Southern District of New York

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that BRANDON GREEN, a/k/a “Light,” was sentenced today to approximately 24.5 years in prison by U.S. District Judge Paul G. Gardephe in connection with his leadership of the Blood Hound Brims, a violent street and prison gang that operated in New York City and elsewhere, and his participation in narcotics trafficking and firearms offenses.  GREEN was convicted on March 27, 2019, following an approximately five-week jury trial before Judge Gardephe, who also imposed today’s sentence. 

U.S. Attorney Audrey Strauss said:  “Brandon Green, one of the leaders of a ruthlessly violent gang, was responsible for extensive narcotics trafficking throughout the city and state of New York.  Today’s lengthy sentence sends an important message to the Blood Hound Brims and other gang members that they will be arrested, prosecuted and face justice for their crimes.” 

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

The Blood Hound Brims was a criminal enterprise that operated principally in the greater New York area, from at least 2005 up to and including 2016. The BHB was a faction of the Bloods street gang, which operates nationwide, and is under the New York Blood Brim Army (“NYBBA”).  The BHB operated within and around various locations in New York, including New York City, Westchester County, Elmira, and in Pennsylvania, as well as within and outside federal and state penal systems. 

The BHB used a hierarchical structure that was organized, in part, by New York City borough, and that was maintained, in part, through the payment of dues.  The founder and leader of the gang was Latique Johnson, and other members and associates of the BHB referred to Johnson as the “Godfather.” The gang was divided into several “pedigrees,” each of which had its own leadership structure which was approved by Johnson.  Leadership positions within the pedigrees included, among others, treasurers who collected dues from members of a particular pedigree, and individuals who performed security and disciplinary functions for the pedigree. 

Members of the BHB had regular meetings, sometimes called “pow wows” or “9-11s,” at which members were required to pay dues.  Some of the meetings were among members of a particular pedigree, and other meetings were for all members of the Enterprise.  Word of the meetings was disseminated via text message, word-of-mouth, and flyers.  The BHB’s business, including rivalries with other gangs, shootings, the arrest of gang members, guns, and drugs, was regularly discussed at these meetings.  “Kitty dues” – money that paid for commissary funds, lawyers, guns, and drugs, and that served as tribute to Johnson – were collected at these meetings.  The BHB maintained its own rules and constitution that new members were required to learn.  Members of the BHB also used code words and secret phrases to communicate with each other both while in prison and on the street in order to avoid detection by law enforcement.   

One of the BHB’s principal objectives was to sell cocaine base, commonly known as “crack cocaine,” powder cocaine, and heroin, which members and associates of the BHB sold throughout the greater New York area and in Pennsylvania. 

Members and associates of the BHB engaged in multiple acts of violence against rival gangs.  These acts of violence included assaults and attempted murders, which were committed to protect the Gang’s drug territory, to retaliate against members of rival gangs who had encroached on the territory controlled by the BHB, and to otherwise promote the standing and reputation of the Gang vis-à-vis rival gangs.  These acts of violence also included assaults and attempted murders against members and associates of the BHB itself, as part of internal power struggles within the Gang.

GREEN, 38, of the Bronx, New York, was one of BHB’s primary suppliers of cocaine and heroin, providing other Gang members with redistribution quantities of narcotics for resale in New York City and Elmira, New York. GREEN also maintained a supply of firearms, which he sometimes made available to other members of the Gang.  At the time of GREEN’s arrest in May 2017, U.S. Marshals recovered six loaded firearms from the residence where he was living.

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Latique Johnson, a/k/a “La Brim,” 41, of the Bronx, New York, the Gang’s founder, was convicted following a jury trial of of racketeering conspiracy, assault in aid of racketeering, attempted murder in aid of racketeering, narcotics conspiracy, and firearms. Johnson was sentenced in 2019 to 30 years in prison.

Donnell Murray, 41, of the Bronx, New York, a BHB leader was convicted following a jury trial of racketeering conspiracy, assault in aid of racketeering, narcotics conspiracy, and a firearms offense.  Murray was sentenced in 2019 to 20 years in prison.

David Cherry, 40, of the Bronx, New York, a BHB leader, was convicted following a guilty plea to a firearms offense.  Cherry was sentenced in June to 10 years in prison.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

The prosecution is being handled by the Violent and Organized Crime Unit of the U.S. Attorney’s Office for the Southern District of New York.  Assistant U.S. Attorneys Jessica Feinstein, Allison Nichols, and Andrew Chan are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that EDDIE COTTO, a/k/a “Eddie Diamond,” was found guilty yesterday in Manhattan federal court following a week-long jury trial before U.S. District Judge Jed S. Rakoff.  COTTO is scheduled to appear for sentencing before Judge Rakoff on November 3, 2021.

U.S. Attorney Audrey Strauss said:  “As a unanimous jury swiftly determined, Eddie Cotto peddled poison in a public housing building for over a year, disrupting the lives of New Yorkers.  Cotto’s distribution of heroin, cocaine, and fentanyl and his callous disregard for its consequences have resulted in today’s conviction.”

As reflected in the Indictment, public filings, and other evidence presented at trial:

EDDIE COTTO was the leader of a drug trafficking organization (the “DTO”) that operated in New York, New York, and controlled drug sales of heroin, cocaine, and fentanyl in and around a New York City Housing Authority building at 1760 Lexington Avenue (the “Building”).  COTTO supervised and coordinated the supply of narcotics to his co-defendants, and stored the DTO’s narcotics in the locked janitorial closets of the Building.  COTTO acted as the gatekeeper of the Building generally from the safety of a Winnebago that COTTO parked in the vicinity of the Building.  From the early morning hours, COTTO would direct his co-defendants, generally via walkie-talkie, to serve customers whom COTTO was sending to the Building to complete narcotics transactions. 

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COTTO, 61, of New York, New York, was convicted of one count of narcotics conspiracy in violation of 21 U.S.C § 846 and four counts of narcotics distribution in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(C).  COTTO faces a mandatory minimum term of five years’ imprisonment and a total maximum sentence for all counts of conviction of 120 years in prison.

Other members of the conspiracy in this case who have been sentenced include SAMMY MCCOY, 64, of New York, New York, who was sentenced to 98 months in prison on May 19, 2019, ERVIN ORTIZ, 62, of New York, New York, who was sentenced to 66 months in prison on May 20, 2021, and JJIMMY RIVAS, 28, of New York, New York, who was sentenced to 24 months in prison on October 11, 2019.  MCCOY and RIVAS were sentenced by U.S. District Judge Victor Marrero and ORTIZ was sentenced by Judge Rakoff.

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

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Timothy V. Capozzi, Rebecca T. Dell, Aline R. Flodr, and Emily A. Johnson are in charge of the prosecution. 

The U.S. Department of Justice today launched five cross-jurisdictional strike forces to help reduce gun violence by disrupting illegal firearms trafficking in key regions across the country.  Leveraging existing  resources, the regional strike forces will better ensure sustained and focused coordination across jurisdictions and help stem the supply of illegally trafficked firearms from source cities, through other communities, and into five key market regions:  New York, Chicago, Los Angeles, the San Francisco Bay Area/Sacramento Region and Washington, D.C.

Each strike force region will be led by designated United States Attorneys, who will collaborate with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and with state and local law enforcement partners within their own jurisdiction (where firearms are used in crimes) as well as law enforcement partners in areas where illegally trafficked guns originate. These officials will use the latest data, evidence, and intelligence from crime scenes to identify patterns, leads, and potential suspects in violent gun crimes.

“All too often, guns found at crime scenes come from hundreds or even thousands of miles away. We are redoubling our efforts as ATF works with law enforcement to track the movement of illegal firearms used in violent crimes.  These strike forces enable sustained coordination across multiple jurisdictions to help disrupt the worst gun trafficking corridors,” said Attorney General Merrick B. Garland. “The Department of Justice will use all of its tools – enforcement, prevention, intervention, and investment – to help ensure the safety of our communities – the department’s highest priority.”

According to gun trace data, the vast majority of firearms recovered in New York City originate outside the state and are illegally trafficked into New York. The new strike force, led by Audrey Strauss, the U.S. Attorney for the Southern District of New York, and Jacquelyn M. Kasulis, the Acting U.S. Attorney for the Eastern District of New York, will help ensure sustained and focused coordination between law enforcement and prosecutors in New York City with their counterparts in locations where many of the firearms originate.

U.S. Attorney Audrey Strauss said: “Disrupting the flow of guns into New York City is an important part of our anti-violence efforts.  We look forward to working with our federal and state partners to investigate and prosecute gun trafficking cases.  Because many of the firearm source locations for New York City overlap with the source locations for firearms recovered in the District of Columbia, we will coordinate our efforts with our D.C. counterparts.”

U.S. Attorney Jacquelyn M. Kasulis said: “Gun violence has taken a terrible, unacceptable toll on our communities, and it must be stopped.  Stemming the flow of illegal guns into New York City is critical to eradicating gun violence in our city.  We are committed to working with our federal and state partners to investigate and prosecute gun trafficking to the fullest extent of the law.”

The strike forces represent one important, concrete step in implementing the Department’s Comprehensive Violent Crime Reduction Strategy, which was announced on May 26, 2021. The comprehensive strategy supports local communities in preventing, investigating, and prosecuting gun violence and other violent crime – and requires U.S. Attorneys’ offices to work with federal, state, local and tribal law enforcement, as well as the communities they serve, to address the most significant drivers of violence in their districts. In guidance to federal agents and prosecutors as part of that comprehensive strategy, the Deputy Attorney General made clear that firearms traffickers providing weapons to violent offenders are an enforcement priority across the country.

Audrey Strauss, the United States Attorney for the Southern District of New York, Ray Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), John B. DeVito, Special Agent in Charge of the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), and Kevin P. Bruen, Superintendent of the New York State Police (“NYSP”), announced today the unsealing of a superseding indictment in Manhattan federal court charging PEDRO GUZMAN MARTINEZ, a/k/a “Peter,” ABEL MONTILLA, a/k/a “Coche Bomba,” JORGE MIRANDA-SANG, a/k/a “Chinito,” and LUIS GOMEZ ORTIZ, a/k/a “Kiké,” with participating in a drug trafficking organization that shipped approximately 4,500 kilograms of cocaine from Puerto Rico to the continental United States, including to New York, Massachusetts, Florida, and Connecticut, for sale and distribution over a period of approximately 10 months.  GUZMAN MARTINEZ and MIRANDA-SANG were arrested this morning in Puerto Rico and are expected to be presented before a magistrate judge in the District of Puerto Rico later today.  GOMEZ ORTIZ was arrested this morning in Florida and is expected to be presented before a magistrate judge in the Middle District of Florida later today.  MONTILLA was arrested this morning in Springfield, Massachusetts, and is expected to be presented before U.S. Magistrate Judge Katharine H. Parker in the Southern District of New York later today.  The case is assigned to U.S. District Judge P. Kevin Castel.    

U.S. Attorney Audrey Strauss said: “These defendants allegedly hid nearly five tons of cocaine in furniture so they could ship it from Puerto Rico to New York City and elsewhere.  As alleged, for a time, the defendants were able to hide their cocaine, but they were unable to hide the scheme from our law enforcement partners.  We will continue to focus on prosecuting large-scale traffickers of illegal drugs.”

DEA Special Agent in Charge Ray Donovan said: “Traffickers have always found new and innovative methods of smuggling drugs into the United States. In this case, they allegedly concealed cocaine into hollowed out furniture. This nearly three-year investigation has dismantled an international drug trafficking organization that allegedly has been shipping thousands of kilograms of cocaine, ultimately destined for our communities.  I applaud our law enforcement partners from the US Attorney’s Office in the Southern District of New York, the ATF and the USPIS for their efforts in bringing this organization to justice.”

ATF Special Agent in Charge John B. DeVito said: “The defendants are alleged to run a drug trafficking organization which conspired to flood our streets with unprecedented levels of illegal narcotics. Thankfully, through the diligent efforts of our law enforcement partners, their alleged operation has been disrupted and dismantled successfully. ATF is committed to the fight against the illegal drug trade and will stand shoulder to shoulder with all of our local, state and federal partners to see that these organizations are eradicated from our communities. I would like to thank the United States Attorney’s Office for their leadership during this investigation.”

USPIS Inspector-in-Charge Philip R. Bartlett: said: “Winning the battle against illicit drugs is a top priority for the Postal Inspection Service and our law enforcement partners. Our objectives are to rid society of illicit drug trafficking and the associated violence, and most importantly, provide a safe environment for the American public.”

Police Commissioner Dermot Shea said: “Today’s charges demonstrate that the investigative efforts of New York City law enforcement are far-reaching, precisely-focused, and patient. As long as individuals – wherever they are based – are involved in illegal narcotics trafficking, the NYPD and our partners will relentlessly work to stop the spread of illegal narcotics on our streets. I commend our colleagues at the United States Attorney’s Office in the Southern District of New York, and our law enforcement partners at the DEA, ATF and USPIS for their dedication and hard work to bring these individuals to justice.”

State Police Superintendent Kevin P. Bruen said: “These arrests are the result of a sustained investigation into a narcotics trafficking organization that was allegedly shipping large quantities of cocaine into the United States, including New York. I want to thank our members and our law enforcement partners for their work on this case and their commitment to stopping the flow of illegal drugs into our country.”

According to the allegations contained in a Superseding Indictment unsealed today in Manhattan federal court and other filings in the case[1]: 

Between at least September 2018 and June 2019, GUZMAN MARTINEZ, MONTILLA, MIRANDA-SANG, and GOMEZ ORTIZ were members of a drug trafficking organization (“DTO”) who conspired to distribute and possess with intent to distribute five kilograms and more of cocaine.

The defendants operated the drug trafficking scheme by arranging for the shipment of approximately 70 large parcels from Puerto Rico to the continental United States.  The cocaine was concealed in custom tables and other furniture, and the packages containing the cocaine were represented to be furniture on shipping documentation, but the hollowed-out furniture in fact concealed hundred-kilogram quantities of cocaine.  In total, the trafficking organization shipped approximately 4,500 kilograms of cocaine, worth approximately $144 million on the street.

GUZMAN MARTINEZ was responsible for delivering the packaged cargo (containing hollowed-out furniture filled with cocaine) to co-conspirators whom GUZMAN MARTINEZ hired to facilitate the shipping logistics using a false company name.

MIRANDA-SANG and GOMEZ ORTIZ identified and hired individuals in the continental United States to receive and sign for DTO shipments, to unpack and distribute the cocaine to other DTO members as directed, and to dispose of the packaging materials to evade detection by law enforcement.

MONTILLA was a Massachusetts-based coordinator of cocaine deliveries who traveled to many delivery locations and coordinated the delivery of cocaine shipments with package recipients.  At least a dozen packages were sent to addresses affiliated with MONTILLA.

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MONTILLA, 48, of Springfield, Massachusetts, and GUZMAN MARTINEZ, 47, MIRANDA-SANG, 42, and GOMEZ ORTIZ, 29, all of Puerto Rico, are each charged with one count of conspiracy to distribute and possess with the intent to distribute narcotics, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the DEA, ATF, USPIS, NYPD, and NYSP in this investigation.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Juliana N. Murray, Ryan B. Finkel, and Peter J. Davis are in charge of the prosecution.

The charges contained in the Superseding 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 Superseding Indictment and the description of the Superseding Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Audrey Strauss, the United States Attorney for the Southern District of New York, and William W. Richards, Special Agent in Charge of the United States Air Force Office of Procurement Fraud Investigations, Joint Base Andrews, announced today that RAYMOND WHITE,  a/k/a “John Raymond Anthony White,” a/k/a “Raymond Alexander White,” was arrested by agents from the Air Force Office of Special Investigations and the Army Major Procurement Fraud Unit this morning at his residence in New York, New York.  WHITE is charged by complaint with submitting false information regarding WHITE’s general contractor business’s finances and prior performance of contracts in order to obtain a contract to build a munitions load crew training facility at Joint Base Andrews, Maryland, and submitting false information to the United States Small Business Administration (SBA) in order to induce the SBA to guarantee 80% of the performance and payment bonds issued in connection with the contract.  The contract was worth in excess of $4.8 million.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Raymond White lied and provided false documentation and credentials to the military and the Small Business Administration in procuring a multimillion-dollar contract he was not qualified to fulfill.  Among other fabrications, White allegedly provided a report from an independent accounting firm that appears not to exist.  White also allegedly provided as a reference the owner of a prior $9 million contracting project, but both the owner and the prior project appear to have been made up out of whole cloth.  As alleged, Raymond White’s actual specialty appears to be the construction of fantastical falsehoods.”

Office of Procurement Fraud Investigations Special Agent in Charge William W. Richards said: “The Office Procurement Fraud Investigations, along with our law enforcement and prosecutorial partners, will work tirelessly to combat fraud threatening the Department of the Air Force.”

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

Beginning on or about May 12, 2019, through at least in or about September 2020, WHITE, president and chief executive officer of a construction management and general contractor company (the “Contractor), submitted a bid to the District of Columbia Army National Guard (“DCARNG”) on a contract (the “Contract”) to build a munitions load crew training facility at Joint Base Andrews, Maryland.  Between September 21, 2019, and September 30, 2019, in response to a pre-award questionnaire sent by the contract specialist, WHITE emailed several documents, including an “Independent Accountants’ Report,” a “Construction Contractor Experience Data,” and a “Firm Dossier” to the contract specialist for the DCARNG.  The contract was awarded to September 30, 2019, to the Contractor for $4,801,000.  These documents contained false financial reports regarding the Contractor’s finances, false information regarding past performance of contracts by the Contractor, and false information regarding members of the management team for the Contractor.  The contract was terminated on or about September 16, 2020, for providing false information to the DCARNG, and no construction work had been performed yet on the site.

As required by federal law, WHITE was required to obtain performance and payment bonds provided by an insurer (generally referred to in the business as a surety) for the Contract. On or about October 23, 2019, the Contractor received a performance and payment bond from a bond insurance company (the “Surety”), and the Surety required that the Contractor obtain a guarantee of the bond from the United States Small Business Administration (“SBA”), so that in the event of default on the bond, the Surety would be reimbursed 80%-90% of any loss incurred by the SBA.  In or around October 2019, WHITE emailed the SBA bond guarantee application materials to a surety bond broker to submit to the SBA.  The application materials included, among other documents, financial statements and a statement of personal history for WHITE.  These documents contained fictitious financial reports regarding the Contractor’s finances and false information regarding past contracts performed by the Contractor.  WHITE also falsely represented in the Statement of Personal History that he never had been convicted of any criminal offense, when WHITE was previously convicted on April 21, 2011, in the Southern District of New York of mail fraud (18 USC § 1341), major fraud against the United States (18 USC § 1031), false statements (18 USC § 1001(a)), and tampering with a witness (18 USC § 1512(b)(3)).  WHITE also listed his name as “Raymond Alexander White” and provided a social security number and date of birth different from those listed in his Bureau of Prisons records.  On or about October 31, 2019, the Contractor obtained a guarantee from the SBA of 80% of the payment and performance bond.  As a result of Contract termination, the SBA has fulfilled three claims that the Surety has submitted to the SBA pursuant to the guarantee provided by the SBA to the bonds issued by the Surety, totaling $242,827.53 as of January 26, 2021.

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WHITE, 56, of New York, New York, is charged with one count of major fraud against the United States, which carries a maximum sentence of 10 years in the prison, and two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison.  

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

Ms. Strauss praised the work of the Air Force Office of Procurement Fraud Investigations and the Army Major Procurement Fraud Unit in this investigation.

The case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Edward C. Robinson Jr. 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 herein should be treated as an allegation as to the defendants charged in the Complaint.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Ray Donovan, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), announced charges today against seven individuals involved in laundering tens of millions of dollars for drug trafficking organizations selling illegal narcotics throughout the United States.  YING SUN, JIAN WANG, FRANK LIU, DIELONG WU, LARRY LAI, and JIE LIN, are charged with conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmission business; STEVEN WOO was also charged as part of the conspiracy to operate an unlicensed money transmission business.  SUN, LIU, and WOO were arrested in California and will be presented in the Central District of California this afternoon before Magistrate Judge John D. Early.  WU and LAI were arrested today in New York and will be presented in the Southern District of New York before Magistrate Judge Katharine H. Parker.  WANG and LIN remain at large.  During the investigation, law enforcement agents seized over $6.5 million from the defendants’ money laundering organization, and, in coordination with unsealing the charges today, seized an additional $8 million in assets traceable to the illicit proceeds laundered by the organization.  The case is assigned to U.S. District Judge Sidney H. Stein.

U.S. Attorney Audrey Strauss said: “Like drug dealers, those who launder the proceeds of drug trafficking profit from the sale of dangerous narcotics that wreak havoc in communities throughout the United States.  As alleged, the individuals arrested today facilitated drug traffickers by concealing millions of dollars of their ill-gotten profits.  Our Office will continue to work closely with the DEA and our law enforcement partners to go after the money networks that are necessary to the operations of the international drug trade.”

DEA Special Agent in Charge Ray Donovan said: “One of the most powerful criminal elements of transnational drug trafficking organizations is money laundering. Like any business, the ultimate goal of drug trafficking is to profit. These money laundering networks provide an invaluable service to traffickers, transferring their ill-gotten gains across the globe. The men and women of the DEA are focused on bringing to justice not only drug traffickers, but anyone who facilitates the drug trade.”

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

From at least November 2019 through May 2021, SUN coordinated the activities of a money laundering organization (“MLO”), communicating with drug trafficking organizations (“DTOs”) throughout the United States and in Mexico to receive large quantities of cash to be laundered.  From April 2020 through April 2021, SUN organized more than 130 money pickups in 23 states involving over $20 million in drug trafficking proceeds.  WANG, LIU, WU, LAI, LIN, and WOO facilitated the MLO’s operations by conducting these money pickups, transporting the cash, depositing the money into the retail banking system, and/or transferring the money to different individuals or entities.

During the course of the investigation, law enforcement agents conducted numerous seizures of bulk currency in connection with the money pickups conducted by the MLO, and seized over $6.5 million.

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SUN, 65, of Arcadia, California, WANG, 52, of Rosemead, California, LIU, 65, of Yorba Linda, California, WU, 58, of Staten Island, New York, LAI, 69, of Queens, New York, and LIN, 58, of Upland, California, are each charged with one count of conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison, and, along with WOO, 69, of Montebello, California, one count of conspiracy to operate an unlicensed money transmission business, 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 defendants will be determined by the judge.

Ms. Strauss praised the outstanding work of the DEA.  She also thanked the Internal Revenue Service and the U.S. Attorney’s Office for the Central District of California for their assistance.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Brett M. Kalikow is 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, the United States Attorney for the Southern District of New York, announced that DONALD LAGUARDIA was sentenced today to 60 months in prison for his securities fraud and misappropriation scheme.  LAGUARDIA was the chief executive and co-founder of a New York-based investment firm, L-R Managers, LLC, which managed the LR Global Frontier Master Fund and two related feeder funds (collectively, the “Frontier Funds”).  LAGUARDIA was found guilty of securities fraud, investment adviser fraud, and wire fraud following a trial last November before United States District Judge Lewis A. Kaplan, who imposed today’s sentence.

U.S. Attorney Audrey Strauss said: “Donald LaGuardia pitched his clients on frontier market investments, but the Frontier Funds turned out to be a front for fraud.  LaGuardia betrayed his clients’ trust by diverting millions to other uses, including his own personal and business expenses.  Now LaGuardia has been sentenced to prison for his crimes.”

According to statements in the Indictment, evidence presented during the trial, and other filings and statements at public court proceedings in the case:

From in or about 2013 through in or about 2017, LAGUARDIA solicited approximately $6.4 million from investors for Frontier Funds, which had a stated focus on investments in “frontier” markets in Latin America, Central and Eastern Europe, the Middle East, Africa, and Asia.  Contrary to LAGUARDIA’s representations, and in breach of his duties to investors in the Frontier Funds, LAGUARDIA misappropriated investors’ money to finance L-R Managers’ payroll, pay rent for its office space on Park Avenue in Manhattan, and pay hundreds of thousands of dollars in charges on the firm’s credit card, among other unauthorized expenses.  Hundreds of thousands of dollars went to the benefit of LAGUARDIA personally.

