Financial Fraud: Edward Martin Rostohar Charged With Bank Fraud And Identity Theft From Federal Credit Union

Financial Fraud

Credit Union Manager Who Allegedly Embezzled $40 Million from His Employer Faces Bank Fraud, Identity Theft Charges

LOS ANGELES – A long-time manager at CBS Employees Federal Credit Union is in federal custody on a criminal complaint alleging he embezzled $40 million from his employer over two decades and spent the money on gambling, expensive cars and watches, and travel by private jet.

Edward Martin Rostohar, 62, of Studio City, has been charged with two felony counts: bank fraud and aggravated identity theft. He was arrested on March 12 and has been ordered detained as both a flight risk and an economic danger to the community. Rostohar’s arraignment is scheduled for April 18.

The charges against Rostohar were made in conjunction with today’s announcement by the National Credit Union Administration (NCUA), a federal agency that regulates credit unions, that it has liquidated CBS Employees Federal Credit Union and discontinued its operations after determining CBS Employees was insolvent with no prospect of restoring viable operations on its own. University Credit Union, located in Westwood, immediately assumed CBS Employees’ assets, loans, and all member shares.

According to an affidavit filed with the criminal complaint, beginning before 2000 and continuing until this month, Rostohar used his position as a manager at the credit union, a federally insured financial institution, to make online payments from the credit union to himself or by forging the signature of another credit union employee on checks made payable to himself.

The alleged scheme was exposed beginning on March 6 when a credit union employee found a $35,000 check made payable to Rostohar, and the check did not include the reason for the high dollar amount, according to court documents. The employee conducted an audit of the credit union checks issued since January 2018 and discovered $3,775,000 in checks made payable to Rostohar and which contained the forged signature of another employee without the employee’s knowledge or consent. On March 12, the credit union informed Rostohar that he had been suspended from his job after an internal investigation uncovered “irregularities in the performance of your job duties,” according to court documents. Later that day, Rostohar’s wife called 911 and told the dispatcher that her husband had stolen money from work and was leaving the country, court papers state. Rostohar was taken into custody and admitted that he stole money from the credit union for 20 years, beginning by paying the monthly balances on his personal credit cards with funds from the credit union’s online accounts or by forging checks, and later by forging his coworker’s signature on credit union checks and depositing them into his personal accounts, court papers state. Rostohar allegedly estimated he stole $40 million from the credit union. An NCUA examination up to February 28 revealed a potential loss to the credit union of $40,541,130.

Prior to his 30 years of employment at the CBS Employees credit union, Rostohar was an examiner at NCUA, court documents state. Rostohar allegedly told law enforcement that this background gave him knowledge of what NCUA examiners look for when examining credit unions and allowed him to avoid detection, the affidavit states. Rostohar allegedly said he gambled away much of the money and spent the rest on traveling by private jet, buying expensive watches, and giving his wife a weekly allowance of $5,000. He also said he purchased two cars – a Porsche and a Tesla – with money he stole from the credit union, court papers state. Rostohar allegedly also admitted to starting a business in Reno, Nevada in December 2018, and he wrote tens of thousands of dollars’ worth of checks to himself to cover the business’s cost as well as to pay a $5,000 monthly mortgage on a home in Reno he recently purchased.

If convicted on both charges, Rostohar faces a statutory maximum sentence of 30 years in federal prison and a $1 million fine on the bank fraud count and a mandatory consecutive term of two years in federal prison on the aggravated identity theft count.

A complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

This matter is being investigated by the Federal Bureau of Investigation and the Los Angeles Police Department.

This case is being prosecuted by Assistant United States Attorney Andrew Brown of the Major Frauds Section.

Original PressReleases…

Financial Fraud: DENNIS GIBB Pleaded Guilty To Falsification Of Records Within The Jurisdiction Of The Securities and Exchange Commission (SEC)

Financial Fraud

Long-Time Redmond, Washington Investment Advisor Pleads Guilty to Defrauding Investors of more than $3 Million

Admits Falsifying Financial Statements – Used Investor Money for Own Expenses

A long-time investment advisor in Redmond, Washington pleaded guilty today in U.S. District Court in Seattle to defrauding some 15 investors of more than $3 million, announced U.S. Attorney Brian T. Moran. DENNIS GIBB, 72, the President and owner of Sweetwater Investments Inc., pleaded guilty to wire fraud and falsification of records with the intent to obstruct a matter within the jurisdiction of the Securities and Exchange Commission (SEC). Simultaneously, GIBB and Sweetwater investment entered into a consent decree with the SEC liquidating the Sweetwater Income Flood LP Fund and barring GIBB from further investment activity. Chief U.S. District Judge Ricardo S. Martinez scheduled sentencing in the criminal case for June 28, 2019.

“Sadly, this defendant sold his investors a dream of a safe retirement, representing that he would use a sophisticated investment strategy, including investing in government bonds, to produce stable returns. Instead, Dennis Gibb used investor funds to pay business expenses for Sweetwater Investments, as well as mortgage and car payments and other living expenses,” said U.S. Attorney Brian T. Moran. “He told investors there was $7.8 million in the fund – the reality was there was less than $2 million. The investors no longer have the safe retirement income they were promised.”

According to the criminal case filings and the SEC consent decree, GIBB created Sweetwater Income Flood Limited Partnership, a private fund Gibb managed, in 2008. As early as 2007, he began soliciting investors for the fund targeting those who wanted steady retirement income in the near future. According to the SEC between 2007 and 2018, about 20 investors put about $7.3 million into the fund. GIBB secretly transferred more than $3.1 million from the fund for his own expenses. To hide his theft, GIBB sent investors falsified quarterly account statements. When the SEC began an examination of the Sweetwater Investments in May 2018, GIBB provided false records to examiners indicating the fund had been liquidated.

