Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Michael F. McPherson, Special Agent-in-Charge of the Tampa Division of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an indictment charging MICHAEL ACKERMAN with wire fraud and money laundering.  ACKERMAN allegedly defrauded over 100 individuals of more than $35 million through his fake cryptocurrency investment scheme.  ACKERMAN will be presented Friday in federal court in the Northern District of Ohio.

U.S. Attorney Geoffrey S. Berman said:  “Allegedly touting monthly returns of over 15%, Michael Ackerman was able to raise over $35 million in investments for his fake cryptocurrency scheme.  He allegedly falsified documents representing to investors that his fund had a balance of over $315 million worth of cryptocurrencies, when in actuality, he had less than half a million dollars.  Today’s arrest should remind would-be investors to take extreme caution and thoroughly vet investment opportunities, especially when promised abnormally high rates of return.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “Ackerman is alleged to have defrauded more than 100 investors through a cryptocurrency fraud scheme, doctoring data for appearances to make his investment fund look successful.  As a result of this scheme, his victims are left feeling cheated after being swindled out of over $35M collectively.  HSI will continue to investigate a plethora of financial fraud cases to ensure that individuals like Ackerman know they will face the consequences for any scheme that victimizes the innocent.”

FBI Special Agent-in-Charge Michael F. McPherson:  “This was a classic fraud scheme with a digital twist, using cryptocurrency to take advantage of unsuspecting investors. 

The FBI and its partners are committed to protecting investors from scams no matter how the fraudsters try and disguise the scheme.”      

According to the allegations in the Complaint and Indictment, both unsealed today[1]:

In or about 2017, MICHAEL ACKERMAN and others started a purported cryptocurrency “investment” fund (the “Fund”) and recruited hundreds of individual investors into the Fund.  Under the terms of the Fund, investors were told that they would receive 50% of their trading profits, and that the founders of the Fund, including ACKERMAN, would receive the other 50%.  ACKERMAN falsely represented to potential investors that the fund had historical returns of approximately 15% each month.  Moreover, during the period alleged in the Complaint and Indictment, ACKERMAN prepared materials falsely purporting to show that the Fund was returning approximately 15% each month, and shared that information with Fund investors.  For example, in or about December 2019, ACKERMAN represented to investors and others that the Fund had a balance of over $315 million worth of cryptocurrencies available for trading in a Fund account.  Those representations by ACKERMAN included screenshots of trading data doctored by ACKERMAN in order to make it appear that the Fund was operating at that successful level, when its actual trading balance was less than the equivalent of half a million dollars.  ACKERMAN, moreover, regularly stole proceeds of this fraud from the Fund, and attempted to conceal those proceeds not only through his false representations to investors, but through the purchase of at least five pieces of real estate, all of which were titled to third parties.

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ACKERMAN, 50, of Sheffield Lake, Ohio, is charged with one count of wire fraud and one count of money laundering, 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 the judge.

Mr. Berman praised the outstanding investigative work of Special Agents from Homeland Security Investigations’ El Dorado Task Force and the Federal Bureau of Investigation in Tampa, and thanked the attorneys and investigators at the Commodity Futures Trading Commission and the Securities and Exchange Commission, whose expertise and diligence were integral to the development of this investigation. 

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

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

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, Commissioner of the New York City Police Department (“NPYD”), announced today the unsealing of an indictment charging LAWRENCE RAY, a/k/a “Lawrence Grecco,” with multiple offenses, including extortion, sex trafficking, and forced labor.  As alleged in the indictment, RAY used physical and psychological threats and coercion to indoctrinate and exploit a group of college students in Westchester County as well as other victims.  RAY extorted approximately $1 million from at least five victims; forced certain victims to perform unpaid labor; and caused, through force, fraud, and coercion, at least one victim to engage in commercial sex acts.  He laundered the proceeds of his crimes through an internet domain business.  RAY committed these offenses in locations including Westchester County, New York, and New York, New York, as well as Pinehurst, North Carolina. 

RAY was arrested this morning in Piscataway, New Jersey.  He will be presented this afternoon before United States Magistrate Judge Robert W. Lehrburger.  The case is assigned to United States District Judge Lewis J. Liman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, for nearly a decade, Lawrence Ray exploited and abused young women and men emotionally, physically, and sexually for his own financial gain.  College is supposed to be a time of self-discovery and new-found independence.  But as alleged, Lawrence Ray exploited that vulnerable time in his victims’ lives through a course of conduct that shocks the conscience.  Through his manipulative interrogation sessions, Ray made his victims confess to alleged wrongdoing and then compelled them to repay Ray alleged damages owed to him, through payments of hundreds of thousands of dollars, or worse, forced labor and sex trafficking.  We hope that today’s charges bring some measure of comfort to the victims and their families.  We thank the FBI and the NYPD for their extraordinary work on this case.”

FBI Assistant Director William F. Sweeney Jr. said:  “Mr. Ray allegedly used his proximity to his victims to lay the groundwork for psychological conditioning, eventually leading several young adults to become unwitting victims of sexual exploitation, verbal and physical abuse, extortion, forced labor, and an egregious case of prostitution.  For the better part of the last decade, we allege there was no limit to the abuse Ray’s victims received, and there is no way of knowing the amount of damage he may have caused them in the years to come.  If you or someone you know came into contact with Mr. Ray, we are asking you to get in touch with us at 1-800-CALL-FBI.  We want victims to know in the eyes of the FBI, they come first.” 

NYPD Commissioner Dermot Shea said:  “The NYPD and all of our law enforcement partners share an unwavering commitment to protecting survivors of human trafficking. This crime is among the most heinous, and our job is to ensure that anyone who would seek to profit through the abuse and exploitation of another human is brought to justice.”

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

From in or about 2010 through the present, LAWRENCE RAY, a/k/a “Lawrence Grecco,” the defendant, subjected a group of college students and other victims to sexual and psychological manipulation and physical abuse.  RAY’s tactics included sleep deprivation, psychological and sexual humiliation, verbal abuse, threats of physical violence, physical violence, threats of criminal legal action, alienating the victims from their families, and exploiting the victims’ mental health vulnerabilities. 

Through this manipulation and abuse, RAY extracted false confessions from the victims to causing purported damages to RAY and his family and associates, and then extorted payment for those purported damages through several means.  The victims made payments to RAY by draining their parents’ savings, opening credit lines, soliciting contributions from acquaintances, selling real estate ownership, and at RAY’s direction, performing unpaid labor for RAY and earning money through prostitution. 

As alleged, through fear, violence, and coercion, RAY forced one female victim to engage in commercial sex acts to pay damages to RAY that she did not actually owe.  Beginning when she was just a college student, RAY sexually groomed this victim, and collected sexually explicit photographs and other personal information which he then used to coerce her into continued commercial sex acts.  RAY also used physical violence.  On one occasion, as alleged, RAY tied his victim to a chair, placed a plastic bag over her head, and nearly suffocated her.  In total, RAY collected over $500,000 in forced prostitution proceeds from this victim.

In addition, as alleged, RAY forced three female victims to perform unpaid labor on a family member’s property in North Carolina.  Through a course of psychological and physical abuse, RAY forced these three victims to do extensive physical labor, sometimes in the middle of the night, for no pay.

Associates of RAY helped RAY collect and transfer the criminal proceeds, which RAY shared with at least two associates.  RAY then laundered his criminal proceeds through an internet domain business.  

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RAY, 60, of Piscataway, New Jersey, is charged with the following offenses: conspiracy to commit extortion, which carries a maximum sentence of 20 years in prison; extortion, which carries a maximum sentence of 20 years in prison; sex trafficking, which carries a maximum sentence of life in prison, and a mandatory minimum sentence of 15 years in prison; obtaining forced labor, which carries a maximum sentence of 20 years in prison; forced labor trafficking, which carries a maximum sentence of 20 years in prison; conspiracy to obtain forced labor, which carries a maximum sentence of 20 years in prison; two counts of violating the Travel Act, each of which carries a maximum sentence of five years in prison; and money laundering, which carries a maximum sentence of 20 years in prison.  The statutory maximum and mandatory penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

If you believe you are a victim of Lawrence Ray, please contact the FBI at 1-800-CALL FBI, and reference this case.

Mr. Berman praised the outstanding investigative work of the FBI and the NYPD.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Danielle Sassoon, Mollie Bracewell, and Lindsey Keenan are in charge of the prosecution.

The charges 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, Attorney for the United States acting under authority conferred by 28 U.S.C. § 515, announced today that, pursuant to an order issued by the Honorable Denny Chin, United States Circuit Court Judge, victims of Bernard L. Madoff have the opportunity to provide the Court with their views regarding Madoff’s pending motion for a sentence reduction.  A copy of the notice to victims is attached (the “Notice”). 

As set forth in the Notice, on June 29, 2009, defendant Bernard L. Madoff was sentenced to a term of imprisonment of 150 years.  Madoff has served approximately 10 years of his sentence. 

On February 5, 2020, Madoff filed a motion with the Court for a sentencing reduction pursuant to 18 U.S.C. § 3582 and the First Step Act.  The motion, which seeks Madoff’s immediate release from prison, is based primarily on his various medical conditions.  The Government will file a response to Madoff’s motion.  The Court may also order a public hearing on the motion.  A copy of the briefs relating to Madoff’s motion for a sentence reduction can be found at:

https://www.justice.gov/usao-sdny/madoff-sentence-reduction

If you are a victim of Madoff’s crimes and you wish to provide your views to Judge Chin with respect to Madoff’s motion for a sentence reduction, you may do so.  Please address any such correspondence to the Court, but send the correspondence to the Victim/Witness coordinator for the U.S. Attorney’s Office for the Southern District of New York by email as follows:

Ms. Wendy Olsen-Clancy

Victim/Witness Coordinator

United States Attorney’s Office Southern District of New York

email: Wendy.Olsen@usdoj.gov

The U.S. Attorney’s Office will then provide a copy of any correspondence received to the Court and counsel for Madoff.  The Court has set a deadline of February 28, 2020 for the U.S. Attorney’s Office to receive any correspondence from victims.  The U.S. Attorney’s Office will also provide notice on the above-noted website of any public hearing date set by the Court. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that NANCY CREDIDIO, the former manager of a car insurance brokerage, was sentenced to 33 months in prison for defrauding more than 1,100 victim customers out of more than $415,000.  CREDIDIO previously pled guilty to conspiracy to commit wire and mail fraud before United States District Judge Paul A. Engelmayer, who also imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman stated:  “For many years, Nancy Credidio duped car insurance applicants and car insurance companies alike.  She lied to them – defrauding insurance applicants out of hundreds of thousands of dollars – to benefit herself.  Today’s sentence sends a clear message that those who commit such fraud will face serious consequences.”

According to the allegations in the Information to which CREDIDIO pled guilty, public court filings, and statements made in court:

In order to legally drive a car in New York State, the car must be covered by an insurance policy.  From in or around 2010 through in or around 2017, CREDIDIO was a manager at a Queens, New York–based entity that sold such insurance policies.  During that period, CREDIDIO participated in various fraudulent practices. 

First, CREDIDIO made various misrepresentations that hurt more than 1,100 insurance applicants and deprived them of more than $415,000 in connection with a roadside assistance program (the “RAP”).  Specifically, CREDIDIO duped applicants into buying the RAP, whereby applicants spent much more on the RAP than they could possibly have received in return.  (Applicants often paid $465 for the RAP for one year, even though the most that they could have possibly received in return was $250.)  In some instances, CREDIDIO simply enrolled applicants in the RAP by signing their signature without their consent.  In other instances, CREDIDIO lied to applicants by falsely claiming that they were required to purchase the RAP in order to obtain car insurance.  On average, each victim spent more than $300 on the RAP and received less than $3 in return.  In order to maintain a steady flow of insurance applicants, CREDIDIO also used some of the RAP proceeds to pay cash kickbacks ($50 to $300 per customer) to the car dealerships who referred her business. 

In addition, CREDIDIO made various misrepresentations that harmed insurance carriers.  For example, on some insurance applications, she falsely claimed that an applicant qualified for certain discounts—such as for defensive driving courses—when the applicant did not in fact qualify for those discounts.  On other applications, she misrepresented the identity of the person operating the car, in order to conceal the fact that the true driver had a problematic driving history that would have led the insurance carrier to decline the policy or to charge a higher premium.  For instance, CREDIDIO used the name of a relative (of the actual applicant), or a customer with an existing insurance policy who had no connection whatsoever to the policy being purchased.

After her arrest in this case, CREDIDIO’s misconduct in the car insurance industry persisted.  While released on bail, she committed more than 215 (additional) instances of fraud and/or theft, which harmed at least two employers and various insurance applicants.

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In addition to her prison term, CREDIDIO, of Flushing, New York, was ordered to serve three years of supervised release.  CREDIDIO was also ordered to pay $417,395.70 in restitution and to forfeit $197,400.

Mr. Berman praised the outstanding investigative efforts of the Federal Bureau of Investigation and the New York Automobile Insurance Plan.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JAVIER ENRIQUE DA SILVA ROJAS (the “defendant” or “DA SILVA”) pled guilty in White Plains federal court to kidnapping Valerie Reyes (the “Victim”) in New Rochelle, New York, and unlawfully transporting her to Connecticut, where her body was found approximately a week later.  DA SILVA, who was arrested in Flushing, Queens, in February 2019, pled guilty today before U.S. District Judge Vincent L. Briccetti.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today in court, Javier Da Silva committed a horrid kidnapping that resulted in the tragic death of Valerie Reyes, a young woman with her entire adult life ahead of her.  Thanks to the excellent work of the FBI and our local law enforcement partners, Da Silva is now facing serious consequences.”

According to the criminal Information filed today, as well as other public documents, and statements made during today’s court proceeding:

DA SILVA and the Victim were previously in a romantic relationship, which ended in approximately April 2018.  In the late evening of January 28, 2019, DA SILVA rented a car from a garage in Flushing, New York, and drove to the Victim’s residence in New Rochelle, New York, arriving in the early morning hours of January 29, 2019.  Before he entered the Victim’s home, DA SILVA switched his phone to “airplane mode.”  DA SILVA then kidnapped the Victim – covering her mouth with several layers of packing tape and binding her feet and hands with packing tape and twine and putting her in a suitcase – before disposing of her body in Connecticut.  Over the ensuing days, DA SILVA used the Victim’s debit card on various occasions to withdraw approximately $5,350 in cash from her bank account.  DA SILVA also sold an iPad belonging to the Victim in the days following her death.

On January 30, 2019, Valerie Reyes was reported missing to the New Rochelle Police Department.  A few days later, on February 5, 2019, her body was recovered in a red suitcase alongside a public road in the Town of Greenwich, Connecticut.  The Connecticut Medical Examiner’s Office later concluded that the Victim died of homicidal asphyxiation.

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DA SILVA, 25, pled guilty to one count of kidnapping.  The charge carries a maximum term of life in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.  DA SILVA is scheduled to be sentenced by Judge Briccetti on May 21, 2020, at 11:00 a.m.        

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation’s (“FBI”) Westchester County Safe Streets Task Force, the FBI New Haven Division, the New Rochelle Police Department, the Greenwich Police Department, the Westchester County District Attorney’s Office, the Westchester County Department of Public Safety, and the Westchester County Real Time Crime Center.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Sam Adelsberg, Mathew Andrews, and Andrew Dember are in charge of the prosecution.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that ELIAS HERBERT HAFEN, a former financial adviser at two investment banks with offices in New York, New York, was sentenced yesterday to 30 months in prison for having defrauded his clients out of more than $1.6 million.  HAFEN previously pled guilty to one count of investment adviser fraud before United States District Judge Alvin K. Hellerstein, who imposed yesterday’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Elias Hafen promised to invest his clients’ money in a high-yield fund with guaranteed returns, and propped up his fraud with fake account statements.  He never invested his clients’ money, instead using it to line his pockets.”

According to allegations in the Information, other documents filed in federal court, and statements made in public court proceedings, including during HAFEN’s guilty plea:

From 2011 until 2018, HAFEN engaged in a scheme to defraud 11 of his financial advisory clients into believing that HAFEN had access to a high-yield investment fund with guaranteed returns, which was not affiliated with the investment bank at which HAFEN worked.  On HAFEN’s advice, these clients transferred approximately $1.6 million directly to HAFEN’s personal bank account for investment in the purported investment fund over the years that HAFEN engaged in his fraudulent scheme.  HAFEN also created fictitious “Investor’s Statements” bearing the name of a non-existent investment company purporting to detail the status of his victims’ investments.  In reality, however, there was no investment fund at all; HAFEN was using the victims’ funds to pay for personal expenses. 

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In addition to the prison term, HAFEN, 64, was also sentenced to three years of supervised release, ordered to pay $745,000 in restitution, and ordered to forfeit $806,750.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Jacob R. Fiddelman is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jonathan D. Larsen, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that MICHAEL MAGNALDI, a former Pelham resident and an owner and operator of a Bronx-based tax preparation business, pled guilty to one count of aiding and assisting in the filing of false tax returns for tax years 2014 to 2017 and one count of subscribing to a false tax return for tax year 2016.  MAGNALDI pled guilty before U.S. Magistrate Judge Paul E. Davison. 

U.S. Attorney Geoffrey S. Berman said:  “After serving in the New York City Department of Finance for 15 years, Michael Magnaldi betrayed the public’s trust by engaging in a years-long pattern of preparing false returns for clients and falsely understating his own income the same year he bought a $705,000 home in Pelham.  Magnaldi’s fraudulent conduct undermined the government’s ability to fund its mandates and cost the government $476,184 in tax revenue.  As we enter tax filing season, Magnaldi now stands convicted of two counts of criminal tax charges and awaits sentencing for his crimes.”

IRS-CI Special Agent-in-Charge Jonathan D. Larsen said:  “As the tax season heats up, this is an important reminder to taxpayers to beware of unscrupulous tax return preparers. Fraudulent tax return preparers harm taxpayers, legitimate businesses, and the American public. IRS-CI is steadfast in its commitment to ending such tax fraud and today’s guilty plea shows the serious consequences for violating this nation’s tax laws.”

According to the allegations contained in the Information to which MAGNALDI pled guilty, MAGNALDI’s plea agreement, and statements made in court:           

MAGNALDI has years of audit experience in the New York City Department of Finance.  Since at least 2014, MAGNALDI owned and operated MGM Tax Solutions, a tax preparation business located in the Bronx, New York. 

As charged in Count One of the Information, for the 2014 through 2017 tax years, MAGNALDI prepared for clients 37 false Forms 1040 containing, among other false information, false Schedule D capital losses, false Individual Retirement Account (“IRA”) contribution deductions, and false Education Tax credits.  MAGNALDI unsuccessfully attempted to conceal his role in preparing these fraudulent tax returns by not listing his or any name as the return preparer, to make it seem as if the returns were self-prepared.  In response to IRS correspondence audits, MAGNALDI caused additional false forms to be sent to the IRS, in an attempt to substantiate the false losses, deductions, and credits claimed on the tax returns.  The total tax loss for the 37 false individual income tax returns of MAGNALDI’s clients is $232,767. 

As charged in Count Two of the Information, in addition to the false filings prepared on behalf of his clients, MAGNALDI also falsely understated his own and his business’s income on their 2016 tax returns, the same year he bought a roughly $705,000 home in Pelham.  Specifically, MAGNALDI falsely understated income on MGM Tax Solutions’ 2016 Form 1120S, which understated flow-through income on MAGNALDI’s 2016 Form 1040.  The tax loss for MAGNALDI’s understatement of flow-through income is $243,417.

The total tax loss resulting from both schemes is $476,184.  

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MAGNALDI, 54, formerly of Pelham, New York, and currently living in St. Augustine, Florida, pled guilty to one count of aiding and assisting in the filing of false tax returns for tax years 2014 to 2017 and one count of subscribing to a false tax return for tax year 2016, each of which carries a maximum sentence of three years in prison.  As part of the plea agreement, MAGNALDI has agreed to pay restitution to the IRS in the amount of at least $476,184 plus interest and penalties.  Sentencing is scheduled for May 8, 2020, at 10:00 a.m., before U.S. District Judge Vincent L. Briccetti.

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

Mr. Berman praised the outstanding work of IRS Criminal Investigation in this case.

This case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorney David R. Felton is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of a superseding federal indictment charging EDWIN CORTORREAL, a/k/a “Crazy Ed,” with the October 27, 2006, murder of Kelly Diaz in the Washington Heights neighborhood of New York, and other crimes.  CORTORREAL, 33, was extradited to the United States from the Dominican Republic to face the charges in the superseding indictment.  CORTORREAL was presented and arraigned today before U.S. District Judge Valerie E. Caproni, to whom the case is assigned.

U.S. Attorney Geoffrey Berman said:  “As alleged, the defendant shot and killed Kelly Diaz in his home.  We thank the FBI and the NYPD for their outstanding work investigating this terrible murder.  We will continue our efforts with our law enforcement partners to prosecute such senseless acts of violence.”

NYPD Commissioner Dermot Shea said:  “Edwin Cortorreal was brought to justice as a result of unrelenting investigative work by NYPD officers and FBI agents in partnership with our law enforcement colleagues here and overseas and the outstanding team of prosecutors assembled by U.S. Attorney Berman. I applaud the efforts to bring justice in this case.”

According to the superseding indictment and statements made in related court filings and proceedings[1]: 

The Hot Boys were a crew of professional home invaders active in Washington Heights and elsewhere from at least 2006 through 2017.  On October 27, 2006, CORTORREAL and four others used a hydraulic pump to silently force open the door of Diaz’s apartment.  CORTORREAL and two others then burst into Diaz’s home, subdued Diaz and his wife, and forced Diaz onto the ground.  CORTORREAL, armed with a gun, stood over Diaz while the rest of the crew ransacked the apartment.  As the crew began to leave, CORTORREAL shot and killed Diaz.