In one example, in 2013, LAGUARDIA solicited an $800,000 investment in the Frontier Funds from an investor (“Investor-1”).  Upon receipt of Investor-1’s money, an L-R Managers employee sent an email to LAGUARDIA and another person asking for approval to forward the $800,000 to the Frontier Funds.  LAGUARDIA responded, “Dont [sic] wire anything yet!”  LAGUARDIA then caused approximately $390,000 of Investor-1’s investment never to be transmitted to the Frontier Funds, but instead to be used to pay himself approximately $52,000 and for various other personal and business expenses.

By September 2015, L-R Managers faced substantial financial difficulties.  On September 1, 2015, an L-R Managers principal sent an email to LAGUARDIA and others at the firm stating that it would be “ethically troubling to accept money into the [Frontier Funds] when [L-R Managers] can no longer support . . . payroll and mission critical services.”  Nevertheless, just a few days later, a new investor solicited by LAGUARDIA (“Investor-2”) made a $2 million investment into the Frontier Funds.  Prior to this investment, LAGUARDIA concealed his firm’s near insolvency from Investor-2 and did not disclose that the Frontier Funds had been paying substantial expenses for L-R Managers, contrary to the representations in the funds’ offering documents.  LAGUARDIA then proceeded, over the course of several months, to use a substantial portion of Investor-2’s investment in the Frontier Funds to continue paying himself and subsidizing his firm’s business expenses.

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LAGUARDIA, 54, of Lavallette, New Jersey, was also sentenced to three years of supervised release.  He was further ordered to forfeit $2,571,500 and pay restitution to victims in the amount of $4,039,872.46.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Margaret Graham and Daniel Loss are in charge of the prosecution.

Audrey Strauss, United States Attorney for the Southern District of New York, announced that STEVEN WHITTICK, the former treasurer of the Law Enforcement Employees Benevolent Association (“LEEBA”) and an officer with the New York City (the “City”) Department of Environmental Protection (“DEP”), pled guilty today before United States District Judge P. Kevin Castel, to charges of conspiring to evade more than $250,000 in federal taxes, including payroll taxes owed by LEEBA and its employees, and his own personal income taxes.  WHITTICK also pled guilty to lying to federal officers during the course of the investigation in this case.  LEEBA is a labor union that represents certain law enforcement officers employed by the City, including officers from DEP, the City Department of Sanitation, and the City Department of Transportation. 

U.S. Attorney Audrey Strauss said: “Steven Whittick today pled guilty to charges that reflect a betrayal of his duties as a law enforcement officer, his legal obligations as a union official, and his responsibilities as a taxpayer.  As a police officer, Whittick swore to uphold the law, not to obstruct it.  As a union official, he betrayed the rank-and-file membership by paying himself off the books.  As a taxpayer, Whittick evaded his legal obligation to pay what was owed.  Now, Steven Whittick awaits sentencing for his crimes.”

According to the Indictment and the underlying complaints filed in this case, as well as other publicly available information and prior court filings, and recent court proceedings:

Law Enforcement Employees Benevolent Association

LEEBA is a labor union that has acted as the collective bargaining representative principally for law enforce­ment personnel at various City agencies, and has entered into agreements on behalf of those law enforcement employees, including agreements for insurance and retirement benefits.  The City agencies whose employees LEEBA represented included, at various times, DEP, the Department of Sanitation, and the Department of Transportation.           

WHITTICK

WHITTICK is a DEP police officer, the former treasurer of LEEBA, and a member of the board of directors of LEEBA and the boards of trustees of the LEEBA Annuity Fund and the LEEBA Welfare Fund.  As LEEBA’s treasurer, WHITTICK had responsibility for LEEBA’s financial matters and accounts, including arranging for LEEBA to pay its payroll through an outside payroll processing firm (the “Payroll Processor”) starting in 2016.  WHITTICK also held signatory authority over LEEBA’s main operating bank account.

            The Tax Evasion Conspiracy

As charged in Count Two of the Indictment, to which WHITTICK pled guilty today, from at least in or about 2015 through 2019, WHITTICK participated in a conspiracy with Kenneth Wynder Jr.,[1] the president of LEEBA, to cause LEEBA to make payments to WHITTICK and Wynder, by check and in cash, and to conceal such payments from the Internal Revenue Service (“IRS”).  WHITTICK further conspired to ensure that such payments were made outside of LEEBA’s Payroll Processor.  He then concealed these payments from the IRS – including off-the-books payments to himself of more than $100,000 and off-the-books payments to Wynder of more than $400,000 – in order to evade his own personal income taxes and the personal income taxes of Wynder, and to evade the payroll taxes that were owed by LEEBA and certain LEEBA employees.

WHITTICK’s False Statements to Federal Agents

In or about October 2019, while serving as LEEBA’s Treasurer and after learning of a federal investigation into LEEBA’s finances – including the investigation of an alleged embezzlement scheme that ultimately resulted in wire fraud charges against Wynder – WHITTICK repeatedly lied to federal agents in an effort to obstruct that investigation.  WHITTICK did so despite personal involvement in some of the financial improprieties with which Wynder is charged.  For example, as alleged, on at least two occasions, on or about February 1, 2018, and March 30, 2018, WHITTICK withdrew $16,000 in cash from a LEEBA bank account, and on each occasion deposited $15,000 cash into Wynder’s personal bank account and $1,000 cash into WHITTICK’s own personal bank account. 

 

            After the FBI executed a search warrant of LEEBA’s offices in September 2019, WHITTICK attempted to obstruct and to influence the ongoing federal investigation by making, in two different interviews with law enforcement agents, false statements about, among other subjects, cash withdrawals he made from LEEBA’s bank accounts, unauthorized withdrawals from LEEBA’s Annuity Fund and from the individual retirement accounts of Fund participants, and LEEBA’s payment for certain travel and entertainment expenses for union officers, including WHITTICK and Wynder.

*                *                *

WHITTICK, 51, of Kingston, New York, pled guilty today to: (1) one count of conspiracy to evade personal and payroll taxes for the tax years 2015 through 2018 and the first three quarters of 2019; and (2) one count of lying to federal investigators.  Each of those charges carries a maximum sentence of five years in prison, a maximum fine of $250,000 or twice the gross gain or loss from the offense, and an order of restitution.  WHITTICK is scheduled to be sentenced by Judge Castel on November 17, 2021, at 11:00 a.m. 

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

Ms. Strauss praised the outstanding work of the FBI, IRS-Criminal Investigation, and the Department of Labor Office of Labor Managements Standards.  Ms. Strauss also thanked the New York City Comptroller’s Office and the New York City Department of Investigation for their assistance.

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys David Raymond Lewis and Eli J. Mark are in charge of the prosecution.

 

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[1] Wynder is charged in six counts of the same Indictment in which WHITTICK was charged.  The charges against Wynder contained in the Indictment are accusations only.  Wynder remains presumed innocent unless and until proven guilty.

Audrey Strauss, the United States Attorney for the Southern District of New York, and George M. Crouch Jr., Special Agent-in-Charge of the Newark Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging DILLON JORDAN, a/k/a “Daniel Jordan,” a/k/a “Daniel Maurice Hatton, a/k/a “Daniel Bohler, with conspiracy to violate the Mann Act, substantive Mann Act and Travel Act violations, and money laundering in connection with operating a prostitution business and laundering the proceeds of that prostitution business through two front companies – a purported party and event planning company and an actual movie production company.  JORDAN was arrested today in San Bernardino County, California, and will be presented today in the Central District of California.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, for years, Dillon Jordan operated an extensive and far-reaching prostitution business, using a purported event planning company and a movie production company to conceal the proceeds he made from exploiting women.  Now the party is over and the film is a wrap.”

FBI Special Agent-in-Charge George M. Crouch Jr. said: “This defendant apparently thought he could hide his alleged criminal dealings behind a supposedly legitimate business.  But the FBI, in its mission to protect our citizens, uses every tool at its disposal to unmask those who violate federal law and assist the impacted victims.  We encourage anyone who was victimized by this defendant, and anyone with additional information, to contact our Newark field office.”

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

From in or about 2010 through at least in or about May 2017, JORDAN operated a prostitution business throughout the United States and abroad.  JORDAN maintained a roster of women who resided around the United States and who, in exchange for payment, performed sexual acts for JORDAN’s clients at locations throughout the United States, including the Southern District of New York, and abroad.  JORDAN communicated with the clients of his prostitution business by email to coordinate the prostitution services, which included sending to clients photos of women who were available for hire for prostitution services, discussing the price of prostitution services, and overseeing travel logistics for women to travel to engage in prostitution.  At times, JORDAN himself arranged the interstate travel from the women to engage in prostitution, and at other times, clients, at JORDAN’s direction, arranged the interstate travel for the women whom JORDAN directed to those clients.  To facilitate his prostitution business, JORDAN also coordinated with a United Kingdom-based madam by sharing and referring customers and prostitutes.

JORDAN primarily managed the finances of the prostitution business through two front companies – a purported party and event planning company and a movie production company – incorporated in California.  JORDAN opened multiple bank accounts for these companies, which he used to accept cash, wire, and check payments for prostitution services from clients and to pay for the expenses of the prostitution business, including paying the women for their prostitution services by cash and check.  By using the two front companies to receive deposits from the prostitution business, JORDAN ensured that transactions involving those proceeds from the prostitution business would disguise the nature, source, and origin of those proceeds.    

*                *                *

JORDAN, 49, of Lake Arrowhead, California, is charged with: one count of conspiracy to violate the Mann Act, which carries a maximum sentence of five years in prison; one count of enticement, which carries a maximum sentence of 20 years in prison; one count of use of interstate commerce to promote unlawful activity, which carries a maximum sentence of five years in prison; and one count of money laundering, which carries a maximum sentence of 20 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. 

We urge anyone who feels she may be a victim of, or have information related to, the conduct in this case to please contact the FBI at [email protected] or (973) 792-3000.

Ms. Strauss praised the investigative work of the FBI.  This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorney Cecilia E. Vogel is in charge of the prosecution.

The allegations 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, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging MICHAEL PALLESCHI, the former Chief Executive Officer of FTE Networks, Inc. (“FTE”), and DAVID LETHEM, the former Chief Financial Officer of FTE, with conspiracy, securities fraud, and wire fraud, improperly influencing the conduct of an audit and aggravated identity theft.  These charges stem from the defendants’ years-long scheme to inflate FTE’s revenue, to conceal liabilities and expenses, and to embezzle company funds.  PALLESCHI was arrested this morning in the Northern District of New York and will be presented today in that district.  LETHEM was arrested this morning in the Middle District of Florida and will be presented today in that district. 

U.S. Attorney Audrey Strauss said:  “When corporate executives sell their company’s stock to the public, they assume the responsibility under federal law of making full and accurate disclosures about their company’s financial condition to investors.  Palleschi and Lethem instead chose to lie about FTE’s finances to make the company appear more financially healthy than it was, thus defrauding FTE’s stockholders and lenders. Instead of forthrightness with their investors, Palleschi and Lethem chose the easy way to cash in by obfuscating FTE’s true financial health through fake documents and forged signatures. This Office is committed to ensuring the integrity of our capital markets through vigorous enforcement of federal securities laws.”

FBI Assistant Director William F. Sweeney Jr. said:  “Concealing a company’s true financials from investors is not only an unscrupulous business practice, but in the case of Palleschi and Lethem, as we allege today, it amounted to a federal crime. Financial fraud schemes are all too common, and in order to maintain investor confidence, we need to hold accountable those who perpetrate them.” 

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

FTE was a telecommunications company based in Naples, Florida and Manhattan.  As of December 2017, its stock traded on the NYSE American market.  From 2014 to 2019, PALLESCHI was the chairman of FTE’s Board of Directors and its Chief Executive Officer.  LETHEM served as FTE’s Chief Financial Officer from 2014 through 2019.

Fraud with Respect to Convertible Notes

From 2016 to early 2019, PALLESCHI and LETHEM caused FTE to issue approximately 70 notes with a total principal balance of more than $22 million to private lenders that the lenders could convert to FTE’s common stock, either upon demand or upon default.  Issuers of such convertible notes must recognize on their financial statements liabilities and expenses that arise from the notes’ conversion features.  PALLESCHI and LETHEM caused FTE to recognize only the principal amounts and resulting interest expense on the company’s books but not the substantial liabilities and expenses arising from the notes’ conversion features.

In furtherance of the scheme, PALLESCHI and LETHEM took several steps to conceal the notes’ conversion features:

Rather than provide FTE’s accountants and auditors with copies of the actual convertible notes, the defendants created fake notes with the same lenders, principal amounts and other terms as the convertible notes and gave the fake notes to the auditors and accountants.  PALLESCHI and LETHEM created more than 35 such fake notes with a total principal balance of more than $14 million. 

PALLESCHI and LETHEM also created fake resolutions of FTE’s Board of Directors that purportedly authorized the company to issue the convertible notes on which they forged the Directors’ signatures.  The defendants then provided these forged Board resolutions to FTE’s lenders. 

On four occasions in June 2017, LETHEM forged the signature of a representative of FTE’s transfer agent on letters that he provided to lenders.  The transfer agent kept records of who owned FTE’s stock and held stock shares that the company had not yet issued.  The forged letters purported to confirm that the transfer agent would hold a sufficient number of shares of FTE’s stock in reserve to pay a convertible lender in case the lender decided to convert a convertible note into FTE stock.  These letters protected convertible lenders by ensuring that enough shares of FTE’s stock would be available to pay off the convertible notes.  Convertible lenders generally required their borrowers to provide them with such letters before funding a convertible note.

PALLESCHI and LETHEM lied repeatedly to FTE’s auditors by falsely denying that the company had issued convertible debt.  In April 2018, LETHEM falsely denied to the auditors that FTE had issued two specific convertible notes.  Three days later, both PALLESCHI and LETHEM repeated this false denial to the auditors in a management representation letter related to the audit of FTE’s 2017 year end financial statements.  PALLESCHI and LETHEM also falsely denied to the auditors in April 2018 and again in November 2018 that a $1.4 million note FTE had entered into in April 2018 was convertible.  When the auditors asked to see a copy of the $1.4 million note, LETHEM falsely claimed that his sole electronic copy of the note was lost because the electronic file had become corrupted.  When the auditors continued to ask for the note, LETHEM concealed that he had the note all along by sending the note to a company attorney and arranged for the attorney to send it back to him.  LETHEM then forwarded the attorney’s email to a company Director, who forwarded it to the auditors with the notation that “[the attorney] found the note!”  When the auditors then asked that the attorney review her files for other notes, LETHEM and the attorney falsely responded that the attorney did not know of, or possess, additional convertible notes.

As a result of this fraud with respect to convertible notes, the defendants caused FTE to understate its debt derivative liabilities and warrant derivative liabilities and to fail to recognize losses on conversion derivative liabilities and losses on issuance of notes in 2017 and 2018.  For example, FTE’s year end 2017 financial statements understated FTE’s debt derivative liabilities by $48 million and warrant derivative liabilities by $16 million.  FTE also failed to recognize a $35 million loss on conversion derivative liabilities and a $42 million loss on issuance of notes for the year ending 2017. 

Fraudulent Revenue Recognition

PALLESCHI and LETHEM also caused FTE to recognize more than $13 million in fraudulent revenue:

This fraudulent revenue included more than $10 million in “unbilled” revenue that the defendants represented FTE had earned from services it had supposedly provided to a large customer that would not yet accept bills for those services.  FTE never provided any such services.

In addition, the defendants caused FTE to recognize approximately $2.6 million as an account receivable for which there was no support.  When FTE’s auditors said that the account receivable should be written off, PALLESCHI and LETHEM  created a fake email from a representative of the customer saying that the customer would “expedite payments” for more than $1.5 million for projects completed by FTE in 2016 and 2017.  The defendants caused this fake email to be sent to FTE’s auditors so that FTE could continue to recognize the receivable. 

PALLESCHI and LETHEM caused FTE to recognize another $600,000 in accounts receivable for work the defendants falsely claimed FTE performed.  When FTE’s auditor sought confirmation of this account receivable from the customer, LETHEM gave the auditor the name and email address of an FTE director who also was an employee of the customer.  PALLESCHI and LETHEM then attempted to persuade the FTE director to sign the confirmation but the director refused to do so.  LETHEM then emailed PALLESCHI in part “should I just send plan b?”  Later that day, LETHEM emailed PALLESCHI an audit confirmation containing the director’s forged signature.  A few days later, LETHEM emailed the auditor a confirmation containing the director’s forged signature.

As a result of the defendants’ fraudulent recognition of revenue, FTE’s financial statements overstated the company’s accounts receivable by between 18% and 120% for each of the quarters in 2017 and 2018 and by approximately 477% for 2016.

Embezzlement of Corporate Funds

PALLESCHI and LETHEM also embezzled corporate funds.  This embezzlement included payments for private jet use, luxury automobiles, personal credit cards, unauthorized wire transfers and stock issuances.  PALLESCHI and LETHEM used a bank account in the name of another entity to hide their diversion of corporate funds. 

PALLESCHI, 46, of Naples, Florida; and LETHEM, 62, of Ft. Myers, Florida, are charged with 1) conspiring to commit securities fraud, wire fraud, making false statements in SEC filings and improperly influencing the conduct of audits, which carries a maximum sentence of 5 years in prison; 2) securities fraud, which carries a maximum sentence of 20 years in prison; 3) wire fraud, which carries a maximum sentence of 20 years in prison; 4) improperly influencing the conduct of audits, which carries a maximum sentence of 20 years in prison; and 5) aggravated identity theft, which carries a mandatory minimum term of 2 years in prison.  The maximum potential sentences in this case are prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

*                      *                      *

Ms. Strauss praised the investigative work of the FBI.  Ms. Strauss further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Elisha Kobre, James McMahon and Negar Tekeei 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.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that JASON DONES-GONZALEZ, an enforcer for La Organización de Narcotraficantes Unidos (“La ONU”), was sentenced by U.S. District Judge Jesse M. Furman to 35 years in prison.  DONES-GONZALEZ previously pled guilty to participating in a racketeering conspiracy, participating in a conspiracy to commit murder, and unlawfully possessing a machine gun.  

U.S. Attorney Audrey Strauss said: “Jason Dones-Gonzalez was a ruthless murderer who carried out numerous acts of wanton and depraved violence as an enforcer for La ONU.  As just one example, Dones-Gonzalez and an accomplice beat a man until he appeared to be dead, but just to be sure, he and the accomplice stuffed the victim’s body into a suitcase, transported it elsewhere, shot it, and lit it on fire.  This degree of cold-blooded indifference to – indeed, apparent pleasure at – taking another human life merits a firm reckoning.  Today Jason Dones-Gonzalez was rightly sentenced to 35 years in prison for his horrific crimes.”

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

From at least in or about 2004 until 2016, DONES-GONZALEZ was a member and enforcer of La ONU, a criminal enterprise involved in shipping thousands of kilograms of cocaine from Puerto Rico to New York.  Cocaine supplied by La ONU was then distributed in New York City, including out of a daycare center in the Bronx, New York.  Members and associates of La ONU also engaged in acts of violence, including murder, to protect and expand the enterprise’s criminal operations and in connection with rivalries with other criminal organizations.  In particular, members of the enterprise were ordered to shoot and kill suspected rival drug trafficking members.

As an enforcer for La ONU, DONES-GONZALEZ participated in the murder of at least seven people between approximately 2006 and 2010.  Those murders involved heinous and brazen acts of violence, including, for example, kidnapping and killing individuals, strangling two individuals believed to be spies, interrogating them for information, and then shooting them, choking and shooting an individual believed to be cooperating with law enforcement, and assaulting an individual, placing that individual’s body in a suitcase, and shooting and lighting the suitcase on fire.  Specifically:

In approximately 2006 or 2007, members of La ONU kidnapped and killed Freddy Mendez-Rivera after learning from corrupt law enforcement officers working for La ONU that Mendez-Rivera had complained to law enforcement about drug dealing occurring in his neighborhood.  DONES-GONZALEZ and two other individuals put Mendez-Rivera into a van and killed him.

In 2007, DONES-GONZALEZ and three other individuals strangled two men alleged to be spies with twisted-up t-shirts while interrogating them for information.  DONES-GONZALEZ and the others then shot the men, one of whom died.

In approximately 2008 or 2009, DONES-GONZALEZ and four other individuals dressed up as police officers and kidnapped an individual known as “Gabi,” a leader of a rival drug trafficking organization, from his home and killed him.

In 2009, DONES-GONZALEZ and another individual killed an individual known as “Sacca Grippe,” because they thought that he was cooperating with law enforcement.  They choked and shot him.

On March 20, 2009, DONES-GONZALEZ and other members of La ONU murdered Carlos Barbosa on the orders of a leader of La ONU because Barbosa was threatening to take control of certain drug territory from that leader.  DONES-GONZALEZ used a FN pistol, which is designed to fire multiple rounds upon a single pull of the trigger, and which fires ammunition that can penetrate body armor.

On November 27, 2009, DONES-GONZALEZ and other La ONU members assaulted Emanuel Correa Romero until he appeared dead.  The leadership of a local housing project gang, after consulting with other leaders of La ONU, had decided that Correa Romero should be killed because he had murdered the friend of a leader of a component of La ONU.  After the assault, DONES-GONZALEZ and another individual placed Correa Romero’s body into a suitcase, removed it from the housing project, and later reported back that they shot the suitcase and then lit it on fire.

On July 1, 2010, a leader of La ONU ordered the murder of Victor Alexis Rivera Santiago, a reggaeton singer who participated in narcotics trafficking, for stealing a kilogram of cocaine from the son of the leader’s friend and killing the son in the process.  DONES-GONZALEZ and others tied Rivera Santiago up in the leader’s presence, transported him to an apartment, questioned him, and killed him.           

*                *                *

In addition to the prison term, Judge Furman sentenced DONES-GONZALEZ, 41, of Puerto Rico, to three years of supervised release.

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 the filing of a civil complaint seeking forfeiture of a 10th Century Khmer sandstone statue – Skanda on a Peacock – for the purpose of returning it to the Kingdom of Cambodia.  The statue was stolen from the Prasat Krachap temple at Koh Ker in Cambodia, and sold by antiquities dealer Douglas Latchford into the international art market. Skanda on a Peacock is considered to be a masterpiece of artistic achievement and a valuable part of the Cambodian cultural heritage. The owner of Skanda on a Peacock has voluntarily relinquished possession of the statue to the custody of HSI.

Manhattan U.S. Attorney Audrey Strauss said: “Skanda on a Peacock is a work of great historical, religious, and artistic significance to the people of Cambodia. With this action, we reaffirm our commitment to ending the sale of illegally trafficked antiquities in the United States, and begin the process of returning Skanda on a Peacock to its rightful home.”

According to the Complaint filed in Manhattan Federal Court on July 15, 2021:

From 928 to 944 A.D., Koh Ker was the capital of the ancient Khmer empire in Cambodia.  The Cambodian state under King Jayavarman IV constructed a vast complex of sacred monuments at Koh Ker, including the Prasat Krachap temple and its statuary. Koh Ker statuary was revolutionary for its time. Many of the statues, including Skanda on a Peacock, were huge, often shown in movement, and were free-standing or in high-relief.  Skanda on a Peacock depicts the Hindu god of war, Skanda, riding on the back of a peacock. The body and tail of the peacock are decorated with intricate engraved patterns. Khmer cultural experts believe that the face of the Skanda on the statue may in fact be a portrait of a royal family member, such as Harshavarman II, the son of King Jayavarman IV.

