the issuance of approximately $140 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 also pled guilty to securities fraud in connection with his solicitation of investments in his private equity funds through materially false and misleading statements. SMERLING pled guilty before U.S. District Judge Denise L. Cote, to whom his case is assigned.
U.S. Attorney Damian Williams said: “As he admitted today, Elliot Smerling used false documents and deceit to obtain over $100 million in fraudulent loans on behalf of his private equity funds. This Office is committed to protecting the integrity of the U.S. financial system, and going after fraudsters who seek to manipulate it for their personal gain. Thanks to our valued partners at the FBI, Smerling now awaits sentencing for his crimes.”
According to the allegations contained in the Superseding Information, court filings, and statements made during the plea proceeding:
From at least in or about January 2019 through at least in or about March 2021, ELLIOT SMERLING, the defendant, solicited and obtained loans totaling approximately $140 million on behalf of his private equity 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, and the chief investment officer of that fund had committed $45 million, and that the investment management division of a banking and financial services firm headquartered in New York, New York, and the chief executive officer of that firm had committed $40 million; and (3) falsified bank records purporting to attest to wire transfers from purported limited partners to Smerling’s 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 private equity funds through materially false and misleading statements concerning the funds’ audited financial statements, limited partners, capital commitments, and holdings.
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SMERLING, 52, of Lake Worth, Florida, pled guilty to one count of bank fraud, which carries a maximum penalty of thirty years in prison, and one count of securities fraud, which carries a maximum penalty of twenty years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as SMERLING’s sentence will be determined by the judge. SMERLING’s sentencing is scheduled for May 13, 2022 at 12:00 p.m. before Judge Cote.
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. Attorney Jilan J. Kamal and Timothy V. Capozzi are in charge of the prosecution.
Bank CEO Stephen M. Calk Sentenced to One Year and One Day for Corruptly Soliciting A Presidential Administration Position in Exchange for Approving $16 Million in LoansRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that STEPHEN M. CALK was sentenced to one year and one day of imprisonment for corruptly using his position as the head of a federally-insured bank to issue millions of dollars in high-risk loans to Paul Manafort in exchange for personal benefit: CALK’s placement on the Donald J. Trump 2016 presidential campaign and assistance from Manafort in trying to obtain a senior position with the incoming presidential administration. On July 13, 2021, CALK was found guilty of financial institution bribery and conspiracy to commit financial institution bribery following a three-week trial before U.S. District Judge Lorna G. Schofield, who also imposed today’s sentence.
U.S. Attorney Damian Williams said: “Stephen Calk abused his position as the CEO of a federally-insured bank to try to buy himself prestige and power by trading millions of dollars in high-risk loans for influence with a presidential campaign and consideration for positions at the highest levels of the Defense Department. Today’s sentence sends the message that those who corrupt federally regulated financial institutions will be held to account.”
As reflected in the Indictment, documents previously filed in the case, and evidence introduced at trial:
CALK, The Federal Savings Bank, and Paul Manafort
STEPHEN M. CALK was the chairman and chief executive officer of The Federal Savings Bank, a federal savings association headquartered in Chicago, Illinois, with an office in New York, New York. The Bank was owned in its entirety by National Bancorp Holdings, a Chicago-based bank holding company, and CALK was the chairman, chief executive officer, and owner of approximately 67% of the holding company.
Paul Manafort was a lobbyist and political consultant. Beginning in or about March 2016, Manafort held a senior role with Donald J. Trump’s 2016 presidential, and from June 2016 through August 2016, he served as chairman of the presidential campaign. After Manafort’s formal role with the presidential campaign concluded in or about August 2016, Manafort continued to be informally involved in the campaign. Beginning in or about November 2016, when Donald J. Trump was elected President of the United States, Manafort provided informal input to the presidential transition team.