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CORTORREAL is charged with conspiring to commit racketeering through the commission of various criminal acts, including murder, in violation of Title 18, United States Code, Section 1962(d); murder in aid of racketeering, in violation of Title 18, United States Code, Section 1959(a)(1); conspiracy to distribute narcotics, in violation of Title 21, United States Code, Section 846; use of a firearm, resulting in death, during a drug-trafficking crime, in violation of Title 18, United States Code, Section 924(j); and other uses of firearms during a drug-trafficking crime, in violation of Title 18, United States Code, Section 924(c).  Each of these crimes carries a maximum term of life in prison, and murder in aid of racketeering carries a mandatory minimum term of life in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI and the NYPD.  Mr. Berman also thanked the Dominican authorities, the Office of International Affairs of the Justice Department’s Criminal Division, and the United States Marshals Service for their assistance in the extradition.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Hagan Scotten and David W. Denton Jr. are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JASON GALANIS pled guilty today for his participation in multiple fraudulent schemes.  In particular, GALANIS pled guilty for his role in a scheme to manipulate the market for Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange, and to defrauding the shareholders of that company (the “Gerova Scheme”), as well as to defraud the clients of an investment advisory firm.  GALANIS also pled guilty today to defrauding a Native American tribal entity and the investing public of tens of millions of dollars in connection with the issuance of bonds by the tribal entity (the “Tribal Bond Scheme”).  GALANIS pled guilty to three counts of conspiracy to commit securities fraud, two counts of securities fraud, one count of investment adviser fraud, and one count of conspiracy to commit investment adviser fraud before U.S. District Judge P. Kevin Castel.  GALANIS had previously pled guilty, in July 2016, for his participation in the Gerova Scheme and, in January 2017, for his participation in the Tribal Bond Scheme, but those convictions were subsequently vacated.    

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Jason Galanis orchestrated two multimillion-dollar fraud schemes, and put together a team of co-conspirators to carry them out.  He and his codefendants engaged in market manipulation and the defrauding of shareholders, and they stole a large portion of the proceeds of tribal bonds that were intended to fund economic development projects.  The overriding theme was victimizing others to enrich themselves.  Now Jason Galanis awaits sentencing for his criminal greed.”

According to the allegations contained in the Information filed against GALANIS, charging documents filed against GALANIS’s co-conspirators, and statements made in related court filings and proceedings:

The Gerova Scheme

From 2009 to 2011, GALANIS, along with his co-conspirators John Galanis, Gary Hirst, Derek Galanis, Ymer Shahini, and Gavin Hamels, engaged in a scheme to defraud the shareholders of Gerova and the investing public, by effecting securities transactions in Gerova stock for the purpose of conferring millions of dollars of undisclosed remuneration to GALANIS and his co-conspirators, without adequate disclosure of GALANIS’s role in directing the transactions or the benefits received by GALANIS and his co-conspirators.

As a part of the scheme to defraud, GALANIS obtained sufficient control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock.  GALANIS obtained this control without causing himself to be identified as an officer or director of Gerova so as to purport to abide by an SEC-imposed bar that forbade him from holding such positions at publicly traded companies.  Among other means and methods, GALANIS, with the assistance of Hirst, caused over 5,000,000 shares of Gerova stock, which represented nearly half the company’s public float and which were intended for GALANIS’s ultimate benefit, to be issued to and held in the name of Ymer Shahini, who knowingly served as a foreign nominee for GALANIS.  GALANIS, John Galanis, Jared Galanis, Derek Galanis, Hirst, and Shahini understood that the purpose of the stock grant to Shahini was to disguise GALANIS’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock. 

At the same time, and as a further part of the scheme to defraud, GALANIS’s co-conspirators, with his knowledge and approval, opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public GALANIS’s ownership of and control over the Gerova stock.

GALANIS, among others, also fraudulently induced investment advisers, including Gavin Hamels, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser.  By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, GALANIS and others were able to, among other things, effectuate the sale of large quantities of Gerova stock from the Shahini Accounts that GALANIS controlled while artificially maintaining the price of Gerova stock through coordinated match trading.  Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public.  As a result, GALANIS and his co-conspirators reaped nearly $20 million in profits.

The Scheme to Defraud Clients of Investment Firm-1

From 2007 to 2010, GALANIS along with an investment adviser identified in the Information as “CC-2,” participated in a scheme to defraud the clients of CC-2’s investment advisory firm, identified in the Information as “Investment Firm-1.”  Oftentimes in exchange for compensation from GALANIS, CC-2 caused Investment Firm-1 clients to invest in notes issued by entities associated with GALANIS. 

When obligations owed by entities associated with GALANIS became due, CC-2 used client funds to purchase either notes issued by other entities associated with GALANIS or publicly traded shares held by such entities.  The funds generated were then used to pay the original obligations owed to other Investment Firm-1 clients.  Through these securities trades, funds in client accounts of one set of Investment Firm-1 investors were used to pay obligations owed to a different set of Investment Firm-1 investors by entities associated with GALANIS.   

The Tribal Bond Scheme

From March 2014 through April 2016, GALANIS, along with his co-conspirators Gary Hirst, John Galanis, a/k/a “Yanni,” Hugh Dunkerley, Michelle Morton, Devon Archer, and Bevan Cooney, engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity (the “Tribal Bonds”), and to use funds in the accounts of clients of asset management firms controlled by GALANIS and his codefendants to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market. 

Documents governing the Tribal Bonds specified that an investment manager would invest the proceeds of the Tribal Bonds in investments that would generate annuity payments sufficient to pay interest on the Tribal Bonds and provide funds to the WLCC to be used for tribal economic development purposes.  In fact, none of the proceeds of the Tribal Bonds were turned over to the investment manager specified in the closing documents.  Instead, significant portions of the proceeds were misappropriated by GALANIS and his codefendants for their own personal use. 

Specifically, the proceeds of the Tribal Bonds were deposited into a bank account in the name of Wealth Assurance Private Client Corporation (“WAPCC”), an entity controlled by Dunkerley and Hirst.  Dunkerley transferred more than $38 million from the WAPCC account to an account controlled by GALANIS, who then misappropriated more than $8.5 million of the proceeds for his personal use, including for expenses associated with his home, jewelry and clothing purchases, travel and entertainment, and restaurant meals. 

There was no ready secondary market for the Tribal Bonds.  Nonetheless, without prior notice to their clients, Morton and Hirst, acting at the direction of GALANIS, used funds belonging to clients of two related investment advisers, Hughes Capital Management, Inc. (“Hughes”), and Atlantic Asset Management, LLC (“Atlantic”), to purchase the Tribal Bonds, even though GALANIS, Hirst, and Morton were well aware that material facts about the Tribal Bonds had been withheld from clients in whose accounts they were placed, including the fact that the Tribal Bond purchases fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients and of the Atlantic pooled investment vehicle in which the Tribal Bonds were purchased.  When Hughes and Atlantic clients learned about the purchase of the Tribal Bonds in their accounts, several of them demanded that the Tribal Bonds be sold.  However, because there was no ready secondary market for the Tribal Bonds, no Tribal Bonds have been sold from any Hughes or Atlantic client accounts.  In addition, GALANIS and his codefendants failed to apprise clients of Hughes and Atlantic regarding substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf. 

In addition, a portion of the misappropriated proceeds was recycled and provided by GALANIS to entities affiliated with Archer and Cooney in order to enable Archer and Cooney to purchase subsequent Tribal Bonds issued by the WLCC.  As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase. 

*                *                *

GALANIS, 49, pled guilty to three counts of conspiracy to commit securities fraud, each carrying a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; two counts of securities fraud, each of which 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; one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense; and one count of conspiracy to commit investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense.  GALANIS will be sentenced by Judge Castel on May 12, 2020. 

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

Mr. Berman praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Brian Blais, Rebecca Mermelstein, and Negar Tekeei are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jonathan D. Larsen, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced federal tax charges against WILLIAM R. GROGG for knowingly and willfully failing to pay over payroll taxes for his company and for corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws.  GROGG was presented in White Plains federal court yesterday before U.S. Magistrate Judge Judith C. McCarthy. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, William R. Grogg failed to pay over payroll taxes for his company for years, and then lied to the IRS about it.  This cost the government hundreds of thousands of dollars in tax revenue.  Grogg now faces 18 counts of criminal tax charges, and the possibility of time behind bars.”

IRS-CI Special Agent in Charge Jonathan D. Larsen said:  “As the indictment against Mr. Grogg demonstrates, using employment taxes for personal and business expenses is illegal, and therefore subject to criminal enforcement. Employment tax enforcement is among the IRS’s highest priorities and our Special Agents will continue to vigorously investigate these criminal allegations.”

According to the allegations in the Indictment[1]:

Since at least the late 1980s, GROGG has worked in the printing and publishing industry in and around Poughkeepsie, New York.  Over his more than three decades in the industry, GROGG has owned, managed, and/or otherwise had significant control over the financial affairs of a number of printing and publishing companies, including:  Hamilton Reproductions, Inc. (“Hamilton Reproductions”), Hamco, which was later called Netpub Corporation (together, “Hamco/Netpub”), Netpublications Inc. (“Netpublications”), and MCA-Netpub (“MCA”).  In or around 1994, the IRS assessed a civil penalty of approximately $368,639.93 against GROGG, as a responsible person, for willfully failing to collect, account for, and pay over to the IRS payroll taxes owed by Hamilton Reproductions. 

From at least the fourth quarter of 2013 through the fourth quarter of 2017, GROGG was the sole owner, president, and/or controlling officer of Netpublications and MCA, which, at any given time, had approximately 20 to 50 paid employees.  As the owner and operator of Netpublications and MCA, GROGG was a responsible person under federal law for collecting, truthfully accounting for, and paying over payroll taxes to the IRS.

GROGG caused Netpublications and, later, MCA to employ a third-party payroll service (the “Payroll Service”), which, among other things, prepared Netpublications’ and MCA’s quarterly payroll tax returns.  Those returns were provided to GROGG.  Although Netpublications and MCA withheld payroll taxes from employees’ paychecks as directed by the Payroll Service, GROGG failed to pay over the withheld payroll taxes, as well as Netpublications’ and MCA’s matching Social Security and Medicare contributions, to the IRS.  Instead, GROGG spent the withheld payroll taxes, which GROGG was required to hold in trust for the United States Government, on personal and business expenses.

In addition, when GROGG was contacted by the IRS in connection with his payroll tax compliance, he made a series of materially false statements to the IRS in writing and during interviews with IRS-CI.  These statements included that Netpublications and MCA were originally owned by a deceased Canadian businessman, and that a deceased associate of the Canadian businessman kept certain of Netpublications’ records in a garage until they were destroyed in a flood.  These and other false statements that GROGG made were intended to obstruct and impede the IRS.

*                *                *

GROGG, 69, of Millbrook, New York, is charged with 17 counts of knowingly and willfully failing to pay over Netpublications’ and MCA’s payroll taxes, each of which carries a maximum sentence of five years in prison, and one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, which carries a maximum sentence of three years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the outstanding investigative work of special agents from IRS-CI.  The prosecution of this case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Benjamin A. Gianforti is in charge of the prosecution.

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

 

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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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROGER THOMAS CLARK, a/k/a “Plural of Mongoose,” a/k/a “Variety Jones,” a/k/a “VJ,” a/k/a “cimon,” pled guilty today to conspiring to distribute massive quantities of narcotics, a charge arising out of his role as the senior adviser to the owner and operator of the “Silk Road” online illicit black market.  During its operation from 2011 until 2013, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute illegal drugs and other illicit goods and services to more than 100,000 buyers, and to launder hundreds of millions of dollars derived from those unlawful transactions.  CLARK pled guilty before United States District Judge William H. Pauley III.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Silk Road was a secret online marketplace for illegal drugs, hacking services, and a whole host of other criminal activity.  As he admitted today, Roger Thomas Clark was a central figure in helping to lead Silk Road and in advocating violence to protect the site.  Clark even went so far as to urge, and facilitate, the attempted killing of a co-conspirator suspected of stealing from Silk Road.  Clark’s arrest, extradition from Thailand, and conviction should make it clear that the purported anonymity of the dark web is not a protective shield from prosecution.”

According to the allegations in the Superseding Indictment, court filings, statements made in court, and evidence presented during the 2015 trial of Ross Ulbricht, Silk Road’s founder:

Ulbricht created Silk Road in approximately January 2011, and owned and operated the underground website until it was shut down by law enforcement authorities in October 2013.  Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet at the time, serving as a sprawling black market bazaar where unlawful goods and services, including illegal drugs of virtually all varieties, were bought and sold regularly by the site’s users.  While in operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over 100,000 buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.        

Silk Road enabled its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement.  Silk Road was operated on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the networks’ users.  Silk Road also included a Bitcoin-based payment system that served to facilitate the illegal commerce conducted on the site, including by concealing the identities and locations of the users transmitting and receiving funds through the site.

CLARK – who went by the online nicknames “Variety Jones,” “VJ,” “Cimon,” “Plural of Mongoose,” and “CaptainSargeant” – was described by Ulbricht as a “real mentor” who advised Ulbricht about, among other things, security vulnerabilities in the Silk Road site, technical infrastructure, the rules that governed Silk Road users and vendors, and the promotion of sales on Silk Road, including the sales of narcotics.  CLARK also provided advice to Ulbricht on developing a “cover story” to make it appear as though Ulbricht had sold Silk Road.  CLARK also assisted with hiring programmers to help improve the infrastructure of, and maintain, Silk Road.  CLARK also was responsible for gathering information on law enforcement’s efforts to investigate Silk Road.  And CLARK advised Ulbricht on how to protect the Silk Road empire.  For instance, when a Silk Road staff member was suspected of stealing $350,000 in Bitcoin from the site, CLARK suggested to Ulbricht that Ulbricht commission a murder-for-hire.  Ulbricht took that suggestion.  (Ultimately, unbeknownst to both men, the attempted murder-for-hire did not result in any harm to the target.)

CLARK was paid at least hundreds of thousands of dollars for his assistance in operating Silk Road.

CLARK, 56, a citizen of Canada, pled guilty to one count of conspiracy to distribute narcotics, 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.  CLARK is scheduled to be sentenced by Judge Pauley on May 29, 2020, at 11:00 a.m.

*                *                *

Mr. Berman praised the outstanding joint efforts of the Federal Bureau of Investigation, Homeland Security Investigations (“HSI”) Chicago-O’Hare, the Drug Enforcement Administration’s New York Field Division, the Internal Revenue Service Criminal Investigation’s New York Field Office, and the New York City Police Department.  Mr. Berman also thanked the HSI Attaché Bangkok, Thailand, for its assistance and support.  Mr. Berman also thanked the Royal Thai Police and the U.S. Department of Justice’s Office of International Affairs for their support and assistance.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Michael D. Neff, Vladislav Vainberg, and Eun Young Choi are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JAMAL SIMON was sentenced today by United States District Judge Paul A. Crotty to 115 months in prison for his participation in an identity theft scheme.  SIMON previously pled guilty before Judge Crotty to one count of conspiracy to commit wire fraud, one count of aggravated identity theft, and one count of wrongfully obtaining individually identifiable health information. 

U.S. Attorney Geoffrey S. Berman said:  “Jamal Simon and his co-conspirators developed a sophisticated scheme to steal from financial institutions and their customers.  Through brazen identity theft and fraud, Simon stole millions of dollars from credit card companies and banks.  Thanks to the skilled investigative work of the FBI, the defendants’ crime spree has been brought to a halt.”

According to the allegations in the Indictment, other documents filed in the case, and statements made in court, including during SIMON’s guilty plea:

From March 2017 through at least July 2017, SIMON and his co-conspirators carried out a wide-ranging fraud scheme that involved unlawfully obtaining individually identifiable information of other individuals (including names, addresses, phone numbers, email addresses, birthdates, bank account numbers, credit and debit card numbers, and cellphone service provider account numbers); impersonating those individuals in order to obtain unauthorized access to their bank accounts, credit and debit card accounts, and cellphone service provider accounts; and then using such access to, among other things, facilitate the fraudulent transfer of funds to bank accounts controlled by members of the conspiracy and the unauthorized purchasing of merchandise and gift cards at retail stores.  In some cases, SIMON transferred victims’ telephone numbers to a cellphone controlled by SIMON so that he and his co-conspirators could circumvent credit card companies’ standard security measures that confirm suspicious transactions through text message or email to the consumer. 

The scheme perpetrated by SIMON and his co-conspirators defrauded financial institutions and individual victims of more than $3.5 million.

*                      *                      *

In addition to the prison term, SIMON, 31, was also sentenced to three years of supervised release, ordered to pay $2,430,771.05 in restitution, and ordered to forfeit $500,000.

Mr. Berman praised the outstanding investigating work of the Federal Bureau of Investigation.

If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900.  For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.

The prosecution is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Nicholas W. Chiuchiolo and Robert B. Sobelman are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dermot F. Shea, Commissioner of the New York City Police Department (“NYPD”), Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Margaret Garnett, Commissioner of the New York City Department of Investigation (“DOI”), announced today the unsealing of an Indictment charging NYSHIEM SPENCER, a/k/a “Willy,” LAFONE ELEY, a/k/a “Fon Fon,” STEFVON ELEY, a/k/a “Balla,” SHALIK JENKINS, a/k/a “Sha Money,” a/k/a “Double O,” MALIK TUNSTALL, a/k/a “Leaky,” PRICE TUNSTALL, a/k/a “P-Black,” NASIR VINCENT, ALLAN GONZALEZ, a/k/a “Bobby,” JONELL DANFORTH, a/k/a “JD,” ELIJAH BURT, a/k/a “Dizzy,” and ASHANAE MCLAUGHLIN with participating in a racketeering conspiracy as members and associates of the Monroe Houses Crew, which operates principally in the James Monroe Houses in the Soundview neighborhood of the Bronx.

As part of the racketeering conspiracy, SPENCER is charged with the October 31, 2017, murder of Luis Vargas.  LAFONE ELEY is charged with shooting at a rival gang member on June 25, 2017.  STEFVON ELEY is charged with shooting a disfavored member of the Monroe Houses Crew on June 30, 2017, and with shooting at rival gang members on May 30, 2018.  VINCENT, DANFORTH, and BURT are charged with slashing a rival gang member on September 14, 2019.  SPENCER, JENKINS, MALIK TUNSTALL, PRICE TUNSTALL, VINCENT, GONZALEZ, and DANFORTH are charged with participating in a narcotics conspiracy.  MCLAUGHLIN is charged with bank fraud conspiracy and aggravated identify theft.  Seven defendants were arrested today and will be presented this afternoon before United States Magistrate Judge James L. Cott.  Three defendants are in state custody on other charges and will be transferred to federal custody at a later date.  The case has been assigned to United States District Judge Analisa Torres.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, the defendants in this case were members of a violent crew operating in the James Monroe Houses in the Bronx.  The violence perpetrated by Monroe Houses Crew members is exemplified by the murder, slashing, and three shootings alleged in today’s indictment.  Thanks to the efforts of our partners at the NYPD, HSI, and DOI, the defendants now face federal charges for their crimes.”           

NYPD Commissioner Dermot F. Shea said:  “Violence in the streets of New York City will not be tolerated.  The stellar investigative efforts of our NYPD detectives, working together with our law enforcement partners and federal prosecutors, has shut down a violent crew to maintain safety for all.”

HSI Special Agent-in Charge Peter C. Fitzhugh said:  “As alleged in the indictment, the Monroe Houses crew was responsible for multiple acts of violence and other forms of mayhem.  The defendants are charged with participating in shootings, a slashing, narcotics distribution, and bank fraud.  HSI is allied with our law enforcement partners to hold crew members accountable for the havoc they wreak on our communities, and together we will ensure there are consequences for their actions.”

DOI Commissioner Margaret Garnett said:  “DOI is committed to ensuring that New York City public housing remains free from violent gang activity that invades our communities and erodes the safety of residents.  We are proud to have partnered with the U.S. Attorney for the Southern District of New York, New York City Police Department, and the New York Field Office of Homeland Security Investigations to secure today’s indictment and protect the residents of the James Monroe Houses.”

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

NYSHIEM SPENCER, a/k/a “Willy,” LAFONE ELEY, a/k/a “Fon Fon,” STEFVON ELEY, a/k/a “Balla,” SHALIK JENKINS, a/k/a “Sha Money,” a/k/a “Double O,” MALIK TUNSTALL, a/k/a “Leaky,” PRICE TUNSTALL, a/k/a “P-Black,” NASIR VINCENT, ALLAN GONZALEZ, a/k/a “Bobby,” JONELL DANFORTH, a/k/a “JD,” ELIJAH BURT, a/k/a “Dizzy,” and ASHANAE MCLAUGHLIN,” are members and associates of the Monroe Houses Crew, a racketeering enterprise that operates principally in the James Monroe Houses.  In order to enrich the enterprise, preserve and protect the power of the enterprise, and enhance its criminal operations, Monroe Houses Crew members and associates committed, conspired, attempted, and threatened to commit acts of violence, including murder; distributed and possessed with intent to distribute narcotics; committed robberies; engaged in fraud; and obtained, possessed, and used firearms.

On or about October 31, 2017, SPENCER and others planned and helped carry out a shooting that resulted in the death of Luis Vargas in the vicinity of 1715 Randall Avenue in the Bronx, New York.

On or about June 25, 2017, LAFONE ELEY and others shot at a rival gang member in the vicinity of the James Monroe Houses in the Bronx, New York.

On or about June 30, 2017, STEFVON ELEY shot and injured a member of the Monroe Houses Crew who had fallen out of favor with other members of the Monroe Houses Crew, in the vicinity of the James Monroe Houses in the Bronx, New York.

On or about May 30, 2018, STEFVON ELEY shot at rival gang members in the vicinity of Rosedale Avenue and Randall Avenue in the Bronx, New York.

On or about September 14, 2019, VINCENT, DANFORTH, BURT, and others slashed a rival gang member in the vicinity of 670 Castle Hill Avenue in the Bronx, New York.                

*                *                *

A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the NYPD, HSI, and DOI.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Andrew K. Chan and Justin V. Rodriguez are in charge of the prosecution.

