Southern District of New York

The Department of Justice announced today that the Madoff Victim Fund (MVF) began its seventh distribution of approximately $568 million in funds forfeited to the U.S. government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to over $3.7 billion to nearly 40,000 victims worldwide. 

In this distribution, payments will be sent to nearly 31,000 victims across the globe, bringing their total recovery to 81.35%. This distribution represents the seventh in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS. More than 2,600 victims will receive their first payment from MVF in this distribution.

“This distribution provides nearly 31,000 victims additional financial recovery from the egregious crimes committed by Bernard Madoff,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “The Department’s continued efforts to ensure justice for victims of crime is demonstrated through the ongoing Madoff remission process and the billions given back to innocent victims worldwide.”  

“This office continues to seek justice for victims of history’s largest Ponzi scheme,” said U.S. Attorney Audrey Strauss for the Southern District of New York. “The additional payment of more than $568 million by our Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section represents the seventh in a series of distributions that will leave victims with compensation for more than 81 percent of their losses. But our work is not yet finished, and the Office’s tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes continues.”

According to court documents and information presented in related proceedings, for decades, Bernard L. Madoff used his position as chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients. On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle. 

On June 29, 2009, then-U.S. District Judge (now U.S. Circuit Judge), Denny Chin sentenced Madoff to serve 150 years in prison for running the largest fraudulent scheme in history. Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. An additional $1.7 billion was collected as part of a deferred prosecution agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.

The MVF’s payouts would not have been possible without the extraordinary efforts of the Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York and the FBI in the prosecution of Madoff’s crimes and the recovery of assets supporting the forfeiture in this case. 

The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings. The Department of Justice also acknowledges the sacrifice of numerous individuals due to the COVID-19 pandemic, who worked in challenging conditions to ensure that this distribution occurred and remained on schedule.  

More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions. Further questions may be directed to the MVF at 866-624-3670 or [email protected].

Audrey Strauss, United States Attorney for the Southern District of New York, announced that STEFAN HE QIN, the founder of the Virgil Sigma Fund LP (“Virgil Sigma”) and the VQR Multistrategy Fund LP (“VQR”), a pair of cryptocurrency hedge funds in New York which claimed to have over $100 million dollars in investments, was sentenced today to 90 months in prison.  On February 4, 2021, QIN pled guilty to one count of securities fraud before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.

U.S. Attorney Audrey Strauss said:  “According to Stefan He Qin, founder of Virgil Sigma and VQR, a pair of cryptocurrency hedge funds in New York, Virgil had a stated market strategy of ‘market neutral,’ safe investments.  Qin’s investors soon discovered that his strategies weren’t much more than a disguised means for him to embezzle and make unauthorized investments with client funds.  When faced with redemption requests he couldn’t fulfill, Qin doubled down on his scheme by attempting to plunder funds from VQR to satisfy his victim investors’ demands.  Qin’s brazen and wide-ranging scheme left his beleaguered investors in the lurch for over $54 million, and he has now been handed the appropriately lengthy sentence of over seven years in federal prison.”  

According to the Information and statements made in open court:

Background

STEFAN HE QIN is a 24-year old Australian national.  Between 2017 through 2020, QIN owned and controlled two cryptocurrency investment funds, Virgil Sigma and VQR, both of which were located in New York, New York.   Since its creation, Virgil Sigma purported to employ a strategy to earn profits from arbitrage opportunities in the cryptocurrency market.   This strategy was touted by QIN to the investing public as “market-neutral,” meaning the fund was not exposed to any risk from the price of cryptocurrency moving up or down and therefore provided a relatively safe and liquid investment. Until recently, Virgil Sigma purported to have over $90 million under management from dozens of investors, including many in the United States.  According to its public marketing materials, Virgil Sigma has been profitable in every month from August 2016 to the present, with the sole exception of March 2017.  QIN also regularly participated in calls with Virgil Sigma investors and other forms of public communication where he touted the growth and success of Virgil Sigma.  For example, in February 2018, QIN and his fund were profiled in the Wall Street Journal.

In or about February 2020, QIN founded VQR. VQR employed a variety of trading strategies and was poised to make or lose money based on the fluctuations in the value of cryptocurrency and was not market neutral.  QIN was the sole owner of VQR’s general partner, but was not involved in VQR’s day-to-day operations.  Instead, VQR had its own trading staff, including a head trader (the “Head Trader”) and other investment professionals.  Until recently, VQR had at least approximately $24 million under management from investors. 

Qin’s Scheme to Steal Assets from Virgil Sigma

Since 2017, QIN engaged in a scheme to steal assets from Virgil Sigma and defraud its investors.  Rather than investing the fund’s assets in a cryptocurrency arbitrage trading strategy as advertised, QIN embezzled investor capital from Virgil Sigma and used the funds for purposes other than the purported arbitrage trading strategy, including: (a) using a substantial portion of investor capital stolen from Virgil Sigma to pay for personal expenses such as food, services, and rent for a penthouse apartment in New York City; (b) using a substantial portion of investor capital from Virgil Sigma to make personal, often illiquid investments in other entities that had nothing to do with cryptocurrencies.  For example, in or about October 2018, QIN invested hundreds of thousands of dollars stolen from Virgil Sigma into a real estate investment; and (c) using a substantial portion of investor capital from Virgil Sigma to invest in crypto-assets that had nothing to do with the fund’s stated arbitrage strategy.  For example, in or about 2018, QIN invested funds from Virgil Sigma into certain initial coin offerings, a speculative form of investing in new issues of cryptocurrency.  As a result of these and other fraudulent activities, QIN dissipated nearly all of the investor capital in Virgil Sigma.  QIN also regularly lied to the fund’s investors about the value, location, and status of their investment capital, including through false account statements that QIN prepared and bogus tax documents that he circulated to his investors. 

Qin Attempts to Steal Assets From VQR to pay Virgil Sigma Investors

In or about December 2020, faced with redemption requests from the Virgil Sigma fund that he could not meet, QIN demanded that the Head Trader at VQR wind down all trading positions at VQR and transfer a portion of the funds to QIN so that QIN could use that money to pay off these redemptions to Virgil Sigma investors.  QIN issued the demand even though the Head Trader advised QIN that closing out VQR’s then-current trading positions, rather than holding those positions in accordance with VQR’s directional trading strategy, would result in losses to VQR’s investors.  At QIN’s direction, the Head Trader accordingly closed out VQR’s positions and turned over access to VQR’s trading accounts to QIN.  QIN subsequently attempted to take control of VQR’s assets in order to enable QIN to meet certain Virgil Sigma investor redemption requests.

The Virgil Sigma fund and VQR have ceased operations and the liquidation and distribution of assets is being handled by a court-appointed receiver in the matter of S.E.C. v. Qin, 20 Civ. 10849. 

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QIN, 24, was also sentenced to three years of supervised release, and ordered to forfeit $54,793,532. 

Ms. Strauss praised the work of the Department of Homeland Security, Homeland Security Investigations.  She further thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.   

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Daniel Tracer is in charge of the prosecution.   

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that AMEET GOYAL, an ophthalmologist in Rye, New York, pled guilty yesterday to perpetrating a seven-year healthcare fraud scheme by falsely billing for millions of dollars of procedures he did not perform, and also to fraudulently obtaining two Government-guaranteed loans intended to help small businesses during the COVID-19 pandemic while facing charges on pretrial release for the healthcare fraud scheme.  GOYAL pled guilty before U.S. District Judge Cathy Seibel to all charges in a six-count superseding Indictment.

U.S. Attorney Audrey Strauss said:  “Dr. Ameet Goyal was an experienced eye doctor who became blinded by greed and routinely defrauded patients who trusted him to heal their eyes.  He grossly overbilled minor ophthalmological procedures, billed for tests and procedures that were never performed, falsified medical records, attempted to corrupt others in his practice to abet the scheme, and sent patients who refused to pay his fraudulent charges to collections.  Already facing charges for defrauding patients and insurers of millions of dollars, Goyal committed a new fraud in applying for Paycheck Protection Program loans on behalf of two separate businesses and lying on the applications.  Goyal looted over $630,000 in federal funds earmarked for legitimate small businesses affected by the COVID-19 pandemic.  Goyal has now admitted to both fraudulent schemes, agreed to forfeit $3.6 million, and faces the possibility of a significant term of incarceration.”

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.  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 the 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.

For example, GOYAL and others at the Practice routinely treated patients for an excision of a chalazion, a small bump on an eyelid, typically removed in less than 15 minutes.  An excision of chalazion, when billed truthfully under its associated code, paid the Practice approximately $200 on average from patients and insurance programs.  However, GOYAL systematically billed an excision of chalazion and other similar superficial eyelid procedures as if he had performed an orbitotomy together with a conjunctivoplasty, which are complex surgeries into the orbit of the eye, often to remove an orbital tumor together with grafting to close the resulting wound, that typically take an hour or more to perform.  These substantial surgeries, as billed, paid the Practice approximately $1,400 on average from a combination of insurance and patient out-of-pocket payments.  GOYAL also upcoded certain superficial procedures as an excision and repair of eyelid, a type of higher-paying eyelid surgery involving reconstruction or removal of certain lesions other than chalazions.  During the relevant time period, GOYAL billed less than 40 chalazions under the billing code designated for excision of chalazion, while billing over 1,400 orbitotomies, over 700 bundled conjunctivoplasties, and over 1,600 excision and repair of eyelid surgeries, all of which he claimed to have personally performed.  The scheme involved numerous other CPT codes for procedures and examinations not performed or upcoded, resulting in at least $3.6 million of ill-gotten gains for GOYAL.

On November 21, 2019, an indictment (the “Indictment”) was returned in the action United States of America v. Ameet Goyal, 19 Cr. 844 (CS) (S.D.N.Y.), charging GOYAL with healthcare fraud, wire fraud, and making false statements relating to healthcare matters.  On November 22, 2019, GOYAL was arraigned on the Indictment and placed on pretrial release pursuant to an order that notified GOYAL of the potential effect of committing a criminal offense while on pretrial release.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  One source of relief provided by the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the Small Business Administration’s (“SBA”) 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 SBA’s PPP Program.  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 email 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 $1,800 payment to a country club in Westchester, New York, within days of receiving the first loan.                    

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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, which carries a maximum sentence of 10 years in prison; the second count charged wire fraud, which carries a maximum sentence of 20 years in prison; and the third count charged making false statements relating to health care matters, which carries a maximum sentence of five years in prison.  Counts four, five, and six charged that while on pretrial release, the defendant committed the following offenses, respectively: bank fraud, which carries a maximum sentence of 30 years in prison; making false statements on a loan application, which carries a maximum sentence of 30 years in prison; and making false statements in a matter within the jurisdiction of the executive branch of the Government of the United States, which carries a maximum sentence of five years in prison.  Additionally, a conviction under counts four, five, and six, if committed while on pretrial release, provides for an additional maximum sentence of 10 years in prison consecutive to any other sentence of imprisonment.

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.

GOYAL is scheduled to be sentenced by Judge Seibel on January 6, 2022, at 2:30 p.m.              

Ms. Strauss 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, whose expertise and diligence were integral to the development of this investigation and the guilty plea.

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.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that defendant SCOTT MANGINI was sentenced today to 18 months in prison in connection with his years-long sale and distribution of adulterated and misbranded drugs, including performance-enhancing drugs (“PEDs”) marketed to racehorse trainers and others in the racehorse industry.  MANGINI pled guilty to a one-count Information on April 23, 2021, before U.S. District Judge J. Paul Oetken, who presided over today’s sentencing.

U.S. Attorney Audrey Strauss said: “Scott Mangini used his skills as a pharmacist to create and supply a market for adulterated and unregulated performance-enhancing drugs that endangered racehorses.  Mangini designed and peddled dozens of products intended for use by those engaged in fraud and animal abuse.  Mangini’s products were manufactured in unsanitary facilities that he hid behind shell companies, straw owners, and fake prescription records.  His conduct persisted despite efforts by state and federal regulators to shutter Mangini’s operation and strip his license.  Today’s sentence underscores this Office’s commitment to the prosecution of those who, in their race for riches, would corruptly produce, peddle, or deploy illegal substances that endanger the animals under their care.”

According to the prior Indictments, the Superseding Information to which MANGINI pled guilty, and other court documents, as well as statements made in public court proceedings:

From at least in or about 2011 through at least in or about March 2020, MANGINI and his conspirators manufactured, sold, and shipped millions of dollars’ worth of adulterated and misbranded equine drugs, including performance-enhancing drugs intended to be administered to racehorses for the purpose of improving those horses’ race performance in order to win races and obtain prize money.  MANGINI, a former pharmacist whose license was suspended in 2016, sold these drugs through several direct-to-consumer websites designed to appeal to racehorse trainers and owners, including, among others, “horseprerace.com” and “racehorsemeds.com.”  

MANGINI contributed to the conspiracy by, among other things, using his training to design and create custom PEDs that were advertised and sold online, using misleading labels, packaging, and return address information, including sales to customers in the Southern District of New York.  Among the drugs advertised and sold during the course of the conspiracy were “blood builders,” which are used by racehorse trainers and others to increase red blood cell counts and/or the oxygenation of muscle tissue of a racehorse in order to stimulate the horse’s endurance, which enhances that horse’s performance in, and recovery from, a race, and customized analgesics, which are used by racehorse trainers and others to deaden a horse’s nerves and block pain in order to improve a horse’s race performance.  MANGINI and his co-conspirators repeatedly touted illegal drugs sold on these websites as substances that “WILL NOT TEST” in the event of drug screens by racing officials.  For example, MANGINI’s pain-numbing product “Numb It Injection” was advertised as a “proprietary formula and without question the most powerful pain shot in the market today AND WILL NOT TEST,” and customers were expressly directed to administer the drug by “injection as close to the event or extreme exercise as possible.”

The drugs distributed through the defendant’s websites were manufactured in facilities not registered with the Food and Drug Administration (“FDA”), and carried significant risks to the animals affected through the administration of those illicit PEDs.  For example, in 2016, MANGINI and his co-conspirator, Scott Robinson, who was previously convicted and sentenced in this case, received a complaint regarding the effect of his unregulated drugs on a customer’s horse: “starting bout 8 hours after I give the injection and for about 36 hours afterwards both my horses act like they are heavily sedated, can barely walk.  Could I have a bad bottle of medicine, I’m afraid to give it anymore since this has happened three times.”  Commenting on this complaint to MANGINI, Robinson wrote simply, “here is another one.”

MANGINI is among 29 individuals charged to date in a series of Indictments arising from an investigation of a widespread scheme 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, horse racing officials, and the FDA, among others, participants in these schemes sought to improve race performance and obtain prize money from racetracks, all to the detriment and risk of the health and well-being of the racehorses. 

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In addition to his prison sentence, MANGINI, 55, of Boca Raton, Florida, was sentenced to three years of supervised release and ordered to pay a forfeiture penalty of $8,108,141.65.

Ms. Strauss 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.  Ms. Strauss also thanked the New Jersey Attorney General’s Office, the New York State Police, and the New York City Police Department for their support of this investigation, and the FDA and the Drug Enforcement Administration for their assistance and expertise.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Sarah Mortazavi, Andrew C. Adams, Anden Chow, and Benet Kearney are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Wendy Woolcock, the Special Agent in Charge of the Special Operations Division of the U.S. Drug Enforcement Administration (“DEA”), today announced that former Venezuelan official Hugo Armando Carvajal Barrios, a/k/a “El Pollo,” was arrested yesterday in Madrid, Spain, based on an Indictment filed in the Southern District of New York.  The Indictment charges Carvajal Barrios with participating in a narco-terrorism conspiracy and a conspiracy to import cocaine into the United States, including a 5.6-ton shipment of cocaine transported from Venezuela to Mexico in April 2006, along with related firearms offenses.[1]  CARVAJAL BARRIOS was originally arrested in connection with these charges in April 2019, and later that year the Spanish National Court approved CARVAJAL BARRIOS’s extradition to the United States. CARVAJAL BARRIOS has since remained a fugitive pending extradition until his arrest yesterday.

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Carvajal Barrios, 61, a Venezuelan national residing in Spain, among other places, is charged with: (1) participating in a narco-terrorism conspiracy, which carries a 20-year mandatory minimum sentence and a maximum of life; (2) conspiring to import cocaine into the United States, which carries a 10-year mandatory minimum sentence and a maximum of life; (3) using and carrying machine guns and destructive devices during and in relation to, and possessing machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine importation conspiracies, which carries a 30-year mandatory minimum sentence and a maximum of life; and (4) conspiring to use and carry machine guns and destructive devices during and in relation to, and to possess machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine importation conspiracies, which carries a maximum sentence of life.  The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit and Miami Field Division, Homeland Security Investigations, the U.S. Treasury Department Office of Foreign Assets Control, the U.S. Department of Justice’s Office of International Affairs, the U.S. Attorney’s Office for the Southern District of Florida, and the Spanish National Police’s Fugitive Unit.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Jason A. Richman, Benjamin Woodside Schrier, and Kyle A. Wirshba are in charge of the prosecution.

 

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[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.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that DWAYNE ANTHONY CONLEY, a/k/a “Taquan Rashad,” a/k/a “Q,” a/k/a “Pops,” was sentenced to 11 years in prison for coercion and enticement and the promotion of prostitution of five victims.  CONLEY previously pled guilty to those offenses on March 11, 2021, before United States District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Audrey Strauss said: “Dwayne Conley exploited and victimized women for his financial gain.  He coerced his victims into prostitution, including by physical abuse and exploiting a victim’s heroin addiction.  For his wanton indifference to the suffering of his victims – indeed, for inflicting that suffering – Conley has been sentenced to a lengthy prison term.”

According to the Superseding Information, publicly filed documents, and evidence presented at the trial of CONLEY’s codefendant Justin Rivera, in or about 2015, CONLEY persuaded, induced, enticed, and coerced a victim, described in the Superseding Information as “Victim‑3,” to travel from New York to Virginia to engage in prostitution.  CONLEY used violence against Victim‑3 on many occasions.  CONLEY also exploited Victim‑3’s severe heroin addiction, verbally abused Victim‑3, used Victim-3 to further his narcotics trafficking, and promoted Victim-3’s prostitution.

In or about 2015, CONLEY also attempted to persuade, induce, entice, and coerce two other victims to travel from New York to Virginia to engage in prostitution.  CONLEY further promoted the prostitution of two additional victims, including by posting advertisements on the Internet for commercial sex with the victims, and providing heroin to one of the victims.  In total, at his sentencing hearing, CONLEY was held accountable for his victimization and exploitation of five different women. 

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In addition to today’s prison sentence, CONLEY, 52, of Central Islip, New York, was sentenced to five years of supervised release.

Ms. Strauss thanked Special Agents and Task Force Officers from the FBI-NYPD New York Child Exploitation and Human Trafficking Task Force, detectives from the Suffolk County Police Department’s Human Trafficking Investigations Unit, and Special Agents from the United States Attorney’s Office for the Southern District of New York for their outstanding work on this case.

The case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Rushmi Bhaskaran, Benjamin Woodside Schrier, and Daniel H. Wolf are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that JOSEPH IORHEMBA ASAN JR. was sentenced to 46 months in connection with a scheme to commit romance fraud scams and business email compromises against dozens of victims across the United States, defraud banks, and launder millions of dollars in fraud proceeds to co-conspirators based in Nigeria.  ASAN was arrested on October 31, 2019, and pled guilty on December 23, 2020, to conspiracy to commit bank fraud and wire fraud.  Today’s sentence was imposed by U.S. District Judge Kimba Wood.

Manhattan U.S. Attorney Audrey Strauss said:  “Among the many victims of the internet scams facilitated by Joseph Asan Jr. were elderly women and men who were callously fooled into believing they were engaging online with potential romantic interests. This former serviceman and his co-defendant even laundered money stolen from a U.S. Marine Corps veteran’s organization in one of the conspiracy’s email spoofing schemes. Asan’s crimes have indeed led to his own reversal of his fortune, as this former defender of this country now becomes a federal prisoner.”

According to allegations in documents filed in Manhattan federal court:

From at least in or about February 2018 through at least in or about October 2019, ASAN and his co-defendant CHARLES IFEANYI OGOZY were members of the U.S. Army Reserves who participated in a scheme to commit fraud against dozens of victims across the United States, defraud banks, and launder millions of dollars in fraud proceeds in bank accounts that they controlled.  The funds laundered by ASAN and OGOZY were obtained primarily through: (a) romance scams, in which members of the scheme deluded unsuspecting older women and men into believing they were in a romantic relationship with a fake identity assumed by members of the scheme, and used false pretenses to cause the victims to transfer money to bank accounts under the control of members of the scheme, including ASAN and OGOZY; and (b) business email compromises, in which members of the scheme gained unauthorized access to or spoofed email accounts and impersonated employees of a company or third parties engaged in business with the company in order to fraudulently induce the victims to transfer money to bank accounts under the control of members of the scheme, including ASAN and OGOZY.  Notably, one of the victims of the defendants’ business email compromise scheme included a U.S. Marine Corps veteran’s organization.

In order to launder proceeds from those fraud schemes, ASAN and OGOZY opened several bank accounts in the names of fake businesses called Uxbridge Capital LLC, Renegade Logistics LLC, and Eldadoc Consulting LLC.  In total, ASAN opened at least 10 business bank accounts at eight different banks in the names of these fake businesses, and he used those accounts to receive and transfer to co-conspirators overseas over $1.8 million in fraud proceeds from at least 69 identified victims.  In connection with the opening of the business bank accounts, ASAN made multiple false statements to banks about the purported business of his companies, including misrepresentations that the companies were involved in shipping, real estate, and public relations.  In addition, a significant portion of the laundered funds was deposited and withdrawn in cash that was not able to be traced by law enforcement.   

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ASAN, 24, of Daytona Beach, Florida, was also sentenced to three years of supervised release.  In addition, ASAN was ordered to forfeit $184,723, and to pay restitution of $1,792,015 to victims.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation and the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.  Ms. Strauss also thanked the U.S. Customs and Border Protection for their assistance in the investigation.  

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that MICHAEL ACKERMAN, who orchestrated a multimillion-dollar cryptocurrency investment scheme, pled guilty to wire fraud today before United States Chief District Judge Laura Taylor Swain.  ACKERMAN admitted to causing victim losses of more than $30 million.

U.S. Attorney Audrey Strauss said: “As he admitted today, Michael Ackerman raised millions of dollars in investments for his fake cryptocurrency scheme by falsely touting monthly returns of over 15 percent, falsifying documents to con investors into thinking his fund had a balance of over $315 million, and spending millions in investor funds on himself.  Now Ackerman awaits sentencing for his crime.”

According to the Indictment and the underlying complaint filed in this case, as well as prior court filings and recent court proceedings:

In or about 2017, MICHAEL ACKERMAN and others started a purported cryptocurrency “investment” fund (the “Fund”) and recruited hundreds of individual investors into the Fund.  The Fund was an investment club that allowed its members to contribute U.S. dollars, which the investors were told would then be used to invest and trade in Bitcoin and other cryptocurrencies.  ACKERMAN was held out as the Fund’s chief trading officer and personally controlled the Fund’s primary trading account on an online cryptocurrency exchange.  Based on figures provided by ACKERMAN, the Fund claimed that its proprietary trading algorithm was earning approximately 15 percent in profit for investors each month.

By December 2019, ACKERMAN claimed that the Fund investment pool – which consisted of approximately $37 million in original investor contributions – had grown in value to approximately $315 million.  ACKERMAN’s claims about the performance of the Fund were communicated to existing Fund investors as well as prospective investors, some of whom were induced to invest in the Fund in the hopes of enjoying high rates of return.

The rates of return that ACKERMAN reported on the Fund investments, and its overall Fund balance, were false.  In reality, the primary trading account used by ACKERMAN had an account balance that never exceeded approximately $5 million.  To support his false claim that the Fund’s investments were earning 15 percent in monthly profits and had grown to approximately $315 million, ACKERMAN doctored numerous account screenshots that he knew were being used to communicate with Fund investors.

Instead of investing and trading on behalf of the Fund, ACKERMAN stole at least $9 million in investor contributions and used them to bankroll a lavish lifestyle that included his purchase of multiple pieces of real estate, hundreds of thousands of dollars of Tiffany jewelry, vehicles, travel, and personal security services.

*                *                *

ACKERMAN, 52, of Sheffield Lake, Ohio, pled guilty today to 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.