The Corrupt Scheme
Between in or about July 2016 and January 2017, CALK engaged in a corrupt scheme to exploit his position as the head of the Bank and the holding company in an effort to secure a valuable personal benefit for himself, namely, Manafort’s assistance in obtaining for CALK a senior position in the presidential administration. During this time period, Manafort sought millions of dollars in loans from the Bank. CALK understood that Manafort urgently needed these loans in order to terminate or avoid foreclosure proceedings on multiple properties owned by Manafort and Manafort’s family. Further, CALK believed that Manafort could use his influence with the presidential transition team to assist CALK in obtaining a senior administration position.
CALK thus sought to leverage his control over the Bank and the loans sought by Manafort to his personal advantage. Specifically, CALK offered to, and did, cause the Bank and holding company to extend $16 million in loans to Manafort in exchange for Manafort’s requested assistance in obtaining a high-level position in the presidential administration. For example, and while Manafort’s loans were pending approval, CALK provided Manafort with a ranked list of the governmental positions he desired, which started with Secretary of the Treasury, and was followed by Deputy Secretary of the Treasury, Secretary of Commerce, and Secretary of Defense, as well as 19 ambassadorships similarly ranked and starting with the United Kingdom, France, Germany, and Italy.
In approving these loans to Manafort, CALK was aware of significant red flags regarding Manafort’s ability to repay the loans, such as his history of defaulting on prior loans. Moreover, given the size of the loans, Manafort’s debt became the single largest lending relationship at the Bank. In order to enable the Bank to issue these loans without violating the Bank’s legal limit on loans to a single borrower, CALK authorized a maneuver never before performed by the Bank, in which the holding company—which CALK also controlled—acquired a portion of the loans from the Bank.
During the same time period, Manafort provided CALK with valuable personal benefits. First, in or about the summer of 2016, during the presidential campaign—and just days after CALK and the rest of the Bank’s credit committee conditionally approved a proposed $9.5 million loan to Manafort — Manafort appointed CALK to a prestigious economic advisory committee affiliated with the campaign. And second, in or about late November and early December 2016—after Donald J. Trump had been elected President, after Manafort’s first loan from the Bank had been issued, and while a second set of loans worth $6.5 million sought by Manafort was pending approval by the Bank— Manafort used his influence with the presidential transition team to assist Calk, recommending CALK for an administration position. Due to Manafort’s efforts, CALK was formally interviewed for the position of Under Secretary of the Army on January 10, 2017 at the presidential transition team’s principal offices in New York, New York. CALK was not ultimately hired.
To conceal the unlawful nature of his scheme, CALK made false and misleading statements to the Office of the Comptroller of the Currency regarding the loans to Manafort. For example, CALK falsely stated to the OCC regulators that he had not known that the Manafort’s properties had been in foreclosure prior to issuing the loans. CALK also stated that he had never desired a position in the presidential administration.
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In addition to the prison term, CALK, 56, was sentenced to two years of supervised release and 800 hours of community service. CALK was also ordered to pay a $1 million fine on Count 1 and a $250,000 fine on Count 2.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation and Federal Deposit Insurance Corporation’s Office of Inspector General.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Monteleoni, Hagan Scotten, Benet Kearney, Alexandra N. Rothman are in charge of the prosecution.
Statement U.S. Attorney Damian Williams on the Conviction of Michael Avenatti for Wire Fraud and Aggravated Identity TheftRead the Press Release
As an attorney and fiduciary, Michael Avenatti pledged to advise his clients and act in good faith. As evidenced by his second conviction by this Office in just three years, this time for stealing a book advance from his client, he did just the opposite. Rather than advise his clients in their best interests, Avenatti instead used his law degree as a license to steal. Michael Avenatti has once again been convicted by a unanimous jury for blatant abuse of his privilege to practice law and for betraying his solemn responsibility to his clients.