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

 

COUNT

CHARGE

DEFENDANTS

MAX. PENALTY

Count One

Racketeering conspiracy

18 U.S.C. § 1962(d)

NYSHEIM SPENCER

Life imprisonment

LAFONE ELEY
STEFVON ELEY
SHALIK JENKINS
MALIK TUNSTALL
PRICE TUNSTALL
NASIR VINCENT
ALLAN GONZALEZ JONELL DANFORTH ELIJAH BURT
ASHANAE MCLAUGHLIN

20 years’ imprisonment

Count Two

Violent crime in aid of racketeering

18 U.S.C. §§ 1959 and 2

LAFONE ELEY

20 years’ imprisonment 

Count Three

Firearms offense

18 U.S.C. §§ 924(c) and 2

LAFONE ELEY

Life imprisonment

Mandatory minimum of ten years’ imprisonment

Court Four

Violent crime in aid of racketeering

18 U.S.C. §§ 1959 and 2

STEFVON ELEY

20 years’ imprisonment 

Count Five

Firearms offense

18 U.S.C. §§ 924(c) and 2

STEFVON ELEY

Life imprisonment

Mandatory minimum of ten years’ imprisonment

Count Six

Violent crime in aid of racketeering

18 U.S.C. §§ 1959 and 2

STEFVON ELEY

20 years’ imprisonment

Count Seven

Firearms offense

18 U.S.C. §§ 924(c) and 2

STEFVON ELEY

Life imprisonment

Mandatory minimum of ten years’ imprisonment

Count Eight

Violent crime in aid of racketeering

18 U.S.C. §§ 1959 and 2

NASIR VINCENT
JONELL DANFORTH ELIJAH BURT

20 years’ imprisonment

Count Nine

Narcotics conspiracy

21 U.S.C. § 846

NYSHEIM SPENCER
SHALIK JENKINS
MALIK TUNSTALL
PRICE TUNSTALL
NASIR VINCENT
ALLAN GONZALEZ JONELL DANFORTH

Life imprisonment

Mandatory minimum of ten years’ imprisonment

Count Ten

Bank fraud conspiracy

18 U.S.C. § 1349

ASHANAE MCLAUGHLIN

30 years’ imprisonment

Count Eleven

Aggravated identity theft

18 U.S.C. § 1028A and 2

ASHANAE MCLAUGHLIN

Mandatory two years’ imprisonment

 

 

 

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As the introductory phrase signifies, the entirety of the text of the Indictment constitutes only allegations, and every fact described herein should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Raymond P. Donovan, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), announced that GERMAN GOMEZ-CASTRUITA and  BENJAMIN CONTRERAS-RANGEL were charged in a criminal complaint in Manhattan federal court with conspiring to import cocaine into the United States, murdering a Mexican military officer in the course of the cocaine importation conspiracy, and related weapons offenses involving the use and possession of machineguns. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “German Gomez-Castruita and Benjamin Contreras-Rangel were allegedly part of a brazen attempt to land a plane full of cocaine on a remote highway in Mexico.  When Mexican authorities interceded, the defendants allegedly opened fire with automatic weapons, murdering a member of the Mexican military in the process.  We mourn the senseless loss of a military officer committed to justice; and I commend our law enforcement partners for their courageous efforts in bringing these two allegedly dangerous drug traffickers to face criminal charges in the U.S.”

DEA Special Agent in Charge Raymond P. Donovan said: “The murder of SEDENA Corporal Emiliano Medina-Ramirez is devastating to law enforcement worldwide and is symbolic of the risks law enforcement encounter in the line of duty.  Violence follows drug trafficking to every country, city, and state.  The defendants’ desperate attempts to shoot their way out of arrest failed and the fallout has led them to face the U.S. rule of law.  I commend our law enforcement partners in Mexico on this significant seizure and their pursuit to dismantle drug trafficking organizations responsible for fueling countless overdose deaths.  And, DEA sends our deepest condolences to Corporal Medina-Ramirez’ family and colleagues at SEDENA.” 

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

On or about January 27, 2020, DEA agents began tracking an aircraft traveling northbound from the Caribbean Coast of Venezuela.  The aircraft landed on a remote highway in the Mexican State of Quintana Roo.  Military Officers with Mexico’s Secretaría de la Defense Nacional (“SEDENA”) met the aircraft near its landing location.  Once there, SEDENA personnel observed a large number of vehicles and individuals involved in unloading the aircraft’s cargo. 

Several individuals, including GOMEZ-CASTRUITA and CONTRERAS-RANGEL, then engaged in a shootout with the SEDENA officers.  In the course of the shooting, SEDENA Corporal Emiliano Medina-Ramirez was killed and three other SEDENA officers were injured.  Following the shootout, GOMEZ-CASTRUITA and CONTRERAS-RANGEL and others fled into the nearby jungle.  GOMEZ-CASTRUITA and CONTRERAS-RANGEL were subsequently apprehended.  Law enforcement searched the vehicles near the aircraft and recovered, among other things, approximately 750 kilograms of cocaine, three assault rifles, and a large amount of ammunition.

*                      *                      *

GOMEZ-CASTRUITA, 37, of Mexico, CONTRERAS-RANGEL, 36, of Mexico, are charged with (1) conspiring to import cocaine into the United States, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; (2) murder while engaged in a narcotics importation conspiracy, which carries a mandatory minimum sentence of 20 years and a maximum sentence of death; (3) using and carrying a firearm during and in relation to a drug trafficking crime resulting in death, which carries a maximum sentence of death; (4) using and carrying machineguns and destructive devices during, and possessing machineguns and destructive devices in furtherance of, the cocaine importation conspiracy, which carries a mandatory consecutive minimum sentence of 30 years and a maximum sentence of life in prison; and (5) conspiring to use and carry machineguns and destructive devices during, and to possess machineguns and destructive devices in furtherance of, the cocaine importation conspiracy, which carries a maximum sentence of life in prison.

Mr. Berman praised the outstanding investigative work of the DEA’s New York Field Division, DEA’s Merida Resident Office, DEA’s Bogota Country Office, and the investigative work and heroic actions of Mexico’s Secretaría de la Defense Nacional.

The case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Michael K. Krouse, Stephanie Lake, Daniel G. Nessim, Benjamin W. Schrier, and Kyle A. Wirshba are in charge of the prosecution.

The charges contained in the Complaint are merely allegations, 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 Complaint, and the description of the Complaint and statements and filings in court 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that STEVEN L. HENNING, a certified public accountant (“CPA”) who was a partner at a Manhattan accounting firm, was sentenced today to 51 months in prison for participating in two wire fraud schemes.  In the first, he falsely claimed to have entered into multimillion-dollar intellectual property deals and defrauded investors out of $2 million.  In the second, he falsely claimed to have entered into client engagements and defrauded an employer out of over $240,000.  HENNING was sentenced by United States District Judge Cathy Seibel.

U.S. Attorney Geoffrey S. Berman said:  “Over several years, Steven Henning committed brazen frauds, exploiting his stature and career accomplishments to defraud people who trusted and relied on him.  Today he has received a significant prison sentence for his crimes.”

At the sentencing hearing, Judge Seibel said that HENNING is a “thief,” he committed “blatant fraud,” and his conduct was “extremely serious.”

According to the allegations in the Information to which HENNING pled guilty, as well as other public information:

HENNING, a CPA at a Manhattan accounting firm, established his own firm called OpportunIP, which he allegedly told victims was a company specializing in assisting other entities in taking intellectual property to the market.  HENNING induced victims to invest in OpportunIP by providing them with fraudulent documents showing OpportunIP’s involvement in multimillion-dollar transactions that would reap millions of dollars in future profits.  Ultimately, the victims learned that the deals did not exist, the documents were false and forged, and they were victims of an alleged scheme to defraud them out of millions of dollars.

As further alleged in the information, after leaving the Manhattan accounting firm, HENNING sought employment with a firm in Chicago, Illinois (the “Chicago Firm”).  He induced the Chicago Firm to hire him and provide him with $240,000 in draw payments based on false and fraudulent statements about business he would bring to the Chicago Firm, including by sending the Chicago Firm fraudulent contracts.

*                *                *

In addition to his prison term, HENNING was ordered to serve three years of supervised release, pay $938,246 in restitution and forfeit $938,246.

Mr. Berman praised the outstanding investigative work of the U. S. Postal Inspection Service and the SEC Office of Inspector General. 

The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorney Margery B. Feinzig is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced the unsealing of an Indictment charging DARON GOODMAN and JAMARR SIMMONS with the January 11, 2020, murder of Jason Parris, 36, in the vicinity of East 170th Street and Webster Avenue in the Bronx, New York.  The case has been assigned to United States District Judge George B. Daniels.  SIMMONS was arrested this morning.  GOODMAN was in state custody and was transferred to federal custody.  Both defendants were presented today before Judge Daniels and ordered detained.

U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, Daron Goodman and Jamar Simmons murdered Jason Parris earlier this month.  Thanks to the outstanding efforts of the NYPD and HSI, Goodman and Simmons now face federal murder charges for this terrible crime.  We continue our daily work with our law enforcement partners to keep the streets safe, and to vigorously investigate and prosecute those who allegedly engage in acts of violence in our community.”

NYPD Commissioner Dermot Shea said:  “This indictment illustrates how committed we are to stopping those engaged in gun violence.  The NYPD, together with federal agents and prosecutors, remain vigilant in our fight against violent crime as part of our joint effort to keep the city and its residents safe.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “In a most heinous act, both Goodman and Simmons are alleged to have murdered a man in cold blood.  HSI will remain committed to work closely with our law enforcement partners on murder investigations in order to bring justice, and maybe some solace, for the victim’s family and loved ones.”

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

On January 11, 2020, DARON GOODMAN and JAMARR SIMMONS, shot and killed Jason Parris in the vicinity of 1441 Webster Avenue in the Bronx.  GOODMAN and SIMMONS killed Parris in part to maintain and increase their position in a racketeering enterprise operating in the Southern District of New York.

*                *                *

GOODMAN, 22, and SIMMONS, 32, are each charged with using a firearm to commit murder in aid of racketeering, which carries a maximum sentence of death, or life in prison, and a mandatory minimum term of five years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.           

Mr. Berman praised the outstanding investigative work of the NYPD and HSI.  Mr. Berman also praised the New York City Department of Correction, Correction Intelligence Bureau, for its assistance in the investigation.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Adam S. Hobson, Michael D. Longyear, and Jacob Warren 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ALEXANDRU BURDUCEA, a doctor who practiced in Manhattan, 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.  BURDUCEA pled guilty on February 14, 2019, and was sentenced by United States District Judge Kimba M. Wood.

U.S. Attorney Geoffrey S. Berman said:  “Before September 2014, Alexandru Burducea, a doctor who practiced in Manhattan, had never prescribed Subsys, a potent fentanyl-based spray.  By the second quarter of 2015, however – in exchange for bribes and kickbacks from Subsys’s manufacturer, Insys Therapeutics – Burducea became approximately the 14th-highest prescriber of Subsys in the country. Burducea sacrificed the safety of his patients to satisfy his own greed, and will now spend time in federal prison for his reckless prescribing of this highly addictive and deadly drug.”

According to the allegations contained in the Indictment against BURDUCEA 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 BURDUCEA.

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.

BURDUCEA’s Participation in the Scheme

BURDUCEA, a doctor certified in pain management and anesthesiology, was an Assistant Professor of anesthesiology at a large Manhattan hospital.  He also practiced at an anesthesiology and pain management office associated with the hospital.  From in or about September 2014 until in or about June 2015, BURDUCEA received approximately $68,400 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys.  In addition, Insys hired BURDUCEA’s then-girlfriend, now wife, to work as BURDUCEA’s sales representative, and the company paid her large commissions based on the volume of Subsys prescribed by her assigned doctors, which included BURDUCEA. 

BURDUCEA, who had never prescribed Subsys before in or about September 2014, became approximately the 14th-highest prescriber of Subsys nationally in the second quarter of 2015, accounting for total net sales of the drug of approximately $621,345 in that quarter.

*          *          *

In addition to the prison sentence, BURDUCEA, 43, of Little Neck, New York, was sentenced to three years of supervised release and ordered to forfeit $68,400. A restitution order will be entered within 90 days.

BURDUCEA 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.  Dialecti Voudouris was convicted upon a guilty plea and is scheduled to be sentenced by Judge Wood on March 5, 2020.  Jeffrey Goldstein was convicted upon a guilty plea and is scheduled to be sentenced by Judge Wood on March 12, 2020.  Gordon Freedman was convicted following a jury trial and is scheduled to be sentenced before Judge Wood on March 19, 2020.

Mr. Berman praised the investigative work of the FBI, and thanked HHS OIG 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 and David Abramowicz are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JANELL THOMPSON, the former vice president, chief financial officer, and co-owner of a consumer products wholesaler based in California, was sentenced today by United States District Judge Naomi Reice Buchwald to 42 months in prison for using her business to distribute massive wholesale quantities of smokeable synthetic cannabinoids throughout the U.S. and to laundering the proceeds of that scheme.  THOMPSON previously pled guilty before Judge Buchwald to one count of conspiracy to distribute a controlled substance and a controlled substance analogue and one count of conspiracy to commit money laundering.

U.S. Attorney Geoffrey S. Berman said:  “Janell Thompson held herself out as a company CFO and vice president, but she was actually a drug trafficker and money launderer.  Through her wholesale company, Thompson distributed massive quantities of illegal and potentially dangerous synthetic cannabinoids throughout the U.S.  Thompson will now serve time in prison for her crimes.”

According to the allegations in the Superseding Information, other documents filed in the case, and statements made in court:

From February 2014 until February 2019, THOMPSON was the vice president, chief financial officer, and co-owner of JK Wholesale LLC, a consumer products retailer based in Carlsbad, California.  During that time period, THOMPSON used JK Wholesale LLC and its affiliated corporate entities to operate a scheme to distribute large quantities of smokeable synthetic cannabinoids (“SSC”), containing controlled substances and controlled substance analogues, throughout the U.S.  SSC, colloquially referred to as “K2” or “Spice,” can be addictive, but are often marketed as safe, legal alternatives to marijuana.  In fact, SSC are not safe and may affect the brain much more powerfully than marijuana; their actual effects can be unpredictable and, in some cases, more dangerous or even life-threatening.

Some of the SSC distributed by THOMPSON’s scheme were branded with colorful graphics and distinctive names, including “Yolo.”  The branded SSC sometimes were misleadingly marketed as “herbal incense.”  Other of the SSC were distributed in bulk quantities. 

*                      *                      *

In addition to a term of imprisonment, THOMPSON, 42, was also sentenced to two years of supervised release and ordered to forfeit $1,000,000.

Mr. Berman praised the outstanding investigative work of the New York City Police Department, the United States Postal Inspection Service, and Homeland Security Investigations.  He also thanked the Wilmington, North Carolina, Resident Office of the Drug Enforcement Administration, the Naval Criminal Investigative Service, and the United States Attorney’s Office for the Eastern District of North Carolina for their assistance.  The long-term investigation of this case was partially funded by the New York/New Jersey High Intensity Drug Trafficking Area, a federal grant program that invests in law enforcement partnerships to build safe and healthy communities.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Daniel G. Nessim and Robert B. Sobelman are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Richard E. Zuckerman, the Principal Deputy Assistant Attorney General for the Tax Division of the Department of Justice, and Jonathan D. Larsen, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that ADEL KELLEL, owner of Raffles Bistro, formerly a restaurant located in New York City, pled guilty today for his role in a tax evasion scheme.  KELLEL pled guilty before Chief Magistrate Judge Gabriel W. Gorenstein.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted in court, restaurateur Adel Kellel cooked his books for years, skimming money from his restaurant and salting it away in personal accounts or using it for personal expenses.  His scheme was a recipe for making millions in unreported income, but now he will have to pay for his gluttony.”

Principal Deputy Assistant Attorney General Richard E. Zuckerman said:  “The defendant funded his lavish lifestyle by failing to pay legally obligated taxes thus causing harm to all Americans.  We remain committed to prosecuting tax criminals who refuse to pay their fair share.”

IRS-CI Chief Jonathan D. Larsen said:  “When Mr. Kellel chose to hide millions of dollars from the IRS, he unfairly shifted the tax burden to honest American taxpayers.  As we start the tax filing season, this is a stark reminder of the serious consequences of tax evasion, including potential imprisonment.  IRS-CI will continue to be relentless in our mission to root out tax fraud.”

According to the Information to which KELLEL pled guilty and statements made in court:

In 2011, KELLEL was the President and a 45 percent owner of K&H Restaurant, Inc. (“K&H”), which operated Raffles Bistro (“Raffles”), a restaurant then located in a hotel (the “Hotel”) in Manhattan.  From 2012 through 2015, KELLEL was the 100 percent owner of K&H.  The gross receipts of K&H consisted primarily of: (a) credit card payments by Raffles’ customers; (b) cash payments by Raffles’ customers; and (c) check payments by the Hotel for various services that Raffles provided to hotel guests and patrons, including room service, banquets, and catering. 

KELLEL concealed and did not report to the Internal Revenue Service (“IRS”) a substantial portion of K&H’s gross receipts for the calendar years 2011 through 2015.  As part of his tax evasion scheme, KELLEL deposited substantial cash income received from Raffles’ customers into personal bank accounts or spent it directly on personal expenses, without disclosing it to his accountants or paying taxes on it.  KELLEL also diverted over 150 Hotel checks, totaling over $2 million in gross receipts, by depositing the checks into approximately a dozen bank accounts that KELLEL did not disclose to his accountants.

KELLEL used the diverted income for various personal expenses, including overseas transfers; condominium fees; rent for a high-end Manhattan apartment; college tuition payments from his children; shopping at luxury retailers, such as Hugo Boss and Saks Fifth Avenue; payments for luxury cars manufactured by Mercedes, Porsche, and Maserati; and payments for domestic and international travel. 

By fraudulently concealing from his accountants the cash and a portion of the Hotel checks received by Raffles, KELLEL caused K&H’s corporate income tax returns and KELLEL’s own individual income tax returns for the calendar years 2011 through 2015 to be materially false.  As a result of his conduct, KELLEL admitted to causing a combined tax loss of at least approximately $771,195 to the IRS and the New York State Department of Taxation and Finance (“NYSDTF”).

*                      *                      *

KELLEL, 62, of New Hyde Park, New York, pled guilty to one count of tax evasion and faces a maximum sentence of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  As part of his plea, KELLEL agreed to pay at least $771,195 in restitution to the IRS and the NYSDTF.  KELLEL is scheduled to be sentenced by U.S. District Judge Paul G. Gardephe on April 23, 2020.

Mr. Berman praised the outstanding work of the Internal Revenue Service, Criminal Investigation, in this case.  Mr. Berman also thanked the U.S. Department of Justice’s Tax Division for their significant assistance in the investigation.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Olga I. Zverovich and Special Assistant U.S. Attorney Jorge Almonte of the Department of Justice’s Tax Division are in charge of the prosecution.

The owner of a former New York City restaurant pleaded guilty to tax evasion today, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, and Chief of Internal Revenue Service- Criminal Investigation (IRS-CI) Jonathan D. Larsen.

“The defendant funded his lavish lifestyle by failing to pay legally obligated taxes thus causing harm to all Americans,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman. “We remain committed to prosecuting tax criminals who refuse to pay their fair share.”

“As he admitted in court, restaurateur Adel Kellel cooked his books for years, skimming money from his restaurant and salting it away in personal accounts or using it for personal expenses,” said U.S. Attorney Geoffrey S. Berman for the Southern District of New York. “His scheme was a recipe for making millions in unreported income, but now he will have to pay for his gluttony.”

“When Mr. Kellel chose to hide millions of dollars from the IRS, he unfairly shifted the tax burden to honest American taxpayers,” said IRS-CI Chief Jonathan D. Larsen. “As we start the tax filing season, this is a stark reminder of the serious consequences of tax evasion, including potential imprisonment. IRS-CI will continue to be relentless in our mission to root out tax fraud.”

According to the Information and statements made in court, in 2011, Adel Kellel was the President and a minority owner of K&H Restaurant Inc. (K&H), which operated Raffles Bistro (Raffles), a restaurant located at a New York City-based hotel. From 2012 through 2015, Kellel was the sole owner of K&H. K&H’s gross receipts consisted primarily of: (1) credit card payments by Raffles customers; (2) cash payments by Raffles customers; and (3) check payments by the hotel for services that Raffles provided to hotel guests and patrons, including room service, banquets, and catering. 

From 2011 through 2015, Kellel concealed a substantial portion of K&H’s gross receipts by not fully reporting the cash received from Raffles’ customers. Kellel further hid the gross receipts by depositing cash into personal bank accounts, by spending funds directly on personal expenses, and by diverting checks paid by the hotel to K&H into non-business bank accounts that Kellel hid from his accountants. During this time, Kellel diverted more than 150 hotel checks, totaling more than $2 million, to more than a dozen bank accounts. 

Kellel used the diverted income for personal expenses, including: overseas transfers; condominium fees; rent for a high-end Manhattan apartment; college tuition payments from his children; shopping at luxury retailers, such as Hugo Boss and Saks Fifth Avenue; payments for luxury cars manufactured by Mercedes, Porsche, and Maserati; and to pay for domestic and international travel. 

By fraudulently concealing from his accountants the cash and a portion of the hotel checks received by Raffles, Kellel caused K&H’s corporate tax returns, and Kellel’s own tax returns from 2011 through 2015 to be materially false. Kellel admitted that his conduct caused a tax loss of at least $771,195 to the Internal Revenue Service (IRS) and the New York State Department of Taxation and Finance (NYSDTF).

U.S. District Judge Paul G. Gardephe set sentencing for April 23, 2020. At sentencing, Kellel faces a maximum sentence of five years in prison. He also faces a term of supervised release and monetary penalties. As part of his plea agreement, Kellel agreed to pay restitution of $613,478 to the IRS, and to pay restitution of $157,717 to NYSDTF.

Principal Deputy Assistant Attorney General Zuckerman, U.S. Attorney Berman, and IRS-CI Chief Larsen praised the efforts of IRS-CI, who conducted the investigation, and Assistant Chief Jorge Almonte of the Tax Division and Assistant U.S. Attorney Olga I. Zverovich, who are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that a federal jury yesterday found HUBERT DUPIGNY, a/k/a “Fox,” guilty of sex trafficking of minors and conspiracy to commit sex trafficking of minors, following an eight-day jury trial before U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Hubert Dupigny recruited girls who were in foster care, then sexually exploited them for financial profit.  Such predatory conduct is repugnant and, as the jury found, deserving of a guilty verdict.  Dupigny now awaits sentencing for his crimes.”

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, enticed, harbored, transported, advertised, provided, obtained, and maintained two minor victims (“Victim-1” and “Victim-2”) for the purpose of commercial sex.