During the civil conflicts of late 20th century, statues and other artifacts were stolen from Koh Ker and entered the international art market through an organized looting network.   Local teams of looters would first remove the statues from the original location at Koh Ker. The statues would then be transported to the Cambodia-Thailand border, and transferred to brokers, who would in turn transport them to dealers in Khmer artifacts located in Thailand, particularly Bangkok.  These dealers would sell the artifacts to local or international customers, who would either retain the pieces or sell them on the international art market.

Skanda on a Peacock, along with several other significant statues, was stolen from Prasat Krachap in or about 1997 by a former member of the Khmer Rouge leading a team of looters (“Looter-1”). Looter-1 transported Skanda on a Peacock by oxcart to the house of a broker near the Thai border. Looter-1 was aware that the broker sold antiquities to a foreign national called “Sia” (which means “lord” in Thai) “Ford” – the British/Thai antiquities dealer Douglas Latchford, a/k/a “Pakpong Kriangsak.” In 2019, Latchford was charged by the Office with wire fraud conspiracy and other crimes related to a many-year scheme to sell looted Cambodian antiquities on the international art market, primarily by creating false provenance documents and falsifying invoices and shipping documents. The indictment was ultimately dismissed due to the death of Latchford.

On or about April 10, 2000, Latchford sold Skanda on a Peacock and, thereafter, it was imported into the United States.  After the most recent owner was contacted by the United States regarding Skanda on a Peacock, the owner agreed to relinquish possession of the statue and to waive all claims of right, title, and interest in it.  Skanda on a Peacock is currently in the possession of the United States Department of Homeland Security.

*                *                *

Ms. Strauss thanked HSI for its outstanding work on this investigation, which she noted is ongoing, and praised its ongoing efforts to find and repatriate stolen and looted cultural property. Ms. Strauss also thanked the Kingdom of Cambodia’s Ministry of Culture and Fine Arts for its assistance with this investigation.

This announcement supports the Memorandum of Understanding first signed between the U.S. and Cambodia in 2003, and last renewed in 2018.

This matter is being handled by the Office’s Money Laundering and International Criminal Enterprises Unit. Assistant U. S. Attorney Jessica Feinstein is in charge of the case.

The allegations contained in the Complaint are merely accusations.

Audrey Strauss, United States Attorney for the Southern District of New York, and Aaron C. Rouse, Special Agent in Charge of the Las Vegas Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging YOSEF COHEN, a/k/a “Joe,” VAGUE SHAGENOVICH TERGALSTANYAN, a/k/a “Vahe,” a/k/a “Vic,” and IGAL BEN HANAN with conspiracy to commit money laundering. 

TERGALSTANYAN and COHEN were arrested and presented in California on July 9, 2021, and July 12, 2021, respectively, and will be arraigned in Manhattan federal court at a later date.  BEN HANAN was arrested on July 12, 2021, and will be presented later today in Nevada.  The case is assigned to U.S. District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, the defendants conspired to launder millions of dollars of illicit proceeds.  Thanks to the hard work of the FBI, the defendants face serious federal charges.”

FBI Special Agent-in-Charge Aaron C. Rouse said: “This case is an outstanding example that demonstrates the strength of the FBI’s partnerships with national and international law enforcement.  The FBI takes pride in combating the most dangerous crime organizations in the world.  This should be a wake-up call to criminals that regardless of where they think they can hide, the FBI and our partners will find them and bring them to justice.” 

According to the allegations in the Indictment:[1]

COHEN, TERGALSTANYAN, and BEN HANAN worked on behalf of organized criminal enterprises operating in several countries around the world.  In recorded conversations with undercover law enforcement officers (the “UCs”) who represented themselves to be members of an international organized criminal enterprise that distributed narcotics and laundered money, the defendants planned money laundering transactions of narcotics proceeds and discussed moving tens of millions of dollars of illicit money on behalf of international criminal organizations.  The defendants conspired to execute, and did execute, money laundering transactions with the UCs and others known and unknown.

On several occasions, the defendants arranged for the UCs to pick up narcotics proceeds, in cash, from locations in the United States and then deliver the cash to the defendants, minus a percentage-based fee paid to the UCs for laundering the proceeds.  For example, as arranged by the defendants, the UCs picked up approximately $208,000 in cash in Medford, New York, and delivered the cash, minus an arranged fee, to TERGALSTANYAN in California.  In addition to discussing money laundering transactions with a UC who was in New York, New York, TERGALSTANYAN later proposed that the UCs pick up and launder one to two million dollars of marijuana proceeds in cash every week in Manhattan. 

In another scheme, for example, the defendants conspired to fraudulently obtain a business visa for BEN HANAN so that BEN HANAN could move to the United States.  In order for BEN HANAN to obtain a business visa, BEN HANAN’s purported business needed funds on deposit that appeared to be legitimate investments.  COHEN proposed that the UCs provide COHEN with $150,000 in cash, and COHEN would use COHEN’s purported businesses to provide funds to BEN HANAN’s purported business.  The UCs provided the cash to COHEN, which was represented to be narcotics proceeds that had not yet been laundered.  Subsequent wire transfers sent by the defendants to the UCs as repayment were falsely described by the defendants as accounting for a particular month or time period, so as to appear like legitimate business transactions.

*          *          *

YOSEF COHEN, 58, of Calabasas, California, VAGUE SHAGENOVICH TERGALSTANYAN, 38, of Glendale, California, and IGAL BEN HANAN, 43, of Las Vegas, Nevada, were each charged with one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), which carries a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants would be determined by a judge.

Ms. Strauss praised the outstanding investigative work of the FBI.  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 Narcotics Unit.  Assistant United States Attorney Micah F. Fergenson is 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, United States Attorney for the Southern District of New York, announced today that AQUILINO TORRES was convicted of kidnapping, kidnapping of a minor, and stalking for the October 2020 kidnapping and stalking of an adult female victim (“Victim-1”) and the kidnapping of Victim-1’s 7-year-old son (“Minor Victim-1”).  TORRES was convicted following a one-week jury trial before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Audrey Strauss said: “Aquilino Torres threatened to kill a 7-year-old child in carrying out a brutal kidnapping of the child and his mother.  Torres then held his victims captive and physically abused both mother and child.  Thanks to the FBI and NYPD, Torres was apprehended, prosecuted, and now stands convicted of these horrific crimes.”

As reflected in the Indictment, documents previously filed in the case, and evidence introduced at trial:

On or about October 5, 2020, TORRES texted and called Victim-1 hundreds of times, including a text threatening to “kick [Minor Victim-1’s] teeth out.”  Later that night, TORRES took Victim-1 and Minor Victim-1 to a motel in the Bronx, where he hit Minor Victim-1 in the face and assaulted Victim-1, breaking her jaw.  While TORRES assaulted Victim-1, he told Victim-1, in sum and substance, that he would hang Victim-1 and that Minor Victim-1 would be found dead in the river.  For the next five days, TORRES held Victim-1 and Minor Victim-1 against their will at an apartment in Washington Heights, without medical treatment for Victim-1’s broken jaw.  On or about October 10, 2020, Victim-1 and Minor Victim-1 escaped from the apartment and were admitted to a hospital shortly thereafter.  In response to their escape, between on or about October 10, 2020, and on or about October 13, 2020, TORRES once again sent Victim-1 hundreds of threatening text messages and called Victim-1 hundreds of times.  For example, TORRES texted Victim-1, in sum and substance, that, if he made the decision to go looking for her, “there won’t be turning back.”  TORRES followed through on those threats and attempted to track down Victim-1 and Minor Victim-1 after they escaped. 

*                *                *

TORRES, 27, was found guilty of (i) one count of kidnapping, in violation of 18 U.S.C. §§ 1201(a)(1) and (b), which carries a maximum sentence of life in prison, (ii) one count of kidnapping of a minor, in violation of 18 U.S.C. §§ 1201(a)(1), (b), and (g), which carries a maximum sentence of life and a mandatory minimum sentence of 20 years, and (iii) one count of stalking, in violation of 18 U.S.C. §§ 2261A(2)(A) and (B), 2261(b)(3), and 2265A, which carries a maximum sentence of 20 years. 

Ms. Strauss praised the outstanding investigative work of the FBI-NYPD Violent Crimes Task Force.  

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys David J. Robles, Sarah L. Kushner, and Andrew S. Dember, and paralegal specialist Ariella Fetman, are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today the filing and settlement of a lawsuit in Manhattan federal court against JUJAMCYN THEATERS LLC, the owners and operators of five of Broadway’s most historic theaters, the AL HIRSCHFELD, the AUGUST WILSON, the EUGENE O’NEILL, the ST. JAMES, and the WALTER KERR, involving violations of the Americans With Disabilities Act (the “ADA”).  The settlement, in the form of a consent decree, was entered yesterday by U.S. District Judge Analisa Torres.

U.S. Attorney Strauss said: “As New York City begins to reopen and welcome the world once again, we are pleased that Jujamcyn Theaters has worked collaboratively with the Office to improve accessibility at its historic venues, so that all patrons are able to enjoy Broadway.  As a result of this suit and settlement, coupled with similar lawsuits filed by the Office against the Shubert Theaters in 2003, and the Nederlander Theaters in 2014, all three of the major Broadway theater organizations have committed to making their venues significantly more accessible to people with disabilities.”

According to the Complaint and Consent Decree filed in Manhattan federal court:

In the course of an investigation and negotiation over several years, the U.S. Attorney’s Office identified numerous ADA violations at each of the five theaters operated by JUJAMCYN THEATERS LLC, all of which were opened in the 1920s.  The ADA generally requires that, for facilities constructed prior to the effective date of the ADA in 1993, barriers to accessibility be removed where it is readily achievable to do so.  Throughout the Government’s investigation and the negotiation of the Consent Decree, JUJAMCYN THEATERS LLC agreed to remove hundreds of barriers to accessibility.

Under the Consent Decree, JUJAMCYN THEATERS LLC agrees to continue its efforts to improve accessibility at its theaters, as the schedules of shows at the theaters permit. Specifically, JUJAMCYN THEATERS LLC has agreed to do the following:

• provide a total of 44 wheelchair accessible seating locations, and direct its ticket vendors to accord priority to persons with disabilities in selling those seating locations;
   
• provide a total of 54 aisle transfer seating locations for persons who are able to transfer from a wheelchair into a seat, and direct its ticket vendors to accord priority to persons with disabilities in selling those seating locations; and
   
• eliminate approximately 200 individual barriers to accessibility in theater restrooms, concession counters, waiting areas, and box offices.

In addition, JUJAMCYN THEATERS LLC will pay a $40,000 civil penalty to the United States.
 
Since President George H.W. Bush signed the ADA into law, the U.S. Attorney’s Office for the Southern District of New York has played a significant role in bringing numerous New York City institutions into compliance with the ADA and its regulations.  The Office’s enforcement efforts include, among many others, Yankee Stadium, Madison Square Garden, Radio City Music Hall, the Shubert Theaters, the Nederlander Theaters, Avery Fisher Hall at Lincoln Center, the Metropolitan Opera, the Apollo Theater, the Puck Building, the Rainbow Room, and The Vessel at Hudson Yards.
 
To file a complaint alleging that any place of public accommodation within the Southern District of New York is not accessible to persons with disabilities, use the Civil Rights Complaint Form available on the United States Attorney’s Office’s website, www.usdoj.gov/usao/nys. Complaints should be sent to:   U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York, 10007
Attention: Chief, Civil Rights Unit
 

The case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorney David J. Kennedy is charge of the case.

Audrey Strauss, the United States Attorney for the Southern District of New York, Brian Gallagher, Acting Special Agent-in-Charge, Northeastern Region, United States Department of Transportation Office of Inspector General (“USDOT-OIG”), Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), and Carolyn Pokorny, Inspector General of the Metropolitan Transportation Authority (“MTA-OIG”), announced today that the United States has settled civil fraud claims against New York-area painting contractor SPECTRUM PAINTING CORP. (“SPECTRUM”).  The settlement resolves the United States’ allegations that SPECTRUM 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 SPECTRUM caused the prime contractors on the projects to misrepresent that codefendant Tower Maintenance Corp. (“Tower”), a certified DBE, was solely performing work on the two projects, when in fact much of that work was performed by SPECTRUM, a non-DBE.  As part of the settlement approved yesterday by U.S. District Judge Analisa Torres, SPECTRUM admits and accepts responsibility for conduct alleged in the Government’s amended complaint and agrees to pay $400,000 to the United States.

Manhattan U.S. Attorney Audrey Strauss said: “The Disadvantaged Business Enterprise program is intended to increase participation of minority- and women-owned businesses that historically have been disadvantaged in federal contracting.  This settlement reflects this Office’s commitment to root out DBE fraud in federally funded contracts so that legitimate DBEs can compete fairly for public construction projects.”

USDOT-OIG Acting Special Agent-in-Charge Brian Gallagher said: “The Disadvantaged Business Enterprise (DBE) Program of the U.S. Department of Transportation is designed to create a level playing field for small, disadvantaged businesses to participate in federally-funded construction projects. We will hold accountable those who conspire to misrepresent their compliance with program requirements to obtain taxpayer supported contracts, thereby undermining the DBE program’s goal of expanding opportunities for small businesses.”

DOI Commissioner Margaret Garnett said: “This settlement rightly holds accountable a subcontractor that intentionally deceived the government and blatantly disregarded the regulations in place to ensure equal access by disadvantaged-owned businesses. Developing a fair and equal environment is how we do business in New York City and that is why contractors must follow the laws advancing participation by minority- and women-owned businesses. DOI thanks the U.S. Attorney’s Office for the Southern District of New York and the rest of our law enforcement partners on this matter for this successful result.”

MTA Inspector General Carolyn Pokorny said: “It is outrageous and against the law to use a minority- or women-owned business as a front to swindle precious taxpayer dollars from the Disadvantaged Business Enterprise program, which is meant to ensure an equal playing field for DBEs.  This scheme was an affront to taxpayers, MTA riders, and the many honest DBEs that legitimately qualify for the federal program that these companies defrauded.  I am proud to stand with our law enforcement partners to protect the integrity of this vital program.”

As alleged in the amended complaint filed in Manhattan federal court in August 2019, SPECTRUM performed steel painting work on two federally funded projects to renovate the Brooklyn Bridge and Queens Plaza.  Contracts for both projects required codefendant Ahern Painting Contractors Co. (“Ahern”) to hire DBEs to perform a percentage of the work and to adhere to the DBE regulations.  SPECTRUM was not a certified DBE, so SPECTRUM and Tower used Tower’s status as a DBE to take credit for work that was performed, managed, and supervised by SPECTRUM.  Further, to conceal this scheme, SPECTRUM employees represented themselves as Tower employees in project documents.  The case against Ahern was resolved in a settlement approved by Judge Torres in October 2019, and the case against Tower is ongoing. 

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

• In or about March 2010, a manager at Spectrum (the “Spectrum Manager”) and a principal at Tower agreed that the two firms would work together on the Brooklyn Bridge Project.  Pursuant to that agreement, the Spectrum Manager conducted a walk-through of the Brooklyn Bridge worksite with the Tower principal and an Ahern superintendent for the Brooklyn Bridge Project.  The Spectrum Manager understood the he participated in the walk-through to assist Tower in preparing the bid Tower later submitted to Ahern for its anticipated work as a DBE subcontractor for the Brooklyn Bridge project.
   
• In May and June 2011, SPECTRUM and Tower memorialized two “consulting agreements” for work on the Brooklyn Bridge and the Queens Plaza Projects.  Pursuant to those agreements, SPECTRUM and Tower agreed that SPECTRUM would “perform certain consulting services,” including “providing project management support,” and would furnish equipment to Tower for the two projects.  The agreements further provided that SPECTRUM would receive 50% of all profits from the Tower DBE work on the projects. 
   
• The key terms of the consulting agreements between Tower and SPECTRUM – including Tower’s agreement to pay SPECTRUM 50 percent of all of its profits from the two projects, or SPECTRUM’s agreement to furnish equipment to Tower for the projects – were not disclosed to Ahern, NYC-DOT, or MTA. 
   
• Throughout the Brooklyn Bridge and Queens Plaza Projects, the SPECTRUM Manager managed and supervised the DBE work that Tower was retained to perform on each project, such as setting the work schedule, ordering materials for the work, hiring the foreman, inspecting the work performed, and coordinating payment for the work. 
   
• The SPECTRUM Manager also hired other supervisors on the Brooklyn Bridge and Queens Plaza Projects.  For example, the SPECTRUM Manager hired the superintendent for the DBE work assigned to Tower for the Brooklyn Bridge Project and the Queens Plaza Project (the “SPECTRUM Superintendent”).  The SPECTRUM Manager also hired an individual to oversee health and safety issues related to the DBE work on the two projects (the “SPECTRUM Safety Supervisor”).  Both the SPECTRUM Superintendent and the SPECTRUM Safety Supervisor were paid by SPECTRUM and not by Tower. 

• The SPECTRUM Manager, SPECTRUM Superintendent, and SPECTRUM Safety Supervisor were all SPECTRUM employees.  On the Brooklyn Bridge and Queens Plaza Projects, they identified themselves to others working on the projects as Tower employees, including by wearing Tower vests and security identification.  In documents submitted to Ahern to obtain security clearances, the SPECTRUM Manager identified himself as a “Tower VP” or as a Tower employee. 
   

Ms. Strauss praised the outstanding investigative work of the USDOT-OIG, DOI, and MTA-OIG. 

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

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., Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of kidnapping conspiracy, sanctions violations conspiracy, bank and wire fraud conspiracy, and money laundering conspiracy charges against ALIREZA SHAVAROGHI FARAHANI, a/k/a “Vezarat Salimi,” a/k/a “Haj Ali,” MAHMOUD KHAZEIN, KIYA SADEGHI, and OMID NOORI, and sanctions violations conspiracy, bank and wire fraud conspiracy, money laundering conspiracy, and structuring charges against NILOUFAR BAHADORIFAR, a/k/a “Nellie Bahadorifar.”  The charges are contained in a Superseding Indictment unsealed today in Manhattan federal court.  The case is pending before U.S. District Judge Ronnie Abrams.  BAHADORIFAR was arrested on July 1, 2021 in California on charges contained in an underlying indictment.  BAHADORIFAR will be arraigned on the charges in the Superseding Indictment by Judge Abrams at a date and time to be set by the Court.  FARAHANI, KHAZEIN, SADEGHI, and NOORI, all of whom are based in Iran, remain at large.     

U.S. Attorney Audrey Strauss said: “As alleged, four of the defendants monitored and planned to kidnap a U.S. citizen of Iranian origin who has been critical of the regime’s autocracy, and to forcibly take their intended victim to Iran, where the victim’s fate would have been uncertain at best.  Among this country’s most cherished freedoms is the right to speak one’s mind without fear of government reprisal.  A U.S. citizen living in the United States must be able to advocate for human rights without being targeted by foreign intelligence operatives.  Thanks to the FBI’s exposure of their alleged scheme, these defendants have failed to silence criticism by forcible abduction.”

Acting Assistant Attorney General Mark J. Lesko said: “Every person in the United States must be free from harassment, threats and physical harm by foreign powers.  Through this indictment, we bring to light one such pernicious plot to harm an American citizen who was exercising their First Amendment rights, and we commit ourselves to bring the defendants to justice.”

FBI Assistant Director William F. Sweeney Jr. said: “This is not some far-fetched movie plot. We allege a group, backed by the Iranian government, conspired to kidnap a U.S. based journalist here on our soil and forcibly return her to Iran. Not on our watch. FBI special agents and analysts will continue to aggressively hunt for foreign operatives who attempt illegal action inside our borders or against our citizens. Working side-by-side with our international partners, the FBI’s reach is global. When we find you, you will be brought here and held accountable under U.S. law.”

According to the allegations contained in the Superseding Indictment, other court filings, and statements made during court proceedings:[1] 

FARAHANI is an Iranian intelligence official who resides in Iran.  KHAZEIN, SADEGHI, and NOORI are Iranian intelligence assets who also reside in Iran.  Since at least June 2020, FARAHANI, and the intelligence network he manages – including KHAZEIN, SADEGHI, and NOORI – have plotted to kidnap a U.S. citizen of Iranian origin (“Victim-1”) from within the United States in furtherance of the Government of Iran’s efforts to silence Victim-1’s criticisms of the regime.  Victim-1 is a journalist, author, and human rights activist, residing in Brooklyn, New York, who has publicized the Government of Iran’s human rights abuses. 

Prior to the plot to kidnap Victim-1 on U.S. soil, the Government of Iran attempted to lure Victim-1 to a third country in order to capture Victim-1 for rendition to Iran.  In approximately 2018, Iranian government officials attempted to induce relatives of Victim-1, who reside in Iran, to invite Victim-1 to travel to a third country for the apparent purpose of having Victim-1 arrested or detained and transported to Iran for imprisonment.  Victim-1’s relatives did not accept the offer.  Iranian intelligence services have previously lured other Iranian dissidents from France and from the United States for the purposes of capturing and imprisoning regime critics and have publicly claimed responsibility for these capture operations.  An electronic device used by FARAHANI contains, among other things, a photo of Victim-1 alongside photos of two other individuals, both of whom were captured by Iranian intelligence, with one later executed and the other imprisoned in Iran, and a caption in Farsi stating, “Gradually the gathering gets bigger...  Are you coming, or should we come for you?”

On multiple occasions in 2020 and 2021, as part of the plot to kidnap Victim-1, FARAHANI and his network procured the services of private investigators to surveil, photograph, and video record Victim-1 and Victim-1’s household members in Brooklyn.  The extensive surveillance that FARAHANI’s network procured included requests for days’ worth of surveillance at Victim-1’s home and the surrounding area, videos and photographs of Victim-1’s family and associates, surveillance of Victim-1 outside Victim-1’s residence, and the installation of and access to a live high-definition video feed depicting Victim-1’s home.  The network repeatedly insisted on high-quality photographs and video recordings of Victim-1 and Victim-1’s household members; a large volume of content; pictures of visitors and objects around the house; and depictions of Victim-1’s body language.  The network procured the surveillance by misrepresenting their identities and the purpose of the surveillance to the investigators, and laundered money into the United States from Iran in order to pay for the surveillance, photos, and video recordings of Victim-1.  SADEGHI acted as the network’s primary point of contact with the private investigators in the United States, and NOORI facilitated payment to the investigators in furtherance of the plot targeting Victim-1.

As part of the kidnapping plot, the FARAHANI-led intelligence network also researched methods of transporting Victim-1 out of the United States for rendition to Iran.  SADEGHI, for example, researched a service offering military-style speedboats for self-operated maritime evacuation out of New York City, and maritime travel from New York to Venezuela, a country whose de facto government has friendly relations with Iran.  KHAZEIN researched travel routes from Victim-1’s residence to a waterfront neighborhood in Brooklyn, the location of Victim-1’s residence relative to Venezuela, and the location of Victim-1’s residence relative to Tehran.    

The network that FARAHANI directs has also targeted victims in other countries, including victims in Canada, the United Kingdom, and the United Arab Emirates, and has worked to procure similar surveillance of those victims.

BAHADORIFAR is originally from Iran and is currently a California resident.  BAHADORIFAR has provided financial and other services from the United States to Iranian residents and entities, including to KHAZEIN, since at least in or about 2015, including access to the U.S. financial system and U.S. financial institutions through the use of card accounts, and has offered to manage business interests in the United States on KHAZEIN’s behalf.  Among other things, BAHADORIFAR caused a payment to be made to a private investigator for surveillance of Victim-1 on KHAZEIN’s behalf.  BAHADORIFAR is not charged with participating in the kidnapping conspiracy, but is alleged to have provided financial services that supported the plot and is charged with conspiring to violate sanctions against Iran, to commit bank and wire fraud, and to commit money laundering.  BAHADORIFAR is also charged with structuring cash deposits totaling more than approximately $445,000.