Highest Paid MTA Employee in 2018 Sentenced to 8 Months in Overtime Fraud SchemeRead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, announced today that THOMAS CAPUTO, a longtime employee of the Long Island Rail Road (“LIRR”) who in 2018 was the highest paid employee of the entire Metropolitan Transportation Authority (“MTA”) due to extraordinarily high volumes of overtime pay, was sentenced to eight months in prison for conspiracy to commit federal program fraud by submitting time reports falsely claiming to have worked hundreds of hours of overtime that he did not in fact work, including for time he spent participating in a bowling league. CAPUTO previously pled guilty on August 26, 2021, before United States District Judge Paul A. Engelmayer, who also imposed the sentence. Judge Engelmayer had earlier sentenced two of CAPUTO’s coconspirators, JOHN NUGENT, and JOSEPH BALESTRA, to terms of imprisonment for their participation in the scheme. NUGENT, who pled guilty on July 27, 2021, was sentenced on November 4, 2021 to a five-month term of imprisonment. BALESTRA, who pled guilty on September 14, 2021, was sentenced on January 4, 2022 to a three-month term of imprisonment.
U.S. Attorney Damian Williams said: “The sentences the court imposed on the participants in this egregious overtime fraud scheme send a clear message: If you commit overtime fraud, you will go to prison. The public expects that public employees will show up and receive honest pay for an honest day’s work, not line their pockets with double-time or time-and-a-half pay while out bowling.”
In sentencing CAPUTO’s codefendant NUGENT, Judge Engelmayer remarked that the defendant participated in “an orgy of overtime fraud that was carried out on an epic scale,” and remarked that “Just punishment requires a substantial sentence including real prison time” and that “The message has to be, if you get caught faking overtime, there will be significant consequences and you will spend time in prison.”
According to the allegations in the Complaint and Indictment filed in federal court, and the statements made in connection with the sentencings of CAPUTO, NUGENT, and BALESTRA and the prosecution of coconspirators JOSEPH RUZZO and FRANK PIZZONIA:
CAPUTO, RUZZO, NUGENT, BALESTRA, and PIZZONIA schemed to fraudulently receive thousands of dollars in compensation from the MTA by falsely claiming to have worked hundreds of voluntary overtime hours that in fact they did not work. The overtime pay the defendants claimed led to significant increases in their salary and led to them being among the highest-paid MTA employees, and in the case of CAPUTO, the highest-paid MTA employee in 2018. The defendants frequently volunteered for overtime and then claimed to have been working lucrative overtime shifts at times when they were in fact at home or at other non-work locations, such as, in the case of CAPUTO, a bowling alley.
The Defendants’ Employment at the MTA
The MTA runs North America’s largest transportation network, providing bus, subway and rail service to a population of more than 15 million people in New York City and the surrounding areas. The MTA’s operating agencies include the LIRR, a commuter railroad providing service between Manhattan and locations on Long Island.
CAPUTO, RUZZO, NUGENT, BALESTRA, and PIZZONIA are current or former LIRR employees. CAPUTO was an LIRR employee responsible for track inspection, RUZZO, NUGENT, and BALESTRA were all LIRR foremen, and PIZZONIA is an LIRR track worker.
In addition to their regular duties, CAPUTO, RUZZO, NUGENT, BALESTRA, and PIZZONIA each volunteered to work and were assigned a number of lucrative overtime shifts during which they were required to, among other things, support third-party contractors working on construction projects on or around LIRR properties. These voluntary overtime shifts were offered to LIRR employees in order of their seniority under the applicable union collective bargaining agreements, enabling CAPUTO, RUZZO, NUGENT, BALESTRA, and PIZZONIA to be assigned large numbers of voluntary overtime shifts due to their seniority.
At all relevant times, CAPUTO, RUZZO, NUGENT, BALESTRA, and PIZZONIA received hourly rates for their regular schedule, and were then entitled to be paid higher “overtime” rates – typically one and a half or two times the regular hourly rate, depending on the circumstances – for additional hours worked. At all relevant times, CAPUTO, RUZZO, NUGENT, and BALESTRA were required to self-report their time.