Under the terms of his plea, ACKERMAN agreed to make restitution of at least $30,667,738.79.  ACKERMAN also agreed to forfeiture of $36,268,515, including the millions of dollars in cash, real estate, and jewelry that were fraudulently obtained from victims or bought with victim funds.

ACKERMAN is scheduled to be sentenced by Judge Swain on January 5, 2022, at 2:00 p.m.       

Ms. Strauss praised the outstanding work of special agents from Homeland Security Investigations’ El Dorado Task Force and the Federal Bureau of Investigation in Tampa, and thanked the attorneys and investigators at the Commodity Futures Trading Commission and the Securities and Exchange Commission whose expertise and diligence were integral to the development of this investigation and today’s guilty plea.

The prosecution of this case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Jessica Greenwood, Sheb Swett, and Kiersten Fletcher are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York (“SDNY”), Kenneth A. Polite Jr., the Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”), and Darrell J. Waldon, the Acting Special Agent in Charge of the Washington DC Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of an indictment charging AFEWORK BEREKET, a/k/a “Affe Bereket,” with conspiring to violate the Foreign Corrupt Practices Act (“FCPA”) and to commit money laundering, in connection with his role in a criminal scheme to bribe foreign government officials perpetrated by Telefonaktiebolaget LM Ericsson (“LM Ericsson”), a multinational telecommunications company headquartered in Sweden, and its subsidiary Ericsson Egypt Ltd. (“Ericsson Egypt” and, collectively with LM Ericsson, “Ericsson”).  BEREKET remains at large.

U.S. Attorney Audrey Strauss said: “As alleged, Afework Bereket conspired in a corrupt scheme to pay millions of dollars in bribes to two Djibouti government officials and an official of a state-owned telecom company to win a contract for Ericsson valued at more than €20 million.  To disguise the scheme, Bereket allegedly engaged in financial sleight-of-hand involving a sham consulting contract, a false due-diligence report, and fake invoices.  The alleged criminal scheme has been exposed, and Affe Bereket is now charged in our District with serious federal crimes.”

Assistant Attorney General Kenneth A. Polite Jr. said: “Bereket allegedly used the U.S. financial system to pay bribes to high-level government officials in Djibouti to ensure that Swedish telecom giant Ericsson won a multimillion-dollar government contract.  Today’s unsealed charges demonstrate the department’s commitment to hold individuals accountable for violations of the FCPA and to ensure that business is won or lost on merit, not the amount of bribes a company’s employees and agents are willing to pay.”

IRS-CI Acting SAC Darrell J. Waldon said: “Our global economy should be one free from corrupt practices.  The indictment unsealed today, reflects the veracity in which IRS-CI will investigate those who engage in bribery to receive their business.  Together with our partners at the Department of Justice, we will continue our efforts to ensure fair competition for companies around the world.

According to allegations in the Indictment, which was unsealed today in Manhattan federal court[1]:

BEREKET, while working for Ericsson, bribed foreign officials in Djibouti in exchange for business with a state-owned telecommunications company there (“Telecom Company-1”). BEREKET was an Ericsson account manager responsible for the Horn of Africa, a region that included Djibouti, from approximately November 2010 until approximately July 2013.  According to the indictment, BEREKET and co-conspirators engaged in a scheme to pay approximately $2.1 million in bribes to three foreign officials – two high-ranking foreign officials in the executive branch of Djibouti’s government, and a high-level executive at Telecom Company-1 – in order to help Ericsson obtain and retain a €20,300,000 contract with Telecom Company-1.  BEREKET and co-conspirators disguised the bribes as payments to a consulting company linked to one of the foreign officials being bribed.  To do so, BEREKET and co-conspirators entered into a sham contract with the consulting company, prepared a false due-diligence report, and caused an Ericsson entity to approve fake invoices.  BEREKET discussed the bribery scheme in multiple communications with co-conspirators.  In one email, he urged  others to pay an invoice from the consulting company “ASAP,” explaining that “[e]verybody in the management of [Telecom Company-1] & in the ministry are waiting their part of the cake.”

*                *                *

AFEWORK BEREKET, 53, a dual citizen of Ethiopia and Sweden, has been charged in the indictment with one count of conspiring to violate the anti-bribery provision of the FCPA, which carries a maximum potential sentence of five years in prison, and one count of conspiring to commit money laundering, which carries a maximum potential sentence of 20 years in prison.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the FCPA Unit of the Fraud Section of DOJ’s Criminal Division. Assistant U.S. Attorneys David Abramowicz and Juliana N. Murray, together with Acting Assistant Chief Andrew Gentin and Trial Attorneys Michael Culhane Harper and James Mandolfo of the Criminal Division’s Fraud Section, 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.

 

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[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.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that HERODE CHANCY, who at the time of the offense was employed as a manager at a Manhattan branch of a national bank (“Bank-1”), was sentenced today to 30 months in prison for his role in a commercial loan fraud scheme for loans totaling over $1 million.  CHANCY’s sentence was imposed by United States District Judge Lewis J. Liman. 

U.S. Attorney Audrey Strauss said: “Bank employee Herode Chancy used fake businesses, doctored bank statements, and stolen identities in an effort to obtain over $1 million in commercial loans.  Now Chancy has rightly been sentenced to prison for his crime.  Prosecutions like this one should serve as notice to individuals in positions of trust at financial institutions that engaging in corrupt criminal conduct will lead to prosecution and prison.”

According to 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, CHANCY and codefendant Adedayo Ilori 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.  CHANCY and Ilori together submitted eight fraudulent business loan applications for a total of $1,025,000 in business loans.  The business loan applications submitted by CHANCY and Ilori included doctored bank statements and listed the identities of other persons as the loan applicants, including stolen identities.  CHANCY and Ilori also opened bank accounts using the identities of those other persons in order to receive the loan payments from the third-party commercial lender.  CHANCY and Ilori subsequently conspired with codefendant Michael Albarella, another bank manager at Bank-1, to open a bank account using a stolen identity 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 CHANCY and Ilori, and Albarella accepted a $10,000 bribe to open the bank account.        

CHANCY and Ilori 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. 

*                *                *

In addition to the prison term, CHANCY, 41, of Bellerose, New York, was sentenced to two years of supervised release and ordered to forfeit $10,000 in fraudulent proceeds.

On August 5, 2021, Albarella was sentenced to six months in prison and three years of supervised release by Judge Liman.  Ilori is scheduled to be sentenced on October 13, 2021.

Ms. Strauss praised the outstanding investigative work of the New York FBI’s Eurasian Organized Crime Task Force and Homeland Security Investigation’s El Dorado Task Force. 

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.

Audrey Strauss, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Dermot Shea, Police Commissioner for the City of New York (“NYPD”), and Stuart K. Cameron, Acting Commissioner of the Suffolk County Police Department (“SCPD”), announced that WILLIAM JONES, a/k/a “Principe,” was charged with the murder of a federal confidential informant.  JONES was arrested yesterday and will be presented today in Manhattan federal court.  The case has been assigned to United States District Judge Edgardo Ramos.

U.S. Attorney Audrey Strauss said: “William Jones allegedly participated in the premeditated murder of Frederick Delacruz solely because Delacruz had the courage to cooperate with law enforcement.  The indictment and arrest demonstrate that this office and its partners will be relentless in our pursuit of anyone who seeks to harm a witness to a crime.”

FBI Assistant Director Michael J. Driscoll said: “Those who witness crimes and cooperate with the government to keep our communities safe are vital to our work in arresting criminals and holding them accountable for their criminal acts.  Mr. Jones may have allegedly thought murdering an informant would make his problems go away.  But violence is never the answer.  Instead, he’s now facing up to a lifetime in federal prison for allegedly murdering a man who would have testified against him.”

NYPD Commissioner Dermot Shea said: “Nearly two years ago in eastern Long Island, William Jones allegedly fatally shot a confidential informant who was a fellow Trinitarios gang member.  But our NYPD investigators and law enforcement partners worked together from the beginning, never giving up, and we welcome these federal charges by the United States Attorney’s Office in the Southern District of New York to achieve some measure of justice in this case.”

Suffolk County Police Commissioner Stuart K. Cameron said: “The ability for individuals to come forward and work with law enforcement is a critical pillar in police work.  Those who have the courage to come forward should be confident their safety is of the utmost importance when pursuing alleged perpetrators of violent crimes, like William Jones.  We hope this arrest will reinforce the partnership between members of law enforcement and those who put themselves at risk to provide valuable information in criminal investigations.”

According to the allegations contained in the Indictment:[1]

In or around December 2019, JONES, who is a member of the Trinitarios street gang, and others agreed to kill Frederick Delacruz, who was a member of the Trinitarios and also a confidential informant for law enforcement.  On December 28, 2019, JONES and others drove Delacruz from the Bronx to Suffolk County, where they caused Delacruz to be shot and killed.

*                *                *

JONES, 43, of the Bronx, New York, is charged  with two counts of conspiracy to murder a federal informant, each of which carries a maximum penalty of death or life in prison and a mandatory minimum sentence of life in prison; two counts of murder of a federal informant, each of which carries a maximum penalty of death or life in prison and a mandatory minimum sentence of life in prison; and murder through the use of a firearm, which carries a maximum penalty of death or life in prison and a mandatory minimum sentence of five years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the FBI, the NYPD, and the Suffolk County Police Department.  She also thanked the Suffolk County District Attorney’s Office for its assistance.

The prosecution is being handled by the Office’s Violent & Organized Crime Unit.  Assistant United States Attorneys Justin V. Rodriguez and Emily A. Johnson 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.

 

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[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. 

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that CARLOS DE LA TORRE pled guilty before United States District Judge Naomi Reice Buchwald to one count of mail fraud and two counts of filing false income tax returns in connection with a years-long scheme to steal from the clients of his tax preparation business and defraud the Internal Revenue Service (“IRS”) and New York State Department of Taxation and Finance (“NYSDTF”). 

U.S. Attorney Audrey Strauss said: “As he admitted today, Carlos De La Torre defrauded his tax preparation clients by converting to his own use money the clients had been told they owed the IRS and New York State.  As he further admitted, De La Torre defrauded the IRS and the State by seeking refunds for overpayments of his taxes that were actually the funds he stole from his clients, and by failing to report those stolen funds as income.  Now Carlos De La Torre awaits sentencing for his crimes.”  

According to the allegations in the Complaint, Information, and statements made in court:

DE LA TORRE is a tax preparer and the sole proprietor of a bookkeeping and tax preparation business in New York, New York.  From at least in or about 2014, through at least in or about 2020, DE LA TORRE represented certain small businesses based in New York City and their owners (the “Victims”) in connection with the preparation and filing of their personal and business federal and state tax returns.  During that time period, DE LA TORRE told the Victims how much they allegedly owed in state and federal personal and business taxes, and the Victims gave DE LA TORRE checks in those amounts.

Instead of submitting the Victims’ checks as payments to be applied toward the Victims’ federal and state tax liabilities, DE LA TORRE fraudulently altered the checks and mailed them to the IRS and the NYSDTF as estimated tax payments to be credited against his own personal tax liabilities.  Those payments greatly exceeded DE LA TORRE’s own tax liabilities each year.  At the end of each tax period, DE LA TORRE fraudulently sought and received refunds from the IRS and the NYSDTF for the total amount of the altered checks he submitted to each agency, less any amount DE LA TORRE actually owed in taxes.  Refunds from the IRS and the NYSDTF were wired by the U.S. Treasury and New York State, respectively, directly into DE LA TORRE’s personal bank account.  In total, DE LA TORRE stole more than $466,000 from the Victims through this scheme. 

DE LA TORRE also filed false tax returns with the IRS and NYSDTF in connection with this scheme, by failing to report on his tax returns the money he stole from the Victims.  Had DE LA TORRE reported that income, as he was required to do, his total tax liability each year would have been much greater than it was, and he would not have been entitled to the refunds that he claimed.  As a result, DE LA TORRE defrauded the IRS and NYSDTF of a total of at least $91,663 (including interest). 

*                *                *

DE LA TORRE, 79, of Little Neck, New York, pled guilty to one count of mail fraud, in violation of Title 18, United States Code, Section 1341, which carries a maximum sentence of 20 years in prison, and to two counts of subscribing to false individual tax returns, in violation of Title 26, United States Code, Section 7206(1), each of which carries a maximum sentence of three 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 would be determined by the judge.  DE LA TORRE is scheduled to be sentenced by Judge Buchwald on December 21, 2021.

Ms. Strauss praised the outstanding investigative work of IRS Criminal Investigation and NYSDTF. 

The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Sarah L. Kushner is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that GEORGE BRIDI, a citizen of the United Kingdom, was extradited to the United States from Cyprus on August 31, 2021.  BRIDI was extradited on charges of conspiracy to commit copyright infringement, wire fraud conspiracy, and conspiracy to commit interstate transportation of stolen property, for his involvement in the Sparks Group, an international piracy group that illegally distributed movies and television shows on the Internet. 

BRIDI was arrested on August 23, 2020, in Paphos, Cyprus.  BRIDI will be presented and arraigned today before U.S. Magistrate Judge Ona T. Wang.  Codefendant Jonatan Correa, a/k/a “Raid,” previously pled guilty to conspiracy to commit copyright infringement and was sentenced on May 19, 2021, to three years and three months of supervised release, with the first three months to be served in community confinement.  Codefendant Umar Ahmad, a citizen of Norway, remains at large.  The case is assigned to U.S. District Judge Richard M. Berman. 

U.S. Attorney Audrey Strauss said: “As alleged, George Bridi was a member of an international video piracy ring that circumvented copyright protections on nearly every movie released by major production studios, as well as television shows, and distributed them worldwide on the Internet.  Thanks to the assistance of our law enforcement partners, the piracy ring has been busted and Bridi is now in U.S. custody.”

According to the allegations contained in the Indictments[[1]]:

Between 2011 and the present, Umar Ahmad, a/k/a “Artist,” GEORGE BRIDI, Jonatan Correa, a/k/a “Raid,” and others known and unknown were members of the Sparks Group, a criminal organization that disseminated on the Internet movies and television shows prior to their retail release date, including nearly every movie released by major production studios, after compromising the content’s copyright protections.

In furtherance of its scheme, the Sparks Group fraudulently obtained copyrighted DVDs and Blu-Ray discs from wholesale distributors in advance of their retail release date by, among other things, making various misrepresentations to the wholesale distributors concerning the reasons that they were obtaining the discs prior to the retail release date.   

Sparks Group members then used computers with specialized software to compromise the copyright protections on the discs, a process referred to as “cracking” or “ripping,” and to reproduce and encode the content in a format that could be easily copied and disseminated over the Internet.  They thereafter uploaded copies of the copyrighted content onto servers controlled by the Sparks Group, where other members further reproduced and disseminated the content on streaming websites, peer-to-peer networks, torrent networks, and other servers accessible to public.  The Sparks Group identified its reproductions by encoding the filenames of reproduced copyrighted content with distinctive tags, and also uploaded photographs of the discs in their original packaging to demonstrate that the reproduced content originated from authentic DVDs and Blu-Ray discs.

Ahmad and BRIDI arranged for discs to be picked up, mailed, or delivered from distributors located in Manhattan, Brooklyn, and New Jersey to other members of the Sparks Group, including Correa, prior to their official release date.  Ahmad, BRIDI, and Correa then reproduced, and aided and abetted the reproduction of, these discs by using computer software that circumvented copyright protections on the discs and reproducing the copyrighted content for further distribution on the Internet. 

The Sparks Group has caused tens of millions of dollars in losses to film production studios.

On August 26, 2020, in coordination with law enforcement authorities in 17 countries and supported by Eurojust and Europol, dozens of servers controlled by the Sparks Group were taken offline around the world, including in North America, Europe, and Asia.  The Sparks Group utilized these servers to store and disseminate copyrighted content illegally to members around the globe. 

*              *             *

BRIDI, 50, is charged with copyright infringement conspiracy, which carries a maximum penalty of five years in prison; wire fraud conspiracy, which carries a maximum penalty of 20 years in prison; and conspiracy to transport stolen property interstate, which carries a maximum penalty of five years in prison.    

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

 Ms. Strauss praised the outstanding work of Homeland Security Investigations and the U.S. Postal Inspection Service.  She also thanked Europol and Eurojust as well as law enforcement authorities in the following countries for their assistance in the investigation: Canada, Cyprus, Czech Republic, Denmark, France, Germany, Italy, Republic of Korea, Latvia, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, and the United Kingdom. 

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Andrew K. Chan, Mollie Bracewell, and Christy Slavik are in charge of the prosecution.  The Justice Department’s Office of International Affairs (OIA) of the Department’s Criminal Division provided significant and ongoing assistance with facilitating the execution of dozens of mutual legal assistance requests in 18 different countries necessary for taking down servers and gathering evidence.  OIA also provided critical support in working with Eurojust and Europol in planning the coordinated operation in August 2020 and provided critical assistance in securing the defendant’s extradition from Cyprus.

The charges contained in the Indictments are merely accusations, and BRIDI and Ahmad are presumed innocent unless and until proven guilty.

 

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[1] As the introductory phrase signifies, the entirety of the texts of the Indictments and the description of the Indictments set forth herein constitute only allegations and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that JASON RHODES, the co-founder, chief investment officer, and chief compliance officer for Sentinel Growth Fund Management, LLC (“Sentinel”), was sentenced today by U.S. District Judge Sidney H. Stein to 48 months in prison for securities fraud, wire fraud, investment adviser fraud and conspiracy charges.  Those charges relate to RHODES’s participation in a scheme to defraud over 25 investors in Sentinel out of more than $25 million by lying to the investors and using investor funds for his own personal use and to make repayments to earlier investors in a Ponzi-like manner.   

U.S. Attorney Audrey Strauss said:  “Jason Rhodes defrauded investors in the fund he co-founded of more than $25 million through years of lies and deceit.  This conduct is made even worse by the fact that Rhodes served as the chief investment officer and Chief Risk Officer of Sentinel, roles in which it was his direct responsibility to safeguard investor funds.  Rhodes will now serve four years in prison for his crimes.”

According to the Indictment and other Court filings:

Beginning in at least 2013 and through in or about December 2016, RHODES, together with his co-conspirators, solicited investments in Sentinel by falsely representing to investors that their funds would be used for legitimate, specified, investment purposes, namely purchasing securities.  In fact, RHODES failed to invest the investor monies as promised, but rather diverted investor funds to his own personal use and the personal use of his co-conspirators and, in a Ponzi-like manner, used them to make repayments to other investors who were demanding their money.  Among other things, RHODES diverted investor funds to a trucking business operated by RHODES and his wife; used them to pay more than $1 million to settle an unrelated civil lawsuit filed against RHODES and one of his co-conspirators; and expended them on other, personal expenses including a resort stay in Dubai and a luxury time-share vacation club.  Through this scheme, RHODES and his co-conspirators defrauded over 25 investors out of more than $25 million.

Among other fraudulent acts, RHODES and a co-conspirator falsified an account statement for an investor (“Investor-1”) to conceal the fact that RHODES and his co-conspirators had misappropriated most of the $4.2 million Investor-1 had invested in Sentinel.  After Investor-1 discovered the fraudulent nature of the account statement, RHODES, working with others, obtained funds from yet another investor (“Investor-2”) in order to make payments to Investor-1.  RHODES and his co-conspirators then, on multiple occasions, created fraudulent reports for Investor-2, falsely reflecting that Investor-2’s funds were invested with portfolio managers in Sentinel’s brokerage accounts and were earning returns.  In truth and in fact, and as RHODES well knew, Investor-2’s funds had been almost entirely misappropriated upon their receipt to repay Investor-1 and were not being managed by portfolio managers on Sentinel’s platform. 

*                      *                      *

RHODES, 48, of Rowayton, Connecticut, was also sentenced to three years of supervised release and ordered to pay restitution and forfeiture of $25,451,801.

Ms. Strauss praised the work of the FBI.  She also thanked the Securities and Exchange Commission for its assistance.  

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Jared Lenow is in charge of the prosecution.  

 

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that Dr. EMMANUEL LAMBRAKIS, a former state-licensed doctor, was sentenced this afternoon to 188 months in prison for conspiring to distribute medically unnecessary oxycodone unlawfully.  LAMBRAKIS pled guilty on November 26, 2019, before U.S. District Judge William H. Pauley III, and was sentenced today before U.S. District Judge Katherine Polk Failla. 

U.S. Attorney Audrey Strauss said: “Dr. Emmanuel Lambrakis wrote medically unnecessary prescriptions for thousands of oxycodone pills – an addictive and potentially fatal opiate.  Instead of abiding by his oath to ‘do no harm,’ Lambrakis pumped deadly drugs into the community.  Lambrakis put his own greed before his duties as a medical professional, and for that he will now spend a lengthy term in federal prison.”

According to the Complaint, the Indictment, and other court documents, as well as statements made in public court proceedings:

Oxycodone is a highly addictive, narcotic opioid that is used to treat severe and chronic pain conditions.  Oxycodone prescriptions are in high demand and can be resold on the street for thousands of dollars.  A single prescription for 120 30-milligram tablets of oxycodone can net an illicit distributor $2,400 in cash or more.

From at least approximately January 2011 until December 2016, LAMBRAKIS operated two medical clinics in Queens, New York, where LAMBRAKIS wrote numerous medically unnecessary prescriptions for large quantities of oxycodone in exchange for cash payments.  LAMBRAKIS typically charged approximately $150 in cash for “patient visits,” and these visits often involved numerous “patients” being seen by LAMBRAKIS at the same time in the same examination room.  During these “patient visits,” LAMBRAKIS would perform simple, perfunctory body manipulations (such as rotating the patient’s arm or leg) and engage in little or no conversation with the purported “patient.”  Nonetheless, LAMBRAKIS would then issue to the patient a prescription for a large quantity of oxycodone, most often 120 30-milligram tablets or more.

Between January 2011 and December 2016, LAMBRAKIS wrote hundreds of oxycodone prescriptions, resulting in the illicit distribution of thousands of oxycodone tablets.  On numerous occasions, LAMBRAKIS wrote 100 or more prescriptions for 30-milligram oxycodone pills in a single day.  As a result of LAMBRAKIS’s actions, LAMBRAKIS collected approximately more than $3 million in fees from his “patients.”

*               *               *

LAMBRAKIS, 74, of New York, New York, pled guilty to one count of conspiring to unlawfully distribute and possess with intent to distribute oxycodone. 

In addition to the prison term, LAMBRAKIS was sentenced to three years of supervised release, and ordered to forfeit $3,093,000, representing the amount he gained from issuing medically unnecessary oxycodone prescriptions.

Ms. Strauss praised the outstanding investigative work of the DEA’s Tactical Diversion Squad, which comprises agents and officers from the DEA, the NYPD, the New York State Police, Town of Orangetown Police Department, Rockland County Drug Task Force, Westchester County Police Department, and New York City Department of Investigation.  She also acknowledged the assistance of the Department of Health & Human Services, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the New York City Human Resources Administration, and the National Insurance Crime Bureau.

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Ryan Finkel, Sarah Mortazavi, Kimberly J. Ravener, and Jessica K. Fender are in charge of the prosecution. 

Audrey Strauss, 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 charging GEORGE CONSTANTINE, MARC ELEFANT, ANDREW DOWD, and SADY RIBEIRO with conspiracy to commit mail and wire fraud, mail fraud, and wire fraud in connection with a scheme to obtain fraudulent insurance reimbursements and other compensation for fraudulent trip-and-fall accidents.  ELEFANT, DOWD, and RIBEIRO were arrested earlier this morning and will be presented today before United States Magistrate Kevin Nathaniel Fox in Manhattan federal court.  CONSTANTINE is expected to surrender and be presented in Manhattan federal court tomorrow.  The case has been assigned to United States District Judge Loretta A. Preska.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, the defendants abused their professional licenses and positions of trust to steal millions of dollars from New York City businesses and their insurance companies through a massive trip-and-fall fraud scheme.  In carrying out the scheme, the defendants allegedly preyed upon the most vulnerable members of society.  Now, thanks to the FBI, the defendants are in custody and facing federal charges.”

FBI Assistant Director-in-Charge Michael J. Driscoll said: “The scheme allegedly carried about by the defendants charged today highlights the extent to which some are willing to go in the name of money.  Licensed attorneys are well aware of their obligation to uphold the law.  As we allege today, they did just the opposite, stealing from business owners and preying upon other vulnerable victims who were coerced into risking their own personal health and safety.  This alleged conduct is beyond reprehensible, and something we won’t let people get away with.”