*                *                *

ALIREZA SHAVAROGHI FARAHANI, 50, MAHMOUD KHAZEIN, 42, KIYA SADEGHI, 35, and OMID NOORI, 45, all of Iran, have each been charged with: (1) conspiring to kidnap, which carries a maximum sentence of life in prison (Count One), (2) conspiring to violate the International Emergency Economic Powers Act and sanctions against the Government of Iran, which carries a maximum sentence of 20 years in prison (Count Two), (3) conspiring to commit bank and wire fraud, which carries a maximum sentence of 30 years in prison (Count Three), and (4) conspiring to launder money, which carries a maximum sentence of 20 years in prison (Count Four).  NILOUFAR BAHADORIFAR, 46, of California, is charged in Counts Two, Three, and Four, and is further charged with structuring (Count Five), which carries a maximum sentence of 10 years in prison.  The potential 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 Judge Abrams.

BAHADORIFAR was arrested on charges contained in an underlying indictment on July 1, 2021, and was arraigned by Judge Abrams on that indictment on July 8, 2021.  FARAHANI, KHAZEIN, SADEGHI, and NOORI remain at large. 

Ms. Strauss praised the outstanding investigative work of the FBI’s New York Field Office Counterintelligence-Cyber Division and the New York FBI Iran Threat Task Force.  Ms. Strauss also thanked the New York City Police Department (“NYPD”) and the NYPD Intelligence Bureau, the FBI’s Los Angeles Field Office Orange County Resident Agency, and the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, for their assistance.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Michael D. Lockard, Jacob H. Gutwillig, and Matthew J.C. Hellman are in charge of the prosecution, with assistance from Trial Attorney Nathan Swinton of the Counterintelligence and Export Control Section.

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

 

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

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that PEDRO VICIOSO DE LIMA, a/k/a “Pep,” a/k/a “Pepo,” was sentenced today in Manhattan federal court to 180 months in prison for leading a drug trafficking organization (the “DTO”) that was responsible for dealing fentanyl-laced heroin that has been tied to multiple suspected fatal and nonfatal overdoses.  VICIOSO DE LIMA previously pled guilty to participating in a conspiracy to distribute heroin, and was sentenced today before U.S. District Judge Colleen McMahon.

U.S. Attorney Audrey Strauss said: “As he previously admitted, Pedro Vicioso De Lima led a Washington Heights drug distribution network that sold fentanyl-laced heroin even after he was aware that customers were overdosing on it.  Vicioso De Lima’s drug peddling and his callous disregard for its consequences have resulted in today’s prison sentence.”

According to the allegations in the Indictment and other filings and statements made in Court:

VICIOSO DE LIMA was the leader of a drug trafficking organization (the “DTO”) that operated in New York, New York, and controlled heroin sales from a building at 501 West 167th Street (the “DTO’s Building”) and the immediately surrounding vicinity (the “DTO’s Drug Territory”).  From July 2016 to October 2018, the DTO is estimated to have distributed more than 85 kilograms of heroin, much of it laced with fentanyl.  VICIOSO DE LIMA controlled and oversaw the operations of the DTO, and together with his trusted second-in-command, Victor Hidalgo, managed stash houses in the DTO’s Drug Territory where the DTO stored its wares.  The defendant directed other members of the DTO on matters ranging from how to handle drugs being sold by the DTO, to managing lookouts who worked for the DTO and surveilled for law enforcement, to handling complaints by customers about the quality of drugs being sold by the DTO. 

No later than May 2018, VICIOSO DE LIMA was told by Hidalgo that the mixture of heroin being sold by the DTO was causing people to “drop[]” – or overdose – outside the DTO’s Building.  Nevertheless, VICIOSO DE LIMA persisted in leading the DTO and selling its potentially fatal narcotics through his arrest in this case in November 2018.

*                *                *

VICIOSO DE LIMA, 52, of Bergenfield, New Jersey, pled guilty to one count of conspiracy to distribute and possess with intent to distribute one kilogram and more of heroin from July 2016 to October 2018.  In addition to the prison term, VICIOSO DE LIMA was sentenced to 10 years of supervised release.

Hidalgo was previously sentenced to 120 months in prison.

Ms. Strauss praised the outstanding investigative work of Homeland Security Investigations, the Drug Enforcement Administration, and the New York City Police Department.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Jessica Greenwood, Aline R. Flodr, and Dominic Gentile are in charge of the prosecution. 

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that STEPHEN M. CALK was convicted of financial institution bribery and conspiracy to commit financial institution bribery, for corruptly using his position as the head of a federally-insured bank to issue millions of dollars in high-risk loans to Paul Manafort in exchange for a personal benefit: CALK’s placement on a 2016 presidential campaign and assistance from Manafort in trying to obtain a senior position with the incoming presidential administration.  CALK was convicted following a three-week trial before U.S. District Judge Lorna G. Schofield.

Manhattan U.S. Attorney Audrey Strauss said:  “A unanimous jury convicted Stephen M. Calk of approving millions of dollars in high-risk loans to Paul Manafort in an effort to secure a personal benefit, namely a high-profile spot on the presidential campaign and appointment as Secretary of the Army or another similarly high-level position in the incoming presidential administration.  Calk used the federally-insured bank he ran as his personal piggybank to try and buy himself prestige and power.  Today’s verdict sends the message that corruption at the highest levels of federally regulated financial institutions will be prosecuted by this Office.”

As reflected in the Indictment, documents previously filed in the case, and evidence introduced at trial:

CALK, The Federal Savings Bank, and Paul Manafort

STEPHEN M. CALK was the chairman and chief executive officer of The Federal Savings Bank, a federal savings association headquartered in Chicago, Illinois, with an office in New York, New York (the “Bank”).  The Bank was owned in its entirety by National Bancorp Holdings, a Chicago-based bank holding company (the “Holding Company”), and CALK was the chairman, chief executive officer, and owner of approximately 67% of the Holding Company.

Paul Manafort was a lobbyist and political consultant.  Beginning in or about March 2016, Manafort held a senior role with a 2016 presidential campaign (the “Presidential Campaign”), and from June 2016 through August 2016, he served as chairman of the Presidential Campaign.  After Manafort’s formal role with the Presidential Campaign concluded in or about August 2016, Manafort continued to be informally involved in the campaign.  Beginning in or about November 2016, when the candidate was elected President of the United States, Manafort provided informal input to the presidential transition team (the “Presidential Transition Team”).

The Corrupt Scheme

Between in or about July 2016 and January 2017, CALK engaged in a corrupt scheme to exploit his position as the head of the Bank and the Holding Company in an effort to secure a valuable personal benefit for himself, namely, Manafort’s assistance in obtaining for CALK a senior position in the presidential administration.  During this time period, Manafort sought millions of dollars in loans from the Bank.  CALK understood that Manafort urgently needed these loans in order to terminate or avoid foreclosure proceedings on multiple properties owned by Manafort and Manafort’s family.  Further, CALK believed that Manafort could use his influence with the Presidential Transition Team to assist CALK in obtaining a senior administration position.

CALK thus sought to leverage his control over the Bank and the loans sought by Manafort to his personal advantage.  Specifically, CALK offered to, and did, cause the Bank and Holding Company to extend $16 million in loans to Manafort in exchange for Manafort’s requested assistance in obtaining a high-level position in the presidential administration.  For example, and while Manafort’s loans were pending approval, CALK provided Manafort with a ranked list of the governmental positions he desired, which started with Secretary of the Treasury, and was followed by Deputy Secretary of the Treasury, Secretary of Commerce, and Secretary of Defense, as well as 19 ambassadorships similarly ranked and starting with the United Kingdom, France, Germany, and Italy.

In approving these loans to Manafort, CALK was aware of significant red flags regarding Manafort’s ability to repay the loans, such as his history of defaulting on prior loans.  Moreover, given the size of the loans, Manafort’s debt became the single largest lending relationship at the Bank.  In order to enable the Bank to issue these loans without violating the Bank’s legal limit on loans to a single borrower, CALK authorized a maneuver never before performed by the Bank, in which the Holding Company—which CALK also controlled—acquired a portion of the loans from the Bank.

During the same time period, Manafort provided CALK with valuable personal benefits.  First, in or about the summer of 2016, during the Presidential Campaign—and just days after CALK and the rest of the Bank’s credit committee conditionally approved a proposed $9.5 million loan to Manafort — Manafort appointed CALK to a prestigious economic advisory committee affiliated with the campaign.  And second, in or about late November and early December 2016—after the candidate had been elected President, after Manafort’s first loan from the Bank had been issued, and while a second set of loans worth $6.5 million sought by Manafort was pending approval by the Bank— Manafort used his influence with the Presidential Transition Team to assist Calk, recommending CALK for an administration position.  Due to Manafort’s efforts, CALK was formally interviewed for the position of Under Secretary of the Army on January 10, 2017 at the Presidential Transition Team’s principal offices in New York, New York.  CALK was not ultimately hired.

To conceal the unlawful nature of his scheme, CALK made false and misleading statements to the OCC regarding the loans to Manafort.  For example, CALK falsely stated to the OCC regulators that he had not known that the Manafort’s properties had been in foreclosure prior to issuing the loans.  CALK also stated that he had never desired a position in the presidential administration. 

*                *                *

CALK, 56, was found guilty of one count of financial institution bribery, which carries a maximum sentence of 30 years in prison, and one count of conspiracy to commit financial institution bribery, which carries a maximum sentence of 5 years in prison.  CALK is scheduled to be sentenced on January 10, 2022.

Ms. Strauss praised the outstanding investigative work of the FBI and FDIC OIG.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Paul M. Monteleoni, Hagan Scotten, and Alexandra N. Rothman are in charge of the prosecution.

Audrey Strauss, United States Attorney for the Southern District of New York, announced the guilty plea today of NAIM ISMAIL relating to his participation in various investment schemes that defrauded victims of over $15 million.  ISMAIL pled guilty before U.S. District Judge Analisa Torres.

Manhattan U.S. Attorney Audrey Strauss said: “In spinning a web of lies, Naim Ismail and his co-conspirators gained, and took advantage of, the confidence of vulnerable individual investors as well as a Manhattan-based business, bilking them of millions of dollars in the process.  With today’s guilty plea, Ismail has admitted to his scheme and now faces a prison term for his conduct.”

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

From February 2007 through July 2016, ISMAIL fraudulently induced individual and corporate victims – including the New York-based subsidiary of an Afghanistan-based bank – to loan large sums of money to entities operated by ISMAIL and others.  ISMAIL did so by claiming that these funds would be used in a particular investment strategy as well as several real estate development projects.  ISMAIL promised investors a generous fixed annual rate of return and promised to return the investors’ principal on a specified timeline.  In fact, ISMAIL and his companies did not invest these funds as promised, nor did ISMAIL repay many of his victims.  Instead, ISMAIL used investor funds to pay the so-called interest payments due to earlier investors in the scheme, as well as for his own personal expenses and investments. 

During the course of the fraudulent scheme, ISMAIL deprived the scheme’s victims of over $15 million. 

*                *                *

ISMAIL, 60, formerly of Irvine, California, pled guilty to one count of conspiracy to commit 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.  Sentencing before Judge Torres is scheduled for November 17, 2021, at 11:00 a.m.

Ms. Strauss praised the outstanding work of the Special Inspector General for Afghan Reconstruction and Homeland Security Investigations on this investigation.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Kiersten A. Fletcher and Jonathan E. Rebold are in charge of the prosecution. 

Audrey Strauss, United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of ANGEL PEREDA for his role in a scheme to sell forged artworks purportedly created by renowned artists, including Jean-Michel Basquiat and Keith Haring.  PEREDA was arrested in New York on July 9, 2021.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Angel Pereda attempted to sell forgeries of artworks by Jean-Michel Basquiat and Keith Haring, among others, as genuine.  If real, such works would be worth millions.  The alleged fakes have little or no value, except potentially as evidence of the alleged crime.  Angel Pereda now faces the prospect of a jury’s appraisal of his alleged conduct.”

FBI Assistant Director William F. Sweeney Jr. said: "As we allege, Mr. Pereda conned art buyers, hoping his victims wouldn’t see the difference between real art and a forgery. He used their trust to his advantage by passing off worthless pieces as priceless works of art. Hopefully, this case provides a lesson to any others hoping to engage in similar behavior – the FBI's Art Crime Team has the resources to distinguish the real from the fake, and its members will ensure you face the consequences of your actions."

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

In or about 2020 and 2021, ANGEL PEREDA engaged in a scheme to sell paintings and other artwork that he marketed for sale as having been painted or created by world-famous artists, including Jean-Michel Basquiat and Keith Haring, among others.  By knowingly and falsely claiming that these fake works were painted by these famous artists, PEREDA tried to trick purchasers into paying millions of dollars for the fake works, which, as the defendant well knew, were essentially worthless.

To deceive his victims, PEREDA falsified the provenance – that is, the ownership history – of the forged artworks.  On one occasion, PEREDA attempted to facilitate the sale of a painting purportedly by Basquiat, which PEREDA referred to as “Glory Boys Kingdom.”  When told by another individual that a particular false provenance had been detected as fraudulent, PEREDA created and sent to an individual in New York new fraudulent provenances, so that the painting could be sold for millions of dollars.  A photograph of “Glory Boys Kingdom” is below:

 

PEREDA is also connected to at least three other works of art purportedly by Basquiat and Haring, which have been determined to be fraudulent.  Photographs of the pieces are below:

 

 

If you believe you have additional information regarding ANGEL PEREDA, also known as “Angel Luis Pereda Eguiluz,” please contact the FBI at 1-800-CALL FBI or [email protected], and reference this case.

PEREDA, 49, of Mexico, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.

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

Ms. Strauss praised the outstanding efforts of the FBI Art Crime Team in the investigation, which she noted is ongoing.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorney Samuel L. Raymond is in charge of the prosecution.

The charge and allegations 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 herein should be treated as an allegation as to the defendants charged in the Complaint.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that MICHAEL CASTILLO, a/k/a “Squirrel,” pled guilty today in Manhattan federal court in connection with the March 10, 2011, murder of Hector Arias in the Bronx, New York.  U.S. District Judge John G. Koeltl accepted the defendant’s guilty plea.  

U.S. Attorney Audrey Strauss said: “Today, Michael Castillo admitted that he shot and killed Hector Arias in 2011.  This guilty plea shows that law enforcement will relentlessly seek justice for murder victims and their loved ones, regardless of the passage of time.”

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

CASTILLO was a member of a conspiracy to distribute marijuana centered near 193rd Street and Broadway in New York, New York.  CASTILLO was hired by the leader of the conspiracy, David Espinal, a/k/a “D-Block,” to kill Hector Arias, the leader of a rival marijuana business operating in the same area.  On March 10, 2011, CASTILLO shot and killed Arias outside Arias’s home at 712 East Gun Hill Road in the Bronx, New York.  The murder plot arose out of the rivalry between the two marijuana businesses. 

*                      *                     *

CASTILLO, 38, pled guilty to one count of murder through the use of a firearm, in violation of 18 U.S.C. § 924(j), which carries a maximum penalty of life in prison and a mandatory minimum penalty of five years in prison.  The statutory maximum and minimum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

CASTILLO is scheduled to be sentenced before Judge Koeltl on October 15, 2021, at 10:00 a.m.

On or about December 8, 2020, CASTILLO’s codefendant, Espinal, pled guilty to conspiring to kill Arias, among other offenses.  During his guilty plea, Espinal admitted to hiring a hitman to kill Arias.    

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation and its Westchester County Safe Streets Task Force in this case. 

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jamie Bagliebter, Maurene Comey, Peter Davis, Scott Hartman, Lindsey Keenan, and Jacqueline Kelly are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a criminal indictment and a criminal complaint charging APOSTOLOS TROVIAS, a/k/a “The Bull,” with securities fraud and money laundering in connection with his scheme to solicit and sell stock trading tips and pre-release earnings and deal information regarding public companies.

Manhattan U.S. Attorney Audrey Strauss said: “Today’s charges demonstrate our Office’s continuing commitment to stopping those who pursue and use inside information to gain an illegal edge in the stock market. As alleged, Apostolos Trovias attempted to hide his insider trading scheme behind anonymizing software, screennames, and bitcoin payments. The Indictment and Complaint unsealed today show that committing insider trading using new technologies still produces a decidedly traditional outcome: a criminal indictment.”

FBI Assistant Director William F. Sweeney Jr. said:  “Behind the veil of the Dark Web, using encrypted messaging applications and emails, Trovias created a business model in which he sold—for profit—proprietary information from other companies, stock trading tips, pre-release earnings, and other inside information, as we allege. The FBI operates within the Dark Web too, and as Trovias learned today, we don't stop enforcing the law just because you commit federal crimes from behind a router with your keyboard.”

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

Since at least in or about December 2016, APOSTOLOS TROVIAS, who identifies himself by the pseudonym “The Bull,” has used websites on the Dark Web and encrypted messaging services to solicit and sell confidential, non-public information about publicly traded companies (“Inside Information”) to enrich himself. TROVIAS’s scheme consisted of multiple related efforts to obtain and monetize confidential nonpublic business information, including (1) the sale of misappropriated stock tips based on confidential customer trading information; (2) the sale of pre-release earnings reports and deal information misappropriated from publicly-traded companies; and (3) the attempted creation of an online marketplace to connect, for a commission, individuals misappropriating Inside Information to individuals willing to pay for and trade on Inside Information.

For example, between in or about December 2016, when he registered for a Dark Web site known as AlphaBay Market, and in or about July 2017, when AlphaBay ceased operations, TROVIAS offered for sale and sold stock tips that were based on non-public inside information about certain securities issuers and which could be purchased individually, or as weekly or monthly subscriptions.

At various times between in or about June 2017 and February 2020, TROVIAS sold Inside Information directly to purchasers, using encrypted messaging and email services to communicate about the sale, rather than exclusively through the marketplace features of the Dark Web forums. For instance, TROVIAS offered for sale and did sell, among other confidential information belonging to various securities issuers, for approximately $5,000 in Bitcoin, at least one pre-release earnings report misappropriated from a publicly-traded company.

In or about 2020, TROVIAS also took steps to design and build a website to facilitate the purchase and sale of material, non-public information for use in stock trading (the “Inside Information Auction Site”). TROVIAS planned to use the Inside Information Auction Site to enrich himself by charging membership fees and commissions from individuals using the Inside Information Auction Site to engage in the unlawful trade of Inside Information.

*                *                *

TROVIAS, 30, of Athens, Greece, is charged with one count of securities fraud and one count of money laundering.  The securities fraud count carries a maximum penalty of 25 years in prison. The money laundering 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 FBI. Ms. Strauss further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action, and the Internal Revenue Service for their cooperation and assistance in this investigation.

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

The charges contained in the Indictment and 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 Indictment and Complaint, and the description of the Indictment and 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 that EMEKA NNAWUBA, a/k/a “Benjamin Alabie,” who is a member of the United States Army Reserves, was sentenced yesterday to 40 months in prison for participating in a scheme to launder over $1 million in proceeds of romance fraud and business email compromise schemes perpetrated against dozens of victims.  NNAWUBA previously pled guilty before United States District Judge Katherine Polk Failla, who also imposed yesterday’s sentence. 

U.S. Attorney Audrey Strauss said:  “Emeka Nnawuba laundered money for a scheme that trolled dating websites in order to steal money from the accounts of unsuspecting women.  He will now spend time in prison and be compelled to make restitution to the victims of the scheme.” 

According to the allegations in the Superseding Indictment, court documents, and statements made in court:

From at least 2016 until 2018, NNAWUBA participated in a scheme to launder the proceeds of frauds perpetrated against dozens of victims.  Among other things, NNAWUBA used false identities and false passports to open bank accounts, received or attempted to receive more than $2 million in fraud proceeds, withdrew tens of thousands of dollars of fraud proceeds in cash, and transferred more than $1 million of fraud proceeds to bank accounts controlled by co-conspirators in an effort to conceal the source of funds. 

The funds laundered by NNAWUBA were procured principally by (a) romance scams, in which members of the scheme trolled dating websites to find unsuspecting women and stole their money on false pretenses, and (b) business compromise scams, in which members of the scheme impersonated individuals, professionals, or businesses in the course of otherwise ordinary financial transactions, and then fraudulently induced the counterparties to those transactions to transfer funds to bank accounts controlled and operated by NNAWUBA or other members of the scheme.

*                *                *

NNAWUBA, 31, of Fayetteville, Arkansas, pled guilty to and was sentenced on one count of participating in a conspiracy to commit money laundering.  In addition to the prison term, NNAWUBA was sentenced to three years of supervised release and was ordered to forfeit $2,096,248.39 and pay $1,362,528.46 in restitution.

Ms. Strauss praised the outstanding investigative work of the U.S. Secret Service, and thanked Homeland Security Investigations for its assistance. 

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Juliana N. Murray and Robert B. Sobelman are in charge of the prosecution. 

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that MICHAEL AVENATTI was sentenced today in Manhattan federal court by United States District Judge Paul G. Gardephe to 30 months in prison for attempting to extort NIKE, Inc., and for defrauding a client.  AVENATTI was previously found guilty on February 14, 2020, following a three-week jury trial.

Manhattan U.S. Attorney Audrey Strauss said:  “Michael Avenatti used illegal and extortionate threats and betrayed one of his clients for the purpose of seeking to obtain millions of dollars for himself.  Not only did Avenatti attempt to weaponize his law license and celebrity to seek to extort payments for himself, he also defrauded his own client.  Avenatti will now serve substantial time in prison for his criminal conduct.”

According to the Complaint, Superseding Indictment, court documents, and evidence presented at trial:

In a scheme that unfolded in less than a week, AVENATTI used threats of economic and reputational harm to seek to extort NIKE, Inc. (“Nike”), while defrauding his client (“Client-1”), by promising to settle potential claims by Client-1 against Nike if Nike agreed to make extortionate payments to AVENATTI.  AVENATTI threatened to hold a press conference on the eve of Nike’s quarterly earnings call and the start of the annual National Collegiate Athletic Association (“NCAA”) basketball tournament at which he would announce allegations of misconduct by employees of Nike.  However, AVENATTI stated that he would refrain from holding the press conference and harming Nike only if Nike made a payment of $1.5 million to Client-1, who was in possession of information potentially damaging to Nike, and further agreed to “retain” AVENATTI and another individual to conduct a supposed “internal investigation” – an investigation that neither Nike nor Client-1 requested – for which AVENATTI demanded to be paid, at a minimum, between $15 million and $25 million.  Alternatively, in lieu of such a retainer, AVENATTI demanded a total payment of $22.5 million from Nike to resolve any claims Client-1 might have and to buy AVENATTI’s silence. 

AVENATTI never told Client-1, among other things, that AVENATTI planned to and did threaten Nike that, unless Nike paid AVENATTI, he would hold the press conference, or that AVENATTI planned to and did seek money for himself separate from, and to the financial detriment of, Client-1.

*                *                *

In addition to the prison sentence, AVENATTI, 50, of Venice Beach, California, was sentenced to three years of supervised release. The Court deferred a determination as to restitution for a later date. 

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

The case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Matthew Podolsky, Daniel C. Richenthal, and Robert B. Sobelman are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that GORDON FREEDMAN, a doctor who practiced in New York, New York, was sentenced today in Manhattan federal court to 121 months in prison for participating in a scheme to receive bribes and kickbacks in the form of fees for sham educational programs (“Speaker Programs”) from pharmaceutical company Insys Therapeutics in exchange for prescribing millions of dollars’ worth of Subsys, a potent fentanyl-based spray manufactured by Insys, among other offenses (the “Insys Bribery Offenses”).  FREEDMAN was convicted of the Insys Bribery Offenses following a jury trial.  FREEDMAN was also sentenced to 210 months in prison, to run concurrently to the other sentence, for distributing oxycodone and fentanyl to a patient for no legitimate medical purpose (the “Diversion Offense”).  That patient ultimately died of a fentanyl overdose from drugs FREEDMAN illegally prescribed him.  FREEDMAN pled guilty to the Diversion Offense in December 2019.  