The Defendants’ Excessive Overtime Claims and Frequent Absences from Work
In 2018, CAPUTO was paid approximately $461,000 by the MTA. Of that amount, approximately $117,000 comprised his base salary and other forms of compensation apart from overtime, while the additional approximately $344,000 was paid for overtime that CAPUTO ostensibly worked. In total, this made CAPUTO the highest paid employee at the MTA during 2018 – higher than, for example, the Chairman of the MTA.
In 2018, CAPUTO claimed to have worked approximately 3,864 overtime hours, on top of 1,682 regular hours. That is, if CAPUTO had worked every single calendar day in 2018 including weekends and holidays (although he did not), that would average out to approximately 10 hours of overtime every day for an entire year in addition to his regular, 40-hour work week.
Similarly, RUZZO, NUGENT, BALESTRA, and PIZZONIA also claimed to have worked and were paid for an excessive number of overtime hours in 2018. Each of them was paid over $200,000 in overtime alone, putting each of them within the top 30 highest paid employees at the MTA during 2018. These payments were based on reported amounts of overtime hours ranging from 2,918 to 3,914, which if the defendants had worked every calendar day in 2018 would average out to approximately 8 to 10 hours for every single day, in addition to the employee’s regular 40-hour work week.
The defendants’ claimed overtime, however, was inflated by numerous hours in which the defendants claimed to be at work but in fact were absent without authorization. Staffers from the Office of the MTA Inspector General (“MTA OIG”) worked with criminal investigators to perform a detailed review of the hours claimed to have been worked by the defendants in or around calendar year 2018. This investigation, among other things, compared the time records for CAPUTO, RUZZO, NUGENT, BALESTRA, and PIZZONIA with various records that established their true whereabouts, such as location information for their cellular phones, bank records, MTA building access card data, work and personal emails and social media records, and records from third parties such as a bowling alley where CAPUTO participated in bowling league games despite claiming to work an average of 10 hours of overtime every single day of 2018.
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In addition to the prison sentences, CAPUTO, 56, of Holbrook, New York, was sentenced to three years of supervised release with six months of home confinement and 200 hours of community service; NUGENT, 50, of Rocky Point, New York, was sentenced to three years of supervised release with five months of home confinement and 200 hours of community service; and BALESTRA, 51, of Blue Point, New York, was sentenced to three years of supervised release with three months of home confinement and 200 hours of community service, and all were ordered to pay restitution in the amount of $109,641.74.
Mr. Williams praised the FBI and the MTA-OIG for their outstanding investigative work on this case.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Monteleoni, Thomas A. McKay, and Aline R. Flodr, are in charge of the prosecution.
Corrupt Puerto Rico Police Officer Sentenced to 30 Years in PrisonRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that WILLIAM VAZQUEZ-BAEZ, a former member of the Puerto Rico Police Department (“PRPD”), was sentenced by U.S. District Judge Jesse M. Furman to 30 years in prison. VAZQUEZ-BAEZ previously pled guilty to one count of participating in a racketeering conspiracy and one count of participating in a conspiracy to commit murder for hire, in connection with his agreement to assist a drug-trafficking organization that shipped drugs to New York and distributed them from a Bronx daycare center.
U.S. Attorney Damian Williams said: “William Vazquez Baez abused his position as a police officer to help a vicious drug organization distribute massive amounts of cocaine and massacre citizens he had sworn to protect. Today Vazquez-Baez was rightly sentenced to 30 years in prison for his horrific crimes.”
According to the Indictment, other filings in this case, and statements during court proceedings:
From approximately 1994 until his arrest in connection with this case in May 2017, VAZQUEZ-BAEZ was an active police officer with the PRPD. From in or about 2004 until in or about 2016, members of La ONU distributed thousands of kilograms of cocaine, including cocaine that was shipped from Puerto Rico to New York and then distributed out of a Bronx daycare center, and protected their territory and trade through numerous acts of violence. Members of La ONU paid VAZQUEZ-BAEZ a salary to corruptly use his position as a police officer to further the interests of La ONU. For example, VAZQUEZ-BAEZ provided narcotics and intelligence, including information obtained from the police narcotics unit. Members of La ONU would also contact VAZQUEZ-BAEZ, among others, when transporting large quantities of cocaine within the San Juan, Puerto Rico area to ensure the shipment avoided areas of police activity. VAZQUEZ-BAEZ also distributed payments to other corrupt police officers who assisted La ONU.