As alleged in the Indictment unsealed today in Manhattan federal court[1]:

From in or about January 2013, up to and including in or about April 2018, the defendants engaged in an extensive fraud scheme through which the defendants defrauded businesses and insurance companies by staging trip-and-fall accidents and filing fraudulent lawsuits arising from those staged trip-and-fall accidents.  In or about 2015, certain members of the fraud scheme split from the original conspiracy and formed a separate conspiracy that operated in substantially the same manner.  GEORGE CONSTANTINE was the primary attorney who filed fraudulent lawsuits in the original conspiracy starting in 2013.  MARC ELEFANT was the primary attorney who filed fraudulent lawsuits in the separate conspiracy, formed in or about 2015.

Fraud scheme participants recruited individuals (the “Patients”) to stage or falsely claim to have suffered trip-and-fall accidents at particular locations throughout the New York City area (the “Accident Sites”).  In the course of the fraud scheme, scheme participants recruited more than 400 Patients.  In the beginning, scheme participants would instruct Patients to claim they had tripped and fallen at a particular location, when in fact the Patients had suffered no such accidents.  Eventually, at the direction of the lawyers who filed fraudulent lawsuits on behalf of the Patients, scheme participants began to instruct Patients to stage trip-and-fall accidents, i.e., to go to a location and deliberately fall.  Common Accident Sites used during the fraud scheme included cellar doors, cracks in concrete sidewalks, and purported “potholes.”

After the staged trip-and-fall accidents, Patients were referred to specific attorneys, including GEORGE CONSTANTINE and MARC ELEFANT, who would file personal injury lawsuits (the “Fraudulent Lawsuits”) against the owners of the Accident Sites and/or insurance companies of the owners of the accident sites (the “Victims”).  The Fraudulent Lawsuits did not disclose that the Patients had deliberately fallen at the accident sites or, in some cases, had not fallen at all.  During the course of the fraud scheme, the defendants, together with others known and unknown, attempted to defraud the Victims of more than $31,000,000.

The Patients were also instructed to receive ongoing chiropractic and medical treatment from certain chiropractors and doctors, including ANDREW DOWD and SADY RIBEIRO.  The fraud scheme participants advised the Patients that if they intended to continue with their lawsuits, they were required to undergo surgery.  As an incentive to getting surgery, the recruited Patients were offered a payment of typically between $1,000 and $1,500 after they completed surgery (“Post-Surgery Payments”).  Patients generally were told to undergo two surgeries.

Doctors in the fraud scheme, including DOWD and RIBEIRO, were expected to, and in fact did, conduct these surgeries regardless of the legitimate medical needs of the Patients.  For example, in a March 2016 email, before DOWD examined the shoulder of a particular Patient who had staged a trip-and-fall accident (“Patient-2”), one of the scheme organizers asked DOWD to “write us an additional report today stating that [Patient-2’s] Lt. shoulder has worsened [so that I can] book this surgery for you.”  DOWD provided the requested report and recommended that Patient-2 undergo arthroscopic surgery. 

Likewise, in an August 2015 email from RIBEIRO to the owner of a litigation funding company, in which RIBEIRO described the services that he performed, RIBEIRO wrote, “I will play very honest ‘game’ with you . . . I see the patient and I generate a very good dictation that justifies the treatment-there is a cost for that and I hope a profit.”

Members of the fraud scheme often recruited individuals who were extremely poor as Patients – individuals desperate enough to submit to surgeries in exchange for the small Post-Surgery Payments.  For example, it was common for Patients to ask for food when they would appear for their intake meetings with the lawyers.  Many of the Patients did not have sufficient clothing to keep them warm during the wintertime and had poor-quality shoes.  Members of the fraud scheme also recruited Patients who were drug addicts.  It was also common for scheme participants to recruit Patients from homeless shelters in New York City.

The Patients’ legal and medical fees were usually paid for by litigation funding companies (the “Funding Companies”), even if the Patient maintained medical coverage through an insurance company or a government-subsidized program.  The Funding Companies also paid the fraud scheme organizers and participants referral fees, typically $1,000 to $2,500, for each Patient who signed a funding agreement.  In exchange for funding Patients’ medical and legal costs, the Funding Companies charged the Patients high interest rates, sometimes up to 50% on medical loans and up to 100% on personal loans.  The interest rates were so high that oftentimes the majority (if not all) of the proceeds that were awarded in the Fraudulent Lawsuits were paid to the Funding Companies, CONSTANTINE, ELEFANT, DOWD, RIBEIRO, and others, with the Patients receiving a much smaller percentage of the remaining recovery.

GEORGE CONSTANTINE, 58, and MARC ELEFANT, 49, are New York-licensed attorneys who represented hundreds of Patients and filed Fraudulent Lawsuits on their behalf as part of the fraud scheme.

ANDREW DOWD, 45, is a New York-licensed orthopedic surgeon who performed hundreds of knee and shoulder surgeries on Patients as part of the fraud scheme, earning approximately $9,500 per surgery.

SADY RIBEIRO, 51, is a New York-licensed pain management doctor and surgeon who performed back surgeries, among other medical procedures, on Patients.  RIBEIRO paid participants cash kickbacks in exchange for patient referrals and treated nearly 200 Patients during the fraud scheme.

GEORGE CONSTANTINE, MARC ELEFANT, ANDREW DOWD, and SADY RIBEIRO are each charged with conspiracy to commit mail and wire fraud, which carries a maximum sentence of 20 years in prison, mail fraud, which carries a maximum sentence of 20 years in prison, and wire fraud, which carries a maximum sentence of 20 years in prison.  DOWD and RIBEIRO are also charged with one additional count each of conspiracy to commit mail and wire fraud, mail fraud, and wire fraud.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

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Ms. Strauss praised the outstanding investigative work of the New York FBI.  Ms. Strauss also thanked the National Insurance Crime Bureau for their assistance in the investigation. 

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Nicholas Chiuchiolo, Nicholas Folly, and Alexandra Rothman 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.                       

 

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[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.

Audrey Strauss, United States Attorney for the Southern District of New York, and Walter Mugdan, Acting Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed a civil lawsuit against E.I. DUPONT DE NEMOURS AND COMPANY (“DuPont”), D & D SALVAGE CORPORATION (“D & D”), OXY USA INC. (“Oxy”), and W.A. BAUM COMPANY, INC. (“W.A. Baum”) (collectively, the “Defendants”), and has simultaneously filed a consent decree settling the lawsuit.  In the complaint, brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 (“CERCLA”) – commonly known as the Superfund statute – the United States alleged that the Defendants arranged for the disposal or treatment of mercury by Port Refinery, Inc. (“Port Refinery”), a mercury refining business in the Village of Rye Brook, New York, which led to releases of mercury into the environment.  The consent decree provides for a combined payment of $1,412,255 by the Defendants for costs incurred by EPA in conducting clean-up activities at the site.

U.S. Attorney Audrey Strauss said: “DuPont, D & D, Oxy, and W.A. Baum contributed to contamination in a residential community by arranging for the treatment or disposal of over 7,000 pounds of toxic mercury, and now each is paying a share of the costs that EPA had to incur to clean up this site.  This Office will continue to hold responsible parties accountable for their share of the costs at the site.”

EPA Acting Regional Administrator Walter Mugdan said: “EPA is recovering more than $1.4 million that the Agency spent to clean up mercury pollution released in the Village of Rye Brook, and that is good news for taxpayers as we are holding the polluter responsible for the cost.  The funds can be put back into the Superfund to assist with cleanup of other sites. This case shows that EPA can take immediate action to protect people while still holding polluters responsible by recovering some of the money down the road.  We don’t have to choose between protecting people and taking appropriate legal action – they go hand-in-hand.”

As alleged in the complaint filed yesterday in White Plains federal District Court, each of the Defendants arranged for Port Refinery’s treatment or disposal of used, surplus, or scrap mercury and mercury-containing materials at the Site.  Port Refinery’s treatment and processing of mercury sent by the Defendants and other parties led to extensive releases of mercury into the environment, necessitating two separate clean-up actions by EPA.  In connection with the second clean-up, EPA incurred costs at the Site for investigative and removal activities, including, among other things, excavating and disposing of more than 9,300 tons of mercury-contaminated soil from the site.

In the consent decree filed yesterday, the Defendants admit and accept responsibility for the following:

• EPA has determined that from the 1970s through the early 1990s, Port Refinery engaged in, among other things, the business of mercury reclaiming, refining, and processing.
• Port Refinery operated in the Village of Rye Brook out of a two-story garage bordered by private residences on its south, east, and west sides.
• EPA has determined that Port Refinery took virtually no environmental precautions or safety measures during its mercury refinement process.
• EPA has determined that Port Refinery released a significant amount of mercury into the environment, contaminating the Site.
• EPA has determined that mercury from the Defendants’ mercury-containing products was comingled at the Site and contributed to the mercury released into the environment.

Moreover, in the consent decree each Defendant admits and accepts responsibility for directly or indirectly delivering mercury to Port Refinery as follows:

• DuPont delivered 3,291 pounds of mercury, which included virgin, unused, scrap, used, and contaminated mercury, to Port Refinery during Port Refinery’s period of operations.
• D & D delivered 2,150 pounds of scrap mercury to Port Refinery during Port Refinery’s period of operations.
• Oxy sold 190 pounds of surplus mercury and mercury-containing materials to a third-party scrap dealer during Port Refinery’s period of operations, and EPA has determined that those surplus mercury and mercury-containing materials came to be located at the Site.
• W.A. Baum delivered 1,425 pounds of “dirty” mercury to Port Refinery during Port Refinery’s period of operations.

Pursuant to the consent decree, the Defendants will pay a total of $1,412,255 in costs incurred by EPA, consisting of $658,639 to be paid by DuPont, $430,352 to be paid by D & D, $38,031 to be paid by Oxy, and $285,233 to be paid by W.A. Baum.

*                *                *

This lawsuit is the United States’ sixth lawsuit against responsible parties to recover clean-up costs for the second clean-up at the Site.  With this settlement, the United States has recovered a total of $2,382,137 from responsible parties. 

The consent decree will be lodged with the District Court for a period of at least 30 days before it is submitted for the Court’s approval, to provide public notice and to afford members of the public the opportunity to comment on the consent decree.

This case is being handled by the Office’s Environmental Protection Unit.  Assistant U.S. Attorney Anthony J. Sun is in charge of the case.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that OMAR AMANAT, an associate of codefendant Kaleil Isaza Tuzman, the former chairman and chief executive officer of the technology start-up company KIT digital, Inc. (“KITD”), was sentenced today by U.S. District Judge Paul G. Gardephe to five years in prison for participating in various securities fraud-related offenses.  AMANAT and Tuzman were found guilty in 2017 after a two-month trial presided over by Judge Gardephe.  AMANAT was convicted of conspiracy to commit wire fraud, wire fraud, aiding and abetting investment advisor fraud, and conspiracy to commit securities fraud. 

U.S. Attorney Audrey Strauss said: “Omar Amanat defrauded investors of millions of dollars through years of lies and deceit.  Among his many fraudulent tactics, Amanat teamed up with Kaleil Tuzman and others to manipulate stock prices and hide investment losses through years of false account statements.  When finally caught, Amanat doubled down on his lies by introducing fake emails into the trial record as ‘exculpatory’ evidence.  Neither the Government nor the jury was fooled.  Amanat was convicted on all counts and remanded by the Court into federal custody, where he will remain until his sentence is served.” 

According to the Indictment and other filings in Manhattan federal court and the evidence presented at trial:

The Scheme to Defraud Maiden Capital Investors

Stephen Maiden[1] was the managing member of Maiden Capital, a hedge fund that managed portfolios of securities.  Between in or about February 2009 and in or about June 2012, AMANAT, along with Maiden and others, devised and carried out a scheme to hide from Maiden Capital investors the fact that Maiden Capital’s investments in Enable – an investment fund run by AMANAT’s brother and codefendant, Irfan Amanat, for which AMANAT raised money (based, in part, on false and misleading representations) – had been lost.  To facilitate the scheme, Maiden, with the knowledge and approval of AMANAT, generated false client account statements that failed to disclose the Enable losses.  In addition, AMANAT wired hundreds of thousands of dollars to a Maiden Capital bank account to support Maiden Capital, including to allow Maiden to repay investors whose redemption requests could not be forestalled and thus to continue to keep secret from Maiden Capital investors the Enable losses for over three years. 

The Market Manipulation Scheme

Between in or about December 2008 and in or about September 2011, AMANAT, Tuzman, and Maiden engaged in efforts to artificially inflate the share price and trading volume of KITD shares.  During this time period, KITD shares traded on the OTC Bulletin Board and on the NASDAQ.  Maiden, at Tuzman and AMANAT’s direction, purchased and sold shares of KITD through Maiden Capital, for the purpose of manipulating KITD’s stock price and creating the illusion of greater volume in the trading for KITD shares. 

For instance, Maiden, with Tuzman’s knowledge and approval, frequently engaged in match trading in which Maiden caused an account under Maiden’s control to buy or sell KITD stock, and on the same day caused an account under Maiden’s control to take the opposite position.  Tuzman also directed Maiden to make timely purchases of KITD stock in an effort to manipulate the price of KITD shares at certain critical times, including, for example, when KITD was seeking to raise additional capital and in the weeks before KITD’s stock was uplisted to the NASDAQ.  At times, Maiden was responsible for nearly all of the day’s trading activity in KITD stock.

Amanat’s Fabrication of Evidence 

Evidence at trial also revealed that AMANAT produced to the Government and entered into evidence at trial emails that had been fabricated.  After two evidentiary hearings, the Court allowed the Government to present to the jury evidence of AMANAT’s use of false and fabricated email evidence during the trial.  After the verdict, Judge Gardephe revoked AMANAT’s bail and ordered him remanded into custody, citing numerous factors, including that “substantial evidence was introduced at trial that Mr. Amanat fabricated emails” showing “disdain for the court” and its procedures.

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AMANAT, 48, was also sentenced to three years of supervised release and ordered of pay a fine of $175,000.

Tuzman, 49, is scheduled to be sentenced by Judge Gardephe on September 10, 2021, at 12:00 p.m.

Irfan Amanat, 50, was convicted at a separate trial before Judge Gardephe in October 2018.  He is scheduled to be sentenced by Judge Gardephe on September 8, 2021, at 1:00 p.m.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service.  She also thanked the Securities and Exchange Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrea M. Griswold, Joshua A. Naftalis, and Daniel M. Tracer are in charge of the prosecution.       

 

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[1] Maiden pled guilty to various offenses for his role in the schemes and cooperated with the Government. 

Audrey Strauss, 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, and Bruce Campbell, Chief of the Town of Newburgh Police Department, announced that VERNON E. COPELAND III, was indicted today for transporting a minor from Bridgeport, Connecticut, to Newburgh, New York, with the intent to engage in criminal sexual activity with the minor.  COPELAND was charged by criminal complaint on November 20, 2020, and arrested on August 3, 2021, in Tampa, Florida.  COPELAND will be transported to the Southern District of New York for arraignment and prosecution.

U.S. Attorney Audrey Strauss said: “As alleged, Vernon Copeland preyed on a 13-year-old, whom he transported from Bridgeport to Newburgh to engage in sex.  Thanks to the FBI and the Town of Newburgh Police, Copeland is in custody and facing this serious federal charge.”

FBI Assistant Director Michael J. Driscoll said: “A 13-year-old child should be spending time playing sports and going to school, not worrying about being used by an alleged criminal for his own sexual gratification. We must do better as adults in protecting these innocent children because even one being victimized by a predator is too many. A first step in helping someone who may be a victim - call 1-800-CALL-FBI if you have any information about Mr. Copeland.”

According to the allegations contained in the Indictment returned today[1]:

On or about February 7, 2020, COPELAND transported a 13-year-old minor (“Victim-1”) from Bridgeport, Connecticut, to Newburgh, New York, where he engaged, and attempted to engage, in illegal sexual activity with Victim-1.

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COPELAND 36, of Newburgh, New York, is charged with one count of transporting a minor with intent to engage in criminal sexual activity, which carries a minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The statutory minimum and maximum 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.

Ms. Strauss praised the efforts of the FBI and the Town of Newburgh Police Department.  She added that the investigation is ongoing.

Any individuals who believe they have information that may be relevant to this investigation should contact the FBI at 1-800-CALL-FBI (225-5324) or https://tips.fbi.gov/.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Lindsey Keenan is in charge of the prosecution.

The charge contained in the Indictment is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that the United States has settled civil fraud claims against TOWER MAINTENANCE CORP. (“TOWER”), a Long Island-based steel painting company.  The settlement resolves the United States’ allegations that TOWER fraudulently obtained payments on two federally funded construction projects by causing misrepresentations of compliance with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of businesses owned by women and minorities.  Specifically, the United States alleged that TOWER, a certified DBE, caused the prime contractors on the projects to misrepresent that TOWER, as a DBE, was solely performing work on the two projects, when in fact the work was managed and supervised by codefendant Spectrum Painting Corp. (“Spectrum”), a non-DBE.   

Under the settlement approved by U.S. District Judge Analisa Torres, TOWER admits and accepts responsibility for conduct alleged in the Government’s amended complaint and agrees to pay $150,000 to the United States.  The settlement amount is based on the Office’s assessment of TOWER’s ability to pay based on the financial information it provided.  The Office previously reached settlements to resolve its fraud claims against the codefendants in the lawsuit, Spectrum and Ahern Painting Contractors Co. (“Ahern”), under which Spectrum and Ahern were required to pay a total of $3.4 million.

Manhattan U.S. Attorney Audrey Strauss said: “With this settlement, my Office paints a clear picture that we will pursue any contractor that participates in an unlawful scheme to exploit the Disadvantaged Business Enterprise program.  All contractors are on notice that we are committed to rooting out public works contracting fraud.”

As alleged in the amended complaint filed in Manhattan federal court in August 2019, TOWER performed steel painting work on two federally funded projects to renovate the Brooklyn Bridge and Queens Plaza.  Contracts for both projects required Ahern to hire DBEs to perform a percentage of the work and to adhere to the DBE regulations.  The DBE regulations require DBEs to manage and supervise their own work.  Yet TOWER hired Spectrum, a non-DBE painting subcontractor, to manage and supervise the DBE work that was supposed to be performed solely by TOWER.  Further, to conceal this scheme, TOWER passed off Spectrum employees as its own in project documents.  

As part of the settlement, TOWER admits, acknowledges, and accepts responsibility for the following conduct alleged in the amended complaint:

• In early 2010, TOWER knew that Ahern entered into an agreement with Skanska Koch Inc. (“Skanska”) for industrial painting and rehabilitation work on the Brooklyn Bridge Project.  TOWER understood that as a subcontractor on the Brooklyn Bridge Project, Ahern was obligated to meet or exceed Ahern’s DBE participation goal on the project.  TOWER also knew that Ahern expected to use TOWER, a certified DBE, to fulfill a substantial part of Ahern’s DBE participation goal for the Brooklyn Bridge Project.  In mid-2010, TOWER in fact entered into a subcontract with Ahern to perform painting and blasting work on the Brooklyn Bridge Project, which TOWER expected would be counted toward Ahern’s DBE participation goal for the project.
   
• In connection with the Brooklyn Bridge Project, TOWER signed and submitted to Ahern various documents stating that the DBE work subcontracted to TOWER would be performed by TOWER alone. 
   
• In mid-2011, TOWER knew that Ahern entered into a contract with the MTA to provide overcoat painting on the elevated structure at the Queens Plaza subway station, and that Ahern was obligated to meet or exceed its DBE participation goal for the Queens Plaza Project.  TOWER also knew that Ahern was going to use TOWER as the DBE contractor on the Queens Plaza Project to meet Ahern’s DBE participation goal.  In 2011, TOWER entered into a subcontract with Ahern to perform painting and blasting work on the Queens Plaza Project, which TOWER expected would be counted toward Ahern’s DBE participation goal for that project.
   
• In May and June 2011, TOWER and Spectrum memorialized two “consulting agreements” for painting and blasting work on the Brooklyn Bridge and Queens Plaza Projects.  The key terms of the consulting agreements between TOWER and Spectrum – including TOWER’s agreement to pay Spectrum 50% of all of its profits from the two projects, Spectrum’s agreement to provide project management support, and Spectrum’s agreement to furnish equipment to TOWER for the projects – were not formally disclosed in writing to Ahern, nor were they disclosed in any way to Skanska, NYC-DOT, or MTA.
   
• Consistent with the consulting agreements, TOWER requested that Spectrum provide project management support for the DBE work that TOWER was retained to perform on the Brooklyn Bridge and Queens Plaza Projects.
   
• In addition to the Spectrum employee who assisted TOWER in preparing the bid TOWER submitted to Ahern for its anticipated work as a DBE subcontractor on the Brooklyn Bridge project (the “Spectrum Manager), Spectrum had two other employees providing project management support to TOWER for the DBE work subcontracted to TOWER on the Brooklyn Bridge and Queens Plaza Projects: a superintendent (the “Spectrum Superintendent”) and a health and safety supervisor (the “Spectrum Safety Supervisor”).
   
• In documents that TOWER submitted to Ahern in 2010, TOWER identified the Spectrum Manager as a “Tower VP” or as a TOWER employee working on the Brooklyn Bridge Project.  And in documents TOWER submitted to Ahern in 2011 in connection with the Queens Plaza Project, TOWER identified the Spectrum Manager as a “Director” of TOWER.  In addition, the Spectrum Manager, the Spectrum Superintendent, and the Spectrum Safety Supervisor identified themselves to others working on the Brooklyn Bridge and Queens Plaza Projects as TOWER employees.
   
• In addition to informing Ahern that Spectrum would perform work on the Brooklyn Bridge and Queens Plaza projects, TOWER should have disclosed Spectrum’s work to the NYC-DOT and MTA DBE officers designated on the projects, and it should have sought clarification from Ahern regarding whether Ahern disclosed Spectrum’s involvement in accordance with Ahern’s obligations.

 

• TOWER should have proactively disclosed to the relevant DBE officer the details of its financial arrangement with Spectrum relative to the Brooklyn Bridge and Queens Plaza Projects, including that TOWER and Spectrum’s agreements relative to the projects included profit sharing and provisions for Spectrum to provide TOWER financing for TOWER’s performance of work on the projects.

Ms. Strauss praised the outstanding investigative work of the United States Department of Transportation Office of Inspector General, the New York City Department of Investigation, and the Inspector General of the Metropolitan Transportation Authority. 

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Mónica P. Folch and David J. Kennedy are in charge of this case.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that a jury returned a guilty verdict today against MEDGHYNE CALONGE, on one count of intentionally causing damage to a protected computer, and one count of accessing a protected computer and recklessly causing damage.  Both counts relate to CALONGE’s deletion of tens of thousands of human resources records of her former employer (“Employer-1”).  U.S. District Judge Gregory H. Woods presided over the six-day trial.

U.S. Attorney Audrey Strauss said: “As a unanimous jury found today, Medghyne Calonge intentionally and maliciously caused severe damage to the computers of her former employer.  Her actions wiped out information vitally important to the employer company, and cost the company money and time to repair.  Now Calonge awaits sentencing for her crimes.”

According to the Indictment and the evidence at trial:

In January 2019, CALONGE was hired by Employer-1, a Manhattan-based online provider of professional services, to serve as the head of human resources in their St. Petersburg, Florida, office.  On June 28, 2019, CALONGE was terminated for failing to meet the minimum requirements of her job after, among other things, she improperly downgraded a colleague’s access to a computer system following an argument with the colleague.   

While she was being terminated, and just before she was escorted from the building, CALONGE was observed by two employees of Employee-1 repeatedly hitting the delete key on her desktop computer.  Several hours later, CALONGE logged into a system (“System-1”) used by Employer‑1 to receive and manage applications for employment with the company, which the company had invested two years and over $100,000 to build.  During the next two days, CALONGE rampaged through System-1, deleting over 17,000 job applications and resumes, and leaving messages with profanities inside the system.  Ultimately, CALONGE completely destroyed all of Employer-1’s data in System-1.  Employer-1 subsequently spent over $100,000 to investigate and respond to the incident and to rebuild System-1.  To this day, Employer-1 has been unable to recover all of its data.  

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CALONGE, 41, of Tampa, Florida, was convicted of one count of intentionally damaging computers, which carries a maximum prison term of 10 years, and one count of recklessly damaging computers, which carries a maximum prison term of five years. 

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.

Ms. Strauss praised the outstanding work of the Federal Bureau of Investigation. 