FREEDMAN was sentenced by United States District Judge Kimba M. Wood.

U.S. Attorney Audrey Strauss said: “Dr. Gordon Freedman, a prominent Manhattan physician, allowed his medical judgment to be corrupted by hundreds of thousands of dollars in bribes that he accepted from Insys in return for prescribing Subsys, a potent fentanyl painkiller.  These payments were made to appear like legitimate speaker program fees, but as the evidence at Freedman’s trial revealed, the speaker programs were a sham and were simply a way for Insys to line Freedman’s pockets.  In addition, Freedman prescribed excessive quantities of oxycodone and fentanyl to one of his patients for no legitimate medical purpose.  The patient overdosed and died from fentanyl prescribed by Freedman.  Freedman will now be serving a long prison sentence for accepting bribes and prescribing medically unnecessary opioids.”           

According to the allegations contained in the Indictments against FREEDMAN, the evidence presented in Court during the trial related to the Insys Bribery Offenses, and filings in related proceedings:

Insys manufactured Subsys, a powerful painkiller approximately 50 to 100 times more potent than morphine.  The U.S. Food and Drug Administration (“FDA”) approved Subsys only for the management of breakthrough pain in cancer patients.  Prescriptions of Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by the defendants.  In or about August 2012, Insys launched a “Speakers Bureau,” purportedly aimed at educating practitioners about Subsys.  In reality, however, Insys used its Speakers Bureau to induce doctors to prescribe large volumes of Subsys by paying them Speaker Program fees.  At each Speaker Program, speakers were supposed to conduct a slide presentation for other health care practitioners regarding Subsys.  However, many of the Speaker Programs led by the speakers paid by Insys were predominantly social affairs where no educational presentation occurred.  Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.

FREEDMAN, a doctor certified in pain management and anesthesiology, owned a private pain management office on Manhattan’s Upper East Side and was an associate clinical professor at a large hospital in Manhattan (“Hospital-1”).  FREEDMAN received approximately $308,600 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys.

In March 2013, a Regional Sales Manager for Insys sent an email to FREEDMAN informing him that he would receive more Speaker Programs in the coming months because Insys wanted prescriptions of Subsys to increase, and urging FREEDMAN to put more patients on Subsys.  FREEDMAN responded, in part, “Got it,” and significantly increased his Subsys prescriptions in the following months, during which he received approximately $33,600 in Speaker Program fees. 

In 2014, FREEDMAN’s prescriptions of Subsys rose even further, and he was the fourth-highest prescriber of Subsys nationally in the final quarter of 2014, accounting for approximately $1,132,287 in overall net sales of Subsys in that quarter.  During 2014, FREEDMAN was the highest-paid Insys Speaker in the nation, receiving approximately $143,000. 

During the period in which FREEDMAN was receiving kickbacks from Insys, he was also distributing powerfully addictive prescription drugs to a particular patient (“Patient-1”) with no legitimate medical purpose.  From in or about 2013 through in or about May 2017, FREEDMAN prescribed enormous quantities of oxycodone and fentanyl to Patient-1.  For example, in 2013 alone, FREEDMAN prescribed Patient-1 approximately 85,427 oxycodone pills –  an average of approximately 234 oxycodone pills per day – containing a total of approximately 2,422,435 mg of oxycodone.  On or about April 13, 2017, FREEDMAN gave Patient-1 prescriptions for approximately 150 doses of a drug containing fentanyl, and for approximately 950 oxycodone pills containing approximately 30 mg of oxycodone per pill.  On or about May 4, 2017, Patient-1 died of a fentanyl overdose after ingesting a quantity of the drug prescribed by FREEDMAN on or about April 13, 2017.

*                *                *

In addition to the prison sentence, FREEDMAN, 61, of New York, New York, was sentenced to three years of supervised release, ordered to forfeit $308,600 and ordered to pay a total fine across the two cases of $75,000.

FREEDMAN was one of five Manhattan doctors convicted for participating in the Subsys bribery conspiracy.  Todd Schlifstein was convicted upon a guilty plea and sentenced by Judge Wood on October 28, 2019, principally to a term of two years in prison.  Alexandru Burducea was convicted upon a guilty plea and sentenced by Judge Wood on January 27, 2020, principally to a term of 57 months in prison.  Dialecti Voudouris was convicted upon a guilty plea and sentenced by Judge Wood on March 5, 2020, principally to time served.  Jeffrey Goldstein was convicted upon a guilty plea and sentenced by Judge Wood on June 16, 2021, principally to a term of 57 months in prison.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation and thanked the U.S. Department of Health and Human Services - Office of the Inspector General for its participation in the investigation.

The cases are being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Noah Solowiejczyk, David Abramowicz, and Katherine Reilly are in charge of the prosecutions.

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest today of STEVEN SHORT, the former head of E.M. Systems & Services, LLC, and affiliated companies (“E.M. Systems”), on charges of fraudulently obtaining credit card processing services for his deceptive Florida-based telemarketing operation.  As alleged in a superseding indictment unsealed today, which also contains charges previously announced against Brandon Becker, the former CEO of CardReady, LLC (“CardReady”), SHORT and Becker fraudulently carried out a credit card laundering scheme that provided access to the credit card system for SHORT’s underlying telemarketing scheme.  From about 2012 through 2015, according to the Indictment, SHORT and E.M. Systems generated over $19 million from thousands of customers who received cold calls promising to reduce their overall debt burdens in exchange for fees of up to $1,495.  The telemarketing operation resulted in hundreds of complaints of fraud and deceptive tactics, and requests for millions of dollars in refunds and chargebacks.  The charges include that, from approximately 2012 through 2015, SHORT, Becker and their co-conspirators carried out a fraudulent credit card processing scheme, processing credit card charges for SHORT’s telemarketing operation, even though applicable contracts prohibited the processing of credit card charges for purported “debt consolidation” and “interest rate reduction” services.  SHORT and Becker are charged with accomplishing this processing fraud by creating dozens of sham merchant accounts and false merchant applications, concealing the true nature of SHORT’s telemarketing operation, and defrauding an associated credit card processing company and a federally insured bank into processing more than $19 million in payments for the scheme.

SHORT was arrested this morning in Tampa, Florida, and is scheduled to be presented in Tampa before U.S. Magistrate Judge Sean Flynn.  Becker was originally arrested at Los Angeles International Airport on September 22, 2019.  The case is assigned to Judge Preska, and is scheduled to go to trial on January 31, 2022.

U.S. Attorney Strauss said:  “Steven Short and his codefendant allegedly preyed on people already in debt in order to enrich themselves, using a web of sham companies to perpetuate and conceal their conduct.  As credit cards and electronic payments become an ever more central part of our society and our economy, both consumers and corporations have every right to expect truthfulness and fair dealing in the marketplace – not fraud and deception.”

FBI Assistant Director William F. Sweeney Jr. said: "As alleged, Becker and Short created more than $19 million in illegitimate profits, derived from victims who were deliberately targeted due to their debt-laden status. They entered into this scheme together and will exit in much the same way—facing a federal indictment that carries significant charges of its own."

According to the Indictment unsealed today:[1]

SHORT controlled E.M. Systems and its affiliates, based in Florida.  Beginning in 2012, SHORT sought to use E.M. Systems to carry out a telemarketing scheme targeting people with outstanding debt, and to offer them purported financial services.  In order to charge for such purported services via credit cards, SHORT sought access to the credit card processing market, through Becker and CardReady.  

Becker was the CEO of CardReady, a Los-Angeles based company acting as a sales agent in the credit card processing industry.  As part of its business as a sales agent, CardReady found merchants who wanted credit card processing services, such as SHORT, and submitted merchant applications on behalf of those merchants to an Independent Sales Organization (“ISO”), referred to in the Indictment as the “New York ISO.”  The New York ISO then evaluated the merchant applications, and referred acceptable merchant accounts up the chain to Payment Processor-1 and to Bank-1.  Bank-1 and Payment Processor-1, in turn, processed payments to merchants for purchases by customers who had used credit cards.

In or about 2012, SHORT negotiated a deal with Becker, to obtain credit card processing for SHORT and E.M. Systems.  Under this deal, CardReady would keep approximately one-third of the credit card sale transactions of SHORT and E.M. Systems, in exchange for providing them access to the credit card processing network.  For roughly the next two years, SHORT and E.M. Systems carried out a telemarketing scheme in which they used telemarketers to cold-call consumers, targeting consumers with outstanding credit card debt.  The cold-callers offered the customers services, including debt consolidation and interest rate reduction on their debts, which were prohibited by the applicable guidelines from Bank-1 and associated processing entities (the “Guidelines”), and which – as SHORT and Becker knew – would produce chargebacks from dissatisfied customers far in excess of the number and rate of chargebacks permitted under the Guidelines.

In securing payment card processing for E.M. Systems, SHORT and Becker concealed that E.M. Systems was the true underlying merchant.  Instead, SHORT, Becker and their co-conspirators, over a period of more than 20 months, created approximately 26 sham merchant companies, each headed by a “signer” (the “Sham Merchants” and the “Sham Merchant Accounts”).  The 26 signers for the 26 Sham Merchants typically had no businesses of their own, and knew little or nothing about E.M. Systems’ business.  In return for signing paperwork, the signers were paid a nominal fee from CardReady.  SHORT, Becker, and their co-conspirators prepared and coordinated fraudulent merchant applications for each of the Sham Merchants, through merchant applications that falsely described the Sham Merchants to make them look like legitimate independent businesses and to make it more likely that the associated Sham Merchant Account would be approved for processing by the New York ISO, Payment Processor-1, and Bank-1.  These false merchant applications also concealed the Sham Merchants’ true association with E.M. Systems.

By steering E.M. Systems’ payment processing through these Sham Merchant Accounts, SHORT and Becker accomplished a number of fraudulent purposes.  First, the use of these Sham Merchant Accounts made it possible for E.M. Systems to conceal its identity from Payment Processor-1 and Bank-1 and to maintain payment card processing.  This was particularly relevant as Payment Processor-1 repeatedly required CardReady to close individual Sham Merchant Accounts because of excessive chargebacks and reports of sales of prohibited services.  SHORT and Becker then caused CardReady to quickly replace the closed Sham Merchant Accounts with new Sham Merchant Accounts, precluding Payment Processor-1 from shutting down its processing of Telemarketer-1 and other high-risk merchants.  Second, the fraudulent processing scheme enabled E.M. Systems to spread out its charges, refunds, and chargebacks across multiple Sham Merchant Accounts.  SHORT and Becker thus enabled E.M. Systems to evade chargeback monitoring programs operated by Bank-1, Payment Processor-1, and the New York ISO.

*                *                *

SHORT, 44, of Tampa, Florida, is charged in Counts One and Four of the Indictment, with conspiracy to commit wire fraud and bank fraud, and bank fraud.  Count One and Count Four each carries a maximum sentence of 30 years in prison, and a maximum fine of $1 million or twice the gross gain or loss from the offense.

Becker, 50, of Los Angeles, California, is charged in four counts, conspiracy to commit wire fraud and bank fraud, conspiracy to make false statements to a bank, wire fraud, and bank fraud.  Count One and Count Four each carries a maximum sentence of 30 years in prison, and a maximum fine of $1 million or twice the gross gain or loss from the offense.  Count Two and Count Three each carries a maximum sentence of 20 years in prison, and a maximum fine of $250,000 or twice the gross gain or loss from the offense. 

The maximum potential sentences for each defendant 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 extraordinary work of the FBI and thanked the Federal Trade Commission for its assistance.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys David Raymond Lewis and Vladislav Vainberg 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, the United States Attorney for the Southern District of New York, announced today that RICHARD RUBIN, a disbarred attorney, pled guilty in Manhattan federal court to securities fraud.  RUBIN’s guilty plea results from his involvement in a fraudulent scheme in which he falsely represented that he was a licensed attorney in signing certain attorney opinion letters, which enabled the relevant securities to be sold to the investing public.  In addition, RUBIN engaged in the fraudulent scheme with Thomas Craft, a licensed attorney, who falsely represented that he had undertaken certain legal work in connection with other attorney opinion letters, when in truth and in fact, RUBIN, despite his disbarment, had undertaken all of the legal work attested to in the letters.

RUBIN was arrested on December 2, 2020, and pled guilty today before U.S. District Judge Paul A. Engelmayer. 

Manhattan U.S. Attorney Audrey Strauss said: “As he admitted today, Richard Rubin falsely represented in attorney opinion letters that he was a licensed attorney, giving false comfort to the investing public that an attorney, acting as a gatekeeper, had performed certain work in connection with securities.  Now he stands guilty of securities fraud and awaits sentencing for his crime.”

As alleged in the Indictment filed against RUBIN, as well as his co-conspirator Craft,[1] and other statements made in open court:

Securities Registration Requirements and SEC Rule 144

Under the Securities Act of 1933 (the “Securities Act”), anyone seeking to sell a security must first register that security unless an exemption applies.  See 15 U.S.C. § 77e.  This registration requirement protects investors by promoting disclosure of information pertinent to informed investment decisions. 

A company registering new securities must complete a registration statement known as U.S. Securities and Exchange Commission (“SEC”) Form S-1 before the securities can be listed on a national exchange and publicly traded.  SEC Form S-1 contains information pertinent to informed investment decisions, including, among other things, information on the company’s business operations, the company’s financial condition, and a description of the company’s management.  In connection with SEC Form S-1, the company is required to file an opinion letter (the “Form S-1 Opinion Letter”) from a licensed attorney attesting that the statements in the SEC Form S-1 are true and correct.  A company’s SEC Form S-1 and the Form S-1 Opinion Letter are available to the public on the SEC’s Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”).

“Restricted securities” refers to securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer, with “affiliate” meaning a person who directly or indirectly controls, or is controlled by, or is under common control with, an issuer.  Affiliates can also include an executive officer or a director or large shareholder who is in a relationship of control with respect to the issuing company.  Restricted securities bear a legend indicating that the securities may not be resold in the marketplace unless they are registered with the SEC or are exempt from such registration requirements.

Securities Act Rule 144 (“Rule 144”), codified at 17 C.F.R. § 230.144, provides a registration exemption for restricted securities.  Specifically, it permits the public resale of restricted securities if a number of conditions are met, including conditions relating to how long the securities are held, the way in which they are sold, the public information available to investors about the securities, and the amount that can be sold at any one time.  Pursuant to Rule 144, however, even if these conditions are met, the sale of restricted securities to the public is still not permitted until a transfer agent removes the “restricted” legend from the security. 

The term “transfer agent” refers to a company that keeps track of individuals and entities that own the stocks and bonds of a given company that has publicly traded securities.  Among other things, transfer agents issue and cancel certificates to reflect changes in ownership, serve as the company’s intermediary for payouts, exchanges, or mailings, and handle lost, destroyed, or stolen certificates.  Transfer agents also, when appropriate, remove the “restricted” legend from securities. 

A Rule 144 Seller’s Representation Letter, or “Seller’s Representation Letter,” is a letter from an affiliate seller (that is, a seller in a relationship of control with the issuer, such as an executive officer, a director, or a large shareholder) of restricted securities to a transfer agent to establish certain facts underlying a legal opinion that the securities at issue can be sold publicly pursuant to Rule 144.  The issuer’s consent to the removal of a legend typically comes in the form of an opinion letter from the issuing company’s attorney, the Seller’s Representation Letter, indicating that the securities at issue satisfy the conditions of Rule 144.  Seller’s Representation Letters contain multiple attestations that are required by law prior to the restricted legend being removed.  The transfer agent relies on the Seller’s Representation Letter in determining whether to remove the restricted legend from a security.

Over-the-Counter Securities and OTC Markets Group

Over-the-counter (“OTC”) securities are securities that are traded between two counterparties outside of a formal securities exchange.  OTC Markets Group (“OTC Markets”) is a securities market headquartered in New York, New York, that provides price and liquidity information for OTC securities.

OTC Markets requires issuers seeking to be listed on OTC Markets to hire a licensed attorney to review company records and submit a letter to OTC Markets (an “OTC Markets Attorney Letter”) regarding whether information publicly disclosed by the issuer is in compliance with the condition in SEC Rule 144 governing the public information available to investors about the issuer.  OTC Markets relies on the OTC Markets Attorney Letter to determine whether an issuer’s security may be listed on OTC Markets.  OTC Markets Attorney Letters are available to the public on the OTC Markets website. 

The Scheme to Defraud

From at least in or about 2011 through at least in or about September 2018, RUBIN and Craft participated in a fraudulent scheme in which Craft falsely represented that he had undertaken certain legal work in connection with Seller’s Representation Letters, OTC Markets Attorney Letters, and S-1 Opinion Letters, all of which enabled the relevant securities to be sold to the investing public.  In addition, in connection with the securities of certain issuers, Rubin, the defendant, falsely represented that he was an attorney in Seller’s Representation Letters and OTC Markets Attorney Letters, all of which enabled the relevant securities to be sold to the investing public.  The false representations were in letters pertaining to over a dozen companies.

RUBIN, 79, of Brooklyn, New York, pled guilty to one count of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2, 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.

RUBIN will be sentenced on November 2, 2021.

*                *                *

Ms. Strauss praised the investigative work of the Office of Inspector General of the SEC and also thanked the SEC Division of Enforcement for its assistance. 

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

The charges against Craft are pending, and he 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, and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced that LUIS LEE was charged in a criminal complaint unsealed today in Manhattan federal court with narcotics distribution resulting in the death of Pathjrie Roman, who died two days before her 21st birthday.  LEE was arrested today and will be presented this afternoon before United States Magistrate Judge James L. Cott. 

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Luis Lee peddled a lethal combination of drugs that caused the death of Pathjrie Roman.  Working with the NYPD, we will continue to combat the epidemic of lethal opioids.”

NYPD Commissioner Dermot Shea said: “The NYPD continues to work to end the trafficking of illegal opioids and bring to justice those who profit from their distribution. We commend and thank the detectives and the attorneys of the U.S. Attorney’s Office for the Southern District whose hard work resulted in this arrest.”

As alleged in the Complaint[1]:

On or about September 18, 2020, Pathjrie Roman contacted LEE on Instagram and asked for Xanax and a depressant, or a “downer,” of which heroin is a type.  That evening, LEE met Roman outside her apartment in the Bronx and delivered the Xanax and heroin.  The heroin, however, was mixed with fentanyl.  LEE’s meeting with Roman was corroborated by their contemporaneous Instagram messages, by LEE’s cellphone location, by building surveillance, and by witness information. 

The next day, September 19, 2020, NYPD and emergency medical personnel found Roman deceased at her apartment.  Following an autopsy, the New York City Medical Examiner determined that Roman died of acute intoxication from the combined effects of fentanyl, acetyl fentanyl, heroin, and alprazolam (generic Xanax).  Hidden inside Roman’s phone case were four glassines containing residue of fentanyl, acetyl fentanyl, and heroin. 

On or about September 20, 2020, another Instagram user told LEE that Roman had died.  Within 24 hours, LEE deleted the Instagram account that he had used to communicate with Roman. 

On or about November 11, 2020, NYPD personnel executed a search of LEE’s bedroom and recovered 12 glassines matching the appearance of the glassines inside Roman’s phone case.  The glassines in LEE’s bedroom contained fentanyl. 

*                      *                      *

LUIS LEE, 26, of New York, New York, is charged with narcotics distribution resulting in death, which carries a mandatory minimum sentence of 20 years in prison and a maximum sentence of life in prison.   

The minimum and maximum potential sentences described above are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the assigned judge.

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

The case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Alexander Li is in charge of the prosecution.

The charge against the defendant is merely an accusation, and he 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 herein should be treated as an allegation as to the defendants charged in the Complaint.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that ARIEL TAVAREZ, a/k/a “A,” a/k/a “Mike,” pled guilty today in Manhattan federal court to conspiring to distribute heroin, cocaine, fentanyl, and a fentanyl analogue, and to distributing narcotics that caused the 2018 death of Colin Kroll, the co-founder of the video hosting service Vine and the trivia game application HQ Trivia.  TAVAREZ pled guilty before United States District Judge Katherine Polk Failla. 

U.S. Attorney Audrey Strauss said: “For years, Ariel Tavarez operated a covert on-demand delivery service for the distribution of highly addictive and dangerous drugs.  Tavarez and his underlings peddled their poison, which Tavarez sometimes secretly laced with deadly synthetic opioids, throughout New York City.  Thanks to the tireless efforts of law enforcement, Mike’s Candyshop is permanently closed.”           

According to the allegations in the Indictment, and statements made in Court:

TAVAREZ was the leader of a drug trafficking organization (the “DTO”) that engaged in a drug delivery service, which identified itself as “Mike’s Candyshop.”  The DTO delivered heroin and cocaine (sometimes laced with fentanyl and a fentanyl analogue) on demand to customers in New York City, and distributed numerous kilograms of heroin and cocaine throughout the course of the conspiracy.  Mike’s Candyshop generally operated seven days per week, from approximately 6:00 p.m. to 12:00 a.m., with the exception of major holidays such as Thanksgiving, New Year’s Eve, and Labor Day. 

Customers of the DTO placed delivery orders via text message to a centralized phone number (the “Candyshop Number”).  The operator of the Candyshop Number was usually TAVAREZ.  Using the Candyshop Number, TAVAREZ accepted customer orders and subsequently arranged for a courier working for the DTO to deliver the narcotics to the customer, usually within hours of the customer texting his or her order to the Candyshop Number.  Certain of the DTO members, including Christian Baez, Luis Meson, a/k/a “Sito,” Gregoris Martinez, a/k/a “Greg,” Kevin Grullon, a/k/a “Kev,” a/k/a “JB,” and Jeffrey Urena, a/k/a “Jeff,” a/k/a “Jay,” served as couriers for the DTO, and regularly delivered and sold narcotics to the DTO’s customers in hand-to-hand drug transactions coordinated through the Candyshop Number. 

The DTO stored heroin, cocaine, a fentanyl analogue, and cash from drug sales in various stash locations maintained by the DTO, including in Brooklyn, New York.  In an effort to avoid law enforcement detection, the DTO sold only to customers who had been referred by existing customers, periodically changed the Candyshop Number, used coded language to discuss narcotics, and delivered narcotics directly to customers at locations specified by the customer.  As a means of marketing its cocaine, and to ensure that the DTO’s customers knew the cocaine provided by the couriers belonged to the DTO, the DTO sold its cocaine in vials sealed with different colored tops. 

On or about December 16, 2018, Colin Kroll, a customer of the DTO, died of a drug overdose in New York, New York.  The narcotics that caused Kroll’s death – cocaine, heroin, fentanyl, and a fentanyl analogue – were purchased from Mike’s Candyshop on the evening of December 14, 2018. 

*                *                *

TAVAREZ pled guilty to one count of conspiring to distribute heroin, cocaine, fentanyl, and a fentanyl analogue, the use of which resulted in the death of Colin Kroll on or about December 16, 2018.  This count carries a statutory mandatory minimum term of 20 years in prison and maximum penalty of life in prison.  The maximum and mandatory minimum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

TAVAREZ is scheduled to be sentenced by Judge Failla on November 23, 2021.           

Baez, Meson, Martinez, Grullon, and Urena each previously entered a plea of guilty to participating in the Mike’s Candyshop narcotics trafficking conspiracy.  Martinez was sentenced on June 29, 2021, to 72 months in prison by Judge Failla.  Baez, Meson, Grullon, and Urena will be sentenced later this year by Judge Failla.

Ms. Strauss praised the outstanding investigative work of Homeland Security Investigations, the Drug Enforcement Administration, the New York City Police Department, and the Organized Crime Drug Enforcement Task Force.  This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation. OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. Additional information about the OCDETF Program can be found at https://www.justice.gov/OCDETF.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Mollie Bracewell, Nicholas W. Chiuchiolo, and Aline R. Flodr are in charge of the prosecution. 