VAZQUEZ-BAEZ also assisted La ONU in acts of violence:
In or about 2006 or 2007, VAZQUEZ-BAEZ alerted La ONU members that Freddy Mendez-Rivera, a local resident, had complained to police about drug dealing occurring in his neighborhood, which led to members of La ONU kidnapping and then killing Mendez-Rivera. Around the same time, VAZQUEZ-BAEZ alerted a senior member of La ONU that the kidnapping was being reported over the police radio. VAZQUEZ-BAEZ advised that, because the fact that Mendez-Rivera had spoken with the police was known throughout the Carolina Narcotics division, it was important that the body never be discovered. When later updated about what had happened, VAZQUEZ-BAEZ laughed and remarked, in substance, that Mendez-Rivera would not be giving the police information any further.
On or about May 9, 2007, members of La ONU hired VAZQUEZ-BAEZ to participate in the murder of Anthony Castro-Carrillo in Carolina, Puerto Rico, in exchange for a cash bonus. VAZQUEZ-BAEZ and members of La ONU stormed Castro-Carrillo’s residence while dressed as police officers and shot and killed him.
In or about 2007, VAZQUEZ-BAEZ delivered a confidential informant, who was in VAZQUEZ-BAEZ’s custody, to members of La ONU, who pretended to be other police officers. Those members of La ONU then shot and killed the informant.
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In addition to the prison term, Judge Furman sentenced VAZQUEZ-BAEZ, 53, of Puerto Rico, to three years of supervised release.
Mr. Williams praised the investigative work of the U.S. Postal Inspection Service, the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the New York City Police Department. Mr. Williams also thanked the United States Attorney’s Office in the District of Puerto Rico and the Puerto Rico Police Department for their support in this ongoing investigation.
The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Jamie E. Bagliebter, Jacob R. Fiddelman, Lara Pomerantz, Justin V. Rodriguez, and Andrew Thomas are in charge of the prosecution.
Bronx Man Sentenced to over Eleven Years in Prison in Connection with 2018 Non-Fatal Shooting and 2020 Firearms OffenseRead the Press Release
Damian Williams, the United States Attorney for the Southern District of New York, announced today that PAUL THOMPSON was sentenced to 110 months in prison for his participation in a 2018 non-fatal shooting and 2020 possession of a loaded firearm. THOMPSON pled guilty on March 31, 2021, before U.S. District Judge Lewis J. Liman, who imposed today’s sentence.
According to public filings and statements made in court:
On or about September 27, 2018, approximately two weeks after THOMPSON had been placed on federal supervised release following a 180-month prison sentence for narcotics and firearms offenses, THOMPSON got into a physical altercation with another individual (“Victim-1”) in the Bronx, New York. During the altercation, THOMPSON shot Victim-1 and fled the scene. THOMPSON then became a fugitive for approximately two years.
On or about June 13, 2020, following a suspected drug deal with another individual (“Victim-2”) in the Bronx, THOMPSON threatened Victim-2 with a loaded firearm and also bit Victim-2’s face. THOMPSON then attempted to discard the firearm and was apprehended by law enforcement. While THOMPSON was being arrested, he told others on the scene to make sure Victim-2 and Victim-2’s family “get it,” because Victim-2 “snitched on me.”
THOMPSON pled guilty to one count of being a felon in possession of ammunition in connection with the 2018 shooting and one count of being a felon in possession of a firearm in connection with the 2020 assault. In connection with his guilty plea, THOMPSON further stipulated to his involvement in the 2018 shooting.