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Timothy V. Capozzi and Louis A. Pellegrino are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced the unsealing of a Complaint charging MARTIN RUIZ with investment adviser fraud in connection with his fraudulent scheme to defraud investors using his investment advisory firm, Carter Bain Wealth Management (“CBWM”).  RUIZ was arrested yesterday morning and presented yesterday afternoon before Magistrate Judge Barbara C. Moses.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Martin Ruiz promised his elderly investment advisory clients safe investments but in fact stole his clients’ retirement savings and lined his own pockets.  Now, for this alleged violation of the law and of his fiduciary duty to his clients, Ruiz faces federal criminal charges.”

Special Agent-in-Charge Peter C. Fitzhugh said: “As alleged, with more than $8 million in misappropriated funds, Ruiz acted with impunity while building his own personal investments.  Ruiz allegedly padded his lavish lifestyle by defrauding investors, many of them elderly working-class retirees, out of their life savings.  No one should live their own version of ‘Lifestyles of the Rich and Famous’ by swindling others out of their hard-earned money.  HSI New York’s El Dorado Task Force worked closely with the United States Attorney’s Office for the Southern District of New York to see that Ruiz will now face the consequences of these alleged actions.”  

According to the allegations contained in the Complaint[1] unsealed yesterday in Manhattan federal court:

From at least in or about March 2011 through in or about the present, RUIZ induced multiple individual investment advisory clients of CBWM, many of whom are elderly, to retain RUIZ and CBWM to advise them on how they should invest their retirement savings.  While ostensibly acting in his fiduciary capacity as their investment adviser, RUIZ instead induced more than a dozen such clients to invest more than $10 million in an investment fund called RAM Fund through the purchase of limited partnership interests.  RUIZ did not disclose to those clients that RUIZ controlled RAM Fund and that he planned to misappropriate their funds.  

In fact, rather than invest the funds in legitimate investment projects and real estate, as he represented to clients, RUIZ misappropriated more than $8 million of client funds from the RAM Fund, transferred those funds through a series of entities RUIZ also controlled, and spent the vast majority of the funds on personal expenses, including the purchase of a home, rent payments on several apartments, and the payment of his personal credit card bills.  In so doing, he violated his fiduciary duty to act in his clients’ best interest and avoid self-dealing.

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RUIZ, 45, of New York, New York, and Santa Fe, New Mexico, is charged with one count of investment adviser fraud.  RUIZ faces 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 a defendant will be determined by the judge.

Ms. Strauss praised the investigative work of HSI.  Ms. Strauss also thanked the Securities & Exchange Commission, which brought a related civil action against RUIZ.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Kiersten A. Fletcher is in charge of the prosecution.

The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

 

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[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.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that JAIME SANTANA, a/k/a “Smiley,” a high-ranking member of Mara Salvatrucha, or MS-13, was sentenced by U.S. District Judge Vernon S. Broderick to 110 months in prison.  SANTANA previously pled guilty to participating in a racketeering conspiracy, and participating in a conspiracy to distribute and possess with intent to distribute methamphetamine and cocaine. 

U.S. Attorney Audrey Strauss said: “Jaime Santana, a leader of the L.A. Program of MS-13, trafficked in weapons and cocaine and helped plan a cross-border methamphetamine distribution network.  Santana was also party to an extortion in which he and others threatened to murder the victim.  Thanks to our partners at HSI and the NYPD, Santana was arrested, convicted, and has now been sentenced to prison for his crimes.”

According to the Indictment, other filings in this case, and statements during court proceedings:

SANTANA is a member of MS-13, a transnational racketeering enterprise that operates throughout North and Central America, including in El Salvador, Mexico, New York, California, Texas, Virginia, Tennessee, and North Carolina.  In order to enrich the enterprise, protect and expand its criminal operations, enforce discipline among its members, and retaliate against members of rival gangs, members and associates of MS-13 committed, conspired, attempted, and threatened to commit acts of violence, distributed and possessed with intent to distribute narcotics, including methamphetamine and cocaine, and obtained, possessed, and used firearms.

MS-13 is organized into chapters called “cliques.”  Groups of cliques, in turn, are aligned as “programs.”  Each program is governed by a group of senior gang leaders known as the “table.”  SANTANA is a high-ranking member of the table of the “L.A. Program” of MS-13.

In July and September 2019, SANTANA sold a 9mm handgun, a .40 caliber handgun, a .45 caliber handgun, boxes of ammunition, and cocaine to individuals working at the direction of law enforcement.

Furthermore, in the summer and fall of 2019, SANTANA was involved, with other high-ranking members of MS-13, in planning for the establishment of a methamphetamine distribution network that started in Mexico and operated throughout the United States, including North Carolina, New York, Virginia, and Tennessee.

In addition, in September 2019, SANTANA and other senior members of MS-13 conspired to extort another gang member, who was told that he either had to repay money or be “green lit” (i.e., killed) for introducing a “bad connection” who supplied poor quality narcotics to the gang.           

*                *                *

In addition to the prison term, Judge Broderick sentenced SANTANA, 41, of Galatin, Tennessee, to five years of supervised release.

Ms. Strauss praised the investigative work of Homeland Security Investigations and the New York City Police Department.

This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation.  OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach.  Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.

This case is being handled by the Office’s Violent & Organized Crime Unit.  Assistant United States Attorneys Michael D. Longyear, Justin V. Rodriguez, and Jacob Warren are in charge of the prosecution.

Ilan Graff, Attorney for the United States, Acting under Authority Conferred by 28 U.S.C. § 515, announced today the guilty plea of JEFFREY HASTINGS, the former chief executive officer and chairman of the board of directors of SAExploration Holdings, Inc. (“SAEX” or the “Company”), a publicly traded seismic data company based in Houston, Texas, for his role in a scheme to fraudulently and materially inflate the publicly reported revenue of SAEX by tens of millions of dollars, in 2015 and 2016, and also for misappropriating millions of dollars from the Company.  HASTINGS pled guilty before U.S. District Judge Gregory H. Woods to conspiracy to commit securities fraud and wire fraud offenses.

Ilan Graff, Attorney for the United States, said: “As he acknowledged in court today, Jeffrey Hastings schemed to inflate his company’s revenue, making it appear more profitable than it was.  Hastings then stole money from the company for his own use.  Hastings now awaits sentencing for his admitted fraud and deception.”

According to the allegations contained in the Superseding Information, the Superseding Indictment, and the Complaint filed in this case, and statements made during the plea proceeding:           

At all times relevant to the Information until August 2016, HASTINGS was the executive chairman of the board of directors of SAEX (the “Board”).  After August 2016, HASTINGS served as both the chairman of the Board and the chief executive officer (“CEO”) of SAEX until he separated from the company in August 2019.  SAEX was a publicly traded seismic data acquisition company headquartered in Houston, Texas, that traded under the symbol “SAEX” on the NASDAQ.  In May 2020, SAEX was delisted from the NASDAQ and, in December 2020, was taken private.  SAEX provided land- and marine-based seismic acquisition services, including program design, planning and permitting, camp services, survey, drilling, recording, and processing.  Seismic data is used by oil and gas companies to identify and analyze drilling prospects and maximize successful drilling.

From February 2015 through May 2019, HASTINGS, together with Brent Whiteley, the then chief financial officer and general counsel of SAEX, Michael Scott, the then executive vice president of operations at SAEX, and “CC-1,” the founder and at various times president, CEO, and chief operating officer of SAEX, devised and carried out a scheme to defraud SAEX’s shareholders, bondholders, and the investing public by artificially and materially inflating SAEX’s reported revenue by making it appear that Alaskan Seismic Ventures, LLC (“ASV”) was an independent and reliable source of tens of millions of dollars of revenue.

In February 2015, HASTINGS and Whiteley discussed finding a way for SAEX to take advantage of certain tax credits offered by the State of Alaska to seismic data library companies, to offset the costs of exploring for oil and gas in Alaska (the “Alaska Tax Credits”).  The Board of SAEX was opposed to operating its own data library company because of concerns about the ability to ensure payment to SAEX, including through the monetization of Alaska Tax Credits, among other reasons.  To avoid the appearance that SAEX was operating a data library company that licensed data to third parties, HASTINGS and Whiteley set up ASV, to purport to operate as an independent customer purchasing seismic data from SAEX and licensing it to third parties.  HASTINGS recruited an acquaintance to serve as the owner and sole employee of ASV.  In truth and in fact, and as hidden from investors, ASV was not independent and could not pay SAEX for its seismic data.

After setting up ASV, HASTINGS and Whiteley created and caused to be created a number of shell companies (the “Shell Companies”) for the purpose of secretly transferring funds from SAEX into ASV.  One of the Shell Companies, Global Equipment Solutions (“Global Equipment”), was purportedly an equipment rental company from which SAEX rented seismic acquisition equipment.  In truth and in fact, and as HASTINGS and his co-conspirators well knew, SAEX did not rent any equipment from Global Equipment and did not owe Global Equipment any money.  The co-conspirators took steps to make the payments from SAEX to Global Equipment appear legitimate to others at SAEX.  For example, Whiteley drafted a lease agreement between SAEX and Global Equipment, and Scott caused fake purchase orders to be created that purported to show expenses incurred by SAEX as a result of renting equipment from Global Equipment.

By the end of 2015, SAEX had recorded on its books approximately $12 million in payables to Global Equipment.  HASTINGS and his co-conspirators ultimately routed approximately $5.8 million of SAEX’s funds through Global Equipment and the other Shell Companies to ASV.  That money then went from ASV back to SAEX to pay outstanding receivables.  The fact that these funds belonged to and originated with SAEX was not disclosed to investors.  HASTINGS and his co-conspirators referred to this portion of the scheme as “round-tripping.”  In addition, HASTINGS and Whiteley then misappropriated more than $5 million of the funds that SAEX transferred to Global Equipment for their own use, including making payments to Scott and CC-1, among others.   

*                *                *

HASTINGS, 63, of Anchorage, Alaska, and British Columbia, Canada, pled guilty to one count of conspiracy to commit securities fraud, to make false statements in annual and quarterly SEC reports, and to make false statements to SAEX’s auditors, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit wire fraud, which carries a maximum sentence of five years in prison.  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.

HASTINGS is scheduled to be sentenced by Judge Woods on November 15, 2021, at 1:00 p.m. 

Whiteley and Scott have already pled guilty and await sentencing before Judge Woods.

Mr. Graff praised the investigative work of the Federal Bureau of Investigation.  He also thanked the Securities and Exchange Commission, which has filed a civil enforcement action against the defendant, for its assistance in the investigation.

The case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Christine I. Magdo, Gina Castellano, and Robert Boone are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that defendants JORGE NAVARRO and KRISTIAN RHEIN have pled guilty to their respective roles in the distribution of adulterated and misbranded drugs with the intent to defraud and mislead, in connection with the charges filed in United States v. Navarro et al., 20 Cr. 160 (MKV).  NAVARRO pled guilty today and RHEIN pled guilty on August 3, 2021, both before U.S. District Judge Mary Kay Vyskocil.  RHEIN will be sentenced by Judge Vyskocil on December 2, 2021, and NAVARRO will be sentenced by Judge Vyskocil on December 17, 2021.

Manhattan U.S. Attorney Audrey Strauss said: “Kristian Rhein and Jorge Navarro represent the supply side and the customer side of the market in performance enhancing substances that have corrupted much of the horse racing industry.  As he admitted today, Navarro, a licensed trainer and the purported ‘winner’ of major races across the world, was in fact a reckless fraudster whose veneer of success relied on the systematic abuse of the animals under his control.  Rhein previously admitted that he flouted his oath as a veterinarian to protect the animals under his care, choosing instead to pursue money through the sale and administration of unregulated substances used by trainers engaged in fraud and animal abuse.  These latest convictions demonstrate the continued commitment of this Office and our partners at the FBI to the investigation and prosecution of corruption, fraud, and endangerment at every level of the horse racing industry.”

According to the allegations contained in the Superseding Indictment, the Superseding Information charging RHEIN, 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, performance enhancing drug (“PED”) distributors, and others to manufacture, distribute, and receive adulterated and misbranded PEDs and 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 NAVARRO, 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, including RHEIN, who was the head veterinarian and owner of Empire Veterinary Group, profited from the sale and administration of these medically unnecessary, misbranded, and adulterated substances.

NAVARRO operated his doping scheme covertly, importing misbranded “clenbuterol” that he both used and distributed to others, avoiding explicit discussion of PEDs during telephone calls, and working with others to coordinate the administration of PEDs at times that racing officials would not detect such cheating.  Among the horses that NAVARRO trained and doped was XY Jet, a thoroughbred horse that won the 2019 Golden Shaheen race in Dubai.  Among NAVARRO’s preferred PEDs were various “blood building” drugs, which, when administered before intense physical exertion, can lead to cardiac issues or death.

Among the misbranded and adulterated PEDs promoted, sold, and administered by RHEIN were an illegally distributed prescription drug, Clenbuterol, used as a bronchodilator and the drug “SGF-1000,” which was compounded and manufactured in unregistered facilities and contained growth factors that the defendants knew to be undetectable through regular drug screens.  SGF-1000 was an intravenous drug promoted as, among other things, a vasodilator capable of promoting stamina, endurance, and lower heart rates in horses through the purported action of “growth factors” supposedly derived from sheep placenta.           

The horse “Maximum Security,” briefly considered the winner of the 2019 Kentucky Derby (though later disqualified), was among the horses that RHEIN assisted in doping.  On June 5, 2019, New Jersey racing regulators tested Maximum Security for performance enhancing drugs a short time after Maximum Security had received a shot of SGF-1000.  The testing occurred in advance of a race scheduled for June 16, 2019, in which Maximum Security competed and placed second.  On an intercepted call following that test, RHEIN asserted that Maximum Security would not test positive for the presence of the drug: “[t]hey don’t even have a test for it [SGF-1000] . . . There’s no test for it in America.”

Through their pleas, NAVARRO has agreed to the payment of restitution in the amount of $25,860,514, reflecting winnings obtained through his fraudulent doping scheme, and RHEIN has agreed to pay restitution in the amount of $729,716 in connection with fraud committed through a false billing practice related to RHEIN’s drug misbranding scheme.  RHEIN, and others working under RHEIN’s direction, created false billing records to be provided to horse owners that did not reflect the drugs that RHEIN and others had actually injected into racehorses under their “care.”  Through this false billing scheme, RHEIN attempted to conceal from potential investigators and horse owners the true nature and means of administration of the PEDs that he and others provided and administered.

*                *                *

Ms. Strauss 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.

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, Benet Kearney, and Anden Chow are in charge of the prosecution.                   

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[1] As to Navarro and Rhein’s codefendants, 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.

Audrey Strauss, the United States Attorney for the Southern District of New York, Jacqueline Maguire, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Miriam E. Rocah, Westchester County District Attorney, announced today the arrest of ROBERT POPE for persuading, inducing, enticing and coercing a 16-year-old minor to engage in sexual activity.   POPE was arrested yesterday morning and presented before U.S. Magistrate Judge Paul E. Davison in White Plains federal court.

Manhattan U.S. Attorney Audrey Strauss said:  “The alleged conduct in this case underlines the urgent need for law enforcement to continue its efforts to protect children from those who prey on them. We have zero tolerance for the exploitation of children and we will prosecute and punish those who engage in this conduct. Any individuals who may have relevant information concerning Robert Pope should please contact the FBI at 1-800-CALL-FBI.”

FBI Acting Assistant Director Jacqueline Maguire said:  "Adults who are entrusted with educating and instructing children usually have the child's best interest at heart. As we allege, Mr. Pope instead chose to abuse his position of authority as a baseball coach to coerce and entice a child into having sex with him. We believe there may be other victims who haven't yet come forward, and we're asking any potential victims and their parents or guardians to contact us at 1-800-CALL-FBI or online at tips.fbi.gov. Your information could help our investigation, and help us hold Mr. Pope accountable."

Westchester County District Attorney Miriam E. Rocah said: "As alleged in this case, Robert Pope abused his position of trust to take advantage of the most vulnerable for his own sexual gratification. We are proud to work together with the Southern District of New York, the New York FBI and the Mount Vernon Police Department to aggressively prosecute sexual abuse of minors and will use all of our collective resources to ensure sexual predators are stopped and held accountable.”

According to the Complaint[1] filed on August 9, 2021 in White Plains federal court and unsealed yesterday:

Between at least on or about September 1, 2020, up to and including at least on or about April 11, 2021, POPE communicated with a 16-year-old minor (“Victim-1”) by cellphone and persuaded Victim-1 to meet POPE in person in Westchester County, New York on more than one occasion to engage in sexual activities with POPE. 

On or about June 15, 2021, ROBERT POPE was charged in Westchester County, New York, with three counts of Criminal Sexual Act in violation of New York Penal Law 130.40(2).  

Ms. Strauss stated that the investigation is ongoing.  Ms. Strauss requests that any individuals who may have relevant information concerning ROBERT POPE contact the Federal Bureau of Investigation at 1-800-CALL-FBI (225-5324). 

*          *          *

POPE, 30, of  Mount Vernon, New York, is charged with one count of coercion and enticement, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life imprisonment.  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.

Ms. Strauss praised the efforts of the FBI, the Westchester County District Attorney’s Office, the Westchester County Safe Streets Task Force, and the Mount Vernon Police Department in connection with this investigation.  She added that the investigation is ongoing.

This case began as an investigation in Westchester County District Attorney’s Office by Assistant District Attorneys Marissa Morra Wynn and Christine Hatfield. The prosecution is being handled by the Office’s White Plains Division.  Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.  

 

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[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.

Audrey Strauss, United States Attorney for the Southern District of New York, announced today that SHENG-WEN CHENG, a/k/a “Justin Cheng,” a/k/a “Justin Jung,” was sentenced to 72 months in prison for multiple fraud schemes he perpetrated.  In particular, CHENG engaged in a scheme to fraudulently obtain over $7 million in Government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic.  CHENG also solicited and obtained investments in Alchemy Coin Technology Limited and related companies controlled by CHENG through materially false and misleading statements and omissions.  Finally, CHENG fraudulently obtained due diligence fees from dozens of start-up companies as part of an advance fee scheme.  CHENG was sentenced earlier today before U.S. District Judge Alison J. Nathan.

U.S. Attorney Audrey Strauss said: “Sheng-Wen Cheng fraudulently applied for over $7 million in government-guaranteed loans under programs designed to provide relief for financially struggling small businesses hurt by the COVID pandemic.  Further, Cheng committed securities fraud by lying to investors in his blockchain-based peer-to-peer lending platform, and wire fraud by engaging in an advance fee scheme.  Now Cheng has been sentenced to prison for his multitude of crimes.”

According to the Complaint, Information, and other documents filed in Manhattan federal court:

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  One source of relief provided by the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the SBA’s Paycheck Protection Program (“PPP”).  Pursuant to the CARES Act, the amount of PPP funds a business is eligible to receive is determined by the number of employees employed by the business and their average payroll costs.  The CARES Act also expanded the separate Economic Injury Disaster Loan (“EIDL”) Program, which provided small businesses with low-interest loans that can provide vital economic support to help overcome the temporary loss of revenue they are experiencing due to COVID-19.

CHENG, a Taiwanese national who entered the United States on a student visa, was a self-proclaimed “serial entrepreneur” who attended Pennsylvania State University (“Penn State”).  From at least in or about April 2020 through at least on or about August 13, 2020, CHENG used the identity of other individuals to submit online applications to the SBA and at least five financial institutions for a total of over $7 million in government-guaranteed loans through the SBA’s PPP and EIDL Program for several companies controlled by CHENG, namely Alchemy Finance, Inc., Alchemy Guarantor LLC d/b/a “Celer Offer,” Celeri Network, Inc., Celeri Treasury LLC, Wynston York LLC, and Neo Bellum Industries Inc. (collectively, the “Cheng Companies”).  In connection with these loan applications, CHENG represented, among other things, that other individuals were the sole owners of the Cheng Companies and that the Cheng Companies together had over 200 employees and paid a total of approximately $1.5 million in wages to those employees on a monthly basis.  In fact, however, the Cheng Companies appear to have had a total of no more than 14 employees. 

In order to support the false representations in the loan applications about the number of employees at and the wages paid by the Cheng Companies, CHENG submitted fraudulent and doctored tax records that were never actually filed with the IRS and payroll records containing the forged electronic signature of a payroll company employee.  CHENG also submitted a payroll summary for one of his companies that listed the names of more than 90 purported employees, several of which consisted of current and former athletes, artists, actors, and public figures.  For example, the list of purported employee names included a co-anchor on Good Morning America, a former National Football League player, and a prominent former Penn State football coach who is now deceased.

Based on the fraudulent PPP loan applications submitted by CHENG, a total of more than $3.7 million in PPP loans were approved for the Cheng Companies and approximately $2.8 million in PPP loan proceeds were deposited into bank accounts solely controlled by CHENG.  Instead of using the PPP loan proceeds for payroll costs, mortgage interest, rent, and/or utilities for the purported Cheng Companies as required by the PPP, CHENG transferred over $1 million abroad, withdrew approximately $360,000 in cash and/or cashier’s checks, and spent at least approximately $279,000 in PPP loan proceeds on personal expenses.  These personal expenses included the purchase of an 18-carat gold Rolex watch for approximately $40,000, rent and move-in fees for a $17,000 per month luxury condominium used by CHENG, approximately $50,000 of furnishings for the condominium, a portion of the purchase of a 2020 S560X4 Mercedes, and purchases totaling approximately $37,000 at Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin, and Yves Saint Laurent.

In addition to the COVID-19 pandemic loan fraud described above, from at least in or about 2017 through at least in or about 2019, CHENG committed securities fraud by soliciting and obtaining approximately $400,000 in investments in Alchemy Coin Technology Limited and related companies (“Alchemy Coin”) controlled by CHENG.  These investments were obtained through materially false and misleading statements and omissions regarding Alchemy Coin’s access to capital, use of investor proceeds, the product readiness of its purported blockchain-based peer-to-peer lending platform, and the registration of its tokens as part of an initial coin offering. 

Finally, from at least in or about 2018 through at least in or about 2019, CHENG committed wire fraud by fraudulently obtaining a total of approximately $380,000 in so-called “due diligence fees” from dozens of start-up companies as part of an advance fee scheme.  CHENG falsely told these companies seeking investors that, in exchange for a due diligence fee that was fully refundable, CHENG would perform due diligence on the companies and assess them for investments or otherwise assist them in securing funding.  However, CHENG had no interest in or financial ability to invest in any of the victim companies, did not return the purportedly refundable fees despite repeated requests from victims, and used the fees for personal expenses as opposed to performing any due diligence.  When CHENG was confronted by victims to return the fees after they realized that no investments were forthcoming, CHENG falsely told the victims that he did not have the fees and that a third-party due diligence company he had employed had stolen the fees.

*                *                *

CHENG, 25 of New York, New York, pled guilty on April 20, 2021, to one count of major fraud against the United States, one count of bank fraud, one count of securities fraud, and  one count of wire fraud. 

In addition to the prison term, CHENG was sentenced to three years of supervised release and ordered to forfeit luxury items seized in connection with his arrest, including a Mercedes, a Rolex watch, and a diamond engagement ring.  The amount of restitution to victims of the offense will be set at a later date.  CHENG also consented to removal from the United States upon his release from prison.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation, the Office of the Inspector General of the U.S. Small Business Administration, and the Internal Revenue Service Criminal Investigation.  Ms. Strauss also thanked the United States Securities and Exchange Commission, U.S. Customs and Border Protection, and the New York State Department of Labor for their assistance.

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.

Audrey Strauss, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, Special Agent in Charge of Homeland Security Investigations (“HSI”) in New York, and Dermot Shea, Police Commissioner of the City of New York (“NYPD”), announced the unsealing of an indictment today charging eight individuals with participating in a conspiracy to distribute crack cocaine in the vicinity of Times Square.  JOHNNY PEREZ, a/k/a “Ghost,” AARON STARKS, a/k/a “Duke,” SEKOU SIMPSON, a/k/a “Tre,” FRED JOHNSON, a/k/a “Trinny,” DAVON MIAL, a/k/a “Smooth,” and DONNELL BRUNS, a/k/a “Mac,” were arrested on Monday evening in the New York area, and will be presented today before U.S. Magistrate Judge Barbara Moses. FRAYVON YOUNG, a/k/a “Harlem” and ROBERT MASON remain at large. The case is assigned to United States District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, the defendants operated a veritable 24-hour open-air bazaar for the sale of crack cocaine in Times Square.  We recall the bad old days of a much seedier Times Square that was unwelcoming, and we are committed to working with our law enforcement partners to ensure that those days remain just a memory.”