The defendant recruited Victim-1 and Victim-2 when they were living in foster care facilities or homes in New York City.  The defendant used Backpage.com to post advertisements of Victim-1 and Victim-2 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.  

The conviction of HUBERT DUPIGNY is the culmination of the prosecution of 19 defendants, set forth in eight indictments, for the sex trafficking of at least 20 minor girls and young adults in New York State’s social services system.  With DUPIGNY’s conviction, all 19 of the defendants have now been convicted, either via guilty plea or following trial.    

*                      *                      *

DUPIGNY, 36, of Brooklyn, New York, was convicted of two counts of sex trafficking of a minor and one count of conspiracy to commit sex trafficking.  The defendant faces a mandatory minimum sentence of 10 years in prison on each count of sex trafficking of a minor, and faces a maximum sentence of life in prison on each of the three counts of conviction.  The maximum potential sentences are prescribed by Congress and provided for informational purposes only, as any sentencing of the defendant will be determined by the judge.  Sentencing will take place before Judge Furman on May 13, 2020, at 3:30 p.m.

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

Mr. Berman thanked the FBI and the New York City Police Department (“NYPD”) for their outstanding work in this matter, particularly the FBI-NYPD New York Child Exploitation and Human Trafficking Task Force.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOHN GERACI was sentenced today in Manhattan federal court to 24 months in prison for conspiring to commit securities and wire fraud.  GERACI participated in a scheme to defraud investors in his company, Meridian Capital Asset Management.  GERACI caused two clients (“Victim-1” and “Victim-2”) to invest in a hedge fund through his company called the Meridian Matrix Long Short Fund (the “Meridian Matrix Fund”).  Between in or about December 2015 and November 2016, GERACI provided fictitious account statements and updates to Victim-1 and Victim-2, telling them that their investment was worth millions when, in reality, GERACI knew that large portions of it had been stolen by the Meridian Matrix Fund’s  co-founder, Nicholas Mitsakos.  GERACI eventually liquidated the Meridian Matrix Fund and misappropriated significant portions of the remaining funds.  Although GERACI had stolen over $1 million of Victim-1 and Victim-2’s investment for himself, GERACI falsely told them that their entire investment had been taken by Mitsakos.  GERACI used the stolen money to pay his own personal and business expenses. 

GERACI pled guilty on October 3, 2019, and was sentenced by United States District Judge Alison J. Nathan.

U.S. Attorney Geoffrey S. Berman said:  “John Geraci lied to his clients about their investment with Nicholas Mitsakos, and later concealed that he had recovered a significant portion of their investment from Mitsakos.  Now Geraci, like Mitsakos before him, is headed to prison.”

According to the Complaint, the Indictment, and other statements made in open court:

GERACI was the principal and founder of Meridian Capital Asset Management.  In or about February 2015, GERACI was introduced to Nicholas Mitsakos, who purported to operate a hedge fund called Matrix Capital (“Matrix”).  Mitsakos told GERACI that Matrix had tens of millions of dollars under management and had achieved annual returns between 19.4% and 66.3% from 2012 to 2014.  GERACI and Mitsakos subsequently entered into an arrangement whereby GERACI would raise money for Mitsakos, Mitsakos would manage that money through a new vehicle, the Meridian Matrix Fund, and GERACI and Mitsakos would then split any fees that the Meridian Matrix Fund generated.  As part of this arrangement, GERACI solicited Victim-1 and Victim-2 to invest approximately $2 million in the Meridian Matrix Fund, in large part by relying on Mitsakos’s claims about his supposed fund’s assets under management and performance returns.

By in or about December 2015, however, GERACI learned that Mitsakos had only invested approximately $1.2 million of Victim-1 and Victim-2’s investment, and had misappropriated significant portions of the remaining money.  GERACI also learned that Mitsakos never had any actual assets under management, and that his performance returns were accordingly fictitious and misleading.  Nonetheless, GERACI never told Victim-1 or Victim-2 that their investment was in jeopardy or had been solicited with misleading information.  To the contrary, GERACI sent Victim-1 and Victim-2 updates that hid Mitsakos’s misappropriation and falsely claimed that their investment had appreciated.  GERACI sent these fictitious updates even after GERACI had liquidated the Meridian Matrix Fund’s trading positions in or about June 2016.  Beginning in or about November 2015, GERACI also misappropriated hundreds of thousands of dollars of Victim-1 and Victim-2’s money for himself. 

In or about August 2016, Mitsakos was charged in this District with securities fraud and other offenses.  In or about September 2016, GERACI changed course:  Instead of providing fictitious account updates to Victim-1 and Victim-2, GERACI told them, in substance and in part, that their entire investment had been wiped out through Mitsakos’s fraud.  GERACI did this even though he had ultimately received approximately $1.1 million of Victim-1 and Victim-2’s investment back from Mitsakos, including after liquidating the Meridian Matrix Fund’s trading positions.  Rather than returning this amount to Victim-1 and Victim-2, GERACI used it to pay for his own personal and business expenses, including, for example, payments on a BMW automobile, a gym membership, gas, groceries, travel expenses, and his cellphone bill.

In addition to sending false account updates to Victim-1 and Victim-2 even after learning that Mitsakos had lied about his fund’s assets and performance and that Mitsakos had stolen significant portions of Victim-1 and Victim-2’s investment, GERACI continued to try to raise money from others for an investment related to the Meridian Matrix Fund.  In attempting to do so, moreover, GERACI relied on the same representations about Matrix’s assets and performance that he knew to be false.   

Mitsakos pled guilty to conspiring to commit securities fraud and wire fraud on May 25, 2017, and was sentenced on November 7, 2017, to 30 months in prison by the Honorable Denny Chin, a judge on the United States Court of Appeals for the Second Circuit who was sitting by designation in the Southern District of New York. 

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In addition to the prison sentence, GERACI, 62, was sentenced to three years of supervised release.  The Court further ordered GERACI to forfeit a sum of $1,098,971.38 and to pay restitution to the victims of the offense.

Mr. Berman praised the investigative work of the United States Postal Inspection Service and thanked the Securities and Exchange Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Jared Lenow and Drew Skinner are in charge of the prosecution.

John C. Demers, the Assistant Attorney General for National Security and Geoffrey S. Berman, the U.S. Attorney for the Southern District of New York, announced today that Jesus Wilfredo Encarnacion, aka “Jihadistsoldgier,” “Jihadinhear,” “Jihadinheart,” “Lionofthegood,” pleaded guilty to attempting to provide material support to Lashkar e-Tayyiba (LeT), a Pakistan-based designated foreign terrorist organization responsible for multiple high-profile attacks, including the infamous Mumbai attacks in November 2008.  Encarnacion pleaded guilty today before United States District Judge Ronnie Abrams.

“Encarnacion admitted to attempting to travel to Pakistan to join a foreign terrorist organization and conspired over the internet with another individual, who’s already plead guilty, to provide that organization with material support,” said Assistant Attorney General for National Security John C. Demers.  “The National Security Division is committed to identifying and holding accountable those who seek to join and support designated foreign terrorist organizations.”

 “As he admitted today, Jesus Encarnacion plotted to travel abroad to join and train with the terrorist organization Lashkar e-Tayyiba, infamous worldwide for their brutal jihadist murder of innocent civilians, and to carry out shootings, bombings, and beheadings on their behalf,” said U.S. Attorney Geoffrey S. Berman for the Southern District of New York.  “Thanks to the excellent work of the FBI and the NYPD, Encarnacion was intercepted before his deadly plot could take flight, and he now awaits sentencing for his crime.”

According to the criminal Complaint, Indictment, and other documents filed in the case, as well as statements made during the plea proceeding:

In November 2018, Encarnacion expressed his desire to join a terrorist group in an online group chat, where he met another individual (CC-1).  CC-1 introduced Encarnacion to an individual who, unbeknownst to CC-1 or Encarnacion, was in fact an undercover FBI employee (UC-1).  Encarnacion repeatedly expressed, in the course of recorded communications through a social media service with CC-1 and through an encrypted messaging service with UC-1, his allegiance to and support for LeT, which, since approximately 2001, has been designated as a Foreign Terrorist Organization by both the United States Secretary of State and the Immigration and Nationality Act. 

Over several months, Encarnacion discussed his desire and plans to join LeT overseas so that he could receive training and participate in violent acts of terrorism.  For example, Encarnacion told UC-1 that he was “ready to kill and die in the name of Allah” and sought UC-1’s assistance to help Encarnacion travel abroad to serve as an “executioner” for LeT, stating, “I want to execute.  I want to behead.  Shoot.”  Encarnacion further stated that he aspired to commit terrorist attacks (“a bombing and shooting”) in the United States, but lacked “guidance” and “guns” to do so.

By early 2019, Encarnacion and UC-1 agreed on a plan that Encarnacion believed would allow him to join LeT in Pakistan.  Encarnacion told UC-1 that he had made arrangements to travel to a particular city in Europe (the “European City”), as the first step in traveling to Pakistan to join LeT.  Encarnacion purchased an airline ticket for a flight scheduled to depart on Feb. 7, 2019, from John F. Kennedy International Airport (JFK Airport) to the European City.  On Feb. 7, 2019, Encarnacion traveled to JFK Airport, where he was arrested by the FBI after he attempted to board that flight.

Encarnacion, 30, of New York, New York, pled guilty to one count of attempting to provide material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Encarnacion is scheduled to be sentenced by Judge Abrams on April 24, 2020, at 11:30 a.m.

Assistant Attorney General Demers and Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department. Assistant Attorney General Demers and  Mr. Berman the New York Office of U. S. Customs and Border Protection.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, the Assistant Attorney General for National Security, announced today that JESUS WILFREDO ENCARNACION, a/k/a “Jihadistsoldgier,” “Jihadinhear,” “Jihadinheart,” “Lionofthegood,” pled guilty to attempting to provide material support to Lashkar e-Tayyiba (“LeT”), a Pakistan-based designated foreign terrorist organization responsible for multiple high-profile attacks, including the infamous Mumbai attacks in November 2008.  ENCARNACION pled guilty today before United States District Judge Ronnie Abrams.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Jesus Encarnacion plotted to travel abroad to join and train with the terrorist organization Lashkar e-Tayyiba, infamous worldwide for their brutal jihadist murder of innocent civilians, and to carry out shootings, bombings, and beheadings on their behalf.  Thanks to the excellent work of the FBI and the NYPD, Encarnacion was intercepted before his deadly plot could take flight, and he now awaits sentencing for his crime.”

Assistant Attorney General for National Security John C. Demers said:  "Encarnacion admitted to attempting to travel to Pakistan to join a foreign terrorist organization and conspired over the internet with another individual, who’s already pled guilty, to provide that organization with material support.  The National Security Division is committed to identifying and holding accountable those who seek to join and support designated foreign terrorist organizations."

According to the criminal Complaint, Indictment, and other documents filed in the case, as well as statements made during the plea proceeding:

In November 2018, ENCARNACION expressed his desire to join a terrorist group in an online group chat, where he met another individual (“CC-1”).  CC-1 introduced ENCARNACION to an individual who, unbeknownst to CC-1 or ENCARNACION, was in fact an undercover FBI employee (“UC-1”).  ENCARNACION repeatedly expressed, in the course of recorded communications through a social media service with CC-1 and through an encrypted messaging service with UC-1, his allegiance to and support for LeT, which, since approximately 2001, has been designated as a Foreign Terrorist Organization by both the United States Secretary of State and the Immigration and Nationality Act. 

Over several months, ENCARNACION discussed his desire and plans to join LeT overseas so that he could receive training and participate in violent acts of terrorism.  For example, ENCARNACION told UC-1 that he was “ready to kill and die in the name of Allah” and sought UC-1’s assistance to help ENCARNACION travel abroad to serve as an “executioner” for LeT, stating, “I want to execute.  I want to behead.  Shoot.”  ENCARNACION further stated that he aspired to commit terrorist attacks (“a bombing and shooting”) in the United States, but lacked “guidance” and “guns” to do so.

By early 2019, ENCARNACION and UC-1 agreed on a plan that ENCARNACION believed would allow him to join LeT in Pakistan.  ENCARNACION told UC-1 that he had made arrangements to travel to a particular city in Europe (the “European City”), as the first step in traveling to Pakistan to join LeT.  ENCARNACION purchased an airline ticket for a flight scheduled to depart on February 7, 2019, from John F. Kennedy International Airport (“JFK Airport”) to the European City.  On February 7, 2019, ENCARNACION traveled to JFK Airport, where he was arrested by the Federal Bureau of Investigation (“FBI”) after he attempted to board that flight.

*                      *                      *

ENCARNACION, 30, of New York, New York, pled guilty to one count of attempting to provide material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

ENCARNACION is scheduled to be sentenced by Judge Abrams on April 24, 2020, at 11:30 a.m.

Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department.  Mr. Berman also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, as well as the New York Office of U. S. Customs and Border Protection.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), Keith A. Bonanno, Special Agent in Charge of the Department of Justice Office of the Inspector General (“DOJ OIG”) Cyber Investigations Office, and Guido Modano, Special Agent in Charge of the DOJ OIG New York Field Office, announced today the arrest and filing of charges against FREDERICK L. SCHEININ.  The Complaint charges that between October 2019 and January 2020, SCHEININ attempted to produce child pornography and entice a minor to have sex.  SCHEININ was arrested yesterday and will be presented later today before U.S. Magistrate Judge Katharine H. Parker in Manhattan federal court.

U.S. Attorney Geoffrey S. Berman said:  “As a diversion investigator at the DEA, Frederick Scheinin’s foremost responsibility was to protect the public from illegally diverted drugs.  Instead of fulfilling this worthy mission, Scheinin allegedly spent months attempting to prey on a 14-year-old boy.  This arrest exemplifies that no one is above the law.  Our law enforcement partners will continue to bring all necessary tools to bear to apprehend individuals who wish to do harm to young children, no matter who they are.”

NYPD Commissioner Dermot Shea said:  “I want to commend the U.S. Attorney and our federal partners who, together with our NYPD investigators, work every day to protect the innocent against such alleged reprehensible predators.  I am proud of the undercover work in this case, which has now led to criminal charges against a law enforcement officer who allegedly betrayed his sacred oath.”

DOJ OIG Cyber Investigations Office Special Agent in Charge Keith A. Bonanno said:   “The OIG and our law enforcement partners will thoroughly investigate allegations of abuse or exploitation of children by DOJ employees.  Those who are found guilty of this type of criminal behavior will be brought to justice.”

Up until the time of his arrest, SCHEININ was a diversion investigator in the New York Field Office of the Drug Enforcement Administration (“DEA”).  According to the allegations in the Complaint filed in Manhattan federal court today[1]:

Between October 2019 and January 2020, SCHEININ used a multimedia messaging application on his cellphone to communicate with an undercover law enforcement officer (“UC‑1”) who was posing as a 14-year-old boy.  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.  The Complaint further alleges that SCHEININ attempted to arrange a meeting with UC-1 at which SCHEININ planned to have sex with UC-1.  Law enforcement arrested SCHEININ yesterday in New York, New York, at a location where SCHEININ said he would meet UC-1.  SCHEININ was in possession of condoms and lubricant at the time of his arrest. 

SCHEININ, 29, of Sunnyside, New York, is charged with one count of attempted production of child pornography, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison, and one count of attempted enticement of a minor, which carries a mandatory minimum sentence of 10 years in prison and maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

*                      *                     *           

Mr. Berman praised the outstanding investigative work of the NYPD and the DOJ OIG New York Field Office and Cyber Investigations Office. 

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

 

 

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

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that CHRISTOPHER COLLINS, who represented the 27th District of New York as a member of the U.S. House of Representatives, was sentenced to 26 months in prison today by U.S. District Judge Vernon S. Broderick for participating in a scheme to commit insider trading and for making false statements to federal law enforcement agents when interviewed about his conduct. 

U.S. Attorney Geoffrey S. Berman said:  “Former New York Congressman and Innate board member Christopher Collins received confidential, nonpublic information that one of Innate’s drugs in development had just failed a clinical trial.  Moments later, from the White House lawn, Collins notified his son Cameron, so that he could trade the stock ahead of the public announcement and avoid taking a substantial loss on the stock.  He then lied to the FBI when asked about his conduct.  Collins’s greed and disregard for the law have now led to a criminal conviction for insider trading and lying to the FBI, his resignation from Congress, and over two years in federal prison.  Lawmakers bear the profound privilege and responsibility of writing and passing laws, but equally as important, the absolute obligation of following them.  Collins’s hubris is a stark reminder that the people of New York can and should demand more from their elected officials, and that no matter how powerful, no lawmaker is above the law.”

The following facts are based on the allegations contained in the Superseding Indictment and statements made in related court filings and proceedings:

The Insider Trading Scheme

The Scheme

            In or about June 2017, CHRISTOPHER COLLINS, who, in addition to serving on the board of directors of Innate Immunotherapeutics (“Innate”), an Australian biotechnology company, was also one of Innate’s largest shareholders, participated in a scheme to commit insider trading.  Specifically, on or about June 22, 2017, CHRISTOPHER COLLINS learned that MIS416 – a multiple sclerosis drug that Innate was developing – had failed a critical drug trial that was meant to determine the drug’s clinical efficacy (the “Drug Trial”).  The negative Drug Trial results were highly confidential, and, as an insider who owed duties of trust and confidence to Innate, CHRISTOPHER COLLINS was obligated to keep the Drug Trial results secret until Innate publicly released them.  Instead, in breach of those duties, CHRISTOPHER COLLINS tipped his son, Cameron Collins, who was also a substantial Innate shareholder, so that Cameron Collins could make timely trades and tip others before Innate publicly released the Drug Trial results.  Cameron Collins traded on the inside information and passed it to Stephen Zarsky, the father of his fiancée, as well as to three individuals not named in the Superseding Indictment (“Individual-1,” “Individual-2,” and “Individual-6”), so that they could utilize the information for the same purpose.  Zarsky, in turn, traded on the information and used it to tip three more individuals not named in the Superseding Indictment (“Individual-3,” “Individual-4,” and “Individual-5,”) so that they too could engage in timely trades in Innate stock.  All of the trades preceded the public release of the negative Drug Trial results.

In total, these trades allowed Cameron Collins and Zarsky, and Individual-1 through Individual-6, to avoid over $768,000 in losses that they would have otherwise incurred if they had sold their stock in Innate after the Drug Trial results became public. 

The Drug Trial Results

In or about October 2014, Innate initiated a Phase 2B clinical trial of its primary drug, MIS416.  Successful completion of the Drug Trial was a necessary prerequisite to the commercialization of MIS416.  Because Innate had no other significant products in development, its stock price was tied to the success of MIS416.

The Drug Trial was widely expected to be completed around the summer of 2017.  For example, on or about June 9, 2017, Innate’s chief executive officer (“CEO”) sent various individuals, including CHRISTOPHER COLLINS, an email stating that “the delivery date for [the] review and ‘verdict’” of the Drug Trial “will [] occur at COB on US Thursday June 22nd.”  As the summer progressed, individuals within Innate remained optimistic that MIS416’s Drug Trial results would be positive.  The initial Drug Trial results were made available by trial administrators to Innate’s CEO on June 22, 2017.  These results established that MIS416 lacked therapeutic value in the treatment of multiple sclerosis.  The results were not publicly released at that time.  Instead, they were released publicly on June 26, 2017, after the U.S. markets had closed (the “Public Announcement”).  Innate’s stock price subsequently crashed, dropping 92% on the first trading day following the Public Announcement. 

Dissemination of the Drug Trial Results

On or about June 22, 2017, at approximately 6:55 p.m., Innate’s CEO sent an email describing the Drug Trial results to the company’s board of directors, including CHRISTOPHER COLLINS.  The email explained to Innate’s board of directors for the first time that the Drug Trial had been a failure.  The email began, in part, “I have bad news to report,” and continued to explain that “the top line analysis of the ‘intent to treat’ patient population (ie every subject who was successfully enrolled in the study) would pretty clearly indicate[s] ‘clinical failure.’”  The email continued, “Top-line 12-month data . . . show no clinically meaningful or statistically significant differences in [outcomes] between MIS416 and placebo,” and concluded by stating, “No doubt we will want to consider this extremely bad news . . . .” 

At the time CHRISTOPHER COLLINS received this email, he was attending the Congressional Picnic at the White House.  At 7:10 p.m., CHRISTOPHER COLLINS replied to the email, stating, in part, “Wow.  Makes no sense.  How are these results even possible???”  After responding to the Innate CEO’s email, CHRISTOPHER COLLINS called his son, Cameron Collins.  They traded six missed calls between 7:11 p.m. and 7:15 p.m.  At 7:16 p.m., CHRISTOPHER COLLINS and Cameron Collins spoke for more than six minutes.  During that six-minute phone call, CHRISTOPHER COLLINS told Cameron Collins, in sum and substance, that MIS416 had failed the Drug Trial.

Trading and Tipping by CAMERON COLLINS and ZARSKY

Cameron Collins began placing orders to sell his Innate shares the morning after he received inside information from CHRISTOPHER COLLINS.  Between the morning of Friday, June 23, 2017, and the close of the market on Monday, June 26, 2017, Cameron Collins sold approximately 1,391,500 shares of Innate stock.  These sales allowed Cameron Collins to avoid approximately $570,900 in losses. 

Furthermore, after learning the Drug Trial results from CHRISTOPHER COLLINS, on or about the night of June 22, 2017, Cameron Collins provided the Drug Trial results to at least the following three sets of individuals so that they could trade in advance of the Public Announcement:  (1) his fiancée, Individual-1; (2) Zarsky and Zarsky’s wife, Individual-2; and (3) Cameron Collins’s friend, Individual-6.  Collectively, these individuals avoided approximately $186,620 in losses as a result of their trading on inside information. 

On or about the morning of June 23, 2017, Zarsky provided the negative Drug Trial results that he had learned from Cameron Collins and Individual-1 to at least the following individuals, among others, or otherwise caused them to trade or attempt to trade in advance of the Public Announcement: (1) his brother, Individual-3; (2) his sister, Individual-4; and (3) his longstanding friend, Individual-5.  Collectively, these individuals avoided approximately $10,900 in losses as a result of their trading on inside information.