In his plea agreement GIBB agrees to forfeit a money judgment in the amount of $3,197,401. Gibb will also owe full restitution for the amount he stole. The government will recommend that any money collected on the money judgment go toward the defendant’s restitution obligation. The SEC is ordering GIBB to liquidate the approximately $1.8 million remaining in the Income Flood Fund and provide it to the SEC for disbursement to victims.

Wire fraud is punishable by up to 20 years in prison. Falsification of records is punishable by up to three years in prison. Prosecutors have agreed to recommend no more than 78 months in prison. The court is not bound by the recommendation, the sentence will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

The case was investigated by the SEC and the FBI. The case is being prosecuted by Assistant United States Attorney Matthew Diggs.

The SEC order is available here.

Financial Fraud: RICHARD DIVER Arrested On Fraud Charges In Connection With His Embezzlement From The Asset Management Company

Financial Fraud

Former Chief Operating Officer Of Asset Management Company Arrested For Defrauding The Company And Its Clients

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service, announced that RICHARD DIVER was arrested on fraud charges in connection with his embezzlement from the asset management company where he worked as Chief Operating Officer. Specifically, DIVER has been charged with investment advisor fraud in connection with his fraudulently overbilling the company’s clients by hundreds of thousands of dollars in fake management fees and rerouting those funds to his personal account, and with wire fraud for fraudulently diverting millions of dollars from the company’s payroll funds to his personal account over a period of several years. DIVER was arrested today in Manhattan, and was presented before Magistrate Judge Katharine H. Parker in Manhattan Federal Court.

Manhattan U.S. Geoffrey S. Berman said: “Richard Diver occupied a position of great responsibility and great trust at the asset management company that employed him. As alleged, he betrayed that trust, stealing from the company and defrauding its clients, all to fund his lavish personal spending. We will continue to work with our law enforcement partners to root out fraud wherever it is found.”

Inspector-in-Charge Philip R. Bartlett said: “Mr. Diver allegedly used his position of trust to overcharge his clients to fund his spending habits and lavish lifestyle. In situations such as these, no one believes they will get caught; but when you allegedly cheat your clients and use the US Mail to facilitate a lie, be forewarned—Postal Inspectors and their law enforcement partners will eventually uncover your unlawful deeds and bring you to justice.”

As alleged in the Complaint unsealed today in Manhattan Federal Court:

DIVER was the Chief Operating Officer (“COO”) of a Manhattan-based asset management company (“Company-1”) that offers its customers investment planning and wealth management services. As COO, DIVER’s responsibilities included overseeing the company’s payroll and billing functions.

Beginning in 2011 and continuing into December 2018, DIVER fraudulently caused Company-1’s third-party payroll vendor to pay him salary significantly beyond his authorized salary and bonus. Over that period, DIVER caused over $4.5 million to be routed to his personal checking account above and beyond his approved compensation.

In 2017, DIVER also began to defraud Company-1’s clients. Typically, Company-1 billed its clients quarterly, in most cases having been authorized by the clients to deduct its investment advisory fees directly from their custodial accounts. DIVER began to cause an employee to run the billing process, which was based on a fixed percentage of the assets the clients had under the company’s management, at off-cycle intervals as to certain clients in addition to the regularly quarterly billing process. These billings were not accompanied by any notice to the clients. The clients affected by this practice therefore had their accounts debited twice, but were only notified of the single legitimate billing in periodic reports and correspondence from the company. DIVER routed the excess funds to his own personal bank accounts through the company’s payroll system. Through this mechanism, DIVER defrauded the clients of over $700,000.

In December 2018, certain clients noticed the overbilling and complained to Company-1’s president, who confronted him. DIVER admitted to the Company-1 president both fraudulent practices, stating that the funds he had stolen were consumed by his own “wild” spending. More recently, law enforcement agents recorded a conversation in which DIVER acknowledged having defrauded the company of $4.5 million through the payroll fraud and certain clients of over $700,000 through the billing fraud.


DIVER, 62 of New York New York, is charged with one count of investment advisor fraud and one count of wire fraud. The wire fraud count carries a maximum potential 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 advisor fraud count carries a maximum sentence of five years in prison and a maximum fine of $10,000. The maximum potential penalty 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 U.S. Postal Inspection Service and thanked the New York Regional Office of the U.S. Securities and Exchange Commission, which has filed a civil action against DIVER in a separate action.

This case is being handled by the Office’s Securities and Commodities Task Force. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.

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

Original PressReleases…

Financial Fraud: Garri Shihman Charged Of Conspiracy To Commit Bank Fraud, Mail Fraud and Wire Fraud

Financial Fraud

Florida Man Pleads Guilty in Fraud Scheme related to the Processing of Credit Card Payments

PITTSBURGH – A resident of Parkland, Florida, pleaded guilty in federal court to a charge of conspiracy to commit Bank Fraud, Mail Fraud and Wire Fraud, United States Attorney Scott W. Brady announced today.

Garri Shihman, 45, pleaded guilty to one count before United States District Judge David S. Cercone.

In connection with the guilty plea, the court was advised that Shihman participated a complex matter has two primary components. The first component is related to the illegal on-line sale of pharmaceutical drugs to U.S. consumers from a host of websites located primarily in India. The second component relates to the fraudulent processing of credit card payments for these pharmaceutical drugs and other products. Shihman is only directly associated with the second component.

The fraud involves use of a series of misrepresentations that cause credit card companies to process credit card transactions for various illegal activities. Credit card companies have policies that preclude the use of their products and services to pay for these type of activities, and they have various internal controls designed to prevent the use of their products and services for such activities.