HSI Special Agent in Charge Peter C. Fitzhugh said: “This crew gave new meaning to the slogan for New York City as the ‘city that never sleeps,’ by allegedly operating a 24-hour drug distribution ring.  Working in shifts nearly around the clock, they preyed on the addictions and vulnerabilities of others. HSI New York and our partners at the NYPD worked closely with the U.S. Attorney’s Office for the Southern District of New York to ensure that those arrested today will face the full weight of our justice system and be held accountable for the actions of their criminal enterprise.”  

NYPD Commissioner Dermot Shea said: “Our officers work night and day to keep every corner of New York free from the scourge of illegal narcotics, including in the crossroads of the world. Today’s federal indictment highlights the continuing commitment our NYPD investigators, prosecutors from the United States Attorney’s Office from the Southern District of New York and law enforcement partners have to that continuing mission.”

As alleged in the Indictment[1] unsealed today in Manhattan federal court and in other court papers and proceedings:

Between at least December 2019 and August 2021, the defendants sold crack cocaine nearly around-the-clock in the vicinity of 43rd Street and 8th Avenue in Manhattan, near Times Square.  One ‘shift’ arrived in the late morning and made sales through the late afternoon, and then other defendants arrived and sold through the evening and nighttime.  Although there was no set composition of defendants for the two shifts, defendant AARON STARKS was often present and overseeing the first shift, and defendant JOHNNY PEREZ was often present and overseeing the second shift.

An undercover law enforcement officer purchased quantities of crack cocaine from the defendants on dozens of occasions, including multiple purchases from each defendant.  Law enforcement surveillance showed nearly continuous sales from the late morning through the nighttime and shift changes.  In addition, surveillance video from the vicinity of 43rd Street and 8th Avenue showed the defendants conducting hundreds of hand-to-hand sales of crack cocaine. For example, during a period of 11 days in March and April 2021, the defendants conducted more than 650 hand-to-hand sales.  In January 2020, law enforcement officers arrested STARKS in the Times Square area and seized from him approximately 312 capsules of crack cocaine and 52 twists of crack cocaine.

*                *                *

PEREZ, 37, of the Bronx, New York, STARKS, 36, of the Bronx, SIMPSON, of Brooklyn, New York, JOHNSON, 43, of Manhattan, MIAL, 32, of the Bronx, YOUNG, 34, of the Bronx, MASON, 39, of the Bronx, and BRUNS, 42, of the Bronx, are each charged with one count of conspiracy to distribute and possess with intent to distribute 280 grams and more of mixtures and substances containing a detectable amount of crack cocaine.  That charge carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendants will be determined by a judge.

Ms. Strauss praised the outstanding investigative work of HSI and the NYPD.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Christy Slavik and Kedar S. Bhatia are in charge of the prosecution.

The charges in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Jacqueline Maguire, the Acting Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of JESUS CONCEPCION, a/k/a “Mr. C.,” for enticing four minor victims to engage in sexual activity, transporting those minor victims across state lines to engage in illegal sexual acts, and inducing one minor victim to produce child pornography.  CONCEPCION was arrested on August 7, 2021, in Charlotte, North Carolina, and was presented today in the Western District of North Carolina.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Jesus Concepcion abused his position as a teacher at a public school in the Bronx to engage in sexual relationships with several of his students.  Concepcion sexually exploited those students, who were minors, at the public school, in and around the Bronx, and in other states.  Together with our partners in the FBI, we will work tirelessly to ensure that anyone who engages in this type of conduct will be subject to the full force of the law.”

FBI Acting Assistant Director Jacqueline Maguire said: “Teachers serve as trusted figures to their students as they work to educate and prepare them for the future. As alleged, Mr. Concepcion egregiously breached that trust as he abused his position to coerce students – some as young as 12 years old – into having sex with him.  Parents deserve to send their children to school each day knowing they will be safe as they receive an education – and not be exploited and assaulted by a so-called educator who only sees students as his potential victims.”

According to the allegations contained in the Indictment filed on July 28, 2021, and unsealed today[1]:

CONCEPCION was a music teacher and orchestra instructor at a public charter middle school located in the Bronx, New York (“School-1”), from in or about 2000 up to and including in or about 2007.  CONCEPCION lured four of his students at School-1 into sexual relationships (“Minor Victim-1,” “Minor Victim-2,” “Minor Victim-3,” and “Minor Victim-4,” and together the “Minor Victims”).  The Minor Victims were as young as 12 years old at the time of the abuse.

From at least in or about 2002 through at least in or about 2007, CONCEPCION singled out the Minor Victims for personal attention.  He gave them money, clothing, jewelry, and other gifts, and he provided them with alcohol.  He told several of the Minor Victims that they were in romantic relationships with him and provided each of the Minor Victims with a cellphone so that they could communicate with him without their parents’ knowledge. CONCEPCION used the cellphones he provided and other devices to maintain his “relationships” with the Minor Victims and to arrange sexual encounters.

CONCEPCION engaged in sexual intercourse with the Minor Victims in various locations, including in School-1’s music room, in the back room of School-1’s auditorium, in his car, at motels, at his residences, and, after some of the Minor Victims left School-1, at their out-of-state high schools.  On numerous occasions, CONCEPCION brought the Minor Victims from School-1 or other locations in the Bronx to motels in New Jersey.  On at least one occasion, CONCEPCION had sexual intercourse with Minor Victim-3 in a New Jersey motel against her will.

CONCEPCION also instructed Minor Victim-3 to take naked photographs of herself and to send them to him.  CONCEPCION directed Minor Victim-3 how to pose, to touch herself in a sexually explicit manner, and to photograph her genitalia. CONCEPCION also attempted to induce another one of the Minor Victims, Minor Victim-4, to take sexually explicit photographs. When Minor Victim-4 resisted, CONCEPCION showed Minor Victim-4 the photographs sent to him by Minor Victim-3 and told Minor Victim-4 that these were the sort of photographs CONCEPCION sought.

*                *                *

CONCEPCION, 48, of Simpsonville, South Carolina, is charged with four counts of enticing a minor to engage in illegal sexual activity and four counts of transporting a minor to engage in illegal sexual activity, each of which carry a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  CONCEPCION also is charged with inducing a minor to produce child pornography, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of life in prison. 

The statutory minimum and maximum 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.

Ms. Strauss praised the efforts of FBI and the New York City Police Department (“NYPD”) for their outstanding work in this matter, particularly the FBI-NYPD New York Child Exploitation and Human Trafficking Task Force.  She also thanked the FBI’s Charlotte Office and U.S. Customs and Border Protection for their assistance.  She added that the investigation is ongoing.             

Any individuals who believe they have information that may be relevant to this investigation should contact FBI at 1-800-CALL-FBI or https://tips.fbi.gov/.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Elinor L. Tarlow and Camille L. Fletcher are in charge of the prosecution. 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that a jury returned a guilty verdict Friday against KASHEEN SAMUELS, a/k/a “Kash,” a/k/a “JR,” on five counts, including charges relating to the felony murder of Andrew Torres during an armed robbery, as well as other charges relating to robbery, robbery conspiracy, and narcotics conspiracy.  U.S. District Judge Edgardo Ramos presided over the 9-day trial.

U.S. Attorney Audrey Strauss said: “Kasheen Samuels planned and carried out dangerous gunpoint robberies for years.  He spread addiction in our communities by selling crack cocaine and heroin.  A young man was shot and killed during one of his robberies, and Kasheen Samuels now stands convicted of that murder by a unanimous jury.  We will continue our work with law enforcement partners to vigorously prosecute gun violence and drug trafficking crimes, and to pursue justice for the victims of violent crimes.”

According to the Superseding Indictment and the evidence at trial:

In June 2017, Kasheen Samuels and others conspired to rob a man of money and jewelry in the Bronx, New York and Middlesex County, New Jersey. The robbery took place in a New Jersey hotel, during which a young man was shot and killed. SAMUELS assisted in planning the robbery, provided a gun that was used during the robbery, and obtained jewelry stolen from one of the victims.

In addition, during April 2016, SAMUELS and others conspired to steal drug-trafficking proceeds near an autobody shop in the Bronx.  SAMUELS also conspired to distribute large quantities of heroin and crack cocaine in the Bronx and Burlington, Vermont, from 2015 to 2018. 

*                      *                      *

SAMUELS, 34, was convicted of conspiracy to commit robbery in April 2016, which carries a maximum prison term of twenty years; conspiracy to commit robbery in June 2017, which carries a maximum prison term of twenty years; robbery on June 21, 2017, which carries a maximum prison term of twenty years; murder through the use of a firearm on June 21, 2017, which carries a mandatory consecutive prison term of five years and a maximum prison term of life; and conspiring to distribute and possess with intent to distribute crack cocaine and heroin, which carries a mandatory minimum prison term of ten years and a maximum prison term of life.  SAMUELS was acquitted of one count of attempted robbery in April 2016 and one count of using a firearm in connection with that attempted robbery.

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.

Ms. Strauss praised the outstanding work of the Special Agents of the U.S. Attorney’s Office.  Ms. Strauss also thanked the Middlesex County Prosecutor’s Office of New Jersey, the Drug Enforcement Administration, the Federal Bureau of Investigation, the New York State Police, the Burlington Police Department, the New York City Police Department, and the Yonkers Police Department for their assistance.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jessica K. Fender, Mollie Bracewell, Christopher Brumwell, and Jason Swergold, and paralegal specialist Christopher Sykes, are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, Jacqueline Maguire, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, Police Commissioner of the City of New York (“NYPD”), announced the arrests of PHYO HEIN HTUT and YE HEIN ZAW for conspiracy to assault and make a violent attack upon Myanmar’s Permanent Representative to the United Nations.  HTUT and ZAW were charged in two separate complaints and will be presented later today in the U.S. District Court in White Plains before U.S. Magistrate Judge Andrew E. Krause.

U.S. Attorney Audrey Strauss said: “As alleged, Phyo Hein Htut and Ye Hein Zaw plotted to seriously injure or kill Myanmar’s ambassador to the United Nations in a planned attack on a foreign official that was to take place on American soil.  We commend the tireless work of our law enforcement partners at all levels of government to ensure the safety of foreign diplomats and officials.”

FBI Acting Assistant Director Jacqueline Maguire said: “Time was of the essence when we received information about a threat to Myanmar’s Ambassador to the United Nations.  I would like to thank our Westchester Safe Streets Task Force and each of our partner law enforcement agencies that worked quickly and diligently to track down the men allegedly hired in this plot to harm and potentially kill a foreign diplomat on U.S. soil.  Our laws apply to everyone in our country, and these men will now face the consequences of allegedly breaking those laws.”  

NYPD Commissioner Dermot Shea said: “As alleged in today’s federal charges, these defendants reached across borders and oceans in designing a violent plot against an international leader on United States soil.  But our NYPD investigators and prosecutors from the United States Attorney’s Office in the Southern District of New York worked relentlessly with our law enforcement partners to bring them to justice before any harm could be done.”     

According to the allegations in the two Complaints filed today[1]:

Between at least in or about July 2021 through at least on or about August 5, 2021, HTUT and ZAW, citizens of Myanmar currently residing in New York, conspired to injure or kill Myanmar’s Permanent Representative to the United Nations (the “Ambassador”).  During the conspiracy, HTUT communicated with an arms dealer in Thailand (the “Arms Dealer”) who sells weapons to the Burmese military, which overthrew Myanmar’s civilian government in or about February 2021.  In the course of those conversations, HTUT and the Arms Dealer agreed on a plan in which HTUT would hire attackers to hurt the Ambassador in an attempt to force the Ambassador to step down from his post.  If the Ambassador did not step down, then the Arms Dealer proposed that the attackers hired by HTUT would kill the Ambassador.

Shortly after agreeing on the plan, ZAW contacted HTUT by cellphone and transferred approximately $4,000 to HTUT through a money transfer app as an advance payment on the plot to attack the Ambassador.  Later, during a recorded phone conversation with ZAW, HTUT discussed how the planned attackers would require an additional $1,000 to conduct the attack on the Ambassador in Westchester County, and for an additional payment the attackers could, in substance, “finish off” the Ambassador.  In response, ZAW agreed, in substance, to pay the additional $1,000 and to try to obtain the additional money.

HTUT, 28, and ZAW, 20, both citizens of Myanmar, are each charged in separate complaints with one count of conspiracy to assault and make a violent attack upon a foreign official, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the FBI’s Westchester Safe Streets Task Force, which comprises special agents and task force officers from the FBI, NYPD, United States Probation Office, New York State Police, New York State Department of Corrections and Community Supervision, Westchester County Department of Public Safety, Westchester County District Attorney’s Office, Putnam County Sheriff’s Office, and the police departments of Yonkers, Mount Vernon, New Rochelle, Greenburgh, White Plains, Peekskill, Ramapo, and Clarkstown.  Ms. Strauss also thanked the Pelham Manor Police Department and the U.S. Department of State’s Diplomatic Security Service for their assistance in the investigation.

Ms. Strauss said that the investigation is ongoing, and asked any individuals with relevant information to contact the FBI at (800)-CALL-FBI.

The prosecution is being handled by the Office’s White Plains Division.  Assistant United States Attorney Nicholas S. Bradley is in charge of the prosecution.

The charges in the Complaints are merely accusations and the defendants are presumed innocent unless and until proven guilty.

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[1] As the introductory phrase signifies, the entirety of the texts of the Complaints and the description of the Complaints set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, Jacqueline Maguire, the Acting Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Thomas Fattorusso, Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that TOUREY AHMED RUFAI, a/k/a “Joe Thompson,” a/k/a “Joe Terry,” a/k/a “Rufai A Tourey,” a/k/a “Ahmed Rufai Tourey,” who was previously sentenced to four years in prison and fled to the Republic of Ghana (“Ghana”) prior to surrendering to serve his sentence, was arrested in Ghana on April 14, 2021, and extradited to the United States earlier today to serve his sentence.  RUFAI’s sentence of four years was imposed by U.S. District Judge Denise L. Cote on April 12, 2019, in connection with RUFAI’s participation in a fraud scheme based in Ghana involving the theft of over $10 million through business email compromises and romance scams that targeted elderly victims from at least 2014 through 2018.

Manhattan U.S. Attorney Audrey Strauss said:  “When a defendant released on bail like Tourey Ahmed Rufai cuts his ankle bracelet and flees the country, it is an affront to the victims of his crimes and the Court.  Thanks to the extraordinary work of the FBI, IRS-CI, and our law enforcement partners both in the United States and in Ghana, this fugitive was apprehended in Ghana and has been returned to the United States to serve his four-year sentence.”  

FBI Acting Assistant Director Jacqueline Maguire said:  “Justice will now rightfully be delivered – both to Mr. Rufai as he serves his prison sentence, and to the innocent victims from whom he stole millions of dollars. When Mr. Rufai decided to cut off his ankle bracelet and flee the United States, he did not understand the FBI’s ability to find fugitives in foreign nations through our extraordinary international law enforcement partnerships. We thank everyone involved, and especially our IRS-CI colleagues and our Ghanaian partners, in ensuring Mr. Rufai will be held accountable for his crimes.”

IRS-CI Acting Special Agent in Charge Thomas Fattorusso said: “This extradition reflects that despite his best efforts, Tourey Ahmed Rufai could not outrun justice, even after two years on the run, and by fleeing to another continent.  Tourey Ahmed Rufai perpetrated an elaborate scheme driven by insatiable greed and a blatant disregard for the tremendous damage inflicted on innocent victims.  He will now rightfully serve out the prison term as originally handed down.”

According to court filings in Manhattan Federal Court:

Between 2014 and 2018, RUFAI, a Ghanaian national who was residing in the Bronx, New York, was a member of a criminal enterprise (the “Enterprise”) based in Ghana that was involved in defrauding more than 100 American businesses and individuals of more than $10 million through business email compromises and romance scams.  RUFAI and his co-conspirators received or otherwise directed the receipt of millions of dollars in fraud proceeds from victims of the Enterprise in bank accounts that they controlled in the Bronx, New York.  Some of these bank accounts were opened using fake names, stolen identities, or shell companies in order to avoid detection and hide the true identities of the members of the Enterprise controlling those accounts.  Once the defendants received the fraud proceeds in bank accounts under their control, the defendants withdrew, transported, and laundered those fraud proceeds to other members of the Enterprise, including those located in Ghana.     

RUFAI was released on bail shortly after his arrest on January 9, 2018, on conditions including a $150,000 bond co-signed by three individuals, surrender of all travel documents, and home detention with electronic monitoring through an ankle bracelet.  At his sentencing on April 12, 2019, RUFAI was sentenced to four years in prison and ordered to self-surrender to prison on May 24, 2019.  Then, on May 12, 2019, 12 days prior to his surrender date, U.S. Pretrial Services learned that the defendant’s ankle bracelet had been removed and that the defendant had fled.  A bench warrant was thereafter issued for the defendant’s arrest.

On April 14, 2021, after the defendant’s bond was forfeited, the defendant was arrested in Ghana pending his extradition to the United States to serve his sentence.  

*                *                *

RUFAI, 33, of the Bronx, New York, pled guilty to conspiracy to commit wire fraud on  January 9, 2019.  In addition to a prison term of four years, he was also sentenced to three years of supervised release and ordered to forfeit $109,868.61 and pay restitution of $320,449.97 to victims. 

Ms. Strauss praised the outstanding investigative work of the FBI and IRS-CI in locating RUFAI in Ghana so that he could be arrested by Ghanaian law enforcement.  Ms. Strauss also thanked the FBI Legal Attaché in Accra, Ghana, U.S. Customs and Border Protection, the Department of Justice’s Office of International Affairs of the Department’s Criminal Division, the U.S. Marshals Service, Ghana’s Economic and Organised Crime Office, Interpol - Ghana Police Service’s Criminal Investigative Division, Ghana National Security, and the Ministry of Justice & Attorney General’s Office of Ghana, for their assistance in the extradition of RUFAI to the United States.

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.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that a jury returned a guilty verdict yesterday against SYDNEY SCALES, a/k/a “Moe Black,” a/k/a “Sid,” on five counts in a Superseding Indictment, including charges of murder-for-hire conspiracy, narcotics conspiracy, a firearms offense, and two counts of distributing crack cocaine.  SCALES is scheduled to be sentenced on November 18, 2021, by U.S. District Judge Jed S. Rakoff, who presided over the 11-day trial. 

U.S. Attorney Audrey Strauss said: “Sydney Scales was the leader of a violent drug operation that peddled drugs and brought guns and violence to our streets.  Scales 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.  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 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 compensate another individual in return for locating and killing at least one rival drug dealer. 

*                      *                      *

SCALES, 42, was convicted on five counts: (1) conspiring to distribute and possess with intent to distribute crack cocaine, powder cocaine, heroin, fentanyl, and marijuana, which carries a mandatory minimum prison term of 10 years and a maximum prison term of life; (2) murder-for-hire conspiracy, which carries a maximum prison term of 10 years; (3) using and carrying firearms during, and possessing firearms in furtherance of, the narcotics conspiracy, which carries a mandatory consecutive prison term of 10 years and a maximum prison term of life; and (4) two counts of distribution and possession with intent to distribute crack cocaine, each of which carries a maximum prison term of 20 years.  SCALES was acquitted of one count of murder in furtherance of drug trafficking and one count of murder using a firearm.

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.

Ms. Strauss praised the outstanding investigative work of 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 United States Attorneys Frank Balsamello, Mathew Andrews, Andrew K. Chan, Sarah Krissoff, and Gina Castellano, and paralegal specialist Claudia Hernandez, are in charge of the prosecution.            

Audrey Strauss, 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”), pled guilty today in Manhattan federal court in connection with his years of corrupt assistance to a criminal enterprise known as La Organización de Narcotraficantes Unidos (“La ONU”), including his participation in the May 9, 2007, murder of Anthony Castro-Carrillo in Carolina, Puerto Rico.  U.S. District Judge Jesse M. Furman accepted the defendant’s guilty plea.

U.S. Attorney Audrey Strauss said: “William Vazquez-Baez perverted his official position for personal gain, and in so doing brought deadly violence into the homes of the very people he was sworn to protect.  Today’s plea represents a milestone in holding Vazquez-Baez responsible for the cold-blooded, murderous violence he wrought.”

According to the allegations in the Information and other filings and statements made in court:

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 shipped thousands of kilograms of cocaine from Puerto Rico to New York, including cocaine that was 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.           

*                *                *

VAZQUEZ-BAEZ, 52, pled guilty to one count of racketeering conspiracy, in violation of 18 U.S.C. § 1962(d), which carries a maximum penalty of 20 years in prison, and one count of conspiracy to commit murder for hire, in violation of 18 U.S.C. § 1958, which carries a maximum penalty of 10 years in prison.  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.

VAZQUEZ-BAEZ is scheduled to be sentenced before Judge Furman on December 2, 2021, at 3:00 p.m.

Ms. Strauss 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.  Ms. Strauss 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 Lara Pomerantz, Justin Rodriguez, and Andrew Thomas are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that SALLY SPINOSA pled guilty in Manhattan federal court to one count of theft of public money related to her false application for benefits related to the attack on New York on September 11, 2001.  SPINOSA pled guilty before U.S. District Judge Paul A. Engelmayer.

U.S. Attorney Audrey Strauss said:  “As she has now admitted, Sally Spinosa stole money for programs intended to benefit the brave men and women of the NYPD, and first-responders across the city, who were injured in the rescue and recovery efforts following September 11, 2001.  She did so by repeatedly lying about the time she spent in the rescue and recovery effort, and will now face the consequences of such brazen lies.”

According to the allegations in the Complaint, court filings, and statements during court proceedings:

Following the attacks on New York and Washington, D.C., on September 11, 2001, Congress created certain programs to provide monetary compensation and medical treatment for victims of the attacks.  Specifically, Congress created the September 11th Victim Compensation Fund (the “VCF”) to provide compensation for any individual who suffered physical harm or was killed as a result of either the September 11th attacks or the debris removal and recovery efforts that took place in the immediate aftermath of the attacks.  Congress also created the World Trade Center Health Program (“WTCHP”) to provide, among other things, monitoring and medical treatment benefits for individuals who have or may develop health conditions due to exposure at disaster or recovery sites tied to the September 11th attacks.  Both the VCF and the WTCHP are funded by Congress.  An individual can be deemed eligible for a VCF award either by submitting medical documents and proof-of-presence documents directly to the VCF, or by going through the WTCHP’s process for having a medical condition certified.

SALLY SPINOSA served as an NYPD officer from in or about July 1986 until July 2019, and was a sergeant in the investigations unit of the NYPD’s Patrol Services Bureau of Staten Island (the “Staten Island Investigations Unit”) on September 11, 2001.  In 2010, SPINOSA participated in a screening interview with the WTCHP in which she falsely stated that she worked for hundreds of hours at the Fresh Kills Landfill in Staten Island, New York (the “Landfill”), from September 2001 to June 2002.  Similarly, in 2014, SPINOSA applied for a monetary award from the VCF, falsely claiming that she was at the Landfill for two hours each day for 62 straight days from September 20, 2001, to November 20, 2001.  In support of her application, SPINOSA submitted proof-of-presence documents, including an affidavit purportedly signed by one of her supervisors at the Staten Island Investigations Unit (“Officer-1”) stating that Officer-1 frequently visited the Landfill with SPINOSA to supervise subordinates (the “Officer-1 Affidavit”).

However, contrary to SPINOSA’s representations to the WTCHP and the VCF, in fact SPINOSA spent little to no time at the Landfill.  Indeed, during much of the time SPINOSA claimed to be working at the Landfill, SPINOSA was pregnant and doing limited work outside the Staten Island Investigations Unit’s offices, or was out of the office entirely on parental leave. Moreover, the Officer-1 Affidavit that SPINOSA submitted in support of her VCF application was fraudulent and was never signed by Officer-1.  

Nevertheless, and based on her false and fraudulent misrepresentations, in or around 2017 the WTCHP granted her benefits.  The WTCHP has since paid for certain medical visits and prescription drugs for SPINOSA.  While SPINOSA’s original fraudulent application to the VCF was denied in 2014, she reapplied in 2017 and 2018 relying on the same false and fraudulent information.  SPINOSA’s VCF claim remains pending.