False Statements to the FBI

On or about April 25, 2018, special agents from the Federal Bureau of Investigation (“FBI”) separately interviewed CHRISTOPHER COLLINS, Cameron Collins and Zarsky.  During these interviews, and as detailed in the Superseding Indictment, CHRISTOPHER COLLINS, Cameron Collins and Zarsky made false statements to the FBI to cover up their participation in the insider trading scheme. 

*                      *                      *

In addition to the prison term, CHRISTOPHER COLLINS was sentenced to one year of supervised release and ordered to pay a fine of $200,000.    

Mr. Berman praised the outstanding work of the FBI 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 U.S. Attorneys Scott Hartman, Max Nicholas, and Damian Williams are in charge of the prosecution.  

Geoffrey S. Berman, 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 complaint charging RICHARD WONG, GABRIELA BRATKOVICS, and EVAN BROWN with honest services wire fraud, bank fraud, bribery of a financial institution employee, and conspiracy, for their role in a kickback scheme designed to compensate WONG, an employee of a large financial institution, for ensuring that his employer continued to utilize the services of the information technology staffing company controlled by BRATKOVICS and BROWN.  WONG was arrested yesterday and presented before United States Magistrate Judge Katharine H. Parker.  BRATKOVICS and BROWN were arrested today and are expected to be presented before Magistrate Judge Parker this afternoon.

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

From 2011 through July 2018, WONG worked for a large financial institution (“Bank-1”) in procurement and was responsible for, among other things, managing relationships with certain vendors, negotiating contracts, reviewing requests for proposals, and requesting quotes for services.  Beginning in 2013, WONG was responsible for supervising Bank-1’s relationship with a company that provides temporary information technology staffing to corporate clients (“Company-1”).  BRATKOVICS and BROWN are the co-founders of Company-1; BRATKOVICS is the chief executive officer of Company-1, and BROWN is the chief financial officer of Company-1. 

Between in or about July 2013 and in or about December 2018, Bank-1 paid Company-1 in excess of $8.4 million for IT staffing services.  Between in or about January 2014 and in or about December 2018, BRATKOVICS and BROWN, acting on behalf of Company-1, caused approximately $891,000 to be transferred to WONG, in the form of cash, checks, and wire transfers; these payments were kickbacks, designed to compensate WONG for assisting Company-1 in securing Bank-1’s business and providing Company-1 with information about Bank-1’s procurement process.  Indeed, the total amount of each kickback payment was tied to the number of hours of Company-1’s services Bank-1 utilized during a particular time period, typically each month.

WONG, BRATKOVICS, and BROWN began discussing possible kickbacks approximately three months after Company-1 began providing services to Bank-1.  On or about October 8, 2013, WONG sent an email to BROWN, writing, in substance and in part, “Send me your spreadsheet on the 5 resources I gotten for you. . . .  And your proposal. . . .  Let’s get on the same page[.]”  Approximately two months later, on or about December 9, 2013, WONG emailed BROWN, copying BRATKOVICS, writing, in substance and in part, “Can you guys send me what you have so I can see the data . . . not saying I will want the money now . . . but want to see how it looks likes [sic][.]”

On multiple occasions, beginning in or about January 2014, BRATKOVICS, BROWN, and WONG exchanged emails discussing spreadsheets that appear to detail the names and hours worked by Company-1 staffers at Bank 1 for specified time periods.  At the bottom of the spreadsheets was a calculation that appears to determine how much Company-1 is to pay WONG in kickbacks for that period.  Throughout the period in which WONG was receiving kickbacks from Bank-1, Company-1 not only continued to provide services to Bank-1, but WONG also repeatedly provided BRATKOVICS and BROWN with information about Bank-1’s internal discussions regarding use of Company-1’s services by blind carbon copying them on emails. 

On or about April 30, 2018, WONG was notified by Bank-1 that his position had been eliminated.  Bank-1 continued to employ the services of Company-1 until in or about December 2018.  WONG continued to receive payments from accounts controlled by BRATKOVICS and Company-1 even after his employment was terminated, until in or about December 2018.

*                *                *

A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI in this case.

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

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

 

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[1] As the introductory phase 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Eduardo A. Chavez, Special Agent in Charge of the Dallas Division of the U.S. Drug Enforcement Administration (“DEA”), announced today the unsealing of four indictments charging MIGUEL CESPEDES, OMAR MOGOLLON, LUIS FELIPE GONZALEZ ARCILA, IVAN ROJAS ACOSTA, ALEX BARRERA FORERO, and DAVID ORTIZ VILLAMIZAR, six Colombian nationals, as well as AMIT AGARWAL, an Indian national who operates a wholesale consumer electronics business in East Hanover, New Jersey, for offenses relating to various international money laundering schemes and the operation of unlicensed money transmission businesses. CESPEDES, MOGOLLON, GONZALEZ, ROJAS, BARRERA, and ORTIZ were arrested in Colombia, and the United States Government will be seeking their extradition to the United States.  AGARWAL was arrested on December 20, 2019, at Newark International Airport.    AGARWAL’s case is assigned to United States District Judge Paul A. Engelmeyer; CESPEDES’s case is assigned to United States District Judge Gregory H. Woods; BARRERA and ORTIZ’s case is assigned to United States District Judge Gregory H. Woods; and MOGOLLON, GONZALEZ, and ROJAS’s case is assigned to United States District Judge J. Paul Oetken.

U.S. Attorney Geoffrey S. Berman said:  “The illegal drug trade depends on shadow financial networks to move drug traffickers’ profits into our banking system and across our borders.  As alleged, these defendants ran those types of networks in both the United States and Colombia.  Today’s arrests demonstrate that this Office, along with our partners here and abroad, will bring the operators of such networks to justice wherever in the world they may hide.”

DEA Special Agent in Charge Eduardo A. Chavez said:  “Today’s arrests serve as notice to those who participate in any aspect of the global drug trade – whether it be selling drugs on a street corner or moving illicit profits through our banking system – the DEA along with our global partners, will hold you responsible and bring you to justice.”

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

From at least in or about June 2018 through at least in or about 2019, MIGUEL CESPEDES, OMAR MOGOLLON, LUIS FELIPE GONZALEZ ARCILA, IVAN ROJAS ACOSTA, ALEX BARRERA FORERO, DAVID ORTIZ VILLAMIZAR, and AMIT AGARWAL all participated in schemes to launder funds from locations throughout the United States to recipients in, among other places, Colombia.  Among other things, the purpose of the schemes was to enable clients with cash located in the United States to transfer the value of that cash to other countries, principally Colombia, without the need for physically transporting United States currency across an international border or directly depositing large amounts of cash into the legitimate financial system.

To effectuate the scheme, “clients,” i.e., the owners of funds located in the United States, utilized the services of money brokers operating primarily in Colombia (the “Money Brokers”).  The Money Brokers offered “contracts” typically requiring (a) the pick-up of United States currency from couriers throughout the United States and the receipt of international wires in the United States, and (b) the delivery of a corresponding amount of pesos in Colombia to the Money Brokers.  In exchange for successfully delivering on a contract, the Money Brokers earned a commission, taken from the pesos received by them in Colombia.  The person(s) with whom the Money Brokers contracted to arrange for the pick-up and receipt of United States currency also received a commission taken from the pesos received by the Money Brokers in Colombia.  Although the payment of commissions from the funds collected pursuant to a contract meant that the clients did not receive the full value of the funds that the clients owned in the United States, this scheme enabled the clients to avoid the risks of having large quantities of cash detected at international borders and to avoid triggering financial reporting requirements.

CESPEDES, MOGOLLON, GONZALEZ, ROJAS, BARRERA, and ORTIZ engaged in the scheme as Money Brokers.  As Money Brokers, working at times independently and at times together, they offered and executed upon multiple contracts requiring the pick-up of funds throughout the United States, and the delivery of a corresponding value of pesos to them in Colombia.  In exchange for their work as Money Brokers, they received commissions taken from the pesos delivered to them in Colombia, as did the individuals with whom they contracted.

AGARWAL was the chief executive officer of a consumer electronics products business based in East Hanover, New Jersey (the “Agarwal Electronics Business”).  Among other things, the Agarwal Electronics Business exported consumer electronics to purchasers throughout the world, including purchasers located in Colombia.  In connection with its business activities, the Agarwal Electronics Business maintained a bank account in the United States, controlled and operated by AGARWAL (the “Agarwal Bank Account”). 

Typically, as part of the scheme, the funds collected in the United States pursuant to contracts offered by CESPEDES, MOGOLLON, GONZALEZ, ROJAS, BARRERA, and ORTIZ were deposited in a bank account located in the United States (“Bank Account-1”), and then transferred to the Agarwal Bank Account.  Pursuant to the contracts offered by the Money Brokers, AGARWAL agreed to accept these funds into the Agarwal Bank Account, and AGARWAL also agreed to accept funds into the Agarwal Bank Account that had been wired to Bank Account-1 from foreign locations, including Mexico.  AGARWAL understood these funds to be narcotics proceeds and sought to repatriate them to South America while avoiding the risk associated with having large quantities of cash detected at international borders, and avoiding the currency reporting requirements imposed by United States laws.

 Upon receiving confirmation that funds collected pursuant to a Money Broker contract issued by CESPEDES, MOGOLLON, GONZALEZ, ROJAS, BARRERA, or ORTIZ were available for deposit into the Agarwal Bank Account, AGARWAL arranged for the export of a roughly equivalent value of consumer electronics products to certain consumer electronic product suppliers located in Colombia (the “Colombian Electronics Suppliers”).  The Colombian Electronics Suppliers, in turn, arranged to pay for the products by delivering pesos to an individual in Colombia, who then delivered those funds to the Money Brokers.  In this way, funds collected in the United States were remitted to Colombia, without requiring that they be reported, declared, or smuggled over international borders.

During the execution of the scheme, federal law enforcement agents working in an undercover capacity, and persons operating at the direction of federal law enforcement agents, informed AGARWAL that the funds he agreed to receive in the Agarwal Bank Account from Bank Account-1, pursuant to the scheme, represented the proceeds of narcotics trafficking activity.  AGARWAL, however, continued to accept the funds into the Agarwal Bank Account while facilitating the Money Broker contracts.   

*                      *                     *

AGARWAL is charged in United States v. Amit Agarwal, 19 Cr. 838, with one count of money laundering, which carries a maximum sentence of 20 years in prison.

CESPEDES is charged in United States v. Miguel Cespedes, 19 Cr. 839, with one count of operation of an unlicensed money transmission business, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.

MOGOLLON, GONZALEZ, and ROJAS are charged in United States v. Omar Mogollon, et al., 19 Cr. 837, with conspiracy to operate an unlicensed money transmission business and operation of an unlicensed money transmission business, each of which carries a maximum sentence of five years in prison. MOGOLLON is also charged with one count of international money laundering, which carries a maximum sentence of 20 years in prison.  

BARRERA and ORTIZ are charged in United States v. Alex Barrera Forero and David Ortiz Villamizar, 19 Cr. 840, with one count of conspiracy to operate an unlicensed money transmission business, and one count of operation of an unlicensed money transmission business, each of which carries a maximum sentence of five years in prison.

The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the respective judges. 

Mr. Berman praised the investigative work of the DEA’s Dallas Field Division’s Enforcement Group 4 and the DEA’s Bogota Country Office, and thanked the authorities in Colombia, and the Justice Department’s Office of International Affairs of the Department’s Criminal Division for their assistance. 

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Tara M. La Morte and Cecilia E. Vogel are in charge of the prosecution.

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

 

---

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOEL DAVIS pled guilty to enticing a child to engage in illegal sexual activity, possession of child pornography, and distribution and receipt of child pornography.  DAVIS faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison.  DAVIS pled guilty today before United States District Judge George B. Daniels.

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Joel Davis arranged to meet a 15-year-old boy for sex, and engaged in illegal sexual activity with the 15-year-old.  He also possessed child pornography that included children under the age of 12.  Davis rightly faces a lengthy prison sentence for victimizing children.”

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 cellphone to arrange a meeting to engage in sexual activity with a 15-year-old boy and in fact met with the 15-year-old boy and engaged in illegal sexual activity.  In addition, between at least in or about May 2018 and June 2018, DAVIS possessed images and videos of child pornography, including images of prepubescent minors who were not yet 12 years old, and received and distributed material containing child pornography using a cellphone.

*                      *                      *

DAVIS, 24, of New York, New York, pled guilty to one count of enticement of a minor under the age of 18 to engage in sexual activity, which carries a mandatory minimum term of 10 years in prison and a maximum of life in prison; one count of possession of child pornography, which carries a mandatory minimum term of five years in prison and a maximum of 20 years in prison; and one count of receipt and distribution of child pornography, which carries a maximum term of imprisonment 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.

DAVIS is scheduled to be sentenced by Judge Daniels on May 7, 2020, at 10:00 a.m.

Mr. Berman praised the outstanding work of the FBI in this investigation.

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.

Up for auction, a rare 2011 Ferrari 599 SA Aperta that is one of only 80 such cars that have ever been made.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that four exotic sport and track cars seized from convicted payday lender SCOTT TUCKER will be auctioned off on February 5, 2020.  The cars were seized from and forfeited by TUCKER in connection with his convictions for operating a $3.5 billion unlawful internet payday lending enterprise that systematically evaded state laws for over 15 years in order to charge illegal interest rates as high as 1000% on loans.  Tucker and his convicted co-defendant, TIMOTHY MUIR, an attorney, lied to millions of customers regarding the true cost of their loans to defraud them out of hundreds, and in some cases, thousands of dollars each.  Further, as part of their multi-year effort to evade law enforcement, the defendants formed sham relationships with Native American tribes and laundered the billions of dollars they took from their customers through nominally tribal bank accounts to hide TUCKER’s ownership and control of the business.  TUCKER’s fraudulent loans were issued to more than 4.5 million people in all fifty states, including more than 250,000 people in New York, many of whom were struggling to pay basic living expenses. 

U.S. Attorney Geoffrey S. Berman said:  “The auction of convicted payday loan fraudster Scott Tucker’s four exotic cars is significant.  The Ferrari and Porsche supercars offered for sale are just the most visible and gaudy signs of Tucker’s greed, luxury playthings bought with money stolen from victims who were often living hand to mouth, people who took out payday loans to buy food for their families or pay medical bills.  We hope this auction generates proceeds sufficient to at least partially compensate the victims of Tucker’s multibillion-dollar fraud scheme.  This Office will continue to aggressively seek compensation for victims of predatory criminals.”

The auction of the cars will feature a rare 2011 Ferrari 599 SA Aperta that is one of only 80 such cars that have ever been made (pictured above), a 700-horsepower 2011 Ferrari 599xx track car, as well as two Porsche Supercars, a 2011 Porsche 911 GT2 RS and a 2005 Porsche Carrera GT.

The live in-person and simulcast auction will take place at the world-class motorsports Circuit of The Americas on February 5, 2020.  Auction details, including videos of each car, can be found at https://www.cwsmarketing.com/?p=9739.  Proceeds of the sales of the cars will be pooled with monies recovered by the Federal Trade Commission (“FTC”), which successfully brought a related civil action against TUCKER and various entities involved in the illegal payday lending scheme, and distributed to victims by the FTC.  Victims seeking restitution are encouraged to visit www.ftc.gov/amg for updated information regarding the FTC’s redress program and to sign up to receive email updates.  To date, more than $500 million has been returned to victims of TUCKER’s crimes.

*                      *                     *

On October 13, 2017, TUCKER and MUIR were convicted on all fourteen counts against them after a five-week jury trial before U.S. District Judge P. Kevin Castel.  On January 5, 2018, TUCKER was sentenced to 200 months in prison, and MUIR was sentenced to 84 months in prison.

Mr. Berman praised the outstanding investigative work of the St. Louis Field Office of the Internal Revenue Service, Criminal Investigation.  Mr. Berman also thanked the Criminal Investigators at the United States Attorney’s Office, the Federal Bureau of Investigation, and the FTC for their assistance with the case.

The prosecution is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Sagar K. Ravi and Hagan Scotten, and are in charge of the prosecution.

 

 

Audrey Strauss, Attorney for the United States acting under authority conferred by 28 U.S.C. § 515, announced today that TELEMAQUE LAVIDAS was convicted after a one-week trial of illegally tipping his best friend and co-defendant Georgios Nikas with inside information he obtained from his father, a member of the board of directors of a pharmaceutical company. 

Deputy U.S. Attorney Audrey Strauss said:  “As the jury concluded, Telemaque Lavidas was a key player in a long-running international insider trading scheme.  Three times he received insider information from his father about Ariad Pharmaceuticals and passed it on to his friend Georgios Nikas, a criminal pipeline that earned its participants more than $15 million in illicit profits.  Lavidas now awaits sentencing for his crimes.”  

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

Athanase Lavidas, the father of TELEMAQUE LAVIDAS, was a prominent Greek businessman and was a member of the board of directors of Ariad Pharmaceuticals, Inc. (“Ariad”), a pharmaceutical company headquartered in Cambridge, Massachusetts, that developed and marketed a leukemia medication named Iclusig.  In violation of his duties of confidentiality to Ariad, Athanase Lavidas provided TELEMAQUE LAVIDAS with tips about three major corporate developments at Ariad.  On each of those occasions, TELEMAQUE LAVIDAS provided that inside information to his best friend Georgios Nikas (“Nikas”) so that Nikas could make timely, profitable trades ahead of Ariad’s public announcements.

The first tip was in October 2013, when Athanase Lavidas learned that the U.S. Food and Drug Administration (“FDA”) was concerned about potential adverse health issues for patients from Iclusig.  Athanase Lavidas contacted TELEMAQUE LAVIDAS to pass this secret information, and TELEMAQUE LAVIDAS passed that tip to Nikas, who had previously amassed a large long position in Ariad securities.  After receiving the inside information from TELEMAQUE LAVIDAS, Nikas sold his Ariad securities and took a substantial short position.  When Ariad publicly announced the patient safety issues, its stock declined by over 65% and Nikas made over $3.2 million in profits and avoided almost $800,000 in losses.  Ariad discontinued sales of Iclusig later in October.

The second tip was in November and December 2013, when Athanase Lavidas learned that Ariad and the FDA were making significant progress toward returning Iclusig to the market.  Athanase Lavidas passed this secret information to TELEMAQUE LAVIDAS, who in turn passed the tips to Nikas.  Nikas bought Ariad securities based on these tips, and when Ariad publicly announced at the end of December that Iclusig was returning to the market, its stock rose and Nikas made over $1.3 million in profits.

The third tip was in July and August 2015, when Ariad received an unsolicited takeover offer from another pharmaceutical company.  Again, Athanase Lavidas learned of the offer in his capacity as a board member, and informed TELEMAQUE LAVIDAS, who in turn passed the tip to Nikas.  Nikas again bought Ariad securities based on this tip, and when a news article was published in late August reporting on the takeover offer, Ariad’s stock rose and Nikas made over $2 million in profits.

Nikas also passed the tips he received from TELEMAQUE LAVIDAS to a series of stock traders.  In total, Nikas and the traders he tipped earned over $15 million in profits from the inside information that TELEMAQUE LAVIDAS provided.

*                      *                      *

TELEMAQUE LAVIDAS, 39, of New York, New York, and Greece, was convicted of one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud and securities fraud, three counts of substantive securities fraud under Title 15, United States Code, Sections 78j(b) and 78ff, one count of substantive wire fraud, and one count of substantive securities fraud under Title 18, United States Code, Section 1348.  The conspiracy counts carry maximum prison terms of five and 20 years, respectively; the substantive wire fraud and Title 15 securities fraud counts each carry a maximum sentence of 20 years.  The substantive Title 18 securities fraud count carries a maximum sentence of 25 years.  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.

TELEMAQUE LAVIDAS is scheduled to be sentenced before Judge Cote on April 17, 2020, at 2:00 p.m.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and also thanked the SEC.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Dermot F. Shea, the Commissioner of the New York City Police Department (“NYPD”), announced the Indictment of BRYANT BROWN, a/k/a “Trigga,” for the murder of Albendris Nunez, 21, in the Bronx, New York, on December 20, 2015.  BROWN was taken into federal custody earlier today and will be presented this afternoon before U.S. Magistrate Judge Katherine H. Parker.  This case is assigned to U.S. District Judge Paul A. Engelmayer.    

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Albendris Nunez was 21 years old when he was murdered in Devoe Park.  As alleged in the Indictment, Bryant Brown was responsible for that murder.  Thanks to our outstanding partners at the NYPD, Brown now faces federal charges for this terrible crime.”

Police Commissioner Dermot Shea said:  “Early on a Sunday, Albendris Nunez was fatally shot on the street outside a Bronx park.  Four years later, our police officers and detectives, working with our law enforcement partners, have brought justice and proven the effectiveness of our unrelenting focus on fighting violent crime."

According to the allegations in the Indictment[1]:

On or about December 20, 2015, BROWN attempted to rob Nunez in vicinity of Devoe Park in the Bronx, New York, and in the course of that robbery Nunez was murdered.

*                      *                     *

BROWN, 25, of the Bronx, New York, is charged with one count of attempted robbery, which carries a maximum penalty of 20 years in prison, and one count of using a firearm to commit murder during a crime of violence, which carries a maximum penalty of death or life in prison, and a mandatory minimum sentence of five years in prison.  The maximum and minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding work of the NYPD.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jamie Bagliebter and Mollie Bracewell are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LORRAINE SHANLEY was sentenced today to two years in prison for bank fraud and subscribing to false and fraudulent individual income tax returns, in connection with fraudulently obtaining over $400,000 from a charity providing support to the families of New York City Police Department (“NYPD”) officers killed in the line of duty.  SHANLEY pled guilty on September 20, 2019, before U.S. District Judge Sidney H. Stein, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “With every paycheck, thousands of New York City Police Department officers and employees donated to charity to support the surviving spouses and children of officers killed in the line of duty.  Yet for years, Lorraine Shanley exploited that generosity, using her position as the charity’s volunteer treasurer to steal over $400,000 for herself and her family.  Today’s sentence sends a clear message that those who commit such fraud will face serious consequences.”

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

From 2010 to 2017, SHANLEY served as a volunteer treasurer for Survivors of the Shield, a charity that provides financial support to the families of NYPD officers killed in the line of duty.  During that time period, Survivors of the Shield received approximately $1.9 million in donations, over 99% of which came from NYPD employees, from an average of 5,500 NYPD employees per year. 