For example, the credit card companies require merchants to apply to use their services, and in the applications, they ask for information about the products or services the company is selling and ask the merchants to provide the website through which the company will sell goods or services. The credit card companies will not open a merchant account if the applicant indicates that they are involved in illegal activities, and the credit card companies check the website to make sure that the applicant is not engaged in illegal activities.

Shihman was involved in a payment processing operation that defrauded the credit card companies through a series of misrepresentations designed to conceal the use of the credit card companies’ products and services to process payments for illegal activities. The complex fraud involved front companies, fraudulent applications, a phone bank, and various other aspects.

The agents, beginning with the undercover purchases of the pharmaceutical drugs, began to unravel this scheme through dozens of search warrants for e-mail accounts, subpoenas, and interviews. Those investigative efforts ultimately led to the execution of a search warrant at Shihman’s business located in Brooklyn, New York. The search warrant revealed of evidence implicating Shihman and others in the fraudulent scheme outlined above.

Judge Cercone scheduled sentencing for July 26, 2019. The law provides for a total sentence of thirty years in prison, a fine of $1,000,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the and the prior criminal history, if any, of the defendant.

Assistant United States Attorney Brendan T. Conway is prosecuting this case on behalf of the government.

The conducted the investigation that led to the prosecution of Garri Shihman.

Financial Fraud: Shameer Hassan And Nadine Bromfield Alexander Sentenced For Conspiracy To Commit Wire Fraud And Money Laundering

Financial Fraud

Members Of Fraudulent Jamaican Sweepstakes Ring Sentenced For Conspiracy, Money Laundering And Aggravated Identity Theft

Orlando, Florida – United States District Judge Roy B. Dalton has sentenced Shameer Hassan (45, Kissimmee) and Nadine Bromfield Alexander (39, Orlando) to 10 years and 7 years in federal prison, respectively, for conspiracy to commit wire fraud, conspiracy to commit money laundering, and aggravated identity theft. Hassan was sentenced to an additional 2 years’ imprisonment for money laundering. The court also ordered Hassan and Alexander to pay $150,314 in restitution to the identified victims of the fraud scheme.

A federal jury found Hassan and Alexander guilty on November 6, 2018.

According to testimony and evidence presented at trial, Hassan and Alexander participated in a fraudulent sweepstakes scheme that operated in the Middle District of Florida and Jamaica. Members of the conspiracy targeted victims throughout the United States, many of whom were elderly, and falsely informed them that they had won a multi-million dollar prize in a sweepstakes contest. The conspirators instructed the victims to wire funds to “representatives” in Orlando in order to prepay fees and taxes associated with the prize. Upon receipt of the funds, other members of the conspiracy converted the funds to money orders and cash. They then paid Hassan, who operated several money transfer businesses, to wire the fraud proceeds to Jamaica.

Alexander stole the personal identity information belonging to more than 35 individuals from her workplace and gave that information to her co-conspirators. Hassan then used the stolen identity information to launder the funds. In less than two years, Hassan and his co-conspirators transferred $4.7 million in funds, obtained from victims, to conspirators in Jamaica.

The court previously sentenced the following members of the conspiracy:

Charlton Morris (39, Casselberry) pleaded guilty to conspiracy to commit money laundering. He was sentenced to 10 years, 1 month in prison.

Robert Blake Madurie (29, Jamaica) pleaded guilty to conspiracy to commit wire fraud and aggravated identity theft. He was sentenced to eight years in prison.

Danny Lopez (32, Orlando) pleaded guilty to conspiracy to commit wire fraud. He was sentenced to seven years and eight months in prison.

Treysier LaPalme (25, Orlando) pleaded guilty to conspiracy to commit wire fraud. He was sentenced to seven years and three three months in prison.

Oral Anthony Stewart (35, Lithonia, Georgia) pleaded guilty to conspiracy to commit wire fraud. He was sentenced to five years in prison.

This case was investigated by the Department of Homeland Security and the SCIRS Federal Financial Crimes Task Force, whose members include the IRS- Criminal Investigation, the Brevard County Sheriff’s Office, the St. Cloud Police Department, the Osceola County Sheriff’s Office, the Winter Park Police Department, the Casselberry Police Department, the Kissimmee Police Department, the Maitland Police Department, the Palm Bay Police Department, and the U.S. Secret Service. It was prosecuted by Assistant United States Attorneys Karen L. Gable and Roger B. Handberg.

Financial Fraud:Victor Osorio Charged With Making False Declarations In Relation To a Bankruptcy Proceeding

Financial Fraud

Bergen County, New Jersey, Man Charged With Bankruptcy Fraud

NEWARK N.J. – A Bergen County, New Jersey, man was charged today with making false declarations in relation to a bankruptcy proceeding, U.S. Attorney Craig Carpenito announced.

Victor Osorio, 40, of Cresskill, New Jersey, is charged by complaint with two counts of bankruptcy fraud. He is scheduled to make his initial appearance this afternoon before U.S. Magistrate Judge Steven C. Mannion in Newark federal court.

According to documents filed in this case and statements made in court:

On Feb. 16, 2017, Osorio filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in U.S. Bankruptcy Court for the District of New Jersey. Osorio signed the bankruptcy petition under penalty of perjury, declaring that the information provided was true and correct.

In the petition, Osorio stated that none of his affiliates had a pending bankruptcy case, failing to disclose that a business in which he had an interest, “Business 1,” had a bankruptcy case pending at the time in U.S. Bankruptcy Court for the Southern District of New York.