*                *                *

SPINOSA, 55, of Freehold, New Jersey, pled guilty to one count of theft of public money, which carries a maximum penalty of 10 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as the defendant’s sentence will be determined by the judge.

SPINOSA is scheduled to be sentenced by Judge Engelmayer on December 1, 2021, at 10:30 a.m.

Ms. Strauss praised the investigative work of the NYPD’s Internal Affairs Bureau and DOJ-OIG.

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Kedar S. Bhatia and Catherine E. Ghosh are in charge of the prosecution.

Deputy Attorney General Lisa O. Monaco joined Audrey Strauss, the United States Attorney for the Southern District of New York, John B. DeVito, Special Agent in Charge of the New York Field Division of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Dermot Shea, Police Commissioner for the City of New York (“NYPD”), for the announcement today of a third superseding indictment charging JAMES THOMAS, a/k/a “Spazz,” DUVAUGHN WILSON, a/k/a “Dupree,” COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,” KEN ALEXANDER, a/k/a “Ryu,” ARGAM TAJ, a/k/a “Sour,” SAMUEL TAJ, a/k/a “Sosa,” CHRISTOPHER MACHADO, a/k/a “Chris Elite,” HARLIE RAMOS, a/k/a “White Girl,” and JAMEL THOMAS, a/k/a “Mel,” with conspiracy to commit gun trafficking and gun trafficking, in connection with their involvement in a scheme to illegally transport firearms from Georgia for resale to residents of New York.  THOMAS, WILSON, and SCHLOSS were also charged with interstate travel with intent to engage in gun trafficking.  This case is assigned to United States District Judge Sidney H. Stein.

JAMEL THOMAS and ARGAM TAJ were arrested this morning in SDNY and will be presented before U.S. Magistrate Judge Robert W. Lehrburger later today.  KEN ALEXANDER was arrested this morning in the District of Massachusetts and will be presented before a magistrate judge in Boston later today.  WILSON, SCHLOSS, and JAMES THOMAS were previously charged; SCHLOSS and JAMES THOMAS are currently in custody.  HARLIE RAMOS, SAMUEL TAJ, and CHRISTOPHER MACHADO remain at large.

Manhattan U.S. Attorney Audrey Strauss said: “Today’s arrests shut down the alleged gun pipeline of these nine defendants.  These arrests should also send a message to anyone who is thinking about illegally selling guns to New Yorkers or illegally bringing guns to New York: We and our law enforcement partners are watching.  And we will prosecute gun traffickers to the fullest extent of the law.” 

ATF Special Agent in Charge John B. DeVito said: “The individuals named in the indictment are alleged to have participated in a trafficking scheme which flooded our New York City Streets with illegal firearms. Combatting firearms trafficking lies at the heart of ATF’s strategy to stop violent gun crime.  Exploitation of Crime Gun Intelligence along with effective collaboration with our law enforcement partners will allow us to disrupt and dismantle groups such as this that in turn fuel the violence in our communities.  I would like to thank the New York Police Department for their partnership on this case and the United States Attorney’s Office for their leadership.”

Police Commissioner Dermot Shea said: “The NYPD continues to work closely with our law enforcement partners to drive down gun violence and stop the trafficking of illegal firearms in New York City. I commend the work of the investigators and prosecutors whose hard work resulted in these arrests, firearms seizures, and indictment.”

According to the allegations in the Superseding Indictment unsealed today in Manhattan federal court:[1]

From at least in or around August 2020 up to and including April 2021, the defendants used Georgia resident DUVAUGHN WILSON, a/k/a “Dupree,” as a straw purchaser to buy at least 87 firearms from at least six federal firearms licensees (“FFLs”) in Georgia.  Over the course of the scheme, during which WILSON completed approximately 30 different transactions, WILSON attested that he was the true purchaser of the firearms, when in fact he was buying the guns on behalf of the defendants, who in turn illegally resold many of the guns to others.

Prior to purchases, the defendants coordinated with WILSON to place orders for specific firearms and pay for the weapons using cash, mobile banking applications, and through wire payments.  When communicating about the firearms, the defendants used coded language, referring to the weapons as “tvs,” “knocks,” and “situations.”  In some instances, the defendants referred to the caliber or model of a firearm by referencing the jersey numbers of famous athletes.

After purchasing the weapons, WILSON transferred the firearms to defendants JAMES THOMAS, a/k/a “Spazz,” COURTNEY SCHLOSS, a/k/a “Bway” a/k/a “Balenci,” and others who (i) sold some of the guns in Georgia and (ii) transported other firearms, primarily by bus, to New York for resale.  In many instances, the guns were transferred to members of the Brooklyn-based “Blixky Gang” – a group composed primarily of aspiring rappers.  Some of these guns later appeared in music videos filmed by members of the Blixky Gang.  The videos, which include some of the defendants charged today, show Blixky Gang members brandishing loaded firearms and displaying stacks of cash.

On some occasions, law enforcement successfully interdicted firearms being transported by the defendants before they reached New York.  For example, in November 2020, law enforcement in South Carolina stopped a bus in Wellford, South Carolina, from which they seized five firearms, four pistol magazines, a high capacity .40 caliber magazine, and a nine-millimeter drum magazine – all of which were being transported by the defendants in a single backpack.

Law enforcement in New York City seized other firearms purchased in Georgia by WILSON.  On at least two occasions, in the wake of violent crimes, the NYPD seized firearms trafficked to New York as part of this scheme.  As alleged, in February 2021, the NYPD seized a gun that WILSON had bought after a fleeing suspect discharged it at responding officers in the Bronx.  And in April 2021, following a shooting in the Bronx, the NYPD seized another pistol purchased by WILSON.

To date, law enforcement authorities across numerous jurisdictions have recovered a total of 18 firearms purchased by WILSON in the course of the scheme.

A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below.  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.

Ms. Strauss praised the outstanding investigative work of the ATF and the New York City Police Department.  Ms. Strauss thanked Lisa O. Monaco, the Deputy Attorney General of the United States, for the Department of Justice’s support and leadership in the area of gun trafficking.  Ms. Strauss also thanked local law enforcement partners as well as those in Georgia, Virginia, Pennsylvania, and South Carolina, including the ATF’s Greenville Field Office, Boston Field Division, and Atlanta Field Division; the Manhattan District Attorney’s Office; the New York/New Jersey Regional Fugitive Task Force; the Duncan Police Department, Wellford Police Department, and Spartanburg County Sheriff’s Office in South Carolina; the Clayton County Sherriff’s Office in Georgia; the Rockingham County Sherriff’s Office and Virginia State Police in Virginia; the Pennsylvania State Police; the United States Marshals Service; and the United States Attorney’s Offices in the Eastern District of New York, the Northern District of Georgia, the District of South Carolina, and the District of Massachusetts.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Ashley C. Nicolas and Matthew J. King are in charge of the prosecution.

The charges in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.

Count

Charge

Defendants

Max. Penalty

1

Conspiracy to Commit (i) Gun Trafficking, and (ii) Illegal Transportation or Receipt in State of Residency of Firearm Purchased or Acquired Outside of State of Residency

JAMES THOMAS, a/k/a “Spazz,”

 

DUVAUGHN WILSON,

 a/k/a “Dupree,”

 

COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,”

 

KEN ALEXANDER, a/k/a “Ryu,”

 

ARGAM TAJ, a/k/a “Sour,”

 

 SAMUEL TAJ, a/k/a “Sosa,”

 

CHRISTOPHER MACHADO, a/k/a “Chris Elite,”

 

HARLIE RAMOS, a/k/a “White Girl,”

 

JAMEL THOMAS, a/k/a “Mel”

 

Five years

2

Gun Trafficking

JAMES THOMAS, a/k/a “Spazz,”

 

DUVAUGHN WILSON,

 a/k/a “Dupree,”

 

COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,”

 

KEN ALEXANDER, a/k/a “Ryu,”

 

ARGAM TAJ, a/k/a “Sour,”

 

 SAMUEL TAJ, a/k/a “Sosa,”

 

CHRISTOPHER MACHADO, a/k/a “Chris Elite,”

 

HARLIE RAMOS, a/k/a “White Girl,”

 

JAMEL THOMAS, a/k/a “Mel”

Five years

3

Interstate Travel With Intent to Engage in Gun Trafficking

JAMES THOMAS, a/k/a “Spazz,”

 

DUVAUGHN WILSON,

 a/k/a “Dupree,”

 

COURTNEY SCHLOSS, a/k/a “Bway,” a/k/a “Balenci,”

10 years

 

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James C. Lee, Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that Bank of N.T. Butterfield & Son Limited (“BUTTERFIELD”) entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office and agreed to pay $5.6 million to the United States for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from 2001 through 2013.  The NPA was based on BUTTERFIELD’s extraordinary cooperation, including its efforts in providing 386 client files for non-compliant U.S. taxpayer-clients, and provides that BUTTERFIELD will not be criminally prosecuted.  The NPA requires BUTTERFIELD to forfeit $4.896 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $704,000 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by BUTTERFIELD’s U.S. taxpayer-clients.

Manhattan U.S. Attorney Audrey Strauss said: “Butterfield admits to helping its clients conceal their ownership of foreign bank accounts to avoid their U.S. tax obligations.  Butterfield allowed its U.S. clients to use sham entities that assisted those U.S. clients in funneling money between U.S.- and Cayman Islands-based accounts.  The resolution of this matter through a non-prosecution agreement, along with forfeiture and restitution, reflects Butterfield’s cooperation in our investigation and demonstrates that cooperation, including assistance in providing U.S. taxpayer client files, has tangible benefits.  We will continue to pursue financial services firms around the world that help their clients evade U.S. taxes.”

Acting Deputy Assistant Attorney General Stuart M. Goldberg said: “As part of the resolution announced today, Butterfield has facilitated the production of approximately 386 unredacted client files.  Taxpayers contemplating hiding money offshore and those who would facilitate their fraud should take note – nothing remains hidden forever.”

IRS-CI Chief James C. Lee said: “As a result of the successful resolution of this investigation, Butterfield has agreed to turn over account files relating to U.S. taxpayer-clients who maintained undeclared assets overseas. This agreement marks yet another significant step forward in combating offshore tax evasion.  Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted. It’s not a matter of ‘if,’ it’s a matter of ‘when.’”

As part of the NPA, BUTTERFIELD admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct.  Specifically, BUTTERFIELD admitted that it knew or should have known certain U.S. taxpayers were using their BUTTERFIELD accounts to evade their U.S. tax obligations, in violation of U.S. law.  BUTTERFIELD acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by: (i) maintaining undeclared accounts for U.S. taxpayer-clients that were held by sham entities – structures that had no legitimate business purpose – even though Bank personnel knew, or should have known, that the entities were being used to conceal the identities of the true account owners; and (ii) opening accounts and facilitating the transfer of funds for U.S. taxpayer-clients despite obvious red flags that the U.S. clients were using the accounts to maintain undeclared assets or commit tax evasion.

The NPA recognizes that, in 2013, BUTTERFIELD implemented a series of remedial measures to stop assisting U.S. taxpayers evading federal income taxes.  The NPA further recognizes BUTTERFIELD’s cooperation, including its efforts to facilitate the production of approximately 386 client files for non-compliant U.S. taxpayers, which included the identities of those U.S. taxpayers.

As part of the NPA, BUTTERFIELD has agreed to forfeit $4.896 million to the United States, representing the gross revenues from services that it provided to U.S. taxpayers with undeclared foreign bank accounts from 2001 through 2013.  In connection with this forfeiture, BUTTERFIELD has agreed not to contest a civil forfeiture action filed by the United States.

The NPA requires BUTTERFIELD to continue to cooperate with the United States for at least three years from the date of the agreement.  In the event that BUTTERFIELD violates the NPA, the U.S. Attorney’s Office may prosecute BUTTERFIELD.

Ms. Strauss thanked the IRS for its outstanding work in the investigation of this matter and thanked the Tax Division of the Department of Justice for its assistance in the investigation.

This investigation is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Kiersten A. Fletcher is in charge of the matter.

A New York federal court today entered a judgment of forfeiture regarding the M/T Courageous, a 2,734-ton oil-products tanker used to make illicit deliveries of petroleum products through ship-to-ship transfers with vessels flagged in the Democratic People’s Republic of Korea (DPRK or North Korea) and direct shipments to the North Korean port of Nampo.

According to court documents, payments to purchase the Courageous, to obtain oil for supplying to North Korea using the Courageous, and to procure necessary services for the Courageous were made using U.S. dollars through unwitting U.S. banks, in violation of U.S. law and United Nations Security Council resolutions. On April 23, 2021, a civil forfeiture action was filed against M/T Courageous. Criminal charges of conspiracy to evade economic sanctions on the DPRK and money laundering conspiracy are pending against the alleged owner and operator of the Courageous, Kwek Kee Seng, a Singaporean national who remains at large.

Pursuant to the International Emergency Economic Powers Act (IEEPA) and the North Korea Sanctions and Policy Enhancement Act of 2016 (NKSPEA), the DPRK and individuals or entities that the Department of the Treasury, Office of Foreign Assets Control (OFAC), has determined are involved in the facilitation of proliferation of weapons of mass destruction are prohibited from engaging in transactions with U.S. persons or using the U.S. financial system. The United Nations Security Council has similarly imposed economic sanctions on North Korea, prohibiting among other things the conduct of ship-to-ship transfers with DPRK-flagged vessels and the provision of petroleum products to the DPRK.

According to documents filed in the civil forfeiture action and allegations contained in the criminal complaint, Kwek and his co-conspirators engaged in an extensive scheme to evade these U.S. and U.N. sanctions by using vessels under their control to covertly transport fuel to North Korea, thereby providing a critical resource for the North Korean government and for DPRK-based companies. One of those vessels was M/T Courageous — formerly known as the Sea Prima — which was purchased by Kwek through front companies to further the scheme to evade sanctions and launder money. Among other things, for a four-month period between August and December 2019, M/T Courageous illicitly stopped transmitting information regarding its location, during which time satellite imagery shows that M/T Courageous both engaged in a ship-to-ship transfer of more than $1.5 million worth of oil to a North Korean ship, the Saebyol, which had been designated by OFAC, and traveled to the North Korean port of Nampo. Kwek and his co-conspirators allegedly took additional steps to hide the scheme by (1) operating a series of shell companies, (2) lying to international shipping authorities about M/T Courageous’s dealings with North Korea, and (3) falsely identifying M/T Courageous as another ship in order to evade detection.

In furtherance of the scheme, Kwek and his co-conspirators arranged for a variety of payments denominated in U.S. dollars that were processed through U.S.-based correspondent accounts to purchase oil – including more than $1.5 million to purchase the oil that was transferred to the Saebyol, over $500,000 to buy M/T Courageous, and thousands more dollars to procure necessary services for M/T Courageous and another vessel, including registration fees, ship materials, and salary payments for crewmembers. Kwek and his co-conspirators overseas sought to conceal these sanctions-evading transactions by, among other things, using front companies to disguise the nature of the transactions; disguising location information for vessels carrying illicit shipments; and conducting ship-to-ship fuel transfers on the open sea in an attempt to hide their counterparties, such as the Saebyol.

Cambodian authorities seized M/T Courageous in March 2020 and held the vessel pursuant to a U.S. seizure warrant, which was issued under seal on April 2, 2020. On April 23, 2021, the U.S. Attorney’s Office for the Southern District of New York filed a civil forfeiture complaint against M/T Courageous and the case was subsequently assigned to District Judge Hon. Valerie Caproni, who issued today’s judgment of forfeiture.

Acting Assistant Attorney General Mark J. Lesko of the Justice Department’s National Security Division, U.S. Attorney Audrey Strauss for the Southern District of New York and Assistant Director-in-Charge Michael J. Driscoll for the FBI’s New York Field Office made the announcement.

The FBI’s New York Field Office, Counterintelligence Division, is investigating the case, with valuable assistance provided by the FBI Legal Attaché Office in Phnom Penh, Cambodia; the Justice Department’s National Security Division, Counterintelligence and Export Control Section, Money Laundering and Asset Recovery Section’s Program Operations Unit, and Office of International Affairs; the U.S. Coast Guard; the Cambodian Ministry of Justice; and the Cambodian National Police.

Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener for the Southern District of New York and Trial Attorney Matthew McKenzie of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Audrey Strauss, the United States Attorney for the Southern District of New York, Mark J. Lesko, the Acting Assistant Attorney General for National Security, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the entry of a judgment of forfeiture regarding the M/T Courageous, a 2,734-ton oil products tanker used to make illicit deliveries of petroleum products through ship-to-ship transfers with vessels flagged in the Democratic People’s Republic of Korea (“DPRK” or “North Korea”) and direct shipments to the North Korean port of Nampo.  Payments to purchase the Courageous, to obtain oil for supplying to North Korea using the Courageous, and to procure necessary services for the Courageous were made using U.S. dollars through unwitting U.S. banks, in violation of U.S. law and United Nations Security Council resolutions.  On April 23, 2021, a civil forfeiture action was filed against M/T Courageous.  Criminal charges of conspiracy to evade economic sanctions on the DPRK and money laundering conspiracy are pending against the alleged owner and operator of the Courageous, KWEK KEE SENG, a Singaporean national who remains at large.  U.S. District Judge Valerie E. Caproni issued today’s judgment of forfeiture. 

The M/T Courageous

M/T Courageous

Manhattan U.S. Attorney Audrey Strauss said:  “Today’s judgment reflects that the sanctions-evading ship, the Courageous, has been forfeited to the United States and will no longer be used to enable North Korea’s pattern of evading the global community’s prohibitions on support for that regime.  Thanks to the extraordinary cooperation between U.S. and Cambodian law enforcement authorities, the Courageous is permanently out of service.”

According to documents filed in the civil forfeiture action and the allegations contained in the criminal complaint filed against KWEK KEE SENG in Manhattan federal court:[1]

Pursuant to the International Emergency Economic Powers Act (“IEEPA”) and the North Korea Sanctions and Policy Enhancement Act of 2016 (“NKSPEA”), the DPRK and individuals or entities that the Department of the Treasury, Office of Foreign Assets Control (“OFAC”) has determined are involved in the facilitation of proliferation of weapons of mass destruction are prohibited from engaging in transactions with U.S. persons or using the U.S. financial system.  The United Nations Security Council has similarly imposed economic sanctions on North Korea, prohibiting among other things the conduct of ship-to-ship transfers with DPRK-flagged vessels and the provision of petroleum products to the DPRK.

KWEK and his co-conspirators engaged in an extensive scheme to evade these U.S. and U.N. sanctions by using vessels under their control to covertly transport fuel to North Korea, thereby providing a critical resource for the North Korean government and for DPRK-based companies.  One of those vessels was M/T Courageous – formerly known as the Sea Prima – which was purchased by KWEK through front companies in order to further KWEK and his co-conspirators’ scheme to evade sanctions and launder money.  Among other things, for a four-month period between August and December 2019, M/T Courageous illicitly stopped transmitting information regarding its location, during which time satellite imagery shows that M/T Courageous both engaged in a ship-to-ship transfer of more than $1.5 million worth of oil to a North Korean ship, the Saebyol, which had been designated by OFAC, and traveled to the North Korean port of Nampo.  KWEK and his co-conspirators took additional steps to hide the scheme by (1) operating a series of shell companies, (2) lying to international shipping authorities about M/T Courageous’s dealings with North Korea, and (3) falsely identifying M/T Courageous as another ship in order to evade detection.

In furtherance of the scheme, KWEK and his co-conspirators arranged for a variety of payments denominated in U.S. dollars that were processed through U.S.-based correspondent accounts to purchase oil – including more than $1.5 million to purchase the oil that was transferred to the Saebyol, over $500,000 to buy M/T Courageous, and thousands more dollars to procure necessary services for M/T Courageous and another vessel, including registration fees, ship materials, and salary payments for crewmembers.  KWEK and his co-conspirators overseas sought to conceal these sanctions-evading transactions by, among other things, using front companies to disguise the nature of the transactions; disguising location information for vessels carrying illicit shipments; and conducting ship-to-ship fuel transfers on the open sea in an attempt to hide their counterparties, such as the Saebyol. 

Cambodian authorities seized M/T Courageous in March of 2020, and held the vessel pursuant to a U.S. seizure warrant, which was issued under seal on April 2, 2020.  On April 23, 2021, the U.S. Attorney’s Office filed a civil forfeiture complaint against M/T Courageous and the case was subsequently assigned to Judge Caproni, who issued today’s judgment of forfeiture.

*                      *                      *

Ms. Strauss praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division.  Ms. Strauss also thanked the FBI Legal Attaché Office in Phnom Penh, Cambodia; the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, Money Laundering and Asset Recovery Section’s Program Operations Unit, and Office of International Affairs; the United States Coast Guard; the Cambodian Ministry of Justice; and the Cambodian National Police, for their assistance.

The cases are being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener are in charge of the cases, with assistance from Trial Attorney Matthew McKenzie of the Counterintelligence and Export Control Section.

The charges in the complaint against KWEK are merely accusations, and KWEK is presumed innocent unless and until proven guilty.         

 

---

[1] As the introductory phrase signifies, the entirety of the text of the criminal complaint filed against KWEK and the description of that complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation as against KWEK.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Anne Milgram, Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced today the extradition of Maulabaksh Gorgeech and Niamatullah Gorgeech for attempting to import heroin into the United States.  The defendants, both citizens of Pakistan, were taken into custody by Thai authorities in Bangkok, Thailand, on April 11, 2021, and extradited to the United States today from Thailand.  They will be presented before United States Magistrate Judge Sarah Netburn later today. 

U.S. Attorney Audrey Strauss said: “As alleged, Maulabaksh Gorgeech and Niamatullah Gorgeech trafficked in wholesale importation of heroin to the United States.  Thanks to the DEA’s global reach and the assistance of law enforcement authorities in Thailand, the defendants are in U.S. custody and facing serious federal charges.”           

DEA Administrator Anne Milgram said: “At a time when the United States is facing an opioid overdose epidemic of unprecedented proportions, it is critical that DEA stop the flow of heroin into the country before it makes its way to our communities.  Directly because of DEA’s efforts, Maulabaksh Gorgeech and Niamatullah Gorgeech are now on American soil, facing significant criminal charges for their alleged crimes.”

According to the allegations contained in the Complaints charging the defendants,[1] which were unsealed today in Manhattan federal court:

Beginning in late 2019, MAULABAKSH GORGEECH and NIAMATULLAH GORGEECH, Asia-based drug traffickers, began communicating and meeting with individuals whom they believed were heroin traffickers interested in purchasing multi-kilogram quantities of heroin for importation into the United States.  Those individuals were, in fact, confidential sources working at the DEA’s direction, and an undercover DEA agent posing as a New York-based heroin distributor.  In March 2019, NIAMATULLAH GORGEECH caused a sample of approximately seven kilograms of heroin to be delivered in Afghanistan, with the understanding that those drugs would be transported to and sold in the United States.  In July 2019, MAULABAKSH GORGEECH offered to provide as many as 100 kilograms of heroin for importation to the United States.  In September 2019, MAULABAKSH GORGEECH caused another sample of approximately seven kilograms of heroin to be delivered in Afghanistan, for importation and sale in the United States.  Following these sample shipments, MAULABAKSH GORGEECH and NIAMATULLAH GORGEECH planned to supply larger quantities of heroin for importation to and distribution within the United States.

*                *                *

MAULABAKSH GORGEECH, 43, and NIAMATULLAH GORGEECH, 37, each a citizen of Pakistan, are charged with one count of attempting to import heroin into the United States, and MAULABAKSH GORGEECH is also charged with a second count of conspiracy to import heroin into the United States.  Each count carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Ms. Strauss praised the outstanding investigative efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, and the OCDETF New York Strike Force; the DEA’s Bangkok, Islamabad, Kabul, and Bucharest Country Offices, and Guam Resident Office; the United States Central Command; U.S. Embassy in Bangkok’s Consul General’s Office and Diplomatic Security Service; the Royal Thai Government’s Office of the Attorney General - International Affairs Department, Royal Thai Police Narcotics Suppression Bureau - Sensitive Investigative Unit, and Ministry of Foreign Affairs; and the Australian Criminal Intelligence Commission.  Ms. Strauss also thanked the U.S. Department of Justice’s Office of International Affairs for its ongoing assistance.

This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation.  OCDETF funds investigations that identify, disrupt, and dismantle 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 case is being prosecuted by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Kimberly J. Ravener and Benjamin Woodside Schrier are in charge of the prosecution.