SHANLEY was an authorized signatory on Survivors of the Shield’s bank account and credit card, and was authorized to use them for Survivor of the Shield’s operations.  But SHANLEY also used the bank account and credit card to benefit herself and her family members.  From 2010 to 2017, SHANLEY fraudulently obtained over $400,000 from Survivors of the Shield’s coffers, taking money for herself and relatives, and paying for various personal expenditures such as landscaping, dental bills, event tickets, airfare, hotels, and shopping at high-end retailers.

*                *                *

In addition to the prison term, SHANLEY, 69, of Staten Island, New York, was sentenced to three years of supervised release, and was ordered to forfeit $406,851 and to pay restitution of $406,851 to Survivors of the Shield, including $290,000 to be paid within 30 days of today's judgment, and $103,983 to the IRS.

Mr. Berman thanked the Internal Revenue Service and special agents with the U.S. Attorney’s Office for their outstanding investigative work.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Brett M. Kalikow is in charge of the prosecution. 

Geoffrey S. Berman, United States Attorney for the Southern District of New York, Raymond P. Donovan, Special Agent in Charge of the New York Office of the Drug Enforcement Administration (“DEA”), Peter C. Fitzhugh, Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), Keith M. Corlett, Superintendent of the New York State Police (“NYSP”), Dermot F. Shea, Commissioner of the New York City Police Department (“NYPD”), and  Margaret Garnett, Commissioner, New York City Department of Investigation (“DOI”), announced the unsealing of a federal indictment charging EDIBERTO SANTANA, a/k/a “Flaco Veneno,” MIGUEL GENAO, a/k/a “Sombra,” CARLOS RAMIREZ, a/k/a “Guerra,” DARINSO MARTE REYES, a/k/a “Cibao,” ANGEL CRISPIN, a/k/a “Secreto,” JOSE MARICHAL, a/k/a “Menor,” a/k/a “El Menol,” and ENIEL VASQUEZ, a/k/a “Dominican Flow,” with participating in a racketeering conspiracy as members of Sunset, a violent set of the Trinitarios gang.  SANTANA and RAMIREZ are charged with the October 23, 2013, murder of Michael Beltre, and SANTANA is also charged with the November 17, 2013, murder of Rafael Alam.  Six defendants were arrested today and were presented this afternoon before United States Magistrate Judge Katharine H. Parker.  The seventh defendant was already in federal custody on separate charges.  The case has been assigned to United States District Judge Paul A. Crotty.

U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, the defendants in this case include high-ranking members of a violent set of the Trinitarios gang known as Sunset.  The violence perpetrated by Sunset members is exemplified by the two murders charged in today’s indictment.  Thanks to the efforts of our partners at the DEA, HSI, NYPD, NYSP, and DOI, the defendants now face federal charges for these most serious of crimes.”

DEA Special Agent in Charge Raymond P. Donovan said:  “Today’s arrests reemphasize that the Trinitarios have put New Yorkers in the cross hairs of gang violence and crime.  Throughout this investigation, two murders and numerous violent crimes including assaults, robberies, and drug trafficking were uncovered.   I applaud our law enforcement partners at the U.S. Attorney’s Office Southern District of New York, New York City Police Department, New York State Police, Homeland Security Investigations, and New York City Department of Investigation for their diligent work.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “With today’s arrest of seven members of the Bronx Sunset Trinitarios, a violent sub-set of the Trinitarios National Gang, HSI New York has helped to make the Bronx safer for everyday New Yorkers.  Those arrested today used violence and intimidation to carry out their illegal activities which led to today’s charges, including racketeering, firearms offenses and murder.  HSI, along with its Federal, State and Local law enforcement partners, remain vigilant in our fight against violent gangs and are committed to ridding our city of them.”

DOI Commissioner Margaret Garnett said:  "The charges in this case demonstrate the significant threat that street gangs continue to pose to the safety of New York City neighborhoods. DOI is proud to work with our law enforcement partners on this investigation, holding accountable those whose criminal activity undermines New Yorkers' right to live in safe communities."

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

EDIBERTO SANTANA, a/k/a “Flaco Veneno,” MIGUEL GENAO, a/k/a “Sombra,” CARLOS RAMIREZ, a/k/a “Guerra,” DARINSO MARTE REYES, a/k/a “Cibao,” ANGEL CRISPIN, a/k/a “Secreto,” JOSE MARICHAL, a/k/a “Menor,” a/k/a “El Menol,” and ENIEL VASQUEZ, a/k/a “Dominican Flow,” are members and associates of a racketeering enterprise known as “Sunset,” which operates in the Bronx, Manhattan, and Brooklyn, New York, among other locations.  Sunset is a set or chapter of the nationwide Trinitarios gang.  In order to enrich the enterprise, protect and expand its criminal operations, enforce discipline among its members, and retaliate against members of rival gangs, Sunset members and associates committed, conspired, attempted, and threatened to commit acts of violence, including murder; distributed and possessed with intent to distribute narcotics; committed robberies; engaged in fraud; and obtained, possessed, and used firearms.

On or about October 23, 2013, SANTANA and RAMIREZ participated in the murder of Michael Beltre in the vicinity of Jerome Avenue and 193rd Street in the Bronx, New York.

On or about November 17, 2013, SANTANA participated in the murder of Rafael Alam in the vicinity of Jerome Avenue and 174th Street in the Bronx, New York.

*                      *                     *

A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the DEA, HSI, NYPD, NYSP, and DOI.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Celia V. Cohen and Jaqueline C. Kelly are in charge of the prosecution.

 

COUNT

CHARGE

DEFENDANTS

MAX. PENALTY

Count One

Racketeering conspiracy

 

 

 

18 U.S.C. § 1962(d)

SANTANA

RAMIREZ

Life imprisonment

GENAO

MARTE REYES CRISPIN MARICHAL VASQUEZ

20 years’ imprisonment

Count Two

Murder in aid of racketeering

 

 

18 U.S.C. §§ 1959 and 2

SANTANA

RAMIREZ

Life imprisonment, or death

 

Mandatory minimum of life imprisonment

Count Three

Murder through use of a firearm

 

18 U.S.C. §§ 924(j) and 2

SANTANA

RAMIREZ

Life imprisonment, or death

 

Mandatory minimum of five years’ imprisonment

 

Court Four

Murder in aid of racketeering

 

18 U.S.C. §§ 1959 and 2

SANTANA

 

Life imprisonment, or death

 

Mandatory minimum of life imprisonment,

Count Five

Murder through use of a firearm

 

18 U.S.C. §§ 924(j) and 2

SANTANA

 

Life imprisonment, or death

 

Mandatory minimum of five years’ imprisonment

 

 

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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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that NATALIE MAYFLOWER SOURS EDWARDS, a/k/a “Natalie Sours,” a/k/a “Natalie May Edwards,” a/k/a “May Edwards,” a former senior adviser at the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), pled guilty today to conspiring to unlawfully disclose Suspicious Activity Reports (“SARs”).  EDWARDS pled guilty before United States District Judge Gregory H. Woods.

U.S. Attorney Geoffrey S. Berman said:  “As she has now admitted, Natalie Mayflower Sours Edwards, a former senior-level FinCEN employee, abused her position of trust by agreeing to repeatedly disclose highly sensitive information contained in Suspicious Activity Reports.  Maintaining the confidentiality of SARs, which are filed by banks and other financial institutions to alert law enforcement to potentially illegal transactions, is essential to permit them to serve their statutory function, and the defendant’s conduct violated the integrity of that critical system and the law.”

According to the allegations contained in the Complaint, Information, publicly available information, court filings, and statements made during the plea proceeding:

The mission of FinCEN is to “safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”[1]  Among other things, FinCEN manages the collection and maintenance of SARs regarding potentially suspicious financial transactions, which, under the Bank Secrecy Act (“BSA”), U.S. financial institutions and other parties are required by law to generate and deliver to FinCEN.  Under the BSA and its implementing regulations, willful disclosure of a SAR or its contents by government employees or agents is a felony unless necessary to fulfill official duties.

Beginning in approximately October 2017, and lasting until her arrest in October 2018, EDWARDS agreed to and did unlawfully disclose numerous SARs to a reporter (“Reporter-1”), the substance of which were published over the course of approximately 12 articles by a news organization for which Reporter-1 worked (“News Organization-1”).  The illegally disclosed SARs pertained to, among other things, Paul Manafort, Richard Gates, the Russian Embassy, Mariia Butina, and Prevezon Alexander.  EDWARDS had access to each of the pertinent SARs and saved them – along with thousands of other files containing sensitive government information – to a flash drive provided to her by FinCEN.  She transmitted the SARs to Reporter-1 by means that included taking photographs or images of them and texting the photographs or images to Reporter-1 over an encrypted application.  In addition to disseminating SARs to Reporter-1, EDWARDS sent or described to Reporter-1 internal FinCEN emails or correspondence appearing to relate to SARs or other information protected by the BSA, and FinCEN nonpublic memoranda, including Investigative Memos and Intelligence Assessments published by the FinCEN Intelligence Division, which contained confidential personal information, business information, and/or security threat assessments.

At the time of EDWARDS’s arrest, she was in possession of a flash drive on which she saved the unlawfully disclosed SARs, and a cellphone containing numerous communications over an encrypted application in which she transmitted SARs and other sensitive government information to Reporter-1.

*                *                *

EDWARDS, 41, of Quinton, Virginia, pled guilty to one count of conspiracy to make unauthorized disclosures of SARs, which carries a maximum sentence of five years in prison.  EDWARDS is scheduled to be sentenced by Judge Woods on Tuesday, June 9, 2020 at 4:00 p.m.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentence of the defendant will be determined by the judge.

Mr. Berman praised the investigative work of the Treasury Department’s Office of Inspector General and the Federal Bureau of Investigation.

This case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Kimberly J. Ravener, Daniel C. Richenthal, and Maurene R. Comey are in charge of the prosecution.

 

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[1] www.fincen.gov/about/mission

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that Joseph Guagliardo, a/k/a “Joseph Gagliardo,” a former New York City Police Department (“NYPD”) officer and former member of the supervisory committee (the “Supervisory Committee”) of Municipal Credit Union (“MCU”), a non-profit financial institution, pled guilty today to abusing his leadership position at MCU to embezzle more than $400,000 dollars from the MCU.  GUAGLIARDO pled guilty before United States District Judge Denise L. Cote.

U.S. Attorney Geoffrey S. Berman said:  “As he has now admitted, Joseph Guagliardo betrayed the trust of MCU’s members, who elected him to supervise and protect MCU, by abusing his position to steal hundreds of thousands of dollars.  Today’s plea is yet another step forward in this Office’s efforts to fully investigate and prosecute those who abused positions of authority at MCU, a multibillion-dollar, non-profit, federally insured credit union, to enrich themselves and their families at the expense of its hard-working members.”

According to the allegations contained in the Complaint, Information, publicly-available information, court filings, and statements made during the plea proceeding:           

MCU is a non-profit financial institution headquartered in New York, New York, which is federally insured by the National Credit Union Administration (“NCUA”).  MCU is the oldest credit union in New York State and one of the oldest and largest in the country, providing banking services to more than 500,000 members, and with more than $2.9 billion in member accounts, each of which is federally insured for at least $250,000 by the National Credit Union Share Insurance Fund, which is administered by the NCUA.  Membership in MCU is generally available to employees of New York City and its agencies, employees of the federal and New York state governments who work in New York City, and employees of hospitals, nursing homes, and similar facilities located within New York State.

GUAGLIARDO is a former officer with the NYPD and a former Supervisory Committee member of MCU, a volunteer position.  In or about 1993, GUAGLIARDO joined the Supervisory Committee, and remained in that position until he was removed from that position by the New York State Department of Financial Services on or about May 24, 2018, except for a brief period of time when he served as a member of MCU’s board of directors in or about 2008. 

Under New York banking law, the Supervisory Committee’s duties included supervision of the actions of MCU’s board of directors and officers.  MCU’s written conflict of interest policy, which was regularly distributed to board members, Supervisory Committee members, and others, provided, among other things, that members of MCU’s “Board of Directors and Supervisory Committee may not do business with the Credit Union, either individually or as representative of any business entity.”

From 2009 through May 2018, in violation of MCU policy and his fiduciary duty as a member of the Supervisory Committee, GUAGLIARDO engaged in a scheme to obtain money from MCU to which he knew he was not entitled, and took steps to conceal his efforts.  Among other things, GUAGLIARDO caused MCU to direct more than $250,000 to a security company created and controlled by GUAGLIARDO, but operated in another’s name, and then directed that money from that company be paid to him and to his family members.  GUAGLIARDO also over-billed MCU more than $200,000 for purported web advertising services provided by a non-profit organization that GUAGLIARDO also controlled.

In addition, during substantially the same period in which GUAGLIARDO was committing these offenses, GUAGLIARDO unlawfully distributed controlled substances to the former chief executive officer of MCU, in the form of prescription drugs, some of which were obtained from GUAGLIARDO’s spouse, who worked as a doctor affiliated with a public hospital, and some of which were obtained from a different doctor affiliated with the NYPD.

*                *                *

GUAGLIARDO, 62, of Brooklyn, New York, pled guilty to one count of embezzlement from a federally insured credit union, which carries a maximum penalty of 30 years in prison.  In his written plea agreement, GUAGLIARDO agreed to forfeit at least $425,514, and to pay at least $468,189 in restitution to MCU. 

GUAGLIARDO is scheduled to be sentenced by Judge Cote on April 10, 2020, at 2:30 p.m.

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

U.S. Attorney Berman praised the outstanding work of the Special Agents of the United States Attorney’s Office.  Mr. Berman also thanked the New York County District Attorney’s Office, the New York State Department of Financial Services, and the NYPD Internal Affairs Bureau for their assistance.

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Eli J. Mark and Daniel C. Richenthal are in charge of the prosecution, with assistance of Special Assistant U.S. Attorney Alona Katz from the New York County District Attorney’s Office.

Eric Dreiband, el Fiscal General Auxiliar de la División de Derechos Civiles, Geoffrey S. Berman, el Fiscal Federal para el Distrito Sur de Nueva York y William F. Sweeney Jr., el Director Auxiliar Encargado de la Oficina del FBI en Nueva York anunciaron hoy que Grafton Thomas ha sido acusado formalmente por un gran jurado de cinco cargos de provocación deliberada de lesiones corporales a cinco víctimas por motivos de la religión de las mismas y cinco cargos de obstrucción al libre ejercicio de religión en un intento de asesinato, los cuales son delitos de odio federales, en relación con su alegado ataque con machete durante una ceremonia del día festivo de Janucá en la casa de un rabino en Monsey, Nueva York, la noche del 28 de diciembre del 2019.

«Desde antes de nuestro establecimiento como nación y desde aquel entonces, este país ha ofrecido refugio a personas de distintos rincones del mundo que han sido víctimas de violencia y de otros tipos de persecución por sus creencias y su derecho al culto», afirmó el Fiscal General Auxiliar de la División de Derechos Civiles, Eric Dreiband. «Hoy en día, Estados Unidos sigue siendo un modelo de libertad para personas perseguidas por motivos de su religión por todo el mundo y un ataque violento contra alguien a causa de su religión no solo es ilegal, sino que también va en contra de todo lo que nuestra nación representa. El Departamento de Justicia de los Estados Unidos seguirá enjuiciando a cualquier persona que se dedique a tales conductas con todo el peso de la ley».

«El 28 de diciembre del 2019, Grafton Thomas supuestamente llegó armado con un machete de 18 pulgadas y entró en la casa de un rabino, donde decenas de personas se habían juntado por el día festivo», dijo el Fiscal Federal para el Distrito Sur de Nueva York, Geoffrey S. Berman. «Ahora alegamos que lo hizo con la intención de convertir a sus víctimas en tales por motivos de su religión. Según las alegaciones, con su cara tapada bajo una bufanda, acuchilló y apuñaló a los congregantes reunidos y huyó, dejando atrás al menos a cinco víctimas. Thomas se enfrenta a una pena de cadena perpetua por sus presuntos actos violentos de perjuicio e intolerancia».

«Cuando las acciones de un individuo traspasan el umbral de un delito federal, tal y como alegamos que el Sr. Grafton hizo en este caso, actuaremos rápidamente», declaró el Director Auxiliar del FBI, William F. Sweeney, Jr. «El mensaje de los cargos de hoy debería ser claro como el agua: el FBI no tolerará violencia contra nadie. Nosotros, junto con nuestros socios, haremos a cualquier persona que cometa delitos como este rendir cuentas de sus acciones. Las sanciones federales por este tipo de ataque son severas y justificadas. En este caso, la comunidad local ayudó, y sus acciones fueron esenciales para la preservación de vidas y llevaron directamente a la captura del Sr. Grafton. Le toca al resto de nuestra comunidad conjuntamente dar un paso adelante y echar una mano. No dejen una brecha abierta para que odio se propague y no hagan caso omiso de este tipo de conducta, tachándolo como el problema de otra persona. Hay que abordarlo y denunciar actividades sospechosas a las autoridades».

Según los alegatos contenidos en la acusación formal y la querella:         

El 28 de diciembre del 2019, Thomas entró en la casa de un rabino en Monsey, Nueva York, la cual es adyacente a la sinagoga del rabino, durante la celebración del fin de Shabat y el séptimo día de Jauncá. Thomas declaró ante decenas de congregantes que «nadie se va a ir» y atacó al grupo con un machete de 18 pulgadas. Al menos cinco víctimas fueron hospitalizadas con lesiones graves, entre ellos tajos, laceraciones profundas, un dedo amputado y una fractura de cráneo.

Tras el ataque, Thomas viajó en carro a la Ciudad de Nueva York. Fue detenido en Harlem por miembros de la Policía de la Ciudad de Nueva York. Los agentes que respondieron a la escena observaron lo que parecía ser sangre en las manos y ropa de Thomas y el olor de lejía que desprendía de su vehículo. Un registro del vehículo de Thomas llevó a la confiscación de, entre otras cosas, un machete que parecía tener encima rastros de sangre seca. Los agentes del orden público registraron posteriormente el domicilio y teléfono celular según las órdenes de registro. El domicilio contenía diarios manuscritos con varias páginas de referencias antisemíticas, las que incluían referencias a «Adolf Hitler» y «la cultura Nazi». El celular de Thomas contenía búsquedas en Internet que se remontaban al menos a noviembre del 2019 de términos como «templos sionistas» en Staten Island y Nueva Jersey, «por qué Hitler odiaba a los judíos» y «compañías destacadas fundadas por judíos en Estados Unidos», así como una visita el día del ataque a una página web que contenía un artículo titulado «Nueva York fortalece la presencia de la policía en barrios judíos tras ataques antisemíticos. Aquí tienes la información más importante».

Se le acusa a Thomas, de 37 años, de cinco cargos de provocación intencional de lesiones corporales e intento de asesinato de cinco víctimas por motivos de su religión, en contra de la Sección 249 del Título 18 del Código de los EE. UU., y cinco cargos de obstrucción al libre ejercicio de religión en un intento de asesinato, en contra de la Sección 247 del Título 18 del Código de los EE. UU. Cada uno de los diez cargos acarrea una pena máxima de cadena perpetua. La máxima pena posible en este caso la dicta el Congreso y se incluye aquí únicamente para fines informativos, ya que es el juez quién determinará la pena verdadera.

El Fiscal General Auxiliar Dreiband y el Sr. Berman elogiaron los esfuerzos extraordinarios del FBI, la Fiscalía de Distrito del Condado de Rockland, la Policía de Ramapo, la Oficina del Sheriff del Condado de Rockland, la Policía Estatal de Nueva York, la Policía de Clarkstown y la Policía de la Ciudad de Nueva York.

La Unidad contra el Terrorismo y Estupefacientes de la Oficina, su División en White Plains y la Unidad de Derechos Civiles de la División Civil de la Oficina están a cargo de este caso. Los Fiscales Federales Auxiliares Michael K. Krouse, Lindsey Keenan y Lara K. Eshkenazi son los encargados del enjuiciamiento.

Los cargos contenidos en la acusación formal son simplemente alegaciones, y al acusado se lo considera inocente mientras no se pruebe su culpabilidad ante un tribunal de justicia.

El año 2020 es el 150º aniversario del Departamento de Justicia. Para aprender más sobre la historia de nuestra agencia, vaya a www.Justice.gov/Celebrating150Years.

Anexo(s): 

Download grafton_thomas_indictment_signed.pdf

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JORGE PADILLA pled guilty today to defrauding victims of more than $900,000 by soliciting investments in a sham financial firm based on misrepresentations and fraudulent documents.  PADILLA pled guilty before U.S. District Judge J. Paul Oetken.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Jorge Padilla fleeced investors through lies and deception.  He lied about the very existence of the company through which he solicited investors, and he sent investors fraudulent statements to prop up the scheme.  Padilla now awaits sentencing for his crime.” 

According to the allegations contained in the Complaint and Information against PADILLA and other documents filed in federal court:

From at least in or about September 2014 through in or about April 2017, JORGE PADILLA orchestrated a scheme to solicit investments in a sham family investment office, Dunatos Capital.  PADILLA, a financial professional registered with the Financial Industry Regulatory Authority (“FINRA”), worked throughout the period at issue for large financial institutions.  Nevertheless, PADILLA, targeting Argentina-based victim-investors who had been clients of one such institution, claimed he had gone to work for Dunatos Capital, purportedly a family office managing tens of millions of dollars in investments.  In order to solicit investments in this sham firm, PADILLA made false representations, including claiming, for example, that Dunatos had tens of millions of dollars under management, was regulated by U.S. financial regulators, and operated out of non-existent Manhattan-based offices.  After victims transferred funds pursuant to PADILLA’s directions, PADILLA prepared and sent fraudulent statements about how the funds were invested.  PADILLA solicited more than $900,000 in purported investments in the sham firm.

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PADILLA, 33, of Haverstraw, New York, pled guilty to one count of wire fraud, 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 sentence for the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.

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

Eric Dreiband, Assistant Attorney General for Civil Rights, Geoffrey S. Berman, 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 FBI announced today that Grafton Thomas has been indicted by a federal grand jury with five counts of willfully causing bodily injury to five victims because of the victims’ religion and five counts of obstructing the free exercise of religion in an attempt to kill, federal hate crimes, related to his alleged machete attack during Hanukkah observances at a rabbi’s home in Monsey, New York, on the night of Dec. 28, 2019. 