Audrey Strauss, the United States Attorney for the Southern District of New York, 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 that SEAN WYGOVSKY, a trader at a large Canadian asset management firm (the “Employer Firm”), was charged in a Complaint in Manhattan federal court with securities fraud and wire fraud in connection with his scheme to steal confidential information about the trade orders of the Employer Firm in order to conduct hundreds of timely, profitable personal securities trades in the same stocks as the Employer Firm.  WYGOVSKY attempted to hide his conduct by trading or causing trading in brokerage accounts held in the names of his close relatives.  WYGOVSKY was arrested this morning in Austin, Texas, and is expected to be presented in federal court this afternoon before a U.S. Magistrate Judge for the Western District of Texas.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Sean Wygovsky illegally exploited his access to his employer firm’s yet-to-be-executed trade orders to make numerous trades in anticipation of the bump or dip the firm’s buying or selling would cause.  To conceal the scheme, Wygovsky allegedly made his front running trades through brokerage accounts of certain of his relatives.  As alleged, Wygovsky made or directed over 700 timely transactions that netted him more than $3.6 million in illegal profits.  Now Sean Wygovsky is in custody and facing serious criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said: “Over the course of several years, as alleged, Wygovsky made hundreds of short-term trades based on inside information that ultimately reaped more than $3 million in profits. Schemes like the one alleged here grossly affect the integrity of our financial markets and remain a top priority for our financial fraud investigative teams.”

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

SEAN WYGOVSKY has been employed at the Employer Firm since approximately 2013.  The Employer Firm is an asset management firm based in Toronto, Canada, with at least approximately $19 billion in assets under management.  WYGOVSKY has a number of close relatives who live in the United States, including a relative in North Carolina (“Relative-1”) and two relatives in Virginia (“Relative-2” and Relative-3”) who are married to each other.

The Front Running Scheme

Based on his position as a trader at the Employer Firm, WYGOVSKY had access to the trade information and trade orders of the Employer Firm.  Like most large asset managers, the Employer Firm had rules and regulations concerning employees’ personal trading, including requirements about the confidentiality of client information and prohibitions against insider trading and personal trading in the same securities as the Employer Firm.  The size of the Employer Firm’s trade orders often caused slight, temporary movements in the price of the securities traded.  For example, if the Employer Firm engaged in a large purchase of stock, the increased demand could cause a slight rise in the stock price, and if the Employer Firm engaged in a large sale of stock, the increased supply could cause a slight drop in the stock price.  Because WYGOVSKY had access to the Employer Firm’s trade orders, he knew in advance when a particular stock price would move slightly up or down based on that trading.

WYGOVSKY’s relatives maintained brokerage accounts for the personal purchase and sale of securities.  In particular, Relative-1 maintained at least one brokerage account and Relative-2 and Relative-3 maintained at least four brokerage accounts (the “Subject Accounts”).  From at least 2015 through April 2021, after obtaining information about the Employer Firm’s upcoming trading activity but before those trades were executed, WYGOVSKY caused the Subject Accounts to buy or sell the same securities the Employer Firm would be buying or selling, in order to profit through the subsequent movement of the stock that would often result from the Employer Firm’s trading.  WYGOVSKY would then cause the Subject Accounts to exit those positions once the Employer Firm’s trading was underway, often within hours of when the Subject Accounts had first entered the positions.  For example, if WYGOVSKY knew that the Employer Firm would be buying a particular stock, WYGOVSKY would cause one or more of the Subject Accounts to purchase that stock beforehand in relatively small amounts.  Then, as the Employer Firm made relatively large purchases, the stock price would increase and WYGOVSKY would cause the Subject Accounts to sell their holdings at a profit. 

At times, WYGOVSKY personally conducted the trading on behalf of both the Employer Firm and the Subject Accounts.  For example, on occasion, IP log-ins from the Subject Accounts show the Subject Accounts were being accessed from locations where WYGOVSKY was travelling.  On other occasions, WYGOVSKY would cause others to execute the timely, profitable trading in the Subject Accounts.  Over an approximately five-year period, WYGOVSKY caused the Subject Accounts to engage in more than 700 such short-term timely, profitable trades, resulting in at least over $3.6 million of profits in the Subject Accounts. 

Financial Transfers Back to Wygovsky

During the course of the front running scheme, Relative-2 and Relative-3 caused at least approximately hundreds of thousands of dollars to be sent back to WYGOVSKY from the Subject Accounts.   For example, between 2015 and 2020, Relative-2 and Relative-3 moved millions of dollars from the Subject Accounts to bank accounts that they controlled, and wrote checks to WYGOVSKY and his immediate family members for hundreds of thousands of dollars.  Furthermore, in or about late 2017 and early 2018, Relative-2 and Relative-3 transferred hundreds of thousands of dollars to a Slovenian bank for the benefit of certain relatives of WYGOVSKY’s wife.  

*                *                *

WYGOVSKY, 40, of Ontario, Canada, is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the work of the FBI.  Ms. Strauss further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action, for their cooperation and assistance in this investigation. 

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

The allegations 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, 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 unsealing of an Indictment charging ROBERT JEFFREY JOHNSON, a/k/a “Jeff Johnson,” ROSS BALDWIN, and KATHLEEN HOOK with conspiring to commit wire fraud and wire fraud for defrauding at least approximately 60 investors of at least approximately $8 million in connection with a precious metals leasing program known as the “Silver Lease Program.”  JOHNSON and BALDWIN were further charged with conspiring to commit wire fraud and wire fraud for defrauding insurance companies by making misrepresentations to these insurance companies in connection with obtaining insurance for the purported silver.  BALDWIN was also charged with making false statements to federal officials in connection with lying to officials of the Commodity Futures Trading Commission (“CFTC”) during a sworn deposition.  JOHNSON and HOOK were arrested this morning in Palm Beach, Florida, and were presented today in the United States District Court for the Southern District of Florida.  BALDWIN was arrested this morning in Albany, New York, and was presented today in the United States District Court for the Northern District of New York.

Manhattan U.S. Attorney Audrey Strauss said:  “Robert Jeffrey Johnson, Ross Baldwin, and Kathleen Hook allegedly lied to investors in order to get them to invest millions of dollars in the ‘Silver Lease Program.’  As alleged, these investors were told that they were purchasing silver, that their silver was being securely stored for them at a high-tech storage facility in Florida, and that they would earn a guaranteed monthly dividend payment.  In reality, the defendants’ promises were not worth their weight in silver – or anything else for that matter. Instead of using investors’ money to purchase silver on their behalf, the defendants allegedly misappropriated that money to pay for their own lavish personal expenses and to fund unrelated business ventures.”

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

The “Silver Lease Program”

From in or about 2014 through in or about January 2021, JOHNSON, BALDWIN, and HOOK conspired to defraud investors in the “Silver Lease Program.”  Investors could participate in the Silver Lease Program by either (1) paying funds to purchase silver that the investor then leased back to the operators of the program in return for a fixed monthly dividend payment or (2) providing silver the investor already owned in order to lease that silver to the operators of the program in return for a fixed monthly dividend payment.

While investors were told that they owned a particular quantity of silver that was being stored for them at a specific secure, locked storage facility in Florida (the “Florida Storage Facility”), in reality the purported silver was not being stored at the Florida Storage Facility.  The entity that was supposed to be storing the investors’ silver, Precious Commodities Inc. (“PCI”), which was functionally controlled by JOHNSON, did not even have any storage units at the Florida Storage Facility.  In order to induce investors to invest in the Silver Lease Program, BALDWIN, through his company National Coin Broker (“NCB”) told the investors various other lies, both orally and through websites and brochures that he prepared in order to solicit investors to participate in the program.

Investors in the Silver Lease Program provided millions of dollars in order to purchase silver through the Silver Lease Program.  Unbeknownst to these investors, a substantial portion of their funds were misappropriated to pay for, among other things, personal expenses of JOHNSON, JOHNSON’s wife, and HOOK, as well as to fund other, unrelated business ventures that JOHNSON, JOHNSON’s wife, and other associates of JOHNSON were engaged in.

Misrepresentations to Insurers

In order to induce investors to invest in the Silver Lease Program and so that they would feel secure in their investment, the operators of the Silver Lease Program touted the fact that the investors’ silver would be fully insured.  Investors were ultimately provided with a certificate of insurance showing that PCI held an insurance policy with respect to the investor’s silver.  JOHNSON and BALDWIN caused material misrepresentations to be made to insurance brokers in connection with procuring these insurance policies.  These misrepresentations included lying about BALDWIN’s role with respect to PCI and lying by claiming that the silver the insurers were insuring would be stored at the Florida Storage Facility. 

Dividend Payments Cease and Investors Do Not Receive the Return of their Silver or Funds

Beginning in approximately the Spring of 2019, investors largely ceased receiving their monthly dividend payments.  Many investors eventually demanded the return of their silver and/or the funds they had invested in the Silver Lease Program.  Investors primarily contacted BALDWIN in their efforts to receive the return of their silver and/or their funds, and BALDWIN frequently forwarded these communications from disgruntled investors to JOHNSON. 

Despite the repeated attempts by numerous Silver Lease Program investors to obtain the return of their silver and/or their money, these investors never received the return of either.

BALDWIN’s False Statements to the CFTC

In October 2018, BALDWIN participated in a sworn deposition with the CFTC that occurred in Manhattan, New York.  During that deposition, BALDWIN made numerous material false statements, including by lying about the role he played in obtaining insurance for PCI and by lying about visiting a storage vault at the Florida Storage Facility with an associate of JOHNSON and observing silver, when in reality this associate of JOHNSON’s never had any storage units at the Florida Storage Facility and did not otherwise have access to any storage units at the Florida Storage Facility.

*          *          *

JOHNSON, 55, of West Palm Beach, Florida, is charged with two counts of conspiracy to commit wire fraud and two counts of wire fraud, which each carry, respectively, a maximum sentence of 20 years in prison.  HOOK, 59, of West Palm Beach, Florida, is charged with one count of conspiracy to commit wire fraud and one count of wire fraud, which each carry, respectively, a maximum sentence of 20 years in prison.  BALDWIN, 60, of Miami, Florida, is charged with two counts of conspiracy to commit wire fraud and two counts of wire fraud, which each carry, respectively, a maximum of 20 years in prison, and is also charged with one count of making false statements to federal officials, which carries a maximum sentence of 5 years in prison.

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

Ms. Strauss praised the investigative work of the FBI.  Ms. Strauss also thanked the CFTC, which has filed a civil enforcement action against the defendants.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Noah Solowiejczyk is 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 VITO NIGRO, a former construction project manager at Turner Construction Company (“Turner”), was sentenced today in Manhattan federal court to 51 months in prison for evading taxes on more than $1.8 million in bribes he received from building sub-contractors, in connection with a number of building projects undertaken for Bloomberg LP (“Bloomberg”).  NIGRO previously pled guilty to those charges, and was sentenced today before U.S. District Judge Analisa Torres. 

In related proceedings, co-conspirator Ronald Olson, a former vice president and deputy operations manager at Turner, was sentenced on June 15, 2021, by the Honorable P. Kevin Castel, to 46 months in prison, for evading taxes on more than $1.5 million in the same scheme; Anthony Guzzone, a former director of global construction at Bloomberg, was sentenced on January 19, 2021, by the Honorable Lewis J. Liman to 38 months in prison, for evading taxes on more than $1.45 million; Michael Campana, a subordinate construction manager at Bloomberg, was sentenced on July 24, 2020, by the Honorable Denise L. Cote to 24 months in prison, for evading taxes on more than $420,000.[1]

U.S. Attorney Audrey Strauss said: “Bribery and tax evasion in the construction industry impose hidden, unfair costs on law-abiding builders, contractors, and fellow taxpayers.  Appropriately, Vito Nigro has been sentenced to prison for his crimes.”

According to the four criminal Informations filed in these federal cases, as well as other public documents and recent court proceedings:

Between 2011 and 2017, NIGRO was a construction project manager at Turner, a construction firm that performed various building projects in New York City and elsewhere for Bloomberg, a global financial firm.  Throughout those years, Guzzone oversaw such building projects at Bloomberg, while NIGRO and Olson worked at Turner.  Beginning in 2013, Campana was also a construction manager at Bloomberg, and a subordinate to Guzzone.  Each of the defendants participated in a scheme to obtain bribes from construction sub-contractors, who paid kickbacks to the defendants in exchange for being awarded various construction contracts and sub-contracts performed for Bloomberg.  Olson and NIGRO also separately schemed to receive kickbacks in connection with construction projects Turner was performing for clients other than Bloomberg.

In all, the defendants have pled guilty to failing to pay taxes, between 2010 and 2017, on bribes exceeding $5.1 million.  The defendants received such bribes in various forms, including millions of dollars in cash, as well as construction projects on their individual homes and properties, and the direct payment of personal expenses.  Such personal expenses included hundreds of thousands of dollars’ worth of repeated renovations and improvement projects at NIGRO’s home in New Jersey and OLSON’s homes on Long Island and Long Beach Island, as well as a sham lease of that beach house, through which OLSON received $20,000 per month in payments that he falsely characterized as rent; Guzzone’s receipts of several sets of Super Bowl tickets, worth approximately $8000 per ticket; and Campana’s receipt of charges related to his 2017 wedding, such as approximately $40,000 paid by sub-contractors to a catering hall in New Jersey, over $13,000 to a photography studio, and over $23,000 to a travel agent for airline tickets purchased in connection with Campana’s honeymoon.  Each of the defendants evaded federal income tax on this bribery income, by failing to declare it on income tax returns for various years between 2010 and 2017.

*                *                *

NIGRO, 60, of Middletown, New Jersey, pled guilty on October 28, 2020, to a single count of tax evasion for the tax years 2011 through 2017.  In addition to the prison term, NIGRO was sentenced to three years of supervised release.  He was also ordered to make full restitution, in an amount to be set by Judge Torres within 30 days.  The Government is seeking $812,108.93 in restitution for unpaid taxes and interest. 

Olson, 54, of Massapequa, New York, pled guilty on July 29, 2020, to a single count of tax evasion for the tax years 2011 through 2017.   He was sentenced on June 15, 2021, to 46 months in prison, three years of supervised release, and ordered to pay restitution of $661,519.57 in unpaid taxes and interest. 

Guzzone, 52, of Middletown, New Jersey, pled guilty on September 29, 2020, to a single count of tax evasion for the tax years 2010 through 2017.  He was sentenced on January 19, 2021, to 38 months in prison, three years of supervised release, and restitution of $574,005.33 in unpaid taxes and interest.

Campana, 35, of Tuckahoe, New York, pled guilty to a tax evasion charge on November 26, 2019, for the tax years 2014 thought 2017, and was sentenced last week, on July 24, 2020, to 24 months in prison, three years of supervised release, restitution of $155,000 in unpaid taxes, and a fine of $10,000. 

Ms. Strauss praised the excellent work of the Internal Revenue Service.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney David Raymond Lewis, and Stanley J. Okula, Senior Litigation Counsel of the Tax Division of the Department of Justice, are in charge of the prosecution.  

 

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[1]  In addition, all four defendants have pled guilty in New York State Supreme Court, Indictment No. 04038-2018, to participating in the underlying bribery scheme, and are awaiting sentencing.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that DEBORAH MENSAH was sentenced to 70 months in prison for her participation in a conspiracy to launder millions of dollars of fraud proceeds from business email compromises and romance scams that targeted the elderly from at least in or about 2014 through in or about 2018.  MENSAH was extradited from the Republic of Ghana (“Ghana”) to the United States on August 21, 2020.  She pled guilty to conspiring to commit money laundering on April 2, 2021, before U.S. District Judge Denise L. Cote, who imposed today’s sentence. 

Manhattan U.S. Attorney Audrey Strauss said: “Deborah Mensah was a member of an international criminal enterprise that stole millions of dollars from businesses and vulnerable individuals across the United States, and laundered that money through a network of bank accounts in the Bronx.  Having previously been extradited from Ghana, Deborah Mensah has now been sentenced to a term in a U.S. prison for her crime.” 

According to the Indictment and other public filings in the case:

From at least in or about 2014 through in or about 2018, MENSAH was a member of a  criminal enterprise (the “Enterprise”) based in Ghana that committed a series of business email compromises and romance scams against individuals and businesses located across the United States, including in the Southern District of New York. 

The objective of the Enterprise’s business email compromise fraud scheme was to trick and deceive businesses into wiring funds into accounts controlled by the Enterprise.  First, members of the Enterprise created email accounts with slight variations of email accounts used by employees of a victim company or third parties engaged in business with a company to “spoof” or impersonate those employees or third parties.  These fake email accounts were specifically designed to trick other employees of the company with access to the company’s finances into thinking the fake email accounts were authentic.  The fake email accounts were used to send instructions to wire money to certain bank accounts and also included fake authorization letters for the wire transfers that contained forged signatures of company employees.  By using this method of deception, the Enterprise sought to trick the victims into transferring hundreds of thousands of dollars to bank accounts the victims believed were under the control of legitimate recipients of the funds as part of normal business operations, when in fact the bank accounts were under the control of members of the Enterprise, including MENSAH.

The Enterprise conducted the romance scams by using electronic messages sent via email, text messaging, or online dating websites that deluded the victims, many of whom were vulnerable older men and women who lived alone, into believing the victim was in a romantic relationship with a fake identity assumed by members of the Enterprise.  Once members of the Enterprise had gained the trust of the victims using the fake identity, they used false pretenses to cause the victims to wire money to bank accounts the victims believed were controlled by their romantic interests, when in fact the bank accounts were controlled by members of the Enterprise, including MENSAH.  At times, the members of the Enterprise also used false pretenses to cause the victims to receive funds into the victims’ bank accounts, which, unbeknownst to the victims, were fraud proceeds, and to transfer those funds to accounts under the control of members of the Enterprise.  The members of the Enterprise, posing as the romantic interest of the victims, also introduced the victims to other individuals purporting to be, for example, consultants or lawyers, who then used false pretenses to cause the victims to wire money to bank accounts controlled by members of the Enterprise.

MENSAH and her co-conspirators received or otherwise directed the receipt of over $10 million in fraud proceeds from victims of the Enterprise into bank accounts that she and other members of the Enterprise controlled in the Bronx, New York.  MENSAH opened and maintained multiple business bank accounts in the name of an auto sales company to receive funds stolen from victims and launder them to co-conspirators based primarily in Ghana.  She also recruited and directed one co-conspirator to receive and launder fraud proceeds and instructed that co-conspirator on how to set up a business bank account for this purpose to avoid detection. 

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MENSAH, 34, a citizen of Ghana, was also sentenced to three years of supervised release.  In addition, MENSAH was ordered to forfeit $202,964 and pay restitution of $1,505,519 to victims. 

Other defendants in this case who have been sentenced include Muftau Adamu, a/k/a “Muftau Adams,” a/k/a “Muftau Iddrissu,” 32, of the Bronx, New York, who was sentenced to 51 months in prison on June 7, 2019; 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,” 34, of the Bronx, New York, who was sentenced to 48 months in prison on April 12, 2019; Prince Nana Aggrey, 45, of the Bronx, New York, who was sentenced to 30 months in prison on May 10, 2019; and Assana Traore, 41, of the Bronx, New York, who was sentenced to 15 months in prison on October 8, 2019.   Adamu, Rufai, and Aggrey each pled guilty to one count of conspiracy to commit wire fraud, and Troare pled guilty to one count of conspiracy to receive stolen money.  Each of the defendants was sentenced by Judge Cote.  

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation.  Ms. Strauss also thanked the United States Marshals Service, the FBI Legal Attaché in Accra, Ghana, U.S. Customs and Border Protection, the Ministry of Justice & Attorney General’s Office of Ghana, and Ghana’s Economic and Organised Crime Office, for their assistance in this case.  The U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division provided significant assistance in securing the defendant’s extradition from Ghana.

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

Audrey Strauss, the United States Attorney for the Southern District of New York, and Paul Kiecker, Administrator of the U.S. Department of Agriculture’s (“USDA”) Food Safety and Inspection Service (“FSIS”), announced today the entry of a consent decree against defendants YIN GONG CORP. and YONG XING WANG (“Defendants”) for violations of the Federal Meat Inspection Act at Defendants’ places of business in New York, New York’s Chinatown.

U.S. Attorney Audrey Strauss said:  “Consumers should be able to have confidence in the safety of the food they buy.  Here, Defendants repeatedly sold uninspected pork products to retailers in violation of the Federal Meat Inspection Act, designed to ensure that the food supply is wholesome and unadulterated.  Today’s consent decree protects the public health by requiring Defendants to adopt practices that comply with the law – and imposing significant sanctions if they fail to do so in the future.”

USDA FSIS Administrator Paul Kiecker said:  “Our inspection personnel are on the job daily, verifying that establishments are providing consumers with safe, wholesome, and properly labeled meat products. We will not tolerate a disregard for consumer health and this consent decree ensures Yin Gong Corp. follows food safety laws.”

The Federal Meat Inspection Act protects the public health by imposing strict requirements on food suppliers regarding the inspection, preparation, transportation, and sale of meat products.  These requirements enable American consumers to have confidence that the meat they purchase and consume is wholesome and unadulterated.

According to the complaint filed earlier this week in Manhattan federal court, for years, Defendants repeatedly violated federal law by selling hundreds of pounds of non-federally inspected pork products to retailers located in New York and other states.  For example, in November 2019, Defendants sold approximately 274 pounds of non-federally inspected pork dumplings and pork buns to a grocery store located in Rochester, New York.  That grocery store then sold approximately 167 pounds of those pork products to its customers.  In all, USDA has uncovered over 650 pounds of meat products sold by Defendants in violation of the Federal Meat Inspection Act.  Although USDA compliance investigators repeatedly warned Defendants, they did not conform their conduct to the law.

In the consent decree entered today, Defendants admit, acknowledge, and accept responsibility for the following:

• Defendants have repeatedly sold non-federally inspected meat and meat food products to retailers for resale, in violation of the Federal Meat Inspection Act.  For example, on or about August 6, 2015, March 3, 2016, July 12, 2018, September 22, 2018, November 24, 2019, and November 19, 2020, Defendants prepared, offered for sale, and sold non-federally inspected pork dumplings to other retailers for resale.
   
• Defendants have also repeatedly sold misbranded meat and meat food products, in violation of the Federal Meat Inspection Act and an accompanying federal regulation. 
   
• Defendants have also repeatedly failed to maintain records that fully and correctly disclosed their business transactions, in violation of applicable federal regulations. 

Pursuant to the consent decree, Defendants are enjoined from selling or transporting any uninspected or misbranded meat products required to be inspected and passed by USDA, or engaging in any other conduct that would violate the Federal Meat Inspection Act.  Defendants are subject to additional actions, including civil monetary penalties, termination of exempt status, contempt sanctions, and other relief, if they violate the provisions of the consent decree.

Ms. Strauss thanked the USDA for its investigative efforts in connection with this matter.

This case is being handled by this Office’s Environmental Protection Unit of the Civil Division.  Assistant United States Attorney Charles S. Jacob is in charge of the case.

Yin Gong Corp. and Yong Xing Wang complaint.pdf Yin Gong Corp. and Yong Xing Wang consent decree.pdf

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that WILLIAM BAZEMORE, a/k/a “Yaya,” a/k/a “Nudie,” a/k/a “Jack,” was sentenced to 327 months in prison for sex trafficking by force, fraud, and coercion.  BAZEMORE previously pled guilty to that offense, and was sentenced today before U.S. District Judge Analisa Torres.  

U.S. Attorney Audrey Strauss said: “William Bazemore used violence and coercion to prey on female victims suffering from drug addiction, and he forced a woman to engage in commercial sex for his own financial gain.  His predatory conduct had an irreparable impact on the lives of his victims.  Today, William Bazemore was justly sentenced to more than 27 years in prison for his crimes.”