Osorio also filed Schedules of Assets and Liabilities, signed under penalty of perjury, in which he stated that he did not own or have an interest in any incorporated or unincorporated businesses. Osorio failed to disclose that he had an ownership interest in Business 1 – and he had declared approximately seven months earlier in Business 1’s bankruptcy documents that he was its sole owner – and had an ownership interest in another business, Business 2.

In the Schedules, Osorio also stated that he did not own or have an interest in any checking, savings or other financial accounts, failing to disclose a bank account with a bank based in the Dominican Republic in which he had an interest.

On Feb. 24, 2017, Osorio filed amendments to the schedules, disclosing a partial ownership interest in Business 1. However, the amendments still failed to disclose an ownership interest in Business 2 and the bank account in the Dominican Republic.

The bankruptcy fraud charge carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense.

U.S. Attorney Carpenito credited New York City Police Department detectives, under the direction of New York City Police Department Commissioner Paul P. O’Neill, assigned to the Homeland Security Investigations Border Security Enforcement Task Force (BEST); and special agents of HSI-New York, under the direction of Special Agent in Charge Angel M. Melendez, assigned to HSI/NY BEST, with the investigation leading to today’s charge.

The government is represented by Assistant U.S. Attorney Dara Govan, Chief of the U.S. Attorney’s Office Public Protection Unit in Newark; Assistant U.S. Attorney Sean M. Sherman, of the Public Protection Unit; and Special Assistant U.S. Attorney Ben Teich of the Economic Crimes Unit.

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

Financial Fraud: Randall Stiles Sentenced To Embezzlement From a Bankruptcy Estate

Financial Fraud

Former Fort Wayne Attorney Sentenced In Federal Court

FORT WAYNE – Randall Stiles, 45 years old, of Fort Wayne, Indiana, was sentenced by U.S. District Court Chief Judge Theresa L. Springmann after pleading guilty to making a false oath in a bankruptcy proceeding, embezzlement from a bankruptcy estate and failure to file a tax return, announced U.S. Attorney Kirsch.

Stiles was sentenced to 6 months in prison and ordered to pay restitution in the amount of $235,055.88 to the Internal Revenue Service and $3,535 to a victim in a bankruptcy case.

According to documents in the case, Stiles was an attorney that practiced in the United States Bankruptcy Court which is a specialized area where lawyers assist individuals in obtaining debt relief based on hard times and financial hardships. Stiles was in a position of trust not only to his clients but to the Court, the Trustee and the legal process. In this case, Stiles’ criminal conduct arose not only from his representation of a client in bankruptcy, but his criminal action in his own personal bankruptcy filing in 2013. Stiles stole from his client, and lied to the Trustee about the filing of his tax return. When faced with possible consequences of his conduct, he did plead to 2 felony counts of bankruptcy fraud and a misdemeanor tax count in September of 2017. Stiles, in his plea, agreed to pay restitution to the client and IRS and agreed to file his unfiled tax returns for 2009, 2010, 2011and 2012. Before the filing of these federal charges, Stiles was suspended indefinitely by the Indiana Supreme Court from the practice of law.

US Attorney Kirsch said, “Attorneys have a duty and obligation to represent their clients fairly and with integrity. Stealing from clients and lying to the court violate the ethics of being an attorney and in this case violated the law. We will utilize all the resources we have available to investigate and prosecute cases involving the breaching of public trust.”

“Criminal bankruptcy fraud threatens the integrity of the bankruptcy system, as well as public confidence in that system,” stated Nancy J. Gargula, U.S. Trustee for Indiana and Central and Southern Illinois (Region 10). “I am grateful to U.S. Attorney Kirsch and our law enforcement partners for their strong commitment to combating bankruptcy- related crimes, especially when committed by persons in a position of trust, as demonstrated by today’s sentencing.” The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. Region 10 is headquartered in Indianapolis, with additional offices in South Bend, Ind., and Peoria, Ill.

Gabriel Grchan, Special Agent in Charge of IRS Criminal investigation said, “Randy Stiles violated the trust of his clients, the Court, and taxpayers. Mr. Stiles stole from U.S. taxpayers by not reporting or paying his taxes. We will not tolerate willful disregard for tax laws and today’s results make that clear.”

“Embezzlement is a crime that diverts funds from their original use and won’t be tolerated by the FBI. We all have the right to expect honest representation from those we hire to assist us,” said Danny Youmara, Asst. Special Agent in Charge of the FBI’s Indianapolis Division. “I hope that those few who decide to violate this trust will see the FBI will continue to investigate and pursue those who enrich themselves at the expense of others and we will hold them accountable.”

The case against Stiles resulted from a referral by the United States Trustee for Indiana and Southern and Central Illinois (Region 10) to the U.S. Attorney for the Northern District of Indiana. The investigation was conducted by the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation Division in collaboration with the Northern Indiana Bankruptcy Fraud Working Group, which is coordinated by the United States Trustee. The case was prosecuted by Assistant U. S. Attorneys Tina Nommay and Deborah Leonard.

Email Scam Examples: Breaking New’s From FBI Chief Mr. Christopher A. Wray

Email Scam Examples

This is an email scam received about “FBI Chief Mr. Christopher A. Wray” is a phishing scam and why not try to contact these people or log onto these sites and enter your data because you risk being stolen.