The charges contained in the Complaints 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 Complaints and the description of the Complaints set forth below constitute only allegations and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that CHUKWUEMEKA OKPARAEKE, a/k/a “Emeka,” was sentenced today to 180 months in prison for importing and trafficking fentanyl analogues and other synthetic opioids through the dark web.  OKPARAEKE previously pled guilty to distributing U-47700, a controlled substance analogue of AH-7921; importing 100 grams and more of acryl fentanyl, a controlled substance analogue of fentanyl, from Hong Kong; and making false statements to the Government regarding the proceeds of his offenses.  Through his guilty plea, OKPARAEKE admitted that in November 2016, he sold U-47700 to an 18-year-old individual (the “Victim”), who died from an overdose after using the drug.  OKPARAEKE further admitted that his narcotics offenses involved over 9 kilograms of acryl fentanyl, nearly 6 kilograms of U-47700, over a kilogram of furanyl fentanyl, as well as 12 grams of 4-ANPP.  OKPARAEKE was sentenced in White Plains federal court by U.S. District Judge Nelson S. Román, who previously accepted OKPARAEKE’s guilty plea. 

U.S. Attorney Audrey Strauss said: “Chukwuemeka Okparaeke previously admitted that he peddled highly addictive opioids over the darknet, including to an 18-year-old who died from them.  Okparaeke also lied to agents and prosecutors about the whereabouts of Bitcoins representing millions of dollars in poison-peddling proceeds.  Now Okparaeke will forfeit those proceeds and go to prison for his crimes.”

According to the allegations in the Superseding Information, Complaint, other court filings, and statements made during public court proceedings:

From at least July 2016 through March 2017, OKPARAEKE imported kilogram quantities of fentanyl analogues, including acryl fentanyl and furanyl fentanyl, and other synthetic opioids, including U-47700, from Hong Kong and China into the United States.  To transact with customers and coordinate his narcotics sales, OKPARAEKE used a darknet website known as AlphaBay Market (“AlphaBay”), accessible only through a special software program that allows users to mask their identities and anonymize their internet traffic.  Under the AlphaBay vendor name “Fentmaster,” OKPARAEKE engaged in more than 7,000 sales of synthetic opioids, which he shipped to customers throughout the United States using the U.S. Postal Service.  OKPARAEKE’s narcotics trafficking generated criminal proceeds of at least 680.60963624 Bitcoins, worth millions of dollars.

In November 2016, OKPARAEKE sold three grams of U-47700 to the Victim, an 18-year-old living in Vancouver, Washington, in an AlphaBay transaction.  The Victim used the drugs purchased from OKPARAEKE and died in a U-47700 overdose on November 10, 2016. 

OKPARAEKE – who attended medical school before he began selling synthetic opioids on AlphaBay – used extensive measures to conceal his identity, including software to encrypt his internet traffic and communications sent from his cellphone.  Using alter egos, he boasted online about his exploits as a darknet drug trafficker, offered advice to other drug dealers, and published a short story describing his criminal activities and his strategies for evading law enforcement.  In January 2017, Customs and Border Protection (“CBP”), in conjunction with Homeland Security Investigations (“HSI”) and United States Postal Inspection Service (“USPIS”), intercepted several packages containing kilogram quantities of fentanyl analogues that OKPARAEKE had imported from Hong Kong.  Subsequently, in March 2017, law enforcement searched a drug premises OKPARAEKE maintained in Kearny, New Jersey.  During the search, law enforcement seized more than 10 kilograms of U-47700, acryl fentanyl, and furanyl fentanyl, as well as a quantity of 4-ANPP and approximately 82 mailing envelopes containing smaller amounts of those substances that OKPARAEKE had packaged for distribution to his customers.

On September 15, 2020, OKPARAEKE met with representatives of the U.S. Attorney’s Office for the Southern District of New York.  During that meeting, OKPARAEKE falsely represented that the approximately 680 Bitcoins – worth millions of dollars – generated by his narcotics sales on AlphaBay were no longer in his possession and control, and that a third party had stolen the Bitcoins from him through hacking and other unauthorized access to OKPARAEKE’s electronic accounts.  OKPARAEKE subsequently surrendered the 680 Bitcoins to USPIS and agreed to forfeit those proceeds as part of his plea agreement.

*                *                *

In addition to the prison term, OKPARAEKE, 32, of Middletown, New York, was sentenced to five years of supervised release and ordered to forfeit $105,177.30 in United States currency and 680.60963624 Bitcoins, presenting proceeds of his narcotics trafficking.

Ms. Strauss praised the outstanding efforts of the USPIS, HSI, CBP, the Federal Bureau of Investigation, the Fairfax County, Virginia, Police Department, the Virginia Office of the Attorney General, the Middletown Police Department, and the Vancouver, Washington, Police Department for their investigative work and ongoing support and assistance with the case. 

The case is being prosecuted by the Office’s White Plains Division.  Assistant United States Attorneys Gillian Grossman, Olga I. Zverovich, and Sagar Ravi are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, David A. Hubbert, Acting Assistant Attorney General for the Justice Department’s Tax Division, and Charles P. Rettig, Commissioner of the Internal Revenue Service (“IRS”), announced that U.S. District Judge Gregory H. Woods entered an order yesterday authorizing the IRS to issue summonses requiring multiple couriers and financial institutions to produce information about U.S. taxpayers who may have used the services of Panama Offshore Legal Services (“POLS”) and its associates (together, the “POLS Group”) to evade federal income taxes.  Specifically, the IRS summonses seek to trace courier deliveries and electronic fund transfers between the POLS Group and its clients, in order to identify the POLS Group’s U.S. taxpayer clients who have used the POLS Group’s services to create or control foreign assets and entities to avoid compliance with their U.S. tax obligations.

Manhattan U.S. Attorney Audrey Strauss said:  “This action underscores our Office’s commitment to hold accountable those who use offshore service providers to avoid U.S. taxes.  In issuing these John Doe summonses, we continue our joint efforts with the IRS to investigate tax evaders who use foreign financial accounts and sham foreign entities to hide their assets.”

Acting Assistant Attorney General David A. Hubbert said:  “The Department of Justice, working alongside the IRS, is dedicated to unearthing the use of foreign bank accounts to evade U.S. taxes.  We will use the many tools available to us, including John Doe summonses like the ones authorized today, to ensure that taxpayers are fully meeting their responsibilities.”

IRS Commissioner Charles P. Rettig said:  “These court-ordered summonses should put on notice every individual and business seeking to avoid paying their fair share of taxes by hiding assets in offshore accounts and companies.  These records will empower the IRS and the Department of Justice to find those attempting to skirt their tax obligations and ensure their compliance with the U.S. tax laws.”

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also disclose certain foreign financial accounts and assets.  According to the allegations set forth in the documents filed in support of the petition to authorize the John Doe summonses, and other information in the public record:

POLS is a Panamanian law firm that advertises services, including to U.S.-based clients, to assist in concealing ownership of offshore entities and accounts.  Among other services, POLS and its associates offer assistance with forming corporations and foundations and creating offshore financial accounts, for purposes of asset protection.  POLS highlights secrecy as a key advantage of its entity formation services, promising its clients “100% anonymity, privacy and confidentiality.”  Other members of the POLS Group similarly advertise that they can assist clients with concealing assets and avoiding taxes.  For example, one POLS Group member assures clients that “a carefully designed corporate strategy allows you to care for your loved ones free from probate, inheritance taxes, and other legal and tax problems.”  The IRS has learned of at least one identified U.S. taxpayer who used POLS’s services to create an unreported offshore entity and account in Panama, through the IRS’s Offshore Voluntary Disclosure Program (“OVDP”).  The OVDP allows U.S. taxpayers to voluntarily disclose foreign accounts or entities used to evade tax in exchange for fixed penalties.

In this action, the Court granted the IRS permission to serve what are known as “John Doe” summonses on 10 entities: Federal Express Corporation; FedEx Ground Package System, Inc.; DHL Express; United Parcel Service, Inc.; the Federal Reserve Bank of New York; The Clearing House Payments Company LLC; HSBC Bank USA, N.A.; Citibank, N.A.; Wells Fargo Bank, N.A.; and Bank of America, N.A.  There is no allegation in this action that the summons recipients have engaged in any wrongdoing.  Rather, the IRS uses John Doe summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown.  The John Doe summonses direct these couriers and financial entities to produce records that will enable the IRS to identify U.S. taxpayers who have used the POLS Group’s services, along with other documents relating to the POLS Group’s business.

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This case is being handled by the Office’s Tax and Bankruptcy Unit.  Assistant U.S. Attorney Talia Kraemer is in charge of the case.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Phillip R. Bartlett, Inspector-in-Charge of the New York Division of the United States Postal Inspection Service (“USPIS”), announced today the unsealing of a criminal indictment charging TREVOR MILTON with securities and wire fraud in connection with his scheme to defraud and mislead investors about the development of products and technology by the company he founded, Nikola Corporation (“Nikola”).

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Trevor Milton brazenly and repeatedly used social media, and appearances and interviews on television, podcasts, and in print, to make false and misleading claims about the status of Nikola’s trucks and technology.  But today’s criminal charges against Milton are where the rubber meets the road, and he now will be held accountable for his allegedly false and misleading statements to investors.”

Inspector-in-Charge Phillip R. Bartlett said:  “This defendant allegedly concealed the progress and success of Nikola’s technology, when he lied to investors and lured them into believing that they had invested at the ground floor of a company that had already developed viable Nikola One and Badger prototypes that were ready to be produced.  The one thing fraudsters have in common – they’re liars, cheaters and thieves.”

MILTON surrendered this morning and will be presented later today before United States Magistrate Judge Sarah Netburn.  The case is assigned to U.S. District Judge Edgardo Ramos.

According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]

Overview

From at least in or about November 2019 up through and including at least in or about September 2020, TREVOR MILTON engaged in a scheme to defraud investors by inducing them to purchase shares of Nikola Corporation (“Nikola”), the electric- and hydrogen-powered vehicle and energy company that MILTON founded, through false and misleading statements regarding Nikola’s product and technology development.  MILTON’s scheme targeted individual, non-professional investors – so-called “retail investors” – by making false and misleading statements directly to the investing public through social media and television, print, and podcast interviews.

MILTON made these false and misleading statements regarding Nikola’s products and capabilities to induce retail investors to purchase Nikola stock.  Among the retail investors who ultimately invested in Nikola were investors who had no prior experience in the stock market and had begun trading during the COVID-19 pandemic to replace or supplement lost income or to occupy their time while in lockdown, and some of the retail investors that MILTON’s fraudulent scheme targeted suffered tens and even hundreds of thousands of dollars in losses, including, in certain cases, the loss of their retirement savings or funds that they had borrowed to invest in Nikola.  Moreover, MILTON took advantage of the fact that Nikola went public by merging with a Special Purpose Acquisition Company or “SPAC,” rather than through a traditional IPO, by making many of his false and misleading claims during a period where he would have not been allowed to make public statements under rules that govern IPOs.

MILTON made false claims regarding nearly all aspects of Nikola’s business, including: (a) false and misleading statements that the company had early success in creating a “fully functioning” semi-truck prototype known as the “Nikola One,” when MILTON knew the prototype was inoperable; (b) false and misleading statements that Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” from the “ground up” using Nikola’s parts and technology, when MILTON knew that was not true; (c) false and misleading statements that Nikola was producing hydrogen and was doing so at a reduced cost, when MILTON knew that in fact no hydrogen was being produced at all by Nikola, at any cost; (d) false and misleading statements that Nikola had developed batteries and other important components in-house, when MILTON knew that Nikola was acquiring those parts from third parties; and (e) false and misleading claims that reservations made for the future delivery of Nikola’s semi-trucks were binding orders representing billions in revenue, when the vast majority of those orders could be cancelled at any time or were for a truck Nikola had no intent to produce in the near-term.

Nikola One

Throughout in or about 2020, MILTON promoted a false and exaggerated narrative that Nikola was a first mover in the zero-emissions-trucking business.  Specifically, MILTON emphasized that Nikola had defied expectations as a young, disruptive company when it managed to build its prototype Nikola One, which Nikola unveiled on or about December 1, 2016, at a large event that was filmed and broadcast on the internet.  During that event and later, MILTON claimed that the prototype Nikola One was a fully functioning truck, and emphasized that early purported success as a defining event for Nikola.  For example, at the unveiling event for the Nikola One, MILTON claimed the Nikola One “fully functions and works, which is really incredible.”

In fact, the Nikola One prototype was not completed, let alone tested and validated, by the time of the unveiling event.  Rather, the prototype was wholly missing significant parts, including gears and motors, and the control system (i.e., the system that communicates the driver’s directions to the vehicle) was incomplete.  The infotainment system in the cab was also incomplete.  Instead, for the purpose of the unveiling event, tablet computers or other computer screens were mounted into the areas where the screens for the infotainment would be, and the screens were set to display images created to have the appearance of infotainment screens, with speedometers, maps, and other information displayed.

Later, in or about January 2018, and despite the fact that the Nikola One prototype was never completed or operational, MILTON had Nikola publish on Twitter and also published on his own Twitter account a video in which the Nikola One appeared to be driving on its own power down a road with no incline.  In fact, to film these clips, the Nikola One was towed to the top of hill, at which point the “driver” released the brakes, and the truck rolled down the hill until being brought to a stop in front of the stop sign.

The Badger

From in or about February 2020 up through and including at least in or about September 2020, MILTON promoted a new electric pickup truck called the Badger through false and misleading claims about the Badger’s engineering and development.  In particular, MILTON repeatedly and falsely stated that Nikola engineered and built the Badger from the “ground up” as a “clean sheet” vehicle using Nikola’s in-house components and intellectual property, that the company had been working on the program for years and had tapped into billions of dollars in Nikola engineering, that the building of prototype vehicles was complete and they were “real” trucks and “fully functioning vehicle inside and outside,” and that an original equipment manufacturer partner (the “OEM Partner”) would mass-produce the vehicle using Nikola’s prototype design and engineering.

In fact, the production of Badger prototypes was outsourced, at MILTON’s direction, to third parties, and the components were not being built from the ground up.  Rather, Nikola purchased several Ford F-150 pickup trucks – a highly popular model to which MILTON had claimed his Badger would compare favorably – to use as “donor” or “surrogate” vehicles, and used the vehicles’ chasses and bodies as the base for constructing the Badger prototypes.  At MILTON’s direction and with his approval, engineers working on the Badger prototypes took steps to hide from the public that Ford donor vehicles were used to produce the prototypes.  And the two prototype Badgers that ultimately were built were little more than show cars and not real consumer vehicles.  For example, the Badger prototypes could not be driven on roads because some of the parts of the body were carbon fiber composite and because they had not undergone safety testing.  The Badger prototypes also lacked certain parts, such as airbags and an operable HVAC.  Similarly, many of the lights in the interior of the Badger prototypes were not operable and were merely backlit.

Moreover, despite MILTON’s claims that Nikola’s OEM Partner would manufacture the Badgers that Nikola had designed and engineered, and that the vehicles would be “70 percent Nikola 30 percent [the OEM Partner],”  the OEM Partner planned to build the Badger based on one of its own electric vehicle platforms.  In fact, the OEM Partner planned to use no Nikola technology or engineering, except for the general aesthetic and potentially the infotainment system.  No one at the OEM Partner ever saw the Badger prototypes that Nikola had been working on and they were not part of the OEM Partner’s engineering or development plans.

Hydrogen Production

MILTON also made numerous false and misleading claims regarding Nikola’s hydrogen business.  Specifically, and among other things, MILTON made false and misleading claims regarding the status of Nikola’s production of hydrogen, the current cost of producing hydrogen, the cost of electricity to produce hydrogen, Nikola’s ability to produce hydrogen using clean energy, and the status of permits related to hydrogen production. 

For example, in or about March 12, 2020, MILTON stated, “Up until Nikola came in the market, hydrogen was around $16 a kilogram, U.S. dollars. Now Nikola is producing it well below $4 a kilogram.” In fact, Nikola has never produced any hydrogen at any price, nor at the time could it have produced hydrogen for below $4 per kilogram.  To the contrary, Nikola has never obtained a permit to produce hydrogen or installed the equipment necessary to produce hydrogen.  At the time that MILTON was claiming that Nikola was producing hydrogen for less than $4 per kilogram, it was in fact purchasing hydrogen from a supplier for $16 per kilogram.

As another example, in a July 17, 2020, podcast, MILTON stated, among other things, that when Nikola first started, hydrogen production stations “were going to be 50 to 60 million,” but now Nikola is “down to, you know, 14, 14 million bucks” due to the “standardization of a hydrogen station.”  In truth and in fact, Nikola had not built a single hydrogen production station, much less “standardized” hydrogen production stations.  At the time, due to the high cost of electricity in California, Nikola was seriously considering moving away from its plan to produce hydrogen on-site at all of its fueling stations, and instead was considering producing hydrogen at a central location through liquefaction.  Milton was well aware of the issues with Nikola’s hydrogen station plan, but directed that Nikola employees “[k]eep the liquefaction discussions quiet from the market.”

In House Technology

MILTON has repeatedly claimed that Nikola has intellectual property rights over important components of its semi-truck line.  While MILTON has stated that Nikola outsources many parts of the trucks, like its tires or windshield, MILTON has also repeatedly stated that Nikola makes the most important parts, including batteries and the powertrain, of the semi-trucks “in house.”  For example, in or about June 2020, MILTON tweeted, “We do our own batteries at Nikola and have since day 1,” and “All the technology, software, controls, E axle, inverters etc. we do internally.” 

In fact, although Nikola has partnered with various companies to try to develop proprietary battery technology, these efforts were not successful, and Nikola has not successfully developed technology internally, and the batteries it has planned to use in its semi-trucks were developed and manufactured by third parties.  Similarly, Nikola has not produced an inverter in house and the inverters it planned to use in its semi-trucks were developed and manufactured by third parties.

Reservations

MILTON has also repeatedly misstated the nature of Nikola’s reservations to suggest that reservations made for its semi-trucks are firm and binding.  For example, in or about July 2020, MILTON claimed that Nikola had “billions and billions of dollars with the contracts” and that these reservations were not “just like, a non-committal thing,” but instead were “like, sign on the dotted line, billions and billions and billions and billions of dollars in orders.”

In fact, although Nikola did have 14,000 reservations for its sleeper semi-truck, with the exception of a reservation for approximately 800 semi-trucks, which is binding provided that Nikola meets certain conditions, these reservations were non-binding and cancellable at any time for any reason.

Milton’s False and Misleading Statements Induced Retail Investors to Purchase Nikola Stock 

After MILTON made the false and misleading statements regarding Nikola’s products and capabilities described above, tens of thousands of retail investors purchased Nikola’s stock between in or around March and September 2020.  During this same period, certain institutional investors who had access to more complete information regarding Nikola’s products and technology, including some who received Nikola shares as part of the SPAC transaction, were able to sell their stock for a significant profit.

The value of Nikola’s stock plummeted after the fact that certain of MILTON’s statements had been false and misleading was disclosed to the market in or around September 2020.  As a result, many Nikola stockholders, including the retail investors who were the target of MILTON’s scheme, suffered significant financial losses, in some cases totaling in the tens or hundreds of thousands of dollars and compromising their financial security or retirement savings. 

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MILTON, 39, of Oakley, Utah, is charged with two counts of securities fraud and one count of wire fraud.  The securities fraud counts carry maximum penalties of 20 and 25 years in prison, respectively. The wire fraud count carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the outstanding work of the USPIS, which jointly conducted this investigation with special agents from the U.S. Attorney’s Office.  Ms. Strauss further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action.

The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Jordan Estes, Matthew Podolsky, Nicolas Roos are in charge of the case.

If you believe you are a victim of Trevor Milton or have relevant information, please email: [email protected].

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

 

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[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. 

Audrey Strauss, United States Attorney for the Southern District of New York, announced that CHAIM DEUTSCH, a former New York City Council Member, was sentenced today in Manhattan federal court to three months in prison for filing a false tax return in connection with outside income he received from his real estate management corporation.  DEUTSCH previously pled guilty before United States Magistrate Judge James L. Cott, who imposed today’s sentence.

U.S. Attorney Audrey Strauss said: “Chaim Deutsch, a former New York City Council Member, violated his oath of office and the law when he defrauded the IRS in connection with income from his real estate business.  At the same time he was serving as an elected official and community leader, Deutsch concealed his true business income to avoid paying his fair share of taxes.  Appropriately, Deutsch has been sentenced to prison for his criminal conduct.” 

According to the allegations contained in the Information to which DEUTSCH pled guilty, other court filings, statements made during public court proceedings, and publicly available information:

From in or about January 2014 through April 2021, DEUTSCH served as the New York City Council Member for the 48th District, which includes portions of Brooklyn.  DEUTSCH was also the sole owner of Chasa Management, Inc., a real estate management business, and he received more than $120,000 annually in outside income from that business, until the end of 2017 when a change in the law prohibited council members from maintaining outside employment.  On or about April 27, 2021, subsequent to his plea in the instant case, DEUTSCH was determined to have vacated his elected office as a result of violating his oath of office by defrauding the federal government in connection with the instant tax offense.

During the tax years 2013 through 2015, DEUTSCH filed false individual and corporate tax returns that decreased his tax liability by claiming false and fictitious business deductions.  In particular, DEUTSCH falsely deducted personal expenses as business expenses, including rental payments for an apartment that he maintained in the 48th District in order to obtain residency for his council position; utility, water, repair, maintenance, automobile, and phone expenses; as well as routine living expenses such as groceries and clothing.  In addition, DEUTSCH further decreased his tax liability by filing fraudulent schedules to his personal income tax forms that declared fictitious business expenses, including for additional purported rent, vehicles, phones, and utility expenses. 

As a result of the false deduction schemes, DEUTSCH received federal tax refunds in each of the relevant tax years.  Specifically, in tax year 2013, DEUTSCH’s false filings generated a federal tax refund of $1,937; in tax year 2014, DEUTSCH’s false filings generated a federal tax refund of $262; and in tax year 2015, DEUTSCH’s false filings generated a federal tax refund of $7,511.

In preparing his personal tax returns and the books and tax returns of Chasa Management, DEUTSCH employed a tax preparer and accounting firm based in Brooklyn, and DEUTSCH would direct the firm to classify or reclassify expenses as business-related to decrease his tax liability.  Only after DEUTSCH was satisfied that the purported business expenses had sufficiently decreased his tax liability were the tax returns finalized and filed.  After DEUTSCH learned of the investigation, he used a different tax preparer to assist in the preparation of his subsequent years’ tax returns.

In total, for tax years 2013 through 2015, DEUTSCH claimed approximately $157,000 in false business expenses on Chasa Management’s returns and an additional approximately $111,000 in false business expenses on his individual income tax returns.  DEUTSCH’s failure to properly pay taxes on his business income evaded approximately $82,076 in taxes due to the Internal Revenue Service (“IRS”), not including interest and penalties. 

*                *                *

In addition to the prison term, Judge Cott ordered DEUTSCH, 52, of Brooklyn, New York, to serve one year of supervised release, to pay a fine in the amount of $5,500, and to pay restitution to the IRS in the amount of $107,007.05. 

Ms. Strauss praised the outstanding work of IRS Criminal Investigation and the Special Agents of the U.S. Attorney’s Office.  Ms. Strauss also thanked the New York City Department of Investigation for its assistance in the investigation.

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorney Eli J. Mark is in charge of the prosecution.

Audrey Strauss, United States Attorney for the Southern District of New York, announced the guilty plea today of JOHN PIERRE DUPONT, a/k/a “John Gary Rinaldo,” in connection with a years-long scheme to defraud thousands of donors to scam political action committees that impersonated numerous U.S. Senate campaigns and candidates.  DUPONT pled guilty to wire fraud and aggravated identity theft before U.S. District Judge Richard M. Berman.

U.S. Attorney Audrey Strauss said: “In impersonating campaigns and candidates to raise money for fake political action committees, John Pierre Dupont took advantage of thousands of vulnerable individual donors who believed they were contributing to causes they believed in.  Instead, hundreds of thousands of dollars that were intended to be legitimate donations were instead stolen by the defendant for his own personal enrichment.  With today’s guilty plea, Dupont has admitted to his scheme and now faces a significant term of incarceration.”

According to the allegations in the Indictment, court filings, and statements made during court proceedings:

From 2015 through 2019, DUPONT defrauded thousands of donors who believed they were donating to three political action committees established by DUPONT (the “Scam PACs”), or to campaigns the Scam PACs falsely claimed to support.  DUPONT’s scheme resulted in hundreds of thousands of dollars being donated through websites he controlled and operated, none of which was donated to campaigns or causes.