According to the Indictment, as well as statements made during BAZEMORE’s plea and sentencing proceedings:

In or about 2017, BAZEMORE was the leader of a criminal enterprise (the “Organization”) involved in various criminal acts, including drug distribution and sex trafficking, in and around New York City, Maine, and Connecticut.  Members and associates of the Organization, including BAZEMORE and codefendant Warren Bryant, transported heroin and crack cocaine between New York, Connecticut, and Maine, at times using women suffering from drug addiction as drug couriers to secrete drugs on their persons and transport drugs and drug proceeds in vehicles controlled by the Organization, and to trade sex for access to drugs.  In addition, BAZEMORE and other members and associates of the Organization used force, threats of force, and coercion to cause a female drug customer (“Victim-1”) to engage in commercial sex for their financial gain, and took actions to prevent Victim-1 and others from cooperating with law enforcement against the Organization.  

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In addition to today’s prison sentence, BAZEMORE, 41, of New York, New York, was sentenced to five years of supervised release.

Codefendant Warren Bryant was sentenced by Judge Torres on September 22, 2020, to 125 months in prison for participating in a racketeering conspiracy and a narcotics conspiracy related to the same scheme.

Ms. Strauss praised the outstanding investigative work of the FBI-NYPD New York Child Exploitation and Human Trafficking Task Force, and the Special Agents of the U.S. Attorney’s Office for the Southern District of New York.

This case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jacqueline Kelly and Danielle Sassoon are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that SALIFOU CONDE was found guilty of bank fraud, wire fraud, and conspiracy to commit bank and wire fraud on June 29, 2021, in connection with his involvement in a years-long scheme to steal over $1.5 million from New York City’s Human Resources Administration (“HRA”), following a four-day jury trial before U.S. District Court Judge Valerie E. Caproni. 

Manhattan U.S. Attorney Audrey Strauss said:  “Salifou Conde was a key participant in a scheme to steal more than 2,400 rent supplement checks worth over $ 1.6 million to the HRA, an agency that provides critical assistance to New Yorkers in need of rental assistance. A Manhattan jury of his peers has found Conde guilty, and he now awaits sentencing for callously targeting a much-needed support system for low income New Yorkers.”

As reflected in the Indictment, public filings, and the evidence presented at trial:

HRA is an agency of the City of New York responsible for administering certain of the City’s public assistance programs.  Among other things, HRA provides rental assistance to low income New Yorkers.  For individuals who qualify, HRA provides rental assistance by sending monthly rent supplement checks to landlords or social services organizations that provide housing or residential treatment to cover a portion of the cost of documented expenses such as rent or storage costs.

During the period charged in the Indictment, HRA rent supplement checks that were undeliverable were sent back to the same P.O. Box at a United States post office in New York, New York.  From there, couriers took the undeliverable checks from the post office and delivered the checks back to HRA.  CONDE worked as one of the couriers and stole checks out of the mail. 

Between approximately 2016 and 2019, CONDE and his co-conspirators were responsible for stealing a total of over 2,400 HRA rent supplement checks worth more than $1.6 million, and fraudulently depositing them into more than 40 bank accounts.  CONDE was a key member of the scheme.  He helped to steal undeliverable HRA rent supplement checks, deposit the checks into a network of bank accounts, and then quickly withdraw the stolen cash. 

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CONDE, 31, of New Jersey, was convicted of one count of wire fraud, which carries a maximum punishment of 20 years in prison; one count of bank fraud, which carries a maximum punishment of 30 years in prison; and one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum punishment of 30 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 New York City Department of Investigation, the Federal Bureau of Investigation, and the New York State Commissioner of Taxation and Finance.

The prosecution of this case is being handled by the Office’s General Crimes Unit.   Assistant United States Attorneys Danielle Kudla, Elizabeth Espinosa, Nicholas Folly, and Kedar Bhatia are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that, following a two-week trial presided over by U.S. District Judge Edgardo Ramos, and approximately one hour of deliberations, DONALD BLAKSTAD, the owner and principal of a California-based investment firm, was found guilty on all counts for committing insider trading and a securities offering fraud scheme.  BLAKSTAD’s offenses yielded more than $7 million in criminal profits. 

U.S. Attorney Audrey Strauss said:  “As a unanimous jury found, Donald Blakstad used his connections to a company insider to gather inside information that he and his associates then traded on, raking in more than $6 million in illegal profits.  In addition, Blakstad defrauded investor clients out of more $1 million, funds he purported would be invested but he instead misappropriated, in some cases for personal expenses.  Now Donald Blakstad awaits sentencing for his crimes.”

According to the allegations contained in the Indictment and the evidence presented at trial:

BLAKSTAD was a stock trader and the owner and principal of an investment fund known as Midcontinental Petroleum Inc. (“Midcontinental Petroleum”), which purported to be in the business of soliciting investments in the energy industry.  Martha Bustos was a former certified public accountant who worked in the finance department at Illumina, Inc. (“Illumina”), a San Diego-based biotechnology company whose securities trade on NASDAQ.  By virtue of her employment at Illumina, Bustos had access to material nonpublic information about Illumina’s financial condition, including its earnings. 

On several occasions, from 2016 through 2018, BLAKSTAD obtained inside information about Illumina’s financial condition from Bustos before Illumina publicly announced its earnings and financial results.  As BLAKSTAD knew, Bustos owed a duty to keep inside information about Illumina confidential. 

BLAKSTAD, aware of Bustos’s breach of duty to Illumina, used this inside information to make profitable trades in Illumina securities shortly before Illumina’s earnings announcements.  At times, BLAKSTAD tipped his associates so that they could trade Illumina stock and options based on the inside information.  At other times, in order to avoid detection, BLAKSTAD arranged for his associates to purchase Illumina securities for BLAKSTAD’s benefit in accounts controlled by his associates. 

Following the public announcement of Illumina’s earnings, BLAKSTAD and his associates sold the Illumina securities at a significant profit, sometimes exceeding more than 2,000 percent.  In total, BLAKSTAD and his associates made more than $6 million in profits from purchasing and selling Illumina securities. 

In addition, from at least in or about 2015 through at least in or about 2019, BLAKSTAD devised and operated a securities offering fraud to fraudulently obtain more than a $1 million from a number of investors.  BLAKSTAD fraudulently induced victim investors to make up-front, lump-sum investments for securities issued by Midcontinental Petroleum, which funds BLAKSTAD then misappropriated, in substantial part. 

To facilitate the scheme, BLAKSTAD made false and misleading representations to investor victims regarding how their investment funds would be utilized.  During the scheme, at BLAKSTAD’s direction, victims transmitted their funds, including by wire transfer, into bank accounts that were controlled by BLAKSTAD.  Once he obtained these investor funds, BLAKSTAD did not use them for the purposes he had represented to investors.  Instead, BLAKSTAD diverted a substantial portion of victims’ funds to himself and to co-conspirators.  For example, BLAKSTAD used the funds to pay for a variety of personal expenses and for purposes that were unrelated to the business of Midcontinental Petroleum. 

BLAKSTAD also made a series of false and misleading statements to victims designed to avoid detection, perpetuate the scheme, and keep the victim funds he received as a result of the fraud.

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BLAKSTAD, 62, of San Diego, California, was convicted on all counts of the Indictment.  He was convicted of one count of conspiracy to commit securities fraud, two counts of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud for his participation in the insider trading scheme.  He was also convicted of one count of conspiracy to commit securities fraud and wire fraud and one count of wire fraud for his participation in the securities offering fraud scheme.  The securities fraud counts and the conspiracy to commit wire fraud count each carry a maximum sentence of 20 years in prison.  The conspiracy to commit securities fraud and the conspiracy to commit securities fraud and wire fraud counts each carry a maximum term of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

BLAKSTAD is scheduled to be sentenced before Judge Ramos, who presided over the trial, on October 28, 2021, at 11:00 a.m. 

Bustos pled guilty in June 2019 for her participation in the insider trading scheme.  Bustos, who is cooperating with the Government, has yet to be sentenced.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation.  Ms. Strauss also thanked the Securities and Exchange Commission, which brought a separate civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Unit.  Assistant U.S. Attorneys Edward A. Imperatore and Jared Lenow are in charge of the prosecution.  

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that GANGADAI RAMPERSAUD AZIM, a/k/a “Julie Azim,” pled guilty today to a more than decade-long conspiracy to commit bank fraud, defrauding her employer, a Manhattan-based bank, by misappropriating approximately $1.7 million.  AZIM pled guilty before U.S. District Judge Katherine Polk Failla.

Manhattan U.S. Attorney Audrey Strauss said:  “As she admitted today, Gangadai Azim betrayed her position as a trusted bank employee to defraud the bank and misappropriate nearly $1.7 million in client funds over the course of more than a dozen years.  Now Azim awaits sentencing for her crime.”

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

Between August 2008 and January 2021, AZIM, a long-time employee of a New York, New York-based bank (“Bank-1”), stole approximately $1.7 million from her employer.  Over the course of approximately 12 years, AZIM executed hundreds of wire transfers of Bank-1 funds to co-conspirators and related companies, who then sent portions of the ill-gotten funds to AZIM’s personal bank account. 

In furtherance of her scheme to defraud Bank-1, AZIM repeatedly made false entries in Bank-1’s systems, misappropriating funds paid to Bank-1 by its clients to satisfy outstanding loan obligations and then extending the maturity dates of those loan obligations, making it appear as though the loan obligations had not yet been paid.  When even the fraudulently extended maturity dates came due, AZIM originated new, fraudulent loans to help conceal the scheme.  AZIM utilized the proceeds of those fraudulent loans to satisfy the loans for which she had previously stolen the client payments.  Over the course of the approximately 12 years, AZIM caused approximately 200 improper wire transfers of Bank-1’s funds, each for an amount under $10,000,  to be sent to third party accounts, including those of co-conspirators and related companies, which then returned portions of those funds to AZIM.  In doing so, AZIM abused her position at Bank-1 and enriched herself at the expense of her employer.   

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AZIM, 58, of Richmond Hill, New York, pled guilty to one count of conspiring to commit bank fraud, in violation of 18 U.S.C. §1349, which carries a maximum sentence of 30 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.

AZIM is scheduled to be sentenced by Judge Failla on October 19, 2021, at 3:30 p.m.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation in this case.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Katherine Reilly is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing today of a 15-count superseding indictment charging DOV MALNIK and TOMER FEINGOLD with offenses relating to their roles as securities traders in a wide-ranging international insider trading ring who made millions of dollars in illicit profits by trading based on misappropriated inside information.  MALNIK, a citizen of Israel and Lithuania, was arrested in Switzerland on October 7, 2020, was extradited on June 10, 2021, from Switzerland, and pled guilty today before U.S. Magistrate Judge Stewart D. Aaron.  FEINGOLD remains at large.  The case is assigned to U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Audrey Strauss said:  “Today’s charges represent another step in our Office’s pursuit of transnational insider trading.  Our Office, along with the FBI and our other law enforcement partners, will vigorously protect the integrity of our nation’s capital markets, regardless of where in the world the inside information is stolen and where tips are illegally passed.”

FBI Assistant Director William F. Sweeney Jr. said:  “Whether it happens inside or outside our borders, trading securities based on misappropriated insider information that affects our financial markets in any way will ultimately lead to federal criminal charges here in the U.S.  Protecting the integrity of our markets from threats both at home and abroad remains a top priority of our white collar crime division.”

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

DOV MALNIK, a citizen of Israel and Lithuania, and TOMER FEINGOLD, a citizen of Israel, were business partners and securities traders who traded in their own names and managed various companies and investment funds.  From at least 2013 through 2017, MALNIK and FEINGOLD participated in a large-scale, international insider trading ring.  Through the scheme, MALNIK and FEINGOLD received material, nonpublic information (“MNPI”) concerning acquisitions and potential acquisitions of publicly traded companies from a securities trader who resided in Switzerland (“CC-1”).  MALNIK and FEINGOLD both knew that this MNPI was obtained by CC-1 directly and indirectly from individuals who were insiders at publicly traded companies and investment banks.  These insiders breached their fiduciary duties and shared MNPI with others, including CC-1, in exchange for compensation, who in turn shared that information with MALNIK and FEINGOLD.  MALNIK and FEINGOLD used that information to place timely, profitable securities trades resulting in millions of dollars of profits.

MALNIK and FEINGOLD began obtaining MNPI from CC-1 in approximately 2013.  During that summer, CC-1 met MALNIK and FEINGOLD and explained to them that CC-1 had numerous sources of MNPI and CC-1 could share that MNPI with MALNIK and FEINGOLD.  In return, MALNIK and FEINGOLD agreed to compensate CC-1 by buying additional securities on CC-1’s behalf and transmitting the profits from those trades to CC-1.  Soon after meeting MALNIK and FEINGOLD, CC-1 explained to them the importance of CC-1 being paid CC-1’s share of the profits in cash because CC-1 needed cash to pay his sources of MNPI.  MALNIK and FEINGOLD agreed to this arrangement and obtained MNPI about numerous companies from CC-1.  Specifically, CC-1 obtained MNPI which was subsequently shared with MALNIK and FEINGOLD from numerous sources, including MNPI that was stolen by investment bank insiders from two different global investment banks.

Throughout the conspiracy, MALNIK and FEINGOLD, as well as the investment bank insiders, CC-1, and others involved in this scheme, took numerous steps to conceal their unlawful enterprise, including through the use of encrypted messaging applications and multiple unregistered “burner” cellphones to communicate with each other.  MALNIK and FEINGOLD also attempted to avoid detection by engaging in securities trading through numerous offshore corporate entities.  For example, in 2011, MALNIK incorporated a British Virgin Islands entity based in Geneva, Switzerland, and subsequently opened trading and/or bank accounts in that shell company’s name.  During the insider trading scheme, MALNIK and FEINGOLD’s offshore companies traded in the stocks of companies about which MALNIK and FEINGOLD had received MNPI – often with multiple of those companies trading in the same stock and on the same days.

MALNIK and FEINGOLD also used these entities to transfer a portion of the profits of their illegal insider trading to CC-1 as per MALNIK and FEINGOLD’s agreement with CC-1.  At first, MALNIK and FEINGOLD instructed their banks to send the funds to an account at a financial institution in Switzerland that agreed to hold the funds for the benefit of CC-1.  After a short time, however, MALNIK and FEINGOLD’s banks questioned the purpose of the transactions and requested justification for the transfer of funds.  Accordingly, in order to deceive the banks, MALNIK, FEINGOLD, and CC-1 agreed that CC-1 would issue fake invoices for consulting services to MALNIK and FEINGOLD’s various offshore entities.  The offshore entities would then send the funds to CC-1’s account pursuant to the fake invoices.

To date, the investigation has also resulted in the conviction of other individuals who were involved in this global insider trading scheme, including investment banker Bryan Cohen, who pled guilty on January 7, 2020, to illegally passing MNPI related to his bank’s corporate clients, and entrepreneur and pharmaceutical company executive Telemaque Lavdias, who was convicted on January 15, 2020, of illegally passing MNPI related to Ariad Pharmaceuticals, Inc.

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MALNIK, 43, an Israeli and Lithuanian citizen and resident of Switzerland, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison.  Sentencing before Judge Marrero will take place on a date to be determined.

FEINGOLD, 42, an Israeli citizen, is charged with conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of 25 years in prison; securities fraud under Title 15, which carries a maximum sentence of 20 years in prison; tender offer fraud, which carries a maximum sentence of 20 years in prison; wire fraud, which carries a maximum sentence of 20 years in prison; securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and money laundering, which carries a maximum sentence of 20 years in prison.

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

Ms. Strauss praised the investigative work of the FBI and also thanked the Securities and Exchange Commission for its assistance.  Ms. Strauss also thanked the Office of International Affairs of the Department of Justice’s Criminal Division and the Swiss Federal Office of Justice for their assistance in the arrest and extradition of MALNIK.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Richard Cooper and Daniel Tracer 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 JOSEPH MELI was sentenced today to 37 months in prison in connection with MELI’s participation in a fraudulent Broadway ticket investment scheme wherein MELI purported to use investor funds to purchase tickets to Broadway shows for resale on the secondary market, but instead misappropriated those funds for his personal use.  MELI previously pled guilty before U.S. District Judge Ronnie Abrams, who imposed today’s sentence. 

U.S. Attorney Audrey Strauss said:  “Joseph Meli, a recidivist fraudster, spun the web of lies that buttressed this scheme while on pretrial release in a prior theatre ticket investment fraud case in this District.  With today’s sentencing, the curtain has come down on Joseph Meli’s act.”   

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

Beginning in at least March 2017 through in or about June 2018, MELI falsely represented to partners in a business entity, Indio Entertainment, LLC (“Indio”), that MELI owned a large number of tickets to live events, or intended to purchase a large number of tickets to live events.  MELI further falsely represented that he would sell those tickets to Indio in exchange for investor money that Indio had solicited for the purpose of reselling the tickets on the secondary market for profit.  MELI, in turn, caused Indio principals to represent to investors that investor funds would be used to purchase bulk tickets to live shows without disclosing MELI’s involvement, and promised investors a share of these profits.  In fact, MELI failed to invest the investor monies as promised, and failed to supply Indio with bulk tickets, but rather diverted investor monies to his own personal use, including sending $455,000 to a close relative of MELI’s in part to pay off credit card debt incurred by MELI, $500,000 to an individual completely unrelated to the entertainment or ticket industry, and $220,000 to a residential management company that managed an apartment MELI was leasing.

This was not MELI’s first involvement in such a scheme.  MELI is currently serving a 78-month sentence imposed by U.S. District Judge Kimba M. Wood in September 2018, resulting from MELI’s involvement in a similar Broadway ticket investment scheme.  Indeed, MELI participated in the present scheme while on pretrial release in the case in front of Judge Wood.

*                *                *

MELI, 46, of New York, New York, will serve 25 of the 37 months of the prison sentence concurrently with the prison sentence he is already serving.  In addition to his prison sentence, MELI was sentenced to three years of supervised release, two years of which will run concurrently with the term of supervised release previously imposed by Judge Wood.  MELI was also ordered to pay a forfeiture penalty of $2,082,425 and restitution in the amount of $1,909,146.

Ms. Strauss praised the work of the Special Agents from the U.S. Attorney’s Office for the Southern District of New York and thanked the Securities and Exchange Commission for its assistance.  

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Sarah Mortazavi and Micah Fergenson are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today that OFER ABARBANEL was arrested this morning in Los Angeles, California, and charged with securities fraud and wire fraud in connection with ABARBANEL’s scheme to defraud investors in a mutual fund he founded and controlled.

Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Ofer Abarbanel conducted a bait-and-switch, promising investors safe and liquid investments but instead transferring their money to risky counterparties to trade for his own benefit and that of his confederates.  His alleged scheme has now been uncovered and he will have to answer for his alleged lies.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Postal Inspectors remind investors to thoroughly review all lucrative offers as well as their fund managers.  In this case, as alleged, Mr. Abarbanel devised a scheme to defraud investors with bogus claims of liquidity and collateral, when in fact he did not use investors’ funds as promised and did not acquire the promised collateral.  Our advice is to trust your gut, and remember that where there is high reward, there is high risk.”

According to the Complaint[1] unsealed today Manhattan federal court:    

From at least in or about 2018 through the present, ABARBANEL engaged in a scheme to defraud investors in a mutual fund he founded and controlled (the “Fund”).  ABARBANEL falsely represented to an investment adviser to a group of investors (the “Investor Group”) that investments in the Fund would be placed “primarily” in short-term United States Treasury Securities having maturities less than or equal to three months.  Contrary to these representations, the vast majority of the investors’ funds were not invested in short-term treasuries.  Instead, immediately after the Investor Group’s investment was received by the Fund, ABARBANEL and his confederates transferred the investor funds to counterparties controlled by or otherwise closely associated with ABARBANEL, for use, among other things, in trading not authorized by the Fund’s offering documents and for the benefit of ABARBANEL and the counterparties.

ABARBANEL further represented that, in order to enhance income, the Fund intended to invest in securities lending transactions as well as repurchase and reverse repurchase agreements.   ABARBANEL represented, as to these transactions, that the Fund would receive, in its possession and control, safe and secure collateral, in the form of treasury securities that could be quickly liquidated in the event a counterparty defaulted on its obligations.  ABARBANEL, however, failed to obtain for the Fund the promised collateral to secure the investments. Nonetheless, ABARBANEL repeatedly represented, in substance, that the Fund had possession of the collateral.  

In or about May and June 2021, ABARBANEL failed to honor a redemption request by the Investor Group for all of its outstanding investment, totaling more than $100 million, instead placing conditions on the redemption that were contrary to the Fund’s offering document and to the Fund’s practices with respect to prior redemptions.  On or about June 16, 2021, the Fund transferred more than $10 million in investor funds from the Fund to a personal brokerage account of an attorney working with the Fund. 

ABARBANEL will be presented later today in federal court in Los Angeles.

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ABARBANEL, 46, a dual U.S.-Israeli citizen who resides in Woodland Hills, California, is charged with one count of securities fraud and one count of wire fraud.  The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense.  The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. 

The maximum potential 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 investigative work of the USPIS and thanked the SEC, which has filed civil charges against ABARBANEL in a separate action.  She added that the criminal investigation is ongoing.

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

The allegations 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 that HUBERT DUPIGNY, a/k/a “Fox,” was sentenced to 300 months in prison for sex trafficking of minors and conspiracy to commit sex trafficking of minors.  DUPIGNY was previously convicted of those offenses, following an eight-day jury trial, on January 24, 2020, before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Audrey Strauss said:  “Hubert Dupigny trafficked minor victims who were runaways from the foster care system – victims who were half his age and did not have permanent homes or families to take care of them.  Dupigny victimized, and violently abused, some of the most vulnerable members of our society for his own financial gain.  His predatory conduct irreparably damaged the lives of his victims.  Today, Hubert Dupigny was justly sentenced to 25 years in prison for his callous exploitation of those minor victims.”

According to the allegations contained in the Indictment and evidence presented during the trial in Manhattan federal court:

From at least in or about August 2016 through in or about May 2017, HUBERT DUPIGNY, a/k/a “Fox,” the defendant, engaged in a conspiracy to commit sex trafficking of minors.  The defendant recruited two minor victims (“Victim-1” and “Victim-2”) to engage in commercial sex acts when they were living in foster care facilities or homes in New York City.   The defendant took photographs of Victim-1 and Victim-2 in lewd positions, used Backpage.com to post advertisements of them for commercial sex, and then directed Victim-1 and Victim-2 to meet customers to engage in commercial sex out of an abandoned home in Brooklyn, New York.  Victim-1 and Victim-2 saw as many as ten to fifteen customers each day.  The defendant took all of the proceeds from their commercial sex acts, forcing Victim-1 and Victim-2 to be reliant on him for food and clothing.

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In addition to today’s prison sentence, DUPIGNY, 38, of Brooklyn, New York, was sentenced to 10 years of supervised release.

Ms. Strauss thanked the FBI and the New York City Police Department for their outstanding work in this matter, particularly the FBI-NYPD New York Child Exploitation and Human Trafficking Task Force.

Any individuals who believe they have information that may be relevant to this investigation should contact the Federal Bureau of Investigation at (212) 384-1000 or https://tips.fbi.gov/.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Mollie Bracewell, Elinor Tarlow, Jacob Gutwillig, and Michael Herman are in charge of the prosecution. 

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that JOEL DAVIS was sentenced to 156 months in prison for enticing a child to engage in illegal sexual activity, 60 months for possession of child pornography, and 60 months for distribution and receipt of child pornography, all to be served concurrently.  DAVIS previously pled guilty on January 16, 2020, before United States District Judge George B. Daniels, who also imposed the sentence.