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THOMPSON, 39, of the Bronx, New York, was sentenced to 110 months in prison for the 2018 shooting and the 2020 assault, to be followed by a consecutive sentence of 26 months in prison for his violation of the terms of supervised release in connection with the same conduct. In addition to the prison term, THOMPSON was sentenced to three years of supervised release.
Mr. Williams praised the outstanding investigative work of the NYPD.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney David Robles is in charge of the prosecution.
U.S. Attorney Announces $12.9 Million Settlement with the Door for Submitting Fraudulent Cost ReportsRead 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 Inspector General (“HHS-OIG”) New York Regional Office, announced today that the United States filed and settled a civil fraud lawsuit against THE DOOR—A CENTER OF ALTERNATIVES (“The Door” or “Defendant”). The Government’s Complaint-in-Intervention (the “Complaint”) alleges that The Door, a healthcare provider in New York City, violated the False Claims Act by fraudulently overreporting the number of visits to its healthcare facility. This overreporting resulted in The Door receiving excessive funding from the Indigent Care Pool, which is a program funded by both the federal government and New York State, that reimburses certain healthcare providers for uncompensated care rendered to low-income New Yorkers.
Under the settlement, approved by U.S. District Judge Alvin K. Hellerstein, The Door will pay $2,725,514.51 to the United States and has admitted and accepted responsibility for conduct alleged by the Government in the Complaint as further described below. The Door has also agreed to pay $10,222,297.89 to the State of New York to resolve the State’s claims, for a total recovery of $12,947,812.40.
U.S. Attorney Damian Williams said: “This Office will remain vigilant in protecting public funds that are designated to help low-income New Yorkers. The Indigent Care Pool is a limited source of funding meant to be shared among healthcare providers throughout New York State in order to further the goal of providing healthcare to all who need it. Through its misconduct, The Door received an excessive share of this funding at the expense of other healthcare providers that were similarly trying to provide services to low-income New Yorkers, and has now been held to account.”
HHS-OIG Special Agent in Charge Scott Lampert said: “Healthcare providers must be held to a high standard of ethical behavior. We will continue to ensure that those individuals and entities that receive funding from the federal government and/or the State of New York to care for low-income individuals operate in an honest manner.”
As described in the Complaint, The Door was required to report the number of threshold visits (“Threshold Visits”) to its facility on cost reports (“Cost Reports”) annually filed with the New York State Department of Health (“DOH”). This metric determined, in large part, the amount of funding that The Door received from the Indigent Care Pool. A Threshold Visit is defined, by regulation, as occurring “each time a patient crosses the threshold of a facility to receive medical care without regard to the number of services provided during that visit.”
From 2009 to 2016 (the “Covered Period”), The Door falsely reported the number of Threshold Visits to its facility, thereby causing it to receive excessive funding from the Indigent Care Pool. Specifically, instead of reporting the number of times a patient crossed the threshold to its facility, The Door based its reporting of Threshold Visits on the number of services provided to the patient during a given visit, thus leading to an inflated number of Threshold Visits. As a result, The Door received substantial funding from the Indigent Care Pool to which it was not entitled.
As part of the settlement, The Door admits, acknowledges, and accepts responsibility for the following conduct:
- During the Covered Period, The Door maintained multiple, internal versions of the Cost Reports. One version reflected an accurate accounting of the Threshold Visit statistic, while other versions reflected an inaccurate accounting of the Threshold Visit statistic because they reported multiple services provided during a given visit.
- The Door was aware of the definition of Threshold Visits contained in the Cost Report instructions and 10 NYCRR § 86-4.9(b), which permitted The Door to count only one Threshold Visit each time a patient crossed its threshold to obtain medical care, regardless of the number of services the patient may have received during that visit.
- On December 4, 2014, The Door’s then-serving Chief Financial Officer (who served in this capacity throughout the Covered Period) sent an email to a data analyst employed by The Door noting that Threshold Visits must be counted based upon the number of visits to the facility, not based upon the number of services provided during a visit or the number of visits unduplicated by individual cost center.