The websites purported to be raising money in support of senate campaigns and candidates, a candidate for governor, and a candidate for president.  Another website operated by DUPONT purported to be raising money “to unite immigrant families,” falsely claiming that donations to the Foundation for Sanity in Politics PAC would “go to help pay our volunteer attorneys’, doctors’, nurses’ and social workers’ costs and pay for transportation to unite immigrant families.”  In fact, that PAC had no volunteers or staff, and dedicated no funds to paying for any action or advocacy.

DUPONT’s scheme targeted victims throughout the country, raising funds based on fraudulent representations that the donations would support the relevant causes, candidates, and campaigns.  In reality, all of the money raised was kept and used by DUPONT, including to continue perpetrating the fraud through additional fundraising and overhead expenditures.  None of the money donated to the Scam PACs was spent on political contributions, and DUPONT failed to report the donations, as required, in filings with the Federal Election Commission.

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DUPONT, 82, of Blythe, Ca, pled guilty to one count of wire fraud, which carried a maximum sentence of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory two years in prison consecutive to any other sentence imposed.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as the defendant’s sentence will be determined by the judge.  Sentencing before Judge Berman is scheduled for October 21, 2021, at 10:00 a.m.

Ms. Strauss praised the outstanding investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York.

If you think you are a victim of the scheme alleged in this press release, please contact Wendy Olsen, Victim & Witness Services for the U.S. Attorney’s Office for the Southern District of New York, at 866-874-8900.           

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorney Alex Rossmiller is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, the Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), and Marty Raybon, Acting Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), announced today that the United States has settled civil fraud claims brought under the False Claims Act against STARGATE APPAREL, INC. (now named EXCEL APPAREL CORP.) (“STARGATE”), RIVSTAR APPAREL, INC. (“RIVSTAR”), and JOSEPH BAILEY.  Stargate and Rivstar are apparel companies headquartered in New York, New York, and BAILEY is the companies’ former CEO and owner.   As alleged in the Government’s lawsuit, filed in 2019, BAILEY, STARGATE, and RIVSTAR employed a variety of schemes to defraud the United States by submitting invoices to CBP that falsely understated the true value of the clothing that they imported into the United States in order to avoid paying millions of dollars in customs duties.  RIVSTAR is no longer operating.

Under the civil settlement approved today by U.S. District Judge J. Paul Oetken, BAILEY will pay $3.2 million to the United States, and STARGATE, RIVSTAR, and the employee stock ownership plan that currently owns the companies will together pay a total of $2.8 million to the United States.  BAILEY, STARGATE, and RIVSTAR admitted and accepted responsibility for their conduct as further described below.  As part of the settlement, STARGATE and RIVSTAR (to the extent that it resumes operations) will also implement a written compliance policy that will include measures designed to ensure that they pay duties on the full, actual value of all future imports and otherwise comply with applicable customs laws and regulations.  Last year, BAILEY pled guilty and was sentenced to six months in prison for engaging in certain of the conduct related to STARGATE imports that is at issue in the Government’s civil complaint.  This civil settlement is in addition to the $1,661,617 forfeiture amount that BAILEY was ordered to pay in the criminal proceedings. 

U.S. Attorney Audrey Strauss said: “Stargate, Rivstar, and their former president engaged in a variety of fraudulent schemes to short-change the Government of customs duties owed for imported clothing by falsely under-reporting its value.  This settlement, along with the separate criminal action against Bailey, demonstrate that our Office will hold companies, as well as their executives, accountable when they try to evade paying the legally required custom duties on imported goods.”

HSI Special Agent in Charge Peter C. Fitzhugh said: “For over a decade these clothing companies used ‘double-invoice’ schemes to underpay customs duties that were owed to the U.S. for garments being imported into the country, resulting in millions of dollars in customs duties lost.  HSI worked closely with U.S. Customs and Border Protection and the U.S. Attorney’s Office for the Southern District of New York to achieve this settlement, requiring the defendants not just to accept responsibility, but also to pay the Government $6 million and enhance their compliance policies.”

CBP Acting Director of New York Field Operations Marty Raybon said: “The settlement reached today is a testament to the dedication of our partners in the United States Attorney's Office, Homeland Security Investigations, and the men and women of CBP in enforcing our nation’s trade laws and punishing those perpetrating this type of fraud.”

The Government’s complaint alleges that in order to avoid customs duties, from 2004 through 2015 (the “Covered Period”), STARGATE, RIVSTAR, and BAILEY engaged in two types of “double invoicing” schemes to fraudulently underpay customs duties owed to the United States in connection with the garments that they brought into the country.  Under the first scheme, the exporter would provide one invoice that reflected the amount Defendants actually paid the exporter for the goods, and a second invoice that fraudulently reflected a fabricated lower amount that was submitted to CBP.  These two invoices were virtually identical (e.g., same invoice number, description of goods, quantity of goods), except that they included different prices for the same shipments of goods.  Under the second scheme, the exporter also would provide two invoices, which together reflected the actual price paid for the shipment.  However, Defendants would only submit one of the invoices to CBP.  The other invoice, which purported to be for “samples,” “accessories,” “commissions,” or “testing costs,” reflected an additional payment made by Defendants for the same goods described in the first invoice and was not submitted to CBP.  The purpose of each of these two schemes was the same – to fraudulently under-report the value of the goods in order to pay less duties.   

As part of the settlement, BAILEY, STARGATE, and RIVSTAR admit, acknowledge, and accept responsibility for the following conduct:

STARGATE Conduct:

• During the Covered Period, Stargate’s primary supplier was Taizhou Jiali Garments Co. Ltd. and its affiliated manufacturers (collectively, “Taizhou”), which are all located in China.  At the direction of BAILEY, STARGATE engaged in two different fraudulent schemes that involved the preparation and use of false and inaccurate invoices to underreport the actual value of goods imported from Taizhou in order to avoid paying the customs duties due.  BAILEY knew that this conduct was wrong and in violation of customs laws.
• As part of the first scheme, from 2007 through 2010, at BAILEY’S direction, Taizhou provided STARGATE with two sets of invoices for each shipment of goods.  One invoice, referred to in email communications as the “pay by” invoice, reflected the actual price paid by STARGATE for the goods.  The second invoice reflected a fake, lower price for the goods and was the invoice that STARGATE presented to CBP through its customs broker.  Stargate, at the direction of Bailey, routinely declared this false, lower value on CBP entry forms in order to pay lower customs duties on goods imported from Taizhou.
• Beginning around 2010 and continuing through at least 2015, BAILEY and STARGATE engaged in a second scheme.  At BAILEY’S direction, Taizhou provided two separate sets of invoices for a given shipment that together reflected the true price Stargate actually paid for the goods.  The first invoice, typically entitled the “commercial invoice,” described the goods purchased, and was submitted to CBP by STARGATE’s customs broker.  The second invoice purported to reflect amounts paid by Stargate for “sample” goods and was not submitted to CBP.  The “sample” invoice was not, in fact, for samples actually purchased by STARGATE.  Rather, STARGATE used the “sample” invoice to make an additional payment to Taizhou for the goods purchased by STARGATE that were described in the “commercial invoice,” while hiding the full value of those goods from CBP.  STARGATE, at the direction of BAILEY, routinely declared only the values recorded on the “commercial invoices,” which were less than the full price paid for the goods, on CBP entry forms in order to pay lower customs duties on goods imported from Taizhou.
• During the Covered Period, STARGATE also imported goods that it purchased from Tex-Prime International, Ltd., and its affiliated manufacturers (collectively “Tex-Prime”), which are located in China.  Beginning in at least 2004 and continuing through 2014, STARGATE, at the direction of BAILEY, also engaged in two different fraudulent schemes that involved the preparation and use of false and inaccurate invoices to underreport the actual value of goods imported from Tex-Prime in order to avoid paying the customs duties due.
• The first scheme involved Tex-Prime providing two nearly identical invoices for each shipment that differed only in the stated price.  The first invoice reflected the amount that STARGATE actually paid for the imported goods.  The second invoice (frequently identified by a “C” suffix following the invoice number, or the term “Custom” following the invoice number in the file name), reflected a false and inaccurate lower price and was the invoice that STARGATE submitted to CBP through STARGATE’s customs broker.  STARGATE, at the direction of BAILEY, routinely declared the values recorded on this second, false invoice on CBP entry forms in order to pay lower customs duties on goods imported from Tex-Prime.
• The second scheme also involved Tex-Prime providing two invoices.  In this scheme, the two invoices together reflected the actual price paid by STARGATE for the shipment.  The first invoice, entitled a “commercial invoice,” described the goods purchased and was submitted to CBP by STARGATE’s customs broker.  The second invoice, entitled a “statement,” purported to be an invoice for accessories charges, commissions, testing charges, or samples.  This second invoice was not submitted to CBP and in reality reflected an additional payment made by STARGATE to Tex-Prime for the same shipment.  STARGATE, at the direction of BAILEY, routinely declared only the values recorded on the “commercial invoices,” which were less than the full price paid for the goods, on CBP entry forms in order to pay lower customs duties on goods imported from Tex-Prime.
• Through the practices described above, STARGATE misrepresented the value of the goods it purchased and imported into the United States.  STARGATE and BAILEY were aware at all times that the reported information was incorrect and grossly understated the actual value of the imported goods, but continued to make the incorrect entries in order to reduce the amount of duties owed.  As a result of their conduct, STARGATE and BAILEY underpaid customs duties that were due and owing to the United States. 

RIVSTAR Conduct:

• During the Covered Period, RIVSTAR imported goods purchased from Pacific Potential Trading Co., Ltd., and its affiliated entities (together, “Pacific Potential”), as well as from Dongguan Bestsign and Trading Co., Ltd., and its affiliated entities (together, “Bestsign”), all of which are located in China.
• During the Covered Period, at RIVSTAR’s request and BAILEY’s direction, Pacific Potential and Bestsign provided two sets of invoices for each shipment imported into the United States by RIVSTAR.  The first invoice described the goods imported and was submitted to CBP by RIVSTAR’s customs broker.  The price reflected on the invoices declared to Customs did not reflect the full price RIVSTAR paid for the merchandise.  The second invoice purported to be for “testing costs” relating to the imported goods and was not submitted to CBP.  Together, the two invoices reflected the true total price that RIVSTAR paid for the goods; RIVSTAR, however, did not declare the amount reflected on the invoice for “testing costs” to CBP.  For the most part, the amounts reflected on the invoice for “testing costs” were not for actual testing, but instead reflected an additional payment made by RIVSTAR to Pacific Potential and Bestsign for the same shipment that was not declared to CBP.  To the extent that any such payments actually related to testing costs, such charges were still dutiable and should have been declared to CBP. 
• Through these practices, RIVSTAR at BAILEY’s direction misrepresented the value of the goods it purchased and imported into the United States.  RIVSTAR and BAILEY were aware at all times that the reported information was incorrect and grossly understated the actual value of the imported goods, but continued to make the incorrect entries in order to reduce the amount of duties owed. As a result of their conduct, RIVSTAR and BAILEY underpaid customs duties that were due and owing to the United States.

The conduct in this matter was first brought to the attention of federal law enforcement by a whistleblower who filed a lawsuit under the False Claims Act.

Ms. Strauss thanked U.S. Customs and Border Protection and Homeland Security Investigations for their assistance with the case.

The civil case is being handled by the Office’s Civil Frauds Unit, and Assistant U.S. Attorney Dominika Tarczynska is in charge of the matter.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that ULYSSES LOPEZ was sentenced today by U.S. District Judge Nelson S. Román to 87 months in prison for leading a drug trafficking conspiracy that distributed kilograms of cocaine out of a grocery store located in New Rochelle, New York.  LOPEZ pled guilty before U.S. Magistrate Judge Judith C. McCarthy on August 27, 2020. 

Manhattan U.S. Attorney Audrey Strauss said: “Today’s sentence sends a message that destructive drug trafficking in our communities will not be tolerated.  We will continue to work with our law enforcement partners to keep our neighborhoods free of addictive and dangerous narcotics.”

According to the allegations in the Indictment, and statements made in court filings and during court proceedings:

From April 2018 up to October 2018, ULYSSES LOPEZ, together with six charged co-defendants, conspired to distribute five kilograms and more of powder cocaine.  LOPEZ was the leader and organizer of the drug trafficking conspiracy, which operated out of several buildings in the vicinity of, and including, the SuperMercado Mexico located in New Rochelle, New York, which was owned and operated by LOPEZ and his father and co-defendant, Valentino Lopez (“Valentino”). 

After being arrested, and while detained at the Westchester County Jail, LOPEZ attempted to obstruct justice by encouraging one of his charged codefendants, Felipe Barajas, to provide false statements to the Government regarding their relationships and Barajas’s use of his residence to store cocaine on LOPEZ’s behalf.  

Six of the charged defendants, including LOPEZ, Valentino, and Barajas, have pled guilty and been sentenced.  Valentino was sentenced on June 25, 2021, to 60 months in prison for his role in the drug trafficking conspiracy.  The seventh defendant remains a fugitive. 

*                *                *

In addition to his prison sentence, LOPEZ, 41, of New Rochelle, New York, was sentenced to four years of supervised release, and forfeiture of $150,000 and a Mercedes Benz ML350.

Ms. Strauss praised the excellent work of the Federal Bureau of Investigation and the Drug Enforcement Administration.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Emily Deininger, David Felton, and Celia Cohen are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that CHRISTIAN NIEVES, a/k/a “Eric Rosario,” a/k/a “White Boy,” was sentenced today to three years in prison in connection with his retaliation against a witness who had testified at a previous federal murder trial by slashing the witness across the neck with a blade.  NIEVES was convicted on April 23, 2021, following an approximately eight-day jury trial presided over by U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.

U.S. Attorney Audrey Strauss said:  “Christian Nieves’s violent assault of a witness to federal crimes was a naked attempt to subvert the administration of justice, sow fear through the community, and prevent future witnesses from coming forward.  Today’s sentence proves that justice will prevail, and sends a clear signal to other gang members that witness retaliation will not be tolerated.” 

According to court documents, the evidence at trial, and statements made in court proceedings:

NIEVES was a member of the Trinitarios street and prison gang, a criminal enterprise with written rules, oath, and constitution.  The gang has a strict prohibition on cooperation with law enforcement (“snitching”), and violations of the gang’s rules are punished by acts of violence.  Among other governing principles, the Trinitarios mandate a “code of silence,” meaning that members are prohibited from cooperating with law enforcement and speaking about the gang in general.

The Trinitarios had an ongoing rivalry with another Dominican gang, Dominicans Don’t Play (“DDPs”).  In 2018, a member of the DDPs, Stiven Siri-Reynoso, was convicted following a jury trial before U.S. District Judge Colleen McMahon of charges including the murder of Jessica White, a Bronx mother who was inadvertently hit during a shooting on a playground as part of the rivalry between the DDPs and the Trinitarios.  Significant evidence at that July 2018 trial focused on the DDP-Trinitario rivalry.  The victim of NIEVES’s retaliation was among the witnesses who testified about the inner workings of the Trinitarios gang (the “Victim”).  In the course of his testimony, the Victim testified about crimes that he had committed with NIEVES, including an incident in 2009 when the Victim took a gun from NIEVES after a Trinitarios-related shooting that had resulted in the death of Issi Dominguez.  The Victim’s testimony violated the Trinitarios’ longtime prohibition against testifying against members of the gang.

Following his testimony, around 7:00 p.m. on the evening of February 5, 2019, the Victim was walking on Grand Concourse in the Bronx when he saw NIEVES and other Trinitarios gang members on the steps of a building near the sidewalk.  As the Victim walked past, one of the group called out to him, and NIEVES and at least one other person began following the Victim.  NIEVES caught up to the Victim, took out a razor blade, and slashed at the Victim’s face, cutting him down the jawline.  During the attack, NIEVES told the Victim “this is happening to you because you are a snitch.”  The Victim received prompt medical attention, including stitches to close the wound.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Allison Nichols and Jun Xiang are in charge of the prosecution.

            Audrey Strauss, the United States Attorney for the Southern District of New York, and Dermot Shea, Police Commissioner for the City of New York (“NYPD”), announced the unsealing of a Superseding Indictment charging VICTOR RIVERA, 30, and JOHAN ARAUJO, 40, with conspiracy to commit robbery, robbery, attempted robbery, attempted extortion, interstate transportation of stolen property, money laundering, and firearms offenses.  ARAUJO was arrested on July 23 and presented and arraigned before United States Magistrate Judge Katharine H. Parker.  RIVERA was previously charged in an Indictment in November 2020 and is currently in custody.  This case is assigned to United States District Judge Alvin K. Hellerstein.           

U.S. Attorney Audrey Strauss said: “As alleged in the Indictment, the defendants committed a series of armed robberies and attempted robberies of jewelers and other owners of luxury watches in and around New York City.  In one of these robberies, a victim was shot.  Thanks to the outstanding work of the NYPD and Special Agents of our Office, time ran out on the defendants, who now face federal charges for their alleged crimes.”

NYPD Commissioner Dermot Shea said: “The charges show that while criminals often believe they can operate in plain sight with apparent impunity, the NYPD and our law enforcement partners exist to shatter that notion and bring those responsible to justice.  I thank our colleagues at the United States Attorney’s Office in the Southern District of New York for their dedication and hard work building this case and ensuring these two alleged dangerous criminals will be held to account.”

As alleged in the Indictment unsealed last Friday in Manhattan federal court and based on statements made in court proceedings and filings[1]:

From at least in or about October 2019 up to and including November 2020, RIVERA, ARAUJO, and others known and unknown agreed to rob victims of luxury watches worth up to hundreds of thousands of dollars each.  The watches owned by victims targeted in the robberies included Richard Mille, Rolex, Audemars Piguet, and Patek Philippe as part of the jewelers’ businesses based in Manhattan’s Diamond District.  RIVERA used guns to commit several of the robberies, and in one robbery, shot a victim, who survived. 

The 11 robberies and attempted robberies included the following: 

1. On October 3, 2019, RIVERA and a co-conspirator robbed a jeweler in Long Island City, New York, of, among other things, a Richard Mille watch worth over $250,000.
2. On October 25, 2019, RIVERA and a co-conspirator robbed a jeweler in Jamaica, New York, of, among other things, a Rolex watch worth over $150,000.
3. On December 10, 2019, RIVERA, ARAUJO, and a co-conspirator robbed a jeweler in Brooklyn, New York, of, among other things, a Patek Philippe watch worth over $160,000 and a diamond necklace worth over $77,000.  During the robbery, a firearm was shown to the victim.
4. On January 14, 2020, RIVERA and a co-conspirator robbed of a jeweler in Rego Park, New York, of, among other things, a Richard Mille watch worth over $500,000.
5. On February 16, 2020, RIVERA and ARAUJO robbed a jeweler in Jamaica Estates, New York, of, among other things, an Audemars Piguet watch worth over $28,000.
6. On February 20, 2020, RIVERA and a co-conspirator robbed an individual in Long Island City, New York, of, among other things, an Audemars Piguet watch worth over $125,000.
7. On June 11, 2020, RIVERA and ARAUJO robbed a jeweler in Brooklyn, New York, of, among other things, a Richard Mille watch worth over $148,000.  During the robbery, a firearm was shown to the victim and a victim was shot.
8. On July 6, 2020, RIVERA and a co-conspirator robbed a jeweler in Hoboken, New Jersey, of, among other things, a Richard Mille watch worth over $81,000.  Following the robbery, RIVERA and others transported the stolen watch from New Jersey to New York.
9. On July 20, 2020, RIVERA and a co-conspirator participated in an attempted robbery of a jeweler in Queens, New York, attempting to steal a Richard Mille watch worth over $180,000.
10. On August 2, 2020, RIVERA and a co-conspirator robbed an individual in the vicinity of Englewood Cliffs, New Jersey, of, among other things, a Richard Mille watch worth over $250,000.  During the robbery, a firearm was shown to a victim.  Following the robbery, RIVERA and others transported the stolen watch from New Jersey to New York.
11. On October 27, 2020, RIVERA and a co-conspirator robbed a jeweler in the vicinity of Woodbury, New York, of, among other things, an Audemars Piguet watch worth over $26,000 and assorted jewels and gold links worth over $60,000.  During the robbery, a firearm was shown to a victim.           

*                *                *

A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below.  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.

Ms. Strauss praised the outstanding investigative work of the New York City Police Department and the Special Agents of the U.S. Attorney’s Office for the Southern District of New York.  Ms. Strauss also thanked the Bergen County Prosecutor’s Office, the Englewood Cliffs Police Department, the Weehawken Police Department, and the Nassau County Police Department for their assistance.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Mathew Andrews, Andrew K. Chan, and Celia Cohen 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.

COUNT

CHARGE

DEFENDANTS

MAX. PENALTY

  Count One

Hobbs Act Robbery Conspiracy

18 U.S.C. § 1951

VICTOR RIVERA

JOHAN ARAUJO

20 years in prison

Count Two

Money Laundering Conspiracy

18 U.S.C. § 1956(h)

VICTOR RIVERA

20 years

Count Three

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Four

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Five

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

JOHAN ARAUJO

20 years

Count Six

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of seven years in prison

Count Seven

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Eight

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

JOHAN ARAUJO

20 years

Count Nine

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

JOHAN ARAUJO

20 years

Count Ten

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of 10 years in prison

Count Eleven

Attempted Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Twelve

Interstate Transportation of Stolen Property

18 U.S.C. §§ 2314 and 2

VICTOR RIVERA

10 years

Count Thirteen

Attempted Hobbs Act Robbery and Extortion

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Fourteen

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Fifteen

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of seven years in prison

Count Sixteen

Interstate Transportation of Stolen Property

18 U.S.C. §§ 2314 and 2

VICTOR RIVERA

10 years

Count Seventeen

Hobbs Act Robbery

18 U.S.C. §§ 1951 and 2

VICTOR RIVERA

20 years

Count Eighteen

Firearms offense

18 U.S.C. §§ 924(c) and 2

VICTOR RIVERA

Life in prison

Mandatory minimum of seven years in prison

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictment, the description of the Indictment, and the statements made in related court filings and proceedings set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that defendant MICHAEL KEGLEY JR. pled guilty today to his role in the distribution of adulterated and misbranded drugs with the intent to defraud and mislead, in connection with the charges filed in United States v. Navarro et al., 20 Cr. 160 (MKV).  KEGLEY pled guilty before U.S. District Judge Mary Kay Vyskocil, and will be sentenced by Judge Vyskocil on November 22, 2021.

Manhattan U.S. Attorney Audrey Strauss said:  “Michael Kegley promoted and sold unregulated performance enhancing substances intended for use by those engaged in fraud and unconscionable animal abuse in the world of professional horseracing. This conviction underscores that our Office and our partners at the FBI are committed to the prosecution and investigation of corruption, fraud, and endangerment at every level of the horse racing industry.”

According to the allegations contained in the Superseding Information, the prior Indictments[1], other filings in this case, and statements during court proceedings:

The charges in the Navarro case arise from an investigation of widespread schemes by racehorse trainers, veterinarians, performance-enhancing drug (“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. Veterinarians and drug distributors, such as KEGLEY, who worked as the director of sales for an unregistered distributor of equine drugs, profited from the sale and administration of these medically unnecessary, misbranded, and adulterated substances.

Among the misbranded and adulterated PEDs marketed and sold by KEGLEY was the drug “SGF-1000,” which was compounded and manufactured in unregistered facilities. SGF-1000 was an intravenous drug promoted as, among other things, a vasodilator capable of promoting stamina, endurance, and lower heart rates in horses through the purported action of “growth factors” supposedly derived from sheep placenta. Despite marketing, selling, and administering SGF-1000, KEGLEY acknowledged in intercepted calls that he, along with a co-defendant involved in the sale of SGF-1000, did not know the actual contents of SGF-1000. Nevertheless, KEGLEY’s sales of that drug persisted, aided by the claim that SGF-1000 would be untestable in horses by law enforcement.

*                *                *

U.S. Attorney Strauss praised the outstanding investigative work of the FBI New York Office’s Eurasian Organized Crime Task Force and its support of the FBI’s Integrity in Sports and Gaming Initiative.

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.

 

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[1] As to Kegley’s co-defendants, the entirety of the texts of the Indictments and the descriptions of the Indictments set forth herein constitute only allegations and every fact described should be treated as an allegation.