Letter From FBI Chief Mr. Christopher A. Wray – Email Scam Example

Reply-To: cb-onlinetransfer20200@outlook.com
From: “Federal Bureau of Investigation (FBI) Info@investigation.com” <fbioffc@gmail.com>
Date: Mon, 25 Mar 2019 14:23:52 -0700
Message-ID: <CAAg381RaYOz+bjZ-KL1F3S2BLs–J0YW8opvfrcirUXYCP7kfg@mail.gmail.com>
Subject: Breaking New’s From FBI chief? Mr. Christopher A. Wray!!!
To: undisclosed-recipients:;
Content-Type: text/plain; charset=”UTF-8″
Bcc: a…1@gmail.com

Federal Bureau of Investigation (FBI)
Anti-Terrorist And Monitory Crime Division.
Federal Bureau Of Investigation.
J.Edgar.Hoover Building Washington Dc
Customers Service Hours / Monday To Saturday
Office Hours Monday To Saturday:

Attention Beneficiary.

We write in regards to your delayed Contract/Inheritance Funds in the
sum of Ten Million, Five Hundred United States Dollars
(US$10,500,000.00) which you are yet to receive as a result of your
inability to raise the required fee(s) to conclude your
Transaction.The FBI has decided to proffer a solution that will make
it easier for all the Beneficiaries to receive their Funds.

We understood that some Fees are required in order process and
Transfer your Funds into your Account. We are also aware that most
Beneficiaries do not have these required fees.

We have therefore deliberated with the Bank in charge of this payment
to allow Beneficiaries the privilege of receiving their Funds in two
(2) or three (3) installments. In this case, Beneficiaries will no
longer be required to pay the fee at once but part of it depending on
the number of installments such Beneficiary will like his/her Funds to
be released tohim/her.

Write the Bank and request that you want your fund to be transferred
to your account by installments payment, so that once the first
payments enters into your account you can then use money from there to
facilitate the transfer of the remaining balance, once the first
installments enters into your account that you will equally give you
another opportunity to do a telex-transfer and withdrawal from your
account to master Citi Bank Online transfer Or STANDARD BANK
procedure.

The Citi Bank which is now in charge of your Payment has agreed to
give the Beneficiaries the option of receiving their Funds at once, in
two or three installments. This will help any beneficiaries to pay
part of the fee and receive part of their Funds with which such
beneficiary can upset the remaining fee and receive his/her complete
Funds. To break this down:

1.)One Hundred Dollars ($100) fee will facilitate the release of Fifty
Thousand United States Dollars (US$50,000.00) only.

2.)Three Hundred Dollars ($300) fee will facilitate the release of Two
Million United States Dollars (US$2,000,000) only.

3.)One Thousand, Six Hundred Dollars ($1,600) fee which is the total
fee will facilitate the release of your Full Contract/inheritance
Funds in the sum of Ten Million, Five Hundred Thousand United States
Dollars (US$10,500,000.00).

However, Feel free to inform us how much you can raise should you
cannot afford any of the above Mentioned installment so as for us to
talk to the Bank to know how much out of your Funds they could release
to you with the amount you can come up with. This is the best the FBI
can do for you and you are advised to take advantage of this
opportunity.

Kindly, contact Mr. Lambert Huddles, at Citi Bank to indicate your
preferred option. He could be reached at: E-mail: {
cb-onlinetransfer20200@outlook.com } NOTE: Do not be shy to indicate
the amount you have in hands (no proper-amount is so small to trigger
installments-payment base on our discussion with the Bank) so that the
first payment will move to your account for you to confirm the
existence of the fund before your proceed for the balance.

Christopher A. Wray
Federal Bureau of Investigation.

Financial Fraud: Vitaly Korchevsky Sentenced For Role In International Securities Fraud And Computer Intrusion

Financial Fraud

Former Hedge Fund Manager Sentenced to 60 Months’ Imprisonment and Ordered to Pay $14.4 Million in Forfeiture for Role in International Securities Fraud and Computer Hacking Scheme

Hackers Traded on Press Releases Stolen from Major Newswire Companies

Vitaly Korchevsky, a former hedge fund manager, was sentenced in federal court in Brooklyn today by United States District Judge Raymond J. Dearie to 60 months’ imprisonment for conspiracy to commit wire fraud, conspiracy to commit securities fraud and computer intrusion, conspiracy to commit money laundering and two counts of securities fraud. The Court also ordered Korchevsky to pay $14.4 million in forfeiture and a $250,000 fine. Co-defendant Vladislay Khalupsky, a securities trader, was convicted of the same charges, and was sentenced on January 11, 2019 to 48 months’ imprisonment.

Following a four-week jury trial, Korchevsky and Khalupsky were convicted in July 2018 for their roles in an international scheme to hack into three newswire services and steal press releases containing non-public financial information prior to their publication. The defendants and their co-conspirators then used this information to make trades generating approximately $30 million in illegal profits

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and David E. Beach, Special Agent-in-Charge, United States Secret Service, New York Field Office (USSS), announced the sentences.

“Korchevsky and Khalupsky will now pay the price for using their experience as traders to generate millions of dollars in unlawful trades based on hacked information,” stated United States Attorney Donoghue. “Today’s sentence sends a powerful message that, no matter how sophisticated or novel the scheme, cybercriminals and traders who steal information from U.S. companies and undermine the integrity of our financial markets will be held accountable for their actions.” Mr. Donoghue expressed his grateful appreciation to the United States Attorney’s Office for the District of New Jersey (USAO-DNJ), the Department of Homeland Security (DHS) and the U.S. Securities and Exchange Commission (SEC) for their significant cooperation and assistance in this case.

“The Secret Service remains committed to aggressively investigating and pursuing those responsible for cyber-enabled financial crimes,” stated USSS Special Agent-in-Charge Beach. “The sentence today is testament to the Secret Service’s commitment to building strong partnerships between local, state and federal law enforcement and represents a win against those who chose to threaten the financial infrastructure of the United States.”