“Since before our founding as a nation and ever since, this country has provided refuge for people from other parts of the world who suffered violence and other forms of persecution because of their right to believe and worship as they see fit,” said Assistant Attorney General Eric Dreiband for the Civil Rights Division. “The United States remains today a beacon of freedom for persecuted religious people all over the world, and violent attacks against anyone because of religion is both illegal and against everything our nation stands for. The United States Department of Justice will continue to prosecute anyone who engages in such conduct to the fullest extent of the law.” 

“On December 28, 2019, Grafton Thomas allegedly came armed with an 18-inch machete and entered a rabbi’s home, where dozens had gathered for the holiday,” said U.S. Attorney Geoffrey S. Berman for the Southern District of New York. “We now allege that he did this with the intention of targeting his victims because of their religion. As alleged, with his face concealed beneath a scarf, he slashed and stabbed the assembled congregants, fled, and left at least five victims in his wake. Thomas faces life in prison for his alleged violent acts of prejudice and intolerance.”

“When an individual’s actions cross the threshold of a federal crime, as we allege Mr. Grafton did here, we will act swiftly,” said FBI Assistant Director William F. Sweeney Jr. “The message from today’s charges should be crystal clear – the FBI won’t tolerate violence against anyone. Working with our partners, we will hold anyone who commits a crime like this accountable for their actions. The federal penalties for this type of attack are severe and justified. In this instance, the local community was engaged, and their actions were essential to saving lives and led directly to Mr. Grafton’s capture. It’s the rest of our community’s joint responsibility to step up and engage as well – don’t give hate a platform to propagate and don’t dismiss this type of behavior as someone else’s problem, address it and immediately report suspicious activity to authorities.”

According to the allegations in the Indictment and the Complaint:

On Dec. 28, 2019, Thomas entered a Rabbi’s home in Monsey, New York, which is adjacent to the Rabbi’s synagogue, during observances related to the end of Shabbat and the seventh night of Hanukkah. Thomas declared to dozens of assembled congregants, “no one is leaving,” and attacked the group with an 18-inch machete. At least five victims were hospitalized with serious injuries, including slash wounds, deep lacerations, a severed finger, and a skull fracture. 

Following the attack, Thomas traveled in a car to New York City, and he was stopped in Harlem by members of the New York City Police Department. The responding officers observed what appeared to be blood on Thomas’s hands and clothing, and smelled bleach coming from his vehicle. A search of Thomas’s vehicle led to the seizure of, among other things, a machete that appeared to have traces of dried blood on it. Law enforcement subsequently searched Thomas’s residence and cellphone pursuant to warrants. The residence contained handwritten journals with several pages of anti-Semitic references, including references to “Adolf Hitler” and “Nazi Culture.” Thomas’s cellphone contained Internet searches dating back to at least November 2019 for terms such as “Zionist Temples” in Staten Island and New Jersey, “why did Hitler hate the Jews,” and “prominent companies founded by Jews in America,” as well as a webpage visit on the day of the attack to an article titled, “New York Increases Police Presence in Jewish Neighborhoods After Anti-Semitic Attacks. Here’s What to Know.”

  Thomas, 37, is charged with five counts of willfully causing bodily injury to, and attempting to kill, five victims because of their religion in violation of Title 18, United States Code, Section 249, and five counts of obstructing the free exercise of religion in an attempt to kill, in violation of Title 18, United States Code, Section 247. Each of the 10 counts carries a maximum prison term of life. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Assistant Attorney General Dreiband and Mr. Berman praised the outstanding efforts of the FBI, the Rockland County District Attorney’s Office, the Ramapo Police Department, the Rockland County Sherriff’s Office, the New York State Police, the Clarkstown Police Department, and the New York City Police Department.

This case is being handled by the Office’s Terrorism and International Narcotics Unit, its White Plains Division, and the Civil Rights Unit of the Office’s Civil Division. Assistant U.S. Attorneys Michael K. Krouse, Lindsey Keenan, and Lara K. Eshkenazi are in charge of the prosecution.

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

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Eric Dreiband, Assistant Attorney General for Civil Rights, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that GRAFTON THOMAS has been indicted by a federal grand jury with five counts of willfully causing bodily injury to five victims because of the victims’ religion and five counts of obstructing the free exercise of religion in an attempt to kill, federal hate crimes, related to his machete attack during Hanukkah observances at a rabbi’s home in Monsey, New York, on the night of December 28, 2019. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “On December 28, 2019, Grafton Thomas allegedly came armed with an 18-inch machete and entered a rabbi’s home, where dozens had gathered for the holiday.  We now allege that he did this with the intention of targeting his victims because of their religion.  As alleged, with his face concealed beneath a scarf, he slashed and stabbed the assembled congregants, fled, and left at least five victims in his wake.  Thomas faces life in prison for his alleged violent acts of prejudice and intolerance.”

Assistant Attorney General Eric Dreiband said:  “Since before our founding as a nation and ever since, this country has provided refuge for people from other parts of the world who suffered violence and other forms of persecution because of their right to believe and worship as they see fit.  The United States remains today a beacon of freedom for persecuted religious people all over the world, and violent attacks against anyone because of religion are both illegal and against everything our nation stands for.  The United States Department of Justice will continue to prosecute anyone who engages in such conduct to the fullest extent of the law.” 

FBI Assistant Director William F. Sweeney Jr. said:  “When an individual’s actions cross the threshold of a federal crime, as we allege Mr. Thomas did here, we will act swiftly.  The message from today’s indictment should be crystal clear – the FBI won’t tolerate violence against anyone.  Working with our partners, we will hold anyone who allegedly commits a crime like this accountable for their actions.  The federal penalties for this type of attack are severe and justified.  In this instance, the local community was engaged, and their actions were essential to saving lives and led directly to Mr. Thomas’s capture.  It’s the rest of our community’s joint responsibility to step up and engage as well – don’t give hate a platform to propagate and don’t dismiss this type of behavior as someone else’s problem, address it and immediately report suspicious activity to authorities.” 

According to the allegations in the Indictment and the Complaint[[1]]:

On December 28, 2019, THOMAS entered a Rabbi’s home in Monsey, New York, which is adjacent to the Rabbi’s synagogue, during observances related to the end of Shabbat and the seventh night of Hanukkah.  THOMAS declared to dozens of assembled congregants, “no one is leaving,” and attacked the group with an 18-inch machete.  At least five victims were hospitalized with serious injuries, including slash wounds, deep lacerations, a severed finger, and a skull fracture. 

Following the attack, Thomas traveled in a car to New York City, and he was stopped in Harlem by members of the New York City Police Department.  The responding officers observed what appeared to be blood on THOMAS’s hands and clothing, and smelled bleach coming from his vehicle.  A search of THOMAS’s vehicle led to the seizure of, among other things, a machete that appeared to have traces of dried blood on it.  Law enforcement subsequently searched THOMAS’s residence and cellphone pursuant to warrants.  The residence contained handwritten journals with several pages of anti-Semitic references, including references to “Adolf Hitler” and “Nazi Culture.”  THOMAS’s cellphone contained Internet searches dating back to at least November 2019 for terms such as “Zionist Temples” in Staten Island and New Jersey, “why did Hitler hate the Jews,” and “prominent companies founded by Jews in America,” as well as a webpage visit on the day of the attack to an article titled, “New York Increases Police Presence in Jewish Neighborhoods After Anti-Semitic Attacks.  Here’s What to Know.”

*                *                *

THOMAS, 37, is charged with five counts of willfully causing bodily injury to, and attempting to kill, five victims because of their religion in violation of Title 18, United States Code, Section 249, and five counts of obstructing the free exercise of religion in an attempt to kill, in violation of Title 18, United States Code, Section 247.  Each of the ten counts carries a maximum prison term of life.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the outstanding efforts of the FBI, the Rockland County District Attorney’s Office, the Ramapo Police Department, the Rockland County Sherriff’s Office, the New York State Police, the Clarkstown Police Department, and the New York City Police Department, as well as the U.S. Department of Justice’s Civil Rights Division.

This case is being handled by the Office’s Terrorism and International Narcotics Unit, its White Plains Division, and the Civil Rights Unit of the Office’s Civil Division.  Assistant U.S. Attorneys Michael K. Krouse, Lindsey Keenan, and Lara K. Eshkenazi are in charge of the prosecution.

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

 

---

[1] As the introductory phrase signifies, the entirety of the texts 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JASON RHODES pled guilty today before U.S. District Judge Sidney H. Stein to securities fraud, wire fraud, investment adviser fraud, and conspiracy charges in connection with his participation in a scheme to defraud approximately 25 investors in Sentinel Growth Fund Management, LLC (“Sentinel”), a hedge fund RHODES co-founded, out of approximately $19.6 million by lying to the investors and using investor funds for his own personal use and to make repayments to earlier investors in a Ponzi-like manner.    

U.S. Attorney Geoffrey S. Berman said:  “As he admitted in court today, Jason Rhodes solicited investors’ money with a promise to invest it in securities.  Instead, he used it to line his own pockets and to pay off other investors who were demanding their money.  Rhodes now faces significant time in federal prison for his admitted crimes.”

According to the Indictment and other Court filings:

Beginning in at least 2013 and through in or about December 2016, RHODES, together with his co-conspirators, solicited investments in Sentinel by falsely representing to investors that their funds would be used for legitimate, specified investment purposes, namely purchasing securities.  In fact, RHODES failed to invest the investor monies as promised, but rather diverted investor funds to his own personal use and the personal use of his co-conspirators and, in a Ponzi-like manner, to make repayments to other investors who were demanding their money.  Among other things, RHODES diverted investor funds to a trucking business operated by RHODES and his wife; to pay more than $1 million to settle an unrelated civil lawsuit filed against RHODES and one of his co-conspirators; and on other personal expenses including a resort stay in Dubai and a luxury time-share vacation club.  Through this scheme, RHODES and his co-conspirators defrauded approximately 25 investors out of a total of approximately $19.6 million.

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

*                      *                      *

RHODES, 47, of Rowayton, Connecticut, pled guilty to one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, one count of wire fraud, and one count of investment adviser fraud.  The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million 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 investment adviser fraud count carries a maximum sentence of five years in prison and a maximum fine of $10,000. 

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.

RHODES is scheduled to be sentenced by Judge Stein on April 6, 2020, at 2:30 p.m.

Mr. Berman praised the work of the Federal Bureau of Investigation.  He also thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.  

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that BRYAN DUNCAN, ROBERT LOCUST, and RYAN RAINFORD were sentenced yesterday by U.S. District Judge Sidney H. Stein to prison in connection with their participation in a multimillion-dollar trip-and-fall fraud scheme.  DUNCAN was sentenced to 80 months in prison; RAINFORD was sentenced to 68 months in prison; and LOCUST was sentenced to 60 months in prison. 

On May 28, 2019, DUNCAN, LOCUST, and RAINFORD were each convicted for their participation in a conspiracy to commit mail and wire fraud following a three-week trial before Judge Stein.  The jury also convicted DUNCAN of a second count of conspiracy to commit mail and wire fraud, along with one count of mail fraud and one count of wire fraud.  Co-conspirators Peter Kalkanis, a former chiropractor, and Kerry Gordon previously pled guilty before Judge Stein to conspiracy to commit mail and wire fraud, mail fraud, and wire fraud.  Kalkanis also pled guilty to aggravated identity theft.  Kalkanis and Gordon have yet to be sentenced.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Bryan Duncan, Robert Locust, and Ryan Rainford were each sentenced to lengthy prison terms for their roles in an age-old fraud scheme that was callous and exploitive.  They honed the slip-and-fall ‘accident’ to an efficient operation, recruiting people to stage accidents, filing fraudulent lawsuits against property owners, steering ‘accident victims’ to particular crooked medical clinics, and often even directing them to have unnecessary surgeries.  Now they will spend years in prison for their crimes.”

Judge Stein said during LOCUST’s sentencing:  “The whole essence of this conspiracy is find the down-and-out, find the desperate, find the homeless.  No person who has a job and education and can support his or her family even minimally is going to say, ‘Oh, I’ll undergo unnecessary back surgery for a thousand dollars.’  These people were vulnerable and desperate.”

According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:

Between in or about 2013 through 2018, DUNCAN, LOCUST, and RAINFORD, the defendants, engaged in a widespread fraud scheme through which the defendants defrauded businesses and insurance companies by staging trip-and-fall accidents and filing fraudulent lawsuits arising from those staged trip-and-fall accidents.  Fraud scheme participants, including the defendants, recruited hundreds of individuals to stage trip-and-fall accidents at particular locations throughout New York City and to claim that they injured themselves as a result of their accidents.  Common accident sites used during the fraud scheme included cellar doors, cracks in concrete sidewalks, and purported “pot holes.”  The defendants instructed the recruited patients to claim that they sustained injuries to particular areas of their bodies, including the knees, shoulders, and/or back – body parts that, if injured, would reap high recoveries in personal injury lawsuits.

After the staged trip-and-fall accidents, recruited patients were referred to specific attorneys who would file lawsuits against the owners of the accident sites and/or insurance companies of the owners of the accident sites (the “Victims”).  The lawsuits did not disclose that the recruited patients had deliberately fallen at the accident sites or, in some cases, had not fallen at all.  During the course of the fraud scheme, the defendants, together with others known and unknown, attempted to defraud the Victims of at least $31,791,000.

The recruited patients were also instructed to receive ongoing medical treatment from certain chiropractors and doctors.  The fraud scheme participants advised the recruited patients that if they intended to continue with their lawsuits, they were required to undergo surgery to increase the value of their fraudulent lawsuits.  The medical procedures included discectomies, spinal fusions, non-surgical epidural injections, and knee and shoulder surgeries.  As an incentive to getting surgery, the recruited patients were offered payments after they completed surgery as well as a percentage of any settlement payments from their lawsuits.  Patients generally had two surgeries and received between $1,000 and $1,500 after each surgery.

The defendants recruited low-income individuals as patients – individuals desperate enough to undergo surgeries in exchange for these small post-surgery payments.  In some instances, the defendants even recruited patients from homeless shelters in New York City.  Over the course of the trial, more than 20 witnesses testified, including 11 patients who admitted to staging trip-and-fall accidents at the direction of DUNCAN, LOCUST, RAINFORD, or other co-conspirators.     

DUNCAN was one of the organizers and leaders of the scheme.  DUNCAN recruited patients into the scheme, organized the recruited patients’ legal and medical appointments, and assisted in procuring the funding for the recruited patients’ medical treatment and lawsuits.  DUNCAN and his partner Kerry Gordon, who started their own case management and legal funding companies, made over $1.5 million in profit from the fraud scheme. 

LOCUST and RAINFORD helped recruit patients into the fraud scheme, transported patients to medical and legal appointments, identified potential accident sites, made payments to recruited patients, and coached recruited patients on faking their injuries. 

Peter Kalkanis, was another organizer and leader of the scheme.  Kalkanis paid his co-defendants to recruit patients into the scheme and transport the patients to medical and attorney appointments.

*                      *                     *

In addition to the prison terms, DUNCAN, RAINFORD, and LOCUST, were each sentenced to three years of supervised release.   

Mr. Berman praised the outstanding investigative work of the New York Field Office of the Federal Bureau of Investigation and the New York City Police Department.  Mr. Berman also thanked the National Insurance Crime Bureau for their assistance in the investigation. 

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Nicholas Folly, Alexandra Rothman, and Nicholas Chiuchiolo are in charge of the prosecution.      

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROBERT ALEXANDER pled guilty today to securities fraud and wire fraud in connection to his participation in a scheme to defraud investors by soliciting investments in his online gaming company (the “Company”) through false representations, and his misappropriation of investor funds for his own personal use.  ALEXANDER pled guilty before United States District Judge Andrew L. Carter Jr. 

U.S. Attorney Geoffrey S. Berman said:  “Robert Alexander, president of an online gaming company, induced investors through false statements about the health of his company and his own background.  Alexander betrayed his investors and spent their funds to support his lifestyle, including gambling excursions to multiple casinos, and a luxury car for one of his family members.  Robert Alexander now faces serious time in prison for gaming his investors.”

According to the Indictment and statements made in open court:

Beginning in at least 2013 and continuing through in or about 2017, ALEXANDER engaged in a scheme to defraud investors in the Company.  Specifically, ALEXANDER solicited and maintained investments in the Company through numerous false representations, including concerning his own professional background, the Company’s financial condition, expected returns on investment, and through false assurances to investors that their investments would be used solely for the Company’s business purposes.  

Also in furtherance of his scheme and contrary to representations made to investors, ALEXANDER used more than approximately $1.3 million of the funds he obtained from investors on his own personal expenses instead of for the Company’s business purposes.  For example, ALEXANDER used investor funds to make payments toward his personal credit cards, to fund his gambling excursions to multiple casinos, to make rental payments for his personal residence, and to make car payments for a luxury car purchased for one of ALEXANDER’s family members.

*                      *                      *

ALEXANDER, 49, of Las Vegas, Nevada, pled guilty to 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 million 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.

Mr. Berman praised the work of the Federal Bureau of Investigation.  He also thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.  

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter Lopez, Regional Administrator for the U.S. Environmental Protection Agency (“EPA”), Region 2, announced today that the United States has filed a civil lawsuit against DOVER GREENS, LLC (“DOVER GREENS”), for violations of the Clean Air Act (“CAA”) and EPA’s National Emissions Standards for Asbestos (“Asbestos NESHAP”) during renovation of the former Harlem Valley Psychiatric Center in Wingdale, New York (the “Campus”).  DOVER GREENS violated the CAA and Asbestos NESHAP when it failed to take the necessary precautions and follow the proper protocols pertaining to the removal, handling, and disposal of asbestos.  The Asbestos NESHAP is designed to protect the public health by preventing exposure to airborne asbestos fibers during building demolition or renovations, waste packaging, transportation, and disposal.  

Along with the lawsuit, the United States has filed a consent decree, agreed to by DOVER GREENS, that resolves the violations through payment of a $575,000 financial penalty and the imposition of injunctive relief, including a requirement that DOVER GREENS provide medical monitoring to individuals potentially exposed to airborne asbestos fibers as a result of these violations.  The consent decree remains subject to Court approval.

U.S. Attorney Geoffrey S. Berman said:  “Despite knowing that it was required to comply with asbestos safety regulations, Dover Greens conducted renovations in flagrant violation of those regulations, risking the health of members of the public and workers at the facility.  The consent decree ensures that Dover Greens will protect people from asbestos exposure in its further work on the Campus and provides medical monitoring for individuals who may have been exposed to asbestos due to Dover Greens’ conduct.  Also, by requiring Dover Greens to pay a substantial penalty, we have sent a strong message that this conduct will not be tolerated.”

EPA Regional Administrator Peter Lopez stated:  “We are determined to protect public health and the environment.  The Clean Air Act and EPA’s National Emissions Standards for Asbestos have been set in place to do just that.  This settlement sends the important message that we will not allow groups or individuals to skirt the law and put people at risk.”

The complaint filed in Manhattan federal court today alleges that in October 2013, DOVER GREENS violated the CAA and Asbestos NESHAP when it rushed to renovate numerous buildings at the Campus (the “October 2013 Work”) in order to prepare the Campus to host a fundraiser.  DOVER GREENS knew that its buildings contained asbestos and that asbestos work practice regulations must be followed.  However, it repeatedly failed to comply with these regulations in its work.  In particular, the complaint alleges that DOVER GREENS violated Asbestos NESHAP requirements to inspect the Campus properly and notify EPA before commencing renovation activities; to remove, store, and dispose of asbestos-containing materials safely; and to have a trained representative present during the renovation.  As a result of its conduct, DOVER GREENS’ employees, contractors, and the individuals who attended this fundraiser faced an increased risk of asbestos exposure. 

The complaint also alleges that during EPA’s investigation, DOVER GREENS failed to provide EPA access and information, as required by the CAA.

*                *                *

In the consent decree lodged with the federal court today, DOVER GREENS admits, acknowledges, and accepts responsibility for the fact that it “failed to follow EPA regulations concerning asbestos when conducting the October 2013 Work.”  DOVER GREENS further admits, acknowledges, and accepts responsibility for the following:

• DOVER GREENS failed to inspect the buildings at issue thoroughly for the presence of regulated asbestos-containing material (“RACM”) and notify EPA prior to commencing the October 2013 Work.
• DOVER GREENS failed to (a) ensure that all RACM was removed before beginning the renovation; (b) ensure that all RACM was adequately wetted before stripping it from buildings; and (c) ensure that all RACM remained wet until it was collected and contained for disposal.
• DOVER GREENS failed to seal all asbestos-containing materials in leak-tight containers while wet and failed to label containers or plastic bags containing RACM with proper warning labels and the name of the waste generator or the location at which waste was generated.
• DOVER GREENS failed to (a) dispose of asbestos waste at a proper disposal site; (b) ensure that properly marked vehicles were used to transport asbestos containing waste; (c) and maintain waste shipment records; and
• DOVER GREENS failed to have a trained representative present during the October 2013 Work.
• The October 2013 Work disturbed asbestos in numerous buildings, potentially exposing DOVER GREENS’ employees, contractors, and guests to asbestos.
• When EPA sought to investigate the October 2013 Work, DOVER GREENS failed to provide EPA inspectors with access to the Campus and failed to provide complete responses to EPA’s requests for information.

Pursuant to the consent decree, DOVER GREENS will pay a civil penalty of $575,000.  The consent decree also requires DOVER GREENS to offer an initial asbestos medical surveillance exam and, if necessary, pay for ongoing medical surveillance for each individual who may have been exposed to asbestos as a result of the October 2013 Work.  Further, DOVER GREENS agrees under the consent decree to conduct routine inspections of and, if necessary, repairs to all buildings on the Campus in order to prevent the release of asbestos fibers into the environment; ensure that warning signs are properly posted on Campus buildings; provide annual asbestos awareness training to DOVER GREENS’ maintenance employees; comply with a detailed Asbestos Operations & Maintenance Plan designed to minimize the potential for asbestos exposure to DOVER GREENS’ employees, building occupants, visitors, and workers; and comply in all respects with the CAA and Asbestos NESHAP when conducting asbestos abatement activity. 