- During the Covered Period, by submitting Cost Reports to DOH that calculated the number of Threshold Visits based on the number of services provided during a given visit, rather than the number of times the patient crossed the threshold to the facility, The Door caused the Indigent Care Pool to pay funds to The Door to which it was not entitled.
Mr. Williams praised the outstanding investigative work of HHS-OIG. This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Alexander J. Hogan is in charge of the case.
Laurence Doud, Former CEO of Pharmaceutical Distributor, Convicted of Conspiring to Distribute Controlled Substances and Defrauding the DEARead the Press Release
Damian Williams, United States Attorney for the Southern District of New York, announced that LAURENCE F. DOUD III, the former Chief Executive Officer of Rochester Drug Co-Operative, Inc. (“RDC”), was convicted today in Manhattan federal court of conspiring to distribute unlawfully oxycodone and fentanyl and conspiring to defraud the Drug Enforcement Administration (“DEA”). DOUD was convicted after a two-week jury trial before U.S. District Judge George B. Daniels.
U.S. Attorney Damian Williams said: “In a first of its kind prosecution, Laurence Doud was held responsible for contributing to the opioid epidemic in the country by conspiring with others in his company to ship massive amounts of dangerous and highly-addictive oxycodone and fentanyl to pharmacies that he knew were illegally dispensing those controlled substances to drug dealers and addicts. The Southern District of New York will continue to bring to justice those responsible for the opioid epidemic – whether they are street level dealers or boardroom executives.”
According to the allegations contained in the Indictment and the evidence presented at trial:
Violations of the Federal Narcotics Laws
From 2012 through March 2017, DOUD knowingly and intentionally violated the federal narcotics laws by distributing, through RDC, dangerous, highly addictive opioids to pharmacy customers that it knew were being sold and used illicitly. At the direction of its senior management, including DOUD, RDC supplied large quantities of oxycodone, fentanyl, and other dangerous opioids to pharmacy customers that its own compliance personnel determined were dispensing those drugs to individuals who had no legitimate medical need for them. RDC, at the direction of DOUD and others, distributed controlled substances to those pharmacies even after identifying “red flags” of diversion, including dispensing highly abused controlled substances in large quantities; dispensing primarily controlled substances; dispensing quantities of controlled substances in amounts consistently higher than accepted medical standards; accepting a high percentage of cash for controlled substance prescriptions; dispensing to out-of-state patients; and filling controlled substances prescriptions issued by practitioners acting outside the scope of their medical practice, under investigation by law enforcement, or on RDC’s “watch list.” In addition, and at DOUD’s direction, RDC frequently brought on pharmacy customers that had been terminated by other distributors.
Conspiracy to Defraud the DEA
From 2012 through March 2017, DOUD took steps to conceal RDC’s illicit distribution of controlled substances from the DEA and other law enforcement authorities. Among other things, DOUD made the deliberate decision not to investigate, monitor, or report to the DEA pharmacy customers that DOUD and others at RDC knew were diverting controlled substances for illegitimate use. Because they knew that reporting these pharmacies would likely result in the DEA investigating and shutting down RDC’s customers, RDC’s senior management, including DOUD, directed the company’s compliance department not to report them, and instead to continue supplying those customers with dangerous controlled substances that the company knew were being dispensed and used for illicit purposes. Among other things, pursuant to DOUD’s instructions, and contrary to the company’s representations to the DEA, RDC opened new customer accounts without conducting due diligence, and supplied those customers – some of whom had been terminated by other distributors – with dangerous controlled substances. Additionally, DOUD caused RDC to avoid filing suspicious order reports with the DEA as required by law. As a result, the DEA’s ability to identify and prevent the illicit dispensing of highly addictive controlled substances by several of RDC’s pharmacy customers was impeded.
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LAURENCE F. DOUD III, 78, of New Smyrna, Florida, was convicted by a jury of one count of conspiracy to distribute controlled substances, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years, and one count of conspiracy to defraud the United States, which carries a maximum prison term of five years. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentencing of the defendant will be determined by the judge.