Between February 2010 and August 2015, computer hackers based in the Ukraine gained unauthorized access into the computer networks of Marketwired L.P., PR Newswire Association LLC and Business Wire, through a series of sophisticated cyberattacks. The hackers moved through the computer networks and stole press releases about upcoming announcements by public companies concerning earnings, revenues and other material non-public information.

In order to monetize that information, the hackers shared the stolen press releases with a network of traders, including Korchevsky and Khalupsky, through overseas computer servers controlled by the hackers, and/or through secure email accounts. Korchevsky and Khalupsky then generally traded ahead of the public distribution of the stolen releases, executing trades in extremely short windows of time, usually shortly after the close of the markets. As a result, the trading data often showed a flurry of trading activity around a stolen press release just prior to its public release. Korchevsky, Khalupsky and their co-conspirators traded on stolen press releases concerning hundreds of publicly traded companies.

The illegal trading by the criminal network resulted in gains of more than $30 million, much of which was routed back to the hackers. Korchevsky traded on the stolen press releases both in brokerage accounts that benefitted the criminal network, as well as in his personal brokerage accounts, and ultimately netted approximately $15 million in profits over the course of the scheme. Khalupsky primarily traded in accounts that benefited the criminal network, and received a percentage of the multi-million dollars in profits he generated by trading on the stolen press releases. He directed that payments received for the illegal profits he generated for the criminal network be made to offshore shell companies.

The charges against Korchevsky and Khalupsky were set forth in an indictment unsealed in August 2015 in connection with a broader investigation conducted by this Office, the USAO-DNJ, the FBI, the USSS and the DHS, as well as a parallel investigation by the SEC. In total, nine defendants were charged criminally for their roles in the scheme. All have either pleaded guilty or been convicted at trial, except for three defendants who remain at large.

The government’s case is being handled by the Office’s Business and Securities Fraud Section and National Security and Cybercrime Section. Assistant United States Attorneys Richard M. Tucker, Julia Nestor and David Gopstein are in charge of the prosecution. Assistant United States Attorney Tanisha Payne is in charge of forfeiture aspect of the case.

The Defendants:

VITALY KORCHEVSKY
Age: 53
Glen Mills, Pennsylvania

VLADISLAV KHALUPSKY
Age: 48
Brooklyn, New York and Odessa, Ukraine

E.D.N.Y. Docket No. 15 CR 381 (RJD)

Financial Fraud: Bishap Mittal Pleaded Guilty To Conspiracy To Access a Protected Computer And Tech Support Scam

Financial Fraud

North Carolina Man Pleads Guilty For His Role In International “Tech Support Scam”

CHARLOTTE, N.C. – A Charlotte, North Carolina man pleaded guilty today to conspiracy to access a protected computer, for his role in an international “Tech Support Scam” that defrauded hundreds of victims, including seniors, of more than $3 million.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, First Assistant U.S. Attorney William Stetzer for the Western District of North Carolina and Special Agent in Charge John A. Strong of the FBI Charlotte Field Office, made the announcement.

Bishap Mittal, 24, pleaded guilty before U.S. Magistrate Judge David S. Cayer. Mittal has been released on bond. A sentencing date has not been set.

According to the information and plea agreement, Mittal was part of a conspiracy that carried out an international internet “Tech Support Scam,” by placing fake pop-up ads on victims’ computers to convince them they had a serious computer problem, and to induce them to pay for purported “technical support” services to resolve the issue. Mittal admitted in court today that he and “Individual 1” resided together in Charlotte. Individual 1 was the owner/manager of Capstone Technologies LLC (Capstone), a company headquartered in Charlotte that claimed to provide computer-related services to its customers. Capstone conducted business using several different aliases, including Authenza Solutions LLC, MS-Squad Technologies, MS-Squad.com, MS Infotech, United Technologies, and Reventus Technologies, (collectively, Capstone Technologies). Individual 1, Mittal, and others carried out the tech support scam using a call center located in India, set up to handle “tech support” calls with potential victims.

According to the information, pop-up ads were a central part of the conspiracy’s tech support scam. Individual 1 and other co-conspirators purchased blocks of malicious pop-up adware from publishers around the world. The fake pop-ups would suddenly appear on victims’ computers freezing their screens, prompting victims to contact Capstone Technologies at a number shown on the pop-up ad. When victims called the Indian-based tech support center for assistance, the co-conspirators used remote access tools to gain control of the victims’ computers. Once in control of the computers, the scammers identified various fictitious causes for the victims’ purported computer malfunction, including the presence of malware or computer viruses, and induced victims to pay for virus clean-up or other tech support services. The co-conspirators then charged victims between $200 and $2,400 to make computers operable again. According to the information, Mittal and his co-conspirators defrauded hundreds of victims throughout the United States, some of whom were elderly, of more than $3 million.

The FBI conducted the investigation. Trial Attorney Timothy Flowers of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Taylor Phillips of the U.S. Attorney’s Office in Charlotte are prosecuting the case.

In March 2019, U.S. Attorney Andrew Murray announced the Office’s Elder Justice Initiative, which aims to combat elder financial exploitation by expanding efforts to investigate and prosecute financial scams that target seniors; educate older adults on how to identify scams and avoid becoming victims of financial fraud; and promote greater coordination with law enforcement partners. For more information please visit: https://edit.justice.gov/usao-wdnc/elder-justice-initiative

Earlier this month, the Justice Department announced the results of the largest-ever coordinated nationwide elder fraud sweep, involving more than 250 defendants from around the globe who victimized more than a million Americans, most of whom were elderly. As part of the sweep, the Department of Justice and its law enforcement partners announced a tech-support fraud takedown, designed to combat an increasingly common form of elder fraud in which criminals trick victims into giving remote access to their computers under the guise of providing technical support. In 2018, technical-support schemes generated over 142,000 consumer complaints to the FTC’s Consumer Sentinel Network. Older adults filed more loss reports on tech-support scams from 2015 to 2018 than on any other fraud category reported to the Consumer Sentinel Network.