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

U.S. Attorney Berman thanked the attorneys and enforcement staff at EPA Region 2 for their critical work in this matter.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Carmen Rottenberg, Administrator of the U.S. Department of Agriculture’s (“USDA”) Food Safety and Inspection Service (“FSIS”), announced today the filing of a complaint and the entry of a consent decree against defendants CHUNG SHING MEATS, INC., also known as NEW CHUNG HING MEATS, INC., and its present and former owners or operators, WING HONG CHEUNG, MIAO HE FENG, YIU KWAN CHEUNG, and TIAN LUN FENG (collectively, the “defendants”), for violations of the Federal Meat Inspection Act and Poultry Products Inspection Act and related regulations at the defendants’ meat distributorship in Chinatown, Manhattan.

U.S. Attorney Geoffrey S. Berman said:  “The owners and operators of Chung Shing Meats, Inc., disregarded federal regulations designed to ensure that food on people’s kitchen tables is wholesome and unadulterated.  The defendants repeatedly sold uninspected meat products, in some instances selling uninspected beef bones as ‘Confucius Style Duckling.’  No style of duckling is composed of beef bones, let alone uninspected and potentially tainted beef bones.  The defendants put people at risk.  Today’s consent decree ensures that Chung Shing Meats will follow the law, protecting the public health and allowing consumers to have confidence in the safety of the food they buy.” 

USDA FSIS Administrator Carmen Rottenberg said:  “The defendants repeatedly violated food safety laws by selling misbranded meat and poultry products and thereby put consumers at risk for foodborne illnesses.  The consent decree agreed to by the defendants ensures that they are not selling any uninspected meat or poultry products and outlines specific ramifications if the provisions of the decree are violated.”

According to the Complaint filed in Manhattan federal court:

The Federal Meat Inspection Act (“FMIA”) and Poultry Products Inspection Act (“PPIA”) protect the public health by imposing a set of inspections, labeling, and packaging requirements for meat and poultry products.  These requirements allow consumers to have confidence in the safety of their meat and poultry products and permit public health officials to trace problems to their source.

For years, the defendants repeatedly violated federal law by selling uninspected and misbranded meat and poultry products to retailers in New York City from their facility at 19 Catherine Street, New York, New York.  The defendants routinely prepared and sold meat and poultry products without meeting the minimum federal meat inspection and identification requirements of the FMIA and the PPIA, including by misbranding or repackaging meat and poultry products without the marks of federal inspection.  USDA has identified FMIA and PPIA violations by the defendants that include selling uninspected or misbranded roast pork, pork chops, roast ducks, beef brisket, Silkie chickens, and other beef, poultry, and pork products.  In all, USDA’s inspections have uncovered over 400 pounds of meat products sold or offered for sale in violation of the FMIA and PPIA.  Although USDA inspectors repeatedly warned the defendants, they did not conform their conduct to the law.

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

• The defendants have repeatedly sold non-federally inspected and misbranded meat and poultry products to retailers for resale, in violation of federal law.

• Among other instances, on or about April 29, 2019, May 2, 2019, and April 6, 2018, the defendants sold for resale non-federally inspected sliced beef meat, non-federally inspected pork baby ribs, non-federally inspected beef shin meat, or non-federally inspected beef bones misbranded as Confucius Style Duckling.

Pursuant to the consent decree, the defendants are enjoined from (1) selling or transporting any meat or poultry products required to be inspected and passed by USDA’s Food Safety and Inspection Service that have not been inspected and passed by USDA inspectors; (2) preparing or processing meat or poultry products in unsanitary conditions; and (3) engaging in any other conduct that would violate the FMIA, PPIA, and related regulations.  The consent decree also requires the defendants to keep records that fully disclose transactions involving meat or poultry products and to complete mandatory training in relevant federal law and regulations.  The 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.

Mr. Berman thanked the USDA for its investigative efforts on this matter.

This case is being handled by this Office’s Environmental Protection Unit of the Civil Division, as part of its Food Safety Initiative.  Assistant United States Attorney Steven J. Kochevar is in charge of the case.

Audrey Strauss, Attorney for the United States acting under authority conferred by 28 U.S.C. § 515, announced that BRYAN COHEN, a former investment banker based in New York, pled guilty today to conspiring to commit securities fraud.  COHEN’s plea stems from stealing material, nonpublic information (“MNPI”) from the investment bank where he worked and passing it to a securities trader based in Switzerland.

COHEN was arrested on October 18, 2019, and pled guilty today before United States Magistrate Judge Debra Freeman.  COHEN’s case is assigned to United States District Judge William H. Pauley III.

According to the Superseding Indictment and statements made in open court:

COHEN was an investment banker working in the investment banking division of a global investment banking advisory firm (“Investment Bank A”).  By virtue of his employment at Investment Bank A, COHEN had access to MNPI relating to corporate transactions, and was under duties and obligations to keep that MNPI strictly confidential.  COHEN previously worked in the London office of Investment Bank A, and later transferred to its New York office.   

Notwithstanding his duties to keep the MNPI confidential, between 2015 and 2017, COHEN stole MNPI from Investment Bank A and passed it to a securities trader based in Switzerland in order to enable the securities trader to place timely, profitable trades based on the MNPI.  COHEN informed the securities trader about corporate acquisitions and provided updates about how the deals were progressing over time.  Some of the inside information that COHEN provided related to companies whose securities were listed on United States exchanges.  The information that COHEN provided ultimately resulted in substantial profits for the traders who received it and traded based on it.  In exchange for providing MNPI he stole from Investment Bank A, COHEN received benefits, including cash, from the securities trader.

COHEN took steps to conceal his scheme, including communicating through prepaid, “burner” cellphones, which he picked up at a Manhattan business, and receiving cash in person and through intermediaries.

*                      *                      *

COHEN, 33, pled guilty to one count of conspiring to commit securities fraud.  This charge carries a maximum term of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the work of the FBI.  She further thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.  She added that the FBI’s investigation was ongoing. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Richard Cooper, Daniel Tracer, and Drew Skinner are in charge of the prosecution.         

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of DAVID WILLIAMS, a/k/a “Pap,” a/k/a “Pap Avilii,” a/k/a “Daddy,” for operating a sex trafficking enterprise, in connection with which WILLIAMS kidnapped, raped, and trafficked an adult victim (“Victim-1”) and also trafficked a minor victim (“Victim-2”).  WILLIAMS will be presented before United States Magistrate Judge Debra Freeman later today.     

U.S. Attorney Geoffrey S. Berman said:  “David Williams allegedly kidnapped, raped, and forced women into prostitution – one of whom was just 14 years old – in operating his human sex trafficking enterprise.  It is reprehensible that a person would forcibly coerce another human being into sex and seek to profit from it, and for allegedly doing so, Williams now faces life in prison.  Human trafficking continues to be a priority for this Office, and I commend the FBI’s Child Exploitation and Human Trafficking Task Force for aggressively pursuing cases to bring sexual predators to justice.”

FBI Assistant Director William F. Sweeney Jr. said:  “The victims in this investigation are living, breathing humans; not property or goods to be sold for sex.  As law enforcement, we will do everything we can to stop criminals from preying on children and vulnerable women, but shockingly these cases don’t go away.  As a community, we must do more to stop the cycle of demand for this despicable criminal activity, and do more to protect these victims.”           

NYPD Commissioner Dermot Shea said: "The NYPD, along with our partners at the Southern District and the FBI, share an unwavering commitment to ensuring that anyone who would seek to profit through the abuse and exploitation of another person – especially at-risk youth – is brought to justice swiftly and successfully. "

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

From at least in or about December 2018 up to and including at least in or about February 2019, WILLIAMS ran a sex trafficking enterprise (the “Business”), along with another person (“CC-1”), who also worked as a prostitute for WILLIAMS.

In February 2019, WILLIAMS and CC-1 kidnapped Victim-1, who was an adult, in Atlantic City, New Jersey, and transported her to the Bronx, New York, to work as a prostitute for the Business.  During the time that Victim-1 was held by WILLIAMS and CC-1, WILLIAMS and CC-1 advertised Victim-1 for sex and also forced Victim-1 to engage in sex acts with clients in exchange for money.  When Victim-1 expressed resistance to being trafficked for sex, WILLIAMS brandished a gun and threatened to hurt Victim-1 unless she complied.  On at least one occasion, WILLIAMS raped Victim-1 after threatening her with a gun.

In or about December 2018, WILLIAMS and CC-1 recruited Victim-2, who was 14 years old at the time, to work as a prostitute for the Business.  During the ensuing months, until in or about February 2019, WILLIAMS and CC-1 advertised Victim-2 for sex and directed Victim-2 to engage in sex acts with clients in exchange for money.  WILLIAMS and CC-1 forced Victim-2 to turn over the money Victim-2 earned from prostitution. 

*                *                *

WILLIAMS is charged with: (1) conspiracy to commit sex trafficking by force, threats of force, fraud, or coercion and sex trafficking of a minor, (2) sex trafficking by force, threats of force, fraud, or coercion, (3) sex trafficking of a minor, (4) coercion and enticement under the Mann Act, (5) coercion and enticement of a minor under the Mann Act, and (6) kidnapping.  Conspiracy to commit sex trafficking by force, threats of force, fraud, or coercion and sex trafficking of a minor, in violation of 18 U.S.C. § 1594(c), carries a maximum term of life in prison.  Sex trafficking by force, threats of force, fraud or coercion, in violation of 18 U.S.C. § 1591(a) and (b)(1), carries a mandatory minimum term of 15 years in prison and a maximum term of life.  Sex trafficking of a minor, in violation of 18 U.S.C. § 1591(a) and (b)(2), carries a mandatory minimum term of 10 years in prison and a maximum term of life.  Coercion and enticement under the Mann Act, in violation of 18 U.S.C. § 2422(a), carries a maximum prison term of 20 years.  Coercion and enticement of a minor under the Mann Act, in violation of 18 U.S.C. § 2422(b), carries a mandatory minimum prison term of 10 years and a maximum term of life.  Kidnapping, in violation of 18 U.S.C. § 1201, carries a maximum term of life in prison.  The maximum potential sentences and the mandatory minimum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. 

Mr. Berman praised the outstanding investigative work of the FBI and, in particular, the New York Child Exploitation and Human Trafficking Task Force.  The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Jun Xiang and Danielle M. Kudla are in charge of the prosecution.

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

 

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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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Phillip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the arrest of AMEEN KESHAVJEE for allegedly mailing a white powdery substance, along with a note indicating the substance was anthrax, to an employee at a Manhattan bar.  KESHAVJEE is charged in a criminal Complaint, unsealed today, with one count of mailing a threatening communication and one count of conveying an anthrax hoax threat.  KESHAVJEE was presented today in Manhattan federal court before U.S. Magistrate Judge Debra Freeman.

U.S. Attorney Geoffrey S. Berman said:  “Today’s arrest makes clear that we will not tolerate anthrax threats.  Thanks to the work of the FBI and the United States Postal Inspection Service, the defendant will have to answer for his alleged threatening actions.”

FBI Assistant Director William F. Sweeney Jr. said:  “Even though there was no actual anthrax in the note allegedly mailed by Keshavjee, that doesn’t minimize the consequences of the crime.  Hoax threats not only intimidate the victims they are intended for, they require extensive law enforcement resources that could be better used elsewhere.  For anyone out there who might be contemplating a hoax of this nature, just remember Keshavjee now faces up to 10 years in prison for his alleged actions.”   

USPIS Inspector-in-Charge Phillip R. Bartlett said:  “As alleged, Mr. Keshavjee used scare tactics to show his displeasure with employees at the bar.  Postal Inspectors remind the public that sending threats through the U.S. mail is illegal.  These types of cases are aggressively investigated by Postal Inspectors and those allegedly involved will be arrested and brought to justice for their crimes.”

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

KESHAVJEE was a patron at a bar in the East Village neighborhood in Manhattan, and sent a series of communications via e-mail to an employee at the bar (“Employee-1”).  In approximately February 2019, Employee-1 told KESHAVJEE that if KESHAVJEE continued sending him messages, he would no longer be welcome at the bar.  KESHAVJEE stopped coming to the bar, but began sending threatening e-mails in which KESHAVJEE, among other things, indicated that he hoped for Employee-1’s death.

On December 9, 2019, KESHAVJEE mailed an envelope to Employee-1 at the bar.  The envelope included a white powdery substance and a note indicating that the substance was anthrax.  Upon opening the envelope, Empoyee-1 called 911.  Law enforcement responded to the scene, secured the area, and seized the materials mailed by KESHAVJEE.  The City of New York Department of Health and Mental Hygiene Public Health Laboratory later concluded that the materials did not contain anthrax.

*                *                *

KESHAVJEE is charged with one count of mailing a threatening communication and one count of conveying an anthrax hoax threat, each of which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding work of the FBI, the USPIS, and the FBI’s New York Joint Terrorism Task Force, which consists principally of agents from the FBI and detectives from the New York City Police Department.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorney Sam Adelsberg is in charge of the prosecution.

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

 

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York, and Jonathan D. Larsen, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced today that HICHAM KABBAJ, a former senior manager in Manhattan for a global internet company (“Company-1”), pled guilty before Untied States Magistrate Judge Stewart D. Aaron to one count of wire fraud.  KABBAJ will be sentenced by United States District Judge Richard M. Berman, to whom the case is assigned.

Manhattan U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Hicham Kabbaj defrauded the company for which he worked by arranging for payment of fraudulent invoices to a shell company he created.  Kabbaj now awaits sentencing for his $6 million deception.”

IRS-CI Special Agent in Charge Jonathan D. Larsen said:  “Today, Mr. Kabbaj pled guilty to a serious felony because he chose to misuse his position of trust as a corporate executive to steal company funds for his own personal gain.  As a result of the dedicated work of IRS-CI special agents, along with our partners at the U.S. Attorney’s Office, Mr. Kabbaj will face the consequences of his crime when he is sentenced by a federal judge.”

According to allegations in the Information and other documents filed in federal court, as well as statements made in public court proceedings:

From at least August 2015 until at least May 2019, KABBAJ engaged in a scheme to defraud his employer into paying a vendor named Interactive Systems, a KABBAJ-controlled shell company, for various information technology (“IT”) products and services.  As part of the scheme, KABBAJ caused Interactive Systems to send invoices to Company-1 claiming that Interactive Systems performed services and purchased firewalls and servers for Company-1.  In reality, Interactive Systems did none of that work, and KABBAJ quickly transferred the money that Company-1 paid to Interactive Systems to his own personal bank accounts.  In total, KABBAJ defrauded Company-1 of more than $6 million as a result of the scheme.

*                *                *

KABBAJ, 48, of Floral Park, New York, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison.  KABBAJ has agreed to forfeit his homes in Palm Beach Gardens, Florida, and Hewitt, New Jersey, as property traceable to the offense, among other assets, and he has agreed pay restitution in the amount of $6,051,453.

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

Mr. Berman praised the investigative work of the IRS-CI and Special Agents of the U.S. Attorney’s Office.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Ni Qian and Andrew A. Rohrbach are in charge of the prosecution.

Geoffrey S. Berman, 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 BLACKLIGHT, S.A., a Swiss entity purporting to offer asset management and trustee services, and its founder and principal owner, KENNETH CIAPALA, as well as ULRIK DEBO, a/k/a “Molgaard Debo,” a/k/a “Ulrik Molgaard,” with engaging in a long-running stock manipulation scheme involving numerous United States issuers.  CIAPALA and DEBO were arrested in the United Kingdom, and the United States Government will be seeking their extradition to the United States. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, for years the Swiss firm Blacklight, S.A., its owner, Kenneth Ciapala, and Ulrik Debo have made millions of dollars by orchestrating stock manipulation schemes of publicly traded shares of U.S.-based issuers.  Today’s charges make clear that our Office, along with our law enforcement partners, will vigorously prosecute those who allegedly manipulate the stocks of U.S. issuers, including those operating abroad.” 

FBI Assistant Director William F. Sweeney Jr. said:  “As a major facilitator of market manipulation schemes, Blacklight, S.A, allegedly enabled numerous ‘pump and dumps’ over the course of six years.  Disrupting the orchestrators of illegal financial activity is a top priority for the FBI’s securities fraud team, and we consider today’s indictment of Blacklight, its founder and principal owner Kenneth Ciapala, and co-conspirator Ulrik Debo an important step in that mission.”           

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

BLACKLIGHT, S.A. (“BLACKLIGHT”), a Swiss entity based in Geneva, Switzerland, that purported to offer asset management and trustee services to its clients, and a founder and co-principal of BLACKLIGHT, KENNETH CIAPALA, executed a wide-ranging stock manipulation scheme that spanned from in or about 2013 through December 2019 in which they manipulated the share price and trading volume of the publicly traded shares of multiple companies, and laundered the proceeds generated by the scheme.  CIAPALA, utilizing BLACKLIGHT, set up various nominee entities to help scheme participants conceal their ownership of public company shares and evade SEC reporting requirements.  BLACKLIGHT opened bank accounts and brokerage accounts on behalf of these nominee entities and executed trades in accounts held by these nominee entities in furtherance of the stock manipulation scheme. 

ULRIK DEBO, a Danish citizen who resided in Europe, furthered the stock manipulation scheme by, among other things, identifying suitable publicly traded shell companies that could be used in the scheme; identifying, in certain instances, suitable privately held companies to engage in “reverse merger” transactions with the shell companies; obtaining financing to purchase all or substantially all of the outstanding shares of the issuers; causing various nominee entities to obtain ownership of the issuer’s shares; identifying and paying “promoters” that issued exaggerated and, at times, false press releases about the issuers in order to raise the trading price and volume of the issuer’s shares; and identifying and paying various “trading specialists” who assisted in artificially manipulating the trading volume and price of the issuer’s shares.

Overview of the Stock Manipulation Scheme

As alleged, from at least 2013 through December 2019, CIAPALA and his firm, BLACKLIGHT, as well as others, conspired to defraud the investing public by orchestrating and facilitating the manipulation of multiple publicly traded stocks, commonly referred to as “pump and dump” schemes.  The vast majority of the stocks that CIAPALA, BLACKLIGHT, DEBO, and their co-conspirators sought to manipulate were “penny” or “microcap” stocks that traded in the United States on the over-the-counter (“OTC”) market.  In executing these pump and dump schemes, CIAPALA, BLACKLIGHT, DEBO, and their co-conspirators (i) secretly amassed beneficial ownership of all, or substantially all, of the stock of certain publicly traded companies; (ii) began manipulating the price and demand for these stocks through, among other means, the release of materially false information to the investing public and manipulative trading practices, thereby causing the share price of these stocks to become artificially inflated; and (iii) sold out of their secretly-amassed positions at artificially inflated values at the expense of the investing public. 

CIAPALA, using his firm BLACKLIGHT, primarily furthered the stock manipulation scheme by helping other participants in the scheme to obscure their beneficial ownership and control of all or substantially all of the shares of companies whose securities they sought to manipulate.  CIAPALA caused BLACKLIGHT to establish nominee entities that were registered in the names of various third parties to hold the shares that were, in reality, beneficially owned and controlled by the scheme participants.  In order to obscure their ownership interests, CIAPALA, BLACKLIGHT, DEBO, and others typically caused these nominee entities’ holdings to be structured so as to ensure that no single nominee entity held more than five percent of the outstanding stock of any of the relevant companies.

CIAPALA also caused BLACKLIGHT to open bank accounts in the names of these nominee entities and to trade shares owned by these nominee entities through various brokerage accounts.  Through BLACKLIGHT, CIAPALA exercised trading authority over these nominee entities’ shares, and CIAPALA directed brokers to execute trades on behalf of these nominee entities in furtherance of the stock manipulation scheme.  After CIAPALA, BLACKLIGHT, DEBO, and others participating in the scheme had obtained control of all or substantially all of the shares of a company, the scheme participants manipulated the share price and trading volume of the stock of the company.  This typically occurred through a promotional campaign and through certain manipulative trading practices. 

With respect to the promotional campaign, CIAPALA, BLACKLIGHT, DEBO, and others participating in the scheme caused promotional materials to be distributed to the investing public that contained exaggerated and, at times, false claims about the company whose stock they sought to manipulate. The scheme participants concealed from the investing public that these promotional materials were financed and created at the direction of those who beneficially owned and controlled substantially all of the shares of the relevant company that was the subject of the promotion. 

In addition, to drive investor demand and artificially inflate the share price, CIAPALA, BLACKLIGHT, DEBO, and other participants also engaged in manipulative trading activity in order to artificially increase the trading volume and share price of the issuers whose stock they sought to manipulate.  This manipulative trading activity included “match” trades whereby the scheme participants caused multiple nominee entities they controlled to essentially trade with one another to create the false appearance of trading volume and demand for the stock. 

Laundering of the Profits Generated by the Scheme           

As a result of the stock manipulation scheme, the scheme’s participants reaped millions of dollars in illicit profits by selling the shares they beneficially owned and controlled into the market at artificially inflated prices.  After these crime proceeds were generated, CIAPALA and BLACKLIGHT allegedly assisted other scheme participants in obtaining their share of the proceeds by sending these funds to them in a manner designed to conceal the source of these funds and the identity of the true recipients of the funds.  With CIAPALA’s knowledge and at times at his direction, transfers of the proceeds of the stock manipulation scheme were executed in a manner intended to conceal the true source of the funds and the recipients of these funds by, for example, using fabricated invoices to justify wire transfers from accounts held in the names of nominee entities (controlled and operated by BLACKLIGHT) to other bank accounts controlled by the scheme participants.   

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The Indictment charges CIAPALA, 38, who resides in Switzerland, and BLACKLIGHT with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; three counts of securities fraud, each of which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; wire fraud, which carries a maximum sentence of 20 years in prison; conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; and money laundering, which carries a maximum sentence of 20 years in prison.  

DEBO, 50, is charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; two counts of securities fraud, each of which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and wire fraud, 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 defendants will be determined by a judge. 

Mr. Berman praised the investigative work of the FBI, and thanked authorities in the United Kingdom, the Justice Department’s Office of International Affairs of the Department’s Criminal Division, and the Securities and Exchange Commission, which initiated civil proceedings against CIAPALA, BLACKLIGHT, DEBO, and others, for their assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force and Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Noah Solowiejczyk and Vladislav Vainberg are in charge of the prosecution.

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

 

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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.