DOUD is scheduled to be sentenced on June 29, 2022.
Mr. Williams praised the outstanding investigative work of the DEA’s Westchester Tactical Diversion Team and thanked Special Agents of United States Attorney’s Office for their assistance.
The prosecution of this case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Thomas Burnett, Nicolas Roos, and Alexandra Rothman are in charge of the prosecution and represented the Government at trial. Assistant United States Attorneys Stephanie Lake and Louis Pellegrino also participated in the investigation into RDC and DOUD.
Horse Doping Drug Supplier 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 SETH FISHMAN, DVM, on two counts 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. FISHMAN 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: “The jury’s swift conviction of Seth Fishman reflects the overwhelming evidence of his guilt as displayed through this trial. As an ostensible veterinarian – sworn to the care and protection of animals – Fishman cynically violated his oath in service of corrupt trainers and in the pursuit of profits. Through the sale of untested, unsafe, and unstable drugs, Fishman’s illegal drug business was a platform for both fraud and animal abuse. Today’s conviction appropriately condemns the danger inherent in Fishman’s crimes and underscores the seriousness with which this Office takes the kind of abuse that Fishman practiced.”
As established by the evidence at trial:[1]
FISHMAN 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 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. FISHMAN, acting as the manufacturer of customized PEDs designed specifically to evade anti-doping controls, reaped millions of dollars from the sale of his drugs to trainers around the United States and across the globe.
FISHMAN specifically targeted clients in the racehorse industry, peddling dozens of unsafe and untested drugs that purported to have performance-enhancing effects on racehorses. FISHMAN created and marketed these drugs as “untestable” under typical anti-doping drug screens and extolled the virtues of these illegal drugs by describing his method of creating customized products for individual customers in order to silo product lines to reduce the likelihood that detection of doping by trainer would undermine the remainder of FISHMAN’s corrupt clientele.
In the course of nearly twenty years during which he operated his doping company, Equestology, FISHMAN took additional efforts to mislead and lie to regulatory authorities in an effort to shield his illegal activity. FISHMAN incorporated a sham business in Panama designed to appear as if his drug operation was outside the jurisdiction of U.S. authorities; he pressured employees to sign non-disclosure agreements intended to gag them if questioned by regulators; he designed labels that would provide no hint as to the provenance of the unsafe drugs shipped across the country; and he lied to state investigators regarding the nature of his business when asked directly about his role in Equestology during a Delaware state investigation in 2011, while also bragging to others that he had called in a “personal political favor” to quash that investigation.
While claiming to practice as a legitimate veterinarian, FISHMAN used his veterinary license as another form of cover for his illegal drug manufacturing business. In fact, FISHMAN sold illicit drugs, including prescription drugs, under sham prescriptions for animals that he never saw or discussed. Those drugs included intravenous and intramuscular injectables that FISHMAN 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.
FISHMAN was convicted of one count of conspiracy to commit misbranding and drug adulteration in connection with the doping operation of convicted co-defendant Jorge Navarro. Among the horses that FISHMAN aided Navarro in doping XY Jet, a thoroughbred horse that won the 2019 Golden Shaheen race in Dubai before dying of sudden heart attack in January 2020. As established at trial, FISHMAN sold tens of thousands of dollars’ worth of PEDs to Navarro over the course of several years, and Navarro specifically credited FISHMAN for XY Jet’s performance at the Golden Shaheen.
FISHMAN was further convicted of a second count of conspiracy to commit misbranding and drug adulteration in connection with the operation of Equestology, which included FISHMAN’s continuation of that offense even following his release on bail following his initial arrest in October 2019. FISHMAN faces a total of up to 20 years in prison for his convictions. The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of FISHMAN will be determined by the judge.
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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 expressed the Office’s appreciation for the Food and Drug Administration, the investigative support and substantive expertise of which was integral to the success of this case.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Sarah Mortazavi, Andrew C. Adams, and Anden Chow are in charge of the prosecution.
[1] As to Fishman’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.