Health Care Fraud: Ademola O. Adebayo Convicted For One Count Of Conspiracy To Commit Health Care Fraud And Wire Fraud

Health Care Fraud

Florida Pharmacist Sentenced to 10 Years in Prison for $100 Million Compounding Pharmacy Fraud Scheme

Eight Others Previously Sentenced

A Florida pharmacist was sentenced to 120 months in prison today followed by three years supervised release. He was also orderd to pay $3.2 million in restitution and $1.4 million in forfeiture for his role in a massive compounding pharmacy fraud scheme, which impacted private insurance companies, Medicare and TRICARE. Eight other individuals have previously been sentenced in connection with the scheme. Various real properties, cars and a 50-foot boat have been forfeited as part of the sentencings.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, Special Agent in Charge George Piro of the FBI’s Miami Field Office, Special Agent in Charge Shimon Richmond of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office and Special Agent in Charge John F. Khin of the U.S. Defense Criminal Investigative Service’s (DCIS) Southeast Field Office made the announcement.

Ademola O. Adebayo, 55, of Odessa, Florida, was convicted on Jan. 11 after a four-day trial of one count of conspiracy to commit health care fraud and wire fraud, three counts of health care fraud, and one count of conspiracy to commit money laundering. He was sentenced before U.S. District Judge Federico A. Moreno of the Southern District of Florida, who presided over the trial.

According to evidence presented at trial, from 2012 to 2015, Adebayo and his co-conspirators engaged in a scheme to defraud private insurance companies, Medicare and TRICARE out of $121 million by submitting false and fraudulent claims for compounded drugs, primarily pain and scar creams, and other prescription medications that were not medically necessary, never provided, or both. The evidence established that in his role as the pharmacist at A to Z Pharmacy, a now-defunct pharmacy located in New Port Richey, Florida, Adebayo conspired to submit or cause the submission of claims that often amounted to several thousands of dollars for a single tube of pain or scar cream. In 2014, when insurance companies discovered the fraud at A to Z Pharmacy and terminated their contracts with the pharmacy, Adebayo agreed to become the straw owner of Havana Pharmacy & Discount in Miami, which Adebayo and his co-conspirators used to continue the fraud, the evidence showed.

The evidence further established that Adebayo personally benefited from the fraud and received $1.5 million through the fraud, which he used to purchase luxury vehicles, including a Ferrari, a Lamborghini, a Bentley, a Porsche and two Cadillacs, as well as a house in Land O Lakes, Florida. All of these items were seized by the government.

Eight other defendants have pleaded guilty in this case. Nicholas Borgesano, 46, of New Port Richey, is serving 15 years for his role as the owner of A to Z Pharmacy in the fraud that involved Havana Pharmacy, Medplus/New Life Pharmacy and Metropolitan Pharmacy, all of Miami; and Jaimy Pharmacy and Prestige Pharmacy, both of Hialeah, Florida.

In addition to Borgesano, the following defendants have previously been sentenced for their roles in the scheme:

  • Scott P. Piccininni, 50, of Fort Lauderdale, Florida, sentenced to serve 51 months in prison;
  • Bradley Sirkin, 56, of Boca Raton, Florida, sentenced to serve 46 months in prison;
  • Peter B. Williams, 58, of New Port Richey, sentenced to serve 26 months in prison, to be served consecutively to a 60-month sentence of imprisonment he is serving as a result of his guilty plea to a separate indictment returned in the Southern District of Florida;
  • Wayne M. Kreisberg, 41, of Parkland, Florida, placed on probation for a term of five years, to be served consecutively to a sentence of probation he is serving as a result of his guilty plea to a separate indictment returned in the Middle District of Florida;
  • Joseph Degregorio, 71, of New Port Richey, sentenced to serve one year and one day in prison;
  • Matthew N. Sterner, 48, of New Port Richey, sentenced to serve 36 months in prison; and
  • Edwin Patrick Young, 49, of New Port Richey, sentenced to serve 66 months in prison.
  • This case was investigated by the FBI with support from HHS-OIG and DCIS and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida. The case was prosecuted by Trial Attorneys Timothy P. Loper and Aleza Remis of the Fraud Section.

The Criminal Division’s Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Since its inception in March 2007, the Medicare Fraud Strike Force, which maintains 14 strike forces operating in 23 districts, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Tax Fraud: RICHARD JOSEPHBERG Pled Guilty Tax Evasion And Three Counts Of Willful Failure To File Tax Returns

Tax Fraud

Financial Broker Pleads Guilty In Manhattan Federal Court To Tax Evasion And Failure To File Tax Returns

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RICHARD JOSEPHBERG pled guilty today to one count of tax evasion and three counts of willful failure to file tax returns. In particular, JOSEPHBERG admitted that he deliberately evaded the assessment of hundreds of thousands of dollars in federal income taxes by fraudulently reporting a 2011 commission of approximately $1.5 million as a long-term capital gain, which was taxed at a much lower rate than ordinary income. In addition, he admitted that he willfully failed to timely file any tax returns for the calendar years 2013 through 2015. As part of his plea, JOSEPHBERG agreed to pay at least $1,275,624 in restitution to the IRS and the New York State Department of Taxation and Finance. JOSEPHBERG pled guilty before United States Circuit Judge Richard J. Sullivan.