U.S. Attorney Audrey Strauss said: “As he previously admitted, Joel Davis, founder of a non-profit called ‘Youth to End Sexual Violence,’ admitted to engaging in the very abhorrent behavior he had publicly pledged to fight.  Davis, who also claims to be a Nobel Prize nominee for his work with his organization, engaged in sex acts with a minor, recording them, and distributing that recording to others – including an undercover FBI agent. Sex with minors is obviously never permissible, acceptable, or justifiable, and by virtue of his non-profit work, Joel Davis was acutely aware of the irreparable harm these crimes inflict on victims. Davis will now serve a lengthy time in federal prison, where he can no longer victimize minors.”

According to the Information and other documents filed in the case to which DAVIS pled, as well as statements made during the plea proceeding:

In or about June 2018, DAVIS used a dating application on his iPhone to entice a fifteen-year-old boy (the “Victim”) to engage in sexual activity with him.  On June 13, 2018, DAVIS invited the Victim to his apartment building in Manhattan and engaged in sexual activity with the Victim, despite knowing that the Victim was a minor.  DAVIS used his smartphone to film a portion of that conduct and sent the video to at least two others, including an undercover FBI agent. 

In addition, between at least in or about May 2018 and June 2018, DAVIS possessed more than 3,700 images and more than 330 videos of child pornography, including numerous images of prepubescent minors who had not attained 12 years of age, and received and distributed material containing child pornography using a cellphone.  DAVIS was arrested on June 26, 2018.

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In addition to today’s prison sentence, DAVIS, 25, of New York, New York, was sentenced to five years of supervised release.

Ms. Strauss praised the outstanding investigative work of the FBI in this investigation.

Any individuals who believe they have information concerning the exploitation of children may contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Matthew J.C. Hellman and Juliana N. Murray are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today the conviction in Manhattan federal court of FREDERICK L. SCHEININ for attempted production of child pornography, attempted receipt of child pornography, and attempted enticement of a minor.  The jury convicted SCHEININ today following a five-day trial before U.S. District Judge Jed S. Rakoff.    

U.S. Attorney Audrey Strauss said:  “As a DEA investigator, Frederick Scheinin was tasked with the important job of protecting the public from the illegal diversion and abuse of prescription drugs, but he betrayed the public trust by spending months trying to prey on a minor for his sexual pleasure.  Scheinin now stands convicted of these heinous crimes.  This office and our law enforcement partners will continue to work tirelessly to detect and apprehend those who pose a threat to children.”

Up until the time of his arrest, SCHEININ was an investigator in the New York Field Office of the Drug Enforcement Administration (“DEA”).  According to the Indictment, documents previously filed in the case, and evidence introduced at trial:

Between October 2019 and January 2020, SCHEININ communicated with an undercover law enforcement officer (“UC‑1”) who was posing as a 14-year-old boy.  During the course of hundreds of graphic text communications and multiple real-time conversations, SCHEININ repeatedly sent sexually explicit images and videos to UC-1 in an attempt to persuade UC-1 to transmit sexually explicit images, photos, and live visual depictions of UC-1 to SCHEININ.  In particular, SCHEININ repeatedly asked UC-1 to transmit images and videos of UC-1’s penis and anus.  SCHEININ also attempted to arrange a meeting with UC-1 at which SCHEININ planned to have sex with UC-1.  Law enforcement arrested SCHEININ on January 16, 2020, in New York, New York, at the location where SCHEININ said he would meet UC-1.  SCHEININ was in possession of a condom and lubricant at the time of his arrest. 

SCHEININ, 33, was remanded to the custody of the U.S. Marshals following the return of the verdict.  Attempted production of child pornography carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison; attempted receipt of child pornography carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison; and attempted enticement of a minor carries a mandatory minimum sentence of 10 years in prison and maximum sentence of life in prison.  SCHEININ is scheduled to be sentenced on September 23, 2021, at 4:00 p.m.

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Ms. Strauss praised the outstanding investigative work of the New York City Police Department and the Cyber Investigations Office of the United States Department of Justice Office of the Inspector General.  Ms. Strauss also thanked the New York Office of the DEA and the DEA Office of Professional Responsibility for their assistance in the matter.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Nicholas W. Chiuchiolo and Daniel G. Nessim are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that HAMID AKHAVAN, aka “Ray Akhavan,” was sentenced on Friday to 30 months in prison, and codefendant RUBEN WEIGAND was sentenced to 15 months in prison, for participating in a scheme to deceive U.S. issuing banks and credit unions into effectuating more than $150 million of credit and debit card purchases of marijuana by disguising those transactions as purchases of other kinds of goods, such as face creams and dog products.  AKHAVAN and WEIGAND were found guilty of bank fraud in March 2021, following a four-week jury trial before U.S. District Court Judge Jed. S. Rakoff, who imposed Friday’s sentence.

Manhattan U.S. Attorney Audrey Strauss said:  “Ray Akhavan and Ruben Weigand orchestrated an elaborate web of lies to deceive U.S. banks and credit card companies into processing more than $150 million in marijuana transactions, in violation of those institutions’ strict policies against such payments.  This massive fraud undermined the fundamental integrity of the U.S. financial system, which relies on banks’ ability to identify the nature of the transactions they process.  Now Akhavan and Weigand have rightly been sentenced to prison for their crimes.”

According to the evidence presented at trial:

AKHAVAN and WEIGAND, working with others, including principals from one of the leading on-demand marijuana delivery companies in the United States (the “Company”), planned and executed a scheme to deceive United States banks and other financial institutions into processing over $150 million in credit and debit card payments for the purchase and delivery of marijuana products (the “Scheme”).

The Scheme involved the deception of virtually all of the participants in the payment processing network, including issuing banks in the United States (the “Issuing Banks”) and Visa and MasterCard.  The primary method used by AKHAVAN, WEIGAND, and other co-conspirators to deceive the Issuing Banks involved the purchase and use of shell companies that were used to disguise the marijuana transactions through the use of phony merchants (the “Phony Merchants”).  The shell companies were used to open offshore bank accounts with merchant acquiring banks and to initiate credit card charges for marijuana purchases made through the Company.  AKHAVAN and WEIGAND worked with other co-conspirators to create these phony merchant accounts – including phony online merchants purportedly selling dog products, diving gear, carbonated drinks, green tea, and face creams – and established Visa and MasterCard merchant processing accounts with one or more offshore acquiring banks.  They then arranged for more than a dozen Phony Merchants to be used by the Company to process debit and credit card purchases of marijuana products.  Many of the Phony Merchants purported to be based in the United Kingdom, but, despite being based outside the United States, claimed to maintain U.S.-based customer service numbers.

To facilitate the Scheme, webpages were created and deployed to lend legitimacy to the Phony Merchants.  The Phony Merchants typically had web pages suggesting that they were involved in selling legitimate goods, such as carbonated drinks, face cream, dog products, and diving gear.  Yet these companies were actually being used to facilitate the approval and processing of marijuana transactions.  The defendants’ scheme even involved fake visits to those websites to make it appear as though the websites had real customers and were operating legitimate online businesses.

The defendants’ scheme also involved the use of online tracking pixels.  Because the descriptors listed on Company customers’ credit card statements often were the URLs for the Phony Merchant websites, Company customers were sometimes confused and did not recognize the transactions on their credit card statements.  The defendants and their co-conspirators were concerned that confused customers would call their Issuing Banks and inadvertently reveal the Scheme by indicating that they had purchased marijuana products and/or that they had made a purchase through the Company.  To lessen the risk that customers would be confused, the defendants used a number of techniques, including online tracking pixels to track which users had visited the Company’s website.  If a Company customer had visited the Company’s website and went to the URL listed on the customer’s credit card statement, the customer would automatically be re-routed to a webpage connected to the Company so that the customer would understand what the real purchase had been for (i.e., from the Company).  However, in order to hide the Scheme, the defendants ensured that if a third-party such as a bank or credit card company investigator visited a URL for a Phony Merchant, they would not be re-routed, and would therefore be unable to discern any connection between the Phony Merchant website and the Company and/or the sale of marijuana products. 

Over $150 million in marijuana credit and debit card transactions were processed using the Phony Merchants.  Some of the merchant websites listed for those transactions included: diverkingdom.com, desirescent.com, outdoormaxx.com, and happypuppybox.com.  Moreover, none of the Phony Merchant website names listed for those transactions referred to the Company or to marijuana.  AKHAVAN, WEIGAND, and others also worked with and directed others to apply incorrect merchant category codes (“MCCs”) to the marijuana transactions in order to disguise the nature of those transactions and create the false appearance that the transactions were completely unrelated to marijuana.  Some of the MCCs/categories listed for the transactions included freight carrier, trucking; clock, jewelry, watch, and silverware; stenographic services; department stores; music stores/pianos; and cosmetic stores.            

AKHAVAN was the leader of the transaction laundering scheme and WEIGAND was responsible for interfacing with the acquiring banks regarding the offshore bank accounts used by the Phony Merchants. 

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In addition to the prison term, AKHAVAN, 43, of, California, was sentenced to three years of supervised release, and ordered to pay a fine of $100,000 and forfeiture in the amount of $17,183,114.57. 

WEIGAND, 38, of Germany, was also sentenced to three years of supervised release, and ordered to pay a fine of $50,000 and forfeiture in the amount of $384,000. 

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

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Nicholas Folly, Tara La Morte, and Emily Deininger are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York (“USAO”), announced that MEYYA MEYYAPPAN, a senior National Aeronautics and Space Administration (“NASA”) scientist, was sentenced today to 30 days in prison for making false statements to the Federal Bureau of Investigation (“FBI”), NASA’s Office of Inspector General (“NASA OIG”), and the USAO. MEYYAPPAN pled guilty on January 13, 2021, before U.S. District Judge P. Kevin Castel, who also imposed today’s sentence.

U.S. Attorney Audrey Strauss said:  “As a senior NASA scientist with access to sensitive and confidential U.S. government technologies and intellectual property, Meyya Meyyappan was understandably subject to restrictions regarding outside employment and compensation.  When questioned by the FBI and NASA, Meyyappan gave false statements regarding his employment by a Chinese government-funded program that recruited individuals with access to foreign technologies and intellectual property. The privilege of access to cutting edge U.S. technologies and intellectual property comes with the critical responsibility of protecting their secrecy. Meyyappan betrayed that trust, by failing to disclose his foreign activities and then compounding his mistakes by lying to the FBI and NASA.  He has now been sentenced to time in federal prison for his unlawful conduct.”

According to the allegations in the Information and other proceedings in this case:

From in or about 1996 through in or about 2021, MEYYAPPAN was employed by NASA, an independent U.S. government agency responsible for the civilian space program, as well as aeronautics and aerospace research.  Beginning in or about 2006, MEYYAPPAN was the Chief Scientist, Exploration Technology at the Center for Nanotechnology, at NASA’s Ames Research Center at Moffett Field in Silicon Valley, California.

In his position at NASA, MEYYAPPAN was subject to certain statutory, regulatory, and agency restrictions and reporting requirements regarding, among other things, outside employment, travel, and compensation.  Notwithstanding these prohibitions, MEYYAPPAN participated in China’s Thousand Talents Program, a program established by the Chinese government to recruit individuals with access to or knowledge of foreign technology or intellectual property, and held professorships at universities in China, South Korea, and Japan, and failed to disclose these associations and positions to NASA and the U.S. Office of Government Ethics. 

On or about October 27, 2020, MEYYAPPAN was interviewed by the FBI, NASA OIG, and the USAO, in New York, New York.  During that proffer session, MEYYAPPAN falsely stated, among other things, that he was not a member of the Thousand Talents Program and that he did not hold a professorship at a Chinese university.  In truth and in fact, MEYYAPPAN was a member of the Thousand Talents Program and held a professorship at a Chinese university, funded by the Chinese government.

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MEYYAPPAN, 66, of Pacifica, California was also ordered to pay a fine of $ 100,000.

Ms. Strauss praised the outstanding work of the FBI and NASA OIG. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorney Joshua A. Naftalis is in charge of the prosecution.  

Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that JEFFREY GOLDSTEIN, a doctor who practiced in New York, New York, was sentenced today in Manhattan federal court to 57 months in prison for conspiring to violate the Anti-Kickback Statute, in connection with a scheme to prescribe Subsys, a potent fentanyl-based spray, in exchange for bribes and kickbacks from Subsys’s manufacturer, Insys Therapeutics.  GOLDSTEIN previously pled guilty, on August 16, 2019, before U.S. Magistrate Judge Henry B. Pitman, and was sentenced today by U.S. District Judge Kimba M. Wood.

U.S. Attorney Audrey Strauss said:  “Jeffrey Goldstein, an Upper East Side Manhattan doctor, prescribed Subsys, a powerful fentanyl opioid, in return for nearly $200,000 in bribes from the drug’s manufacturer, Insys Therapeutics.  Goldstein put his own patients at risk in order to satisfy his own greed, and will now spend time in federal prison for recklessly prescribing this highly addictive and powerful opioid.  This sentence sends a loud and clear signal to the medical community that if you take bribes in return for prescribing, you will be prosecuted to the full extent of the law and risk significant prison time.”           

According to the allegations contained in the Indictment against GOLDSTEIN and filings in related proceedings: 

The Insys Speakers Bureau 

Subsys, which is manufactured by Insys, is a powerful painkiller approximately 50 to 100 times more potent than morphine.  The FDA approved Subsys only for the management of breakthrough pain in cancer patients.  Prescriptions of Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by GOLDSTEIN.

In or about August 2012, Insys launched a “Speakers Bureau,” a roster of doctors who would conduct programs (“Speaker Programs”) purportedly aimed at educating other practitioners about Subsys.  In reality, Insys used its Speakers Bureau to induce the doctors who served as speakers to prescribe large volumes of Subsys by paying them Speaker Program fees.  Speakers were supposed to conduct an educational slide presentation for other health care practitioners at each Speaker Program.  In reality, many of the Speaker Programs were predominantly social affairs where no educational presentation about Subsys occurred.  Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.

Goldstein’s Participation in the Scheme

GOLDSTEIN was a doctor of osteopathic medicine who owned a private medical office on the Upper East Side.  GOLDSTEIN received approximately $196,000 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys.  After GOLDSTEIN began prescribing a competitor painkiller, Insys pressured him to stop doing so and switch patients back to Subsys, which GOLDSTEIN did.

GOLDSTEIN also received other items of value from Insys in order to induce him to prescribe.  For example, Insys employees took GOLDSTEIN and Todd Schlifstein, who co-owned a private medical office with GOLDSTEIN, to a Manhattan strip club where Insys spent approximately $4,100 on a private room, alcoholic drinks, and “lap dances” for GOLDSTEIN and Schlifstein.  GOLDSTEIN also arranged for Insys to pay for the annual holiday party for his private medical office.

In 2014, GOLDSTEIN was approximately the fifth-highest-paid Insys Speaker nationally.  He was the sixth-highest prescriber of Subsys in the last quarter of 2014, accounting for approximately $809,275 in overall net sales of Subsys in that quarter.

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In addition to the prison sentence, GOLDSTEIN, 51, of New Rochelle, New York, was sentenced to two years of supervised release and ordered to forfeit $196,600.

GOLDSTEIN was one of five Manhattan doctors convicted for participating in the Subsys bribery conspiracy.  Todd Schlifstein was convicted upon a guilty plea and sentenced by Judge Wood on October 28, 2019, principally to a term of two years in prison.  Alexandru Burducea was convicted upon a guilty plea and sentenced by Judge Wood on January 27, 2020, principally to a term of 57 months in prison.  Dialecti Voudouris was convicted upon a guilty plea and sentenced by Judge Wood on March 5, 2020, principally to time served.  Gordon Freedman was convicted following a jury trial in December 2019 and is scheduled to be sentenced before Judge Wood on July 8, 2021.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation, and thanked the U.S. Department of Health and Human Services, Office of the Inspector General, for its participation in the investigation.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Noah Solowiejczyk, David Abramowicz, and Katherine Reilly are in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, announced that ROMANA LEYVA pled guilty today to participating in a conspiracy that for several years exploited elderly victims by remotely accessing their computers and convincing victims to pay for computer support services they did not need, and which were never actually provided.  In total, the conspiracy generated more than $10 million in proceeds from at least approximately 7,500 victims.  LEYVA pled guilty to conspiracy to commit wire fraud and conspiracy to intentionally damage victims’ computers, before U.S. District Judge Paul A. Crotty, to whom her case is assigned.  

U.S. Attorney Audrey Strauss said:  “As she admitted today, Romana Leyva was a leader of a conspiracy that caused pop-up windows to appear on victims’ computers – pop-up windows that claimed, falsely, that a virus had infected the victims’ computers.  Through this and other misrepresentations, this fraud scheme deceived thousands of victims, including some of society’s most vulnerable members, into paying a total of more than $10 million.  Leyva now awaits sentencing for her crimes.”

According to the allegations contained in the Superseding Information, court filings, and statements made during plea proceedings:

From approximately February 2015 through December 2018, LEYVA was a member of a criminal fraud ring (the “Fraud Ring”) based in the United States and India that committed a technical support fraud scheme that exploited elderly victims located across the United States and Canada, including in the Southern District of New York.  The Fraud Ring’s primary objective was to trick victims into believing that their computers were infected with malware, in order to deceive them into paying hundreds or thousands of dollars for phony computer repair services.  Over the course of the conspiracy, the Fraud Ring generated more than $10 million in proceeds from at least 7,500 victims.

The scheme generally worked as follows:  First, the Fraud Ring caused pop-up windows to appear on victims’ computers.  The pop-up windows claimed, falsely, that a virus had infected the victim’s computer.  The pop-up window directed the victim to call a particular telephone number to obtain technical support.  In at least some instances, the pop-up window threatened victims that, if they restarted or shut down their computer, it could “cause serious damage to the system,” including “complete data loss.”  In an attempt to give the false appearance of legitimacy, in some instances the pop-up window included, without authorization, the corporate logo of a well-known, legitimate technology company.  In fact, no virus had infected victims’ computers, and the technical support phone numbers were not associated with the legitimate technology company.  Rather, these representations were false and were designed to trick victims into paying the Fraud Ring to “fix” a problem that did not exist.  And while the purported “virus” was a hoax, the pop-up window itself did cause various victims’ computers to completely “freeze,” thereby preventing these victims from accessing the data and files in their computer – which caused some victims to call the phone number listed on the pop-up window.  In exchange for victims’ payment of several hundreds or thousands of dollars (depending on the precise “service” victims purchased), the purported technician remotely accessed the victim’s computer and ran an anti-virus tool, which is free and available on the Internet.  The Fraud Ring also re-victimized various victims, after they had made payments to purportedly “fix” their tech problems.

LEYVA’s roles in the scheme included (1) creating several fraudulent corporate entities that were used to receive fraud proceeds from victims, (2) recruiting others (including through misrepresentations) to register fraudulent corporate entities that became part of and facilitated the activities of the Fraud Ring, and (3) assisting others in setting up fraudulent corporate entities and bank accounts, including coaching them to make misrepresentations to bank employees where necessary.  As she acknowledged as part of her guilty plea, LEYVA was a leader or organizer in this conspiracy.

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LEYVA, 37, of Las Vegas, Nevada, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum penalty of five years in prison; and one count of conspiracy to intentionally damage a protected computer, which carries a maximum penalty of five years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as LEYVA’s sentence will be determined by the judge.  LEYVA’s sentencing is scheduled for September 15, 2021, at 12:00 p.m.

Ms. Strauss praised the New York Office of Homeland Security Investigations’ (“HSI”) El Dorado Task Force, Cyber Intrusion/Cyber Fraud Group, for its outstanding work on the investigation.  Ms. Strauss also thanked the New York City Police Department for its assistance on this case. 

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Michael D. Neff is in charge of the prosecution.

Audrey Strauss, the United States Attorney for the Southern District of New York, John B. DeVito, the Special Agent in Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, Commissioner of the New York City Fire Department (“FDNY”), announced that DANIEL MELAMED, a/k/a “Danny,” a real estate developer in New York City, was sentenced to 66 months in federal prison for participating in a conspiracy to commit arson in which he directed that multiple fires be set at residential buildings whose occupants he wished to vacate in order to develop the premises.  MELAMED previously pled guilty to participating in a conspiracy to commit arson, before United States District Judge Lewis A. Kaplan who imposed today’s sentence.

U.S. Attorney Audrey Strauss said:  “Almost a decade ago, Daniel Melamed decided that he could use his power and influence as a real estate developer to burn families out of their homes, homes that he wanted to develop and flip at a profit.  As he learned when he was first arrested almost two years ago and was reminded again today, we will fight fire with fire and together with our partners in the ATF, the NYPD, and the FDNY bring to justice anyone who seeks to terrorize the members of this community through arson.  And if you are a real estate developer in this city and think that you are above the law, then think again, unless you want to see your own plans go up in smoke.”

ATF Special Agent in Charge John B. DeVito said:  “Arson is inherently dangerous, and we simply cannot allow it. I hope this sentencing acts as a significant deterrent for others who may consider committing this heinous crime. We are thankful that Melamed’s criminal actions did not cost anyone their life and that justice can be served in this case. ATF will continue to work with our law enforcement partners at the federal, state, and local levels to investigate and prosecute individuals who show a callous disregard for the safety of our community.”

FDNY Commissioner Daniel A. Nigro said: “Setting fires in residential buildings while occupants are sleeping is a truly despicable crime. These fires endangered the lives of the innocent residents and the Firefighters who bravely responded to save them. I applaud our Fire Marshals, members of the NYPD and ATF, and the U.S. Attorney’s office for their efforts to bring this individual to justice.” 

According to the allegations contained in the Superseding Indictment, other court filings, publicly-available information, and statements made in public court proceedings:

Between 2011 and 2013, MELAMED directed his co-defendant and co-conspirator, Curtis Williams, to set multiple fires at residential buildings that MELAMED wished to develop and was planning to acquire or had recently acquired.  The purpose of the fires was to terrorize and thereby drive out the occupants of these residential buildings, whose lawful removal achieved through eviction or voluntary buyout payments proved too burdensome for MELAMED, either because of the time or cost involved to achieve a vacant premises otherwise deemed ripe for development.  MELAMED paid Williams to set the fires, and in turn, Williams retained another individual to set the fires, which were uniformly set at night when the occupants of the targeted properties were asleep.  Ultimately, the investigation into these fires determined that MELAMED had directed Williams to use fire to vacate at least three occupied residential buildings at which a total of five separate fires were set.  Although no person was physically harmed as a result of these fires, certain of the fires resulted in substantial damage, particularly in the case of a single-family home in Albertson, New York, which was largely incinerated and from which the members of the family who lived there escaped with their lives but not any of their multiple pets, who were burned alive, or their belongings, which were largely destroyed.  As late as 2019, in video-recorded meetings between MELAMED and Williams, MELAMED discussed with Williams vacating another occupied residential building, which MELAMED owned, by either illegally cutting its utility lines or setting fire to it, the latter option being discussed using the term “milk” or the phrase “pour milk,” which was MELAMED’s coded terminology for using fire to vacate the occupants of a building.  Following these meetings, MELAMED was arrested and ordered detained in November 2019. 

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In addition to his prison term, MELAMED, 43, of Great Neck, New York, was sentenced to 3 years of supervised release and was ordered to forfeit $500,000 and pay a further fine of $50,000.

Curtis Williams, 52, pled guilty to participating in a conspiracy to commit arson, and multiple counts of arson, on April 14, 2021.  A sentencing date has not yet been set.

Ms. Strauss praised the dogged and outstanding investigative work of the New York City Arson Explosives Task Force.  The New York City Arson Explosives Task Force comprises Special Agents and Task Force Officers from multiple federal, state, and local law-enforcement agencies, including the ATF, NYPD, and FDNY.  Ms. Strauss also thanked the Kings County District Attorney’s Office for its substantial contributions and ongoing assistance to the investigation culminating in MELAMED’s conviction and sentence.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Kyle Wirshba and Thomas John Wright are in charge of the prosecution.