U.S. Attorney Geoffrey S. Berman said: “As he admitted, Richard Josephberg defrauded the IRS and evaded taxes by disguising more than $1.5 million in income as long-term capital gain. He also admitted he failed to file tax returns for four years. Now Josephberg awaits sentencing for his multifaceted tax dodge.”

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

JOSEPHBERG was previously convicted in September 2007, in the U.S. District Court for the Southern District of New York, of 16 counts of tax fraud and one count of health care fraud, which resulted in a sentence of 50 months in prison and three years’ supervised release. While on supervised release for that conviction, he began engaging in the criminal conduct that formed the basis of today’s plea.

Specifically, starting in late 2010, JOSEPHBERG began working for an investor relations firm (“Firm-1”) in Manhattan. Through the individual who operated Firm-1, JOSEPHBERG secured a commission-based arrangement with another investment firm (“Firm-2”), which agreed to pay JOSEPHBERG a commission of approximately 15 percent of any profit generated by Firm-2 on financing deals originated by JOSEPHBERG. For originating one such financing deal, JOSEPHBERG was entitled to commission payments totaling approximately $1.57 million in 2011. After receiving payments totaling approximately $35,725 in his own name, JOSEPHBERG directed Firm-2 to issue the remaining commission payments in the name of a newly formed nominee corporate entity called “Almorli Advisors Inc.” JOSEPHBERG opened a new bank account in the name of Almorli Advisors Inc. (“Almorli Bank Account-1”), and deposited payments totaling approximately $1.53 million into that account.

In March 2012, while preparing to file 2011 federal income tax returns, JOSEPHBERG took steps to evade paying hundreds of thousands of dollars in federal income taxes by disguising and concealing the type of income that JOSEPHBERG had received from Firm-2. On or about March 27, 2012, JOSEPHBERG formed a second entity called “Almorli Advisors NY LLC,” which served as a shell company to insulate JOSEPHBERG from IRS scrutiny. JOSEPHBERG caused his accountant to prepare a false 2011 partnership income tax return, Form 1065, in the name of Almorli Advisors NY LLC (the “2011 Form 1065”), listing JOSEPHBERG as a 99 percent partner and JOSEPHBERG’s son as a one percent partner. To evade a substantial part of the income taxes due and owing for 2011, JOSEPHBERG caused the 2011 Form 1065 falsely to report the commission payments from Firm-2, totaling approximately $1,574,922, as a long-term capital gain, rather than ordinary income. JOSEPHBERG’s purported 99 percent share of this false long-term capital gain flowed through to JOSEPHBERG’s 2011 individual income tax return, Form 1040. JOSEPHBERG’s fraudulent misclassification of this income resulted in a reported tax liability that was hundreds of thousands of dollars lower than the true tax liability because individual long-term capital gains were taxed at a significantly lower rate than ordinary income.

JOSEPHBERG also engaged in a scheme to evade the assessment of federal income taxes for calendar years 2013 through 2016. During those years, JOSEPHBERG received substantial income from performing consulting and other professional services. Despite earning substantial income, JOSEPHBERG failed timely to file any federal income tax returns for the calendar years 2013 through 2016 until after IRS agents informed JOSEPHBERG in May 2017 that he was under investigation. In addition to not timely filing any tax returns, JOSEPHBERG took various affirmative steps to evade the assessment of taxes. Among other things, JOSEPHBERG routed substantial amounts of income through Almorli Bank Account-1 and another bank account in the name of Almorli Advisors Inc., which bank accounts JOSEPHBERG controlled and used to pay for his personal expenses.

JOSEPHBERG’s tax evasion and failure to file tax returns had a dual purpose: by using corporate entities to conceal personal income, JOSEPHBERG was attempting both to evade paying his substantial outstanding tax liabilities from prior years (1997, 1998, and 2005) and to evade assessment of taxes for 2011 and 2013 through 2016, as charged in the Indictment.


JOSEPHBERG, 72, of Greenwich, Connecticut, pled guilty to one count of tax evasion for the tax year 2011, which carries a maximum sentence of five years in prison, and three counts of willful failure to file tax returns for the tax years 2013 through 2015, each of which carries a maximum sentence of one year 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. As part of his plea, JOSEPHBERG agreed to pay at least $1,275,624 in restitution to the IRS and the New York State Department of Taxation and Finance. JOSEPHBERG is scheduled to be sentenced by Judge Sullivan on July 15, 2019, at 2 p.m.

Mr. Berman praised the outstanding work of the Internal Revenue Service, Criminal Investigation, in this case. Mr. Berman also thanked the New York State Department of Taxation and Finance for its assistance in the prosecution.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Olga I. Zverovich and Andrew D. Beaty are in charge of the prosecution.

Financial Fraud: Group Of Five Persons Pleaded Guilty To Felony Charges In Connection With a Scheme To Fraudulently Sell Workout Supplements

Financial Fraud

Five Individuals and Two Companies Plead Guilty to Felony Charges in Multimillion Dollar Scheme to Fraudulently Sell Popular Dietary Supplements

Five individual defendants and two companies pleaded guilty in Dallas to felony charges in connection with a scheme to fraudulently sell workout supplements, the Department of Justice announced today.

All of the defendants played roles in developing, manufacturing, or marketing the popular workout and weight loss supplements known as Jack3d and OxyElite Pro, which were distributed by Dallas-based dietary supplement company USPlabs. Cyril Willson, 38, of Ralston, Nebraska, and Matthew Hebert, 40, of Dallas, pleaded guilty today to introducing misbranded food into interstate commerce with the intent to defraud or mislead. Jonathan Doyle, 40, of Dallas, the president of USPlabs, pleaded guilty February 21 to conspiracy to introduce misbranded food into interstate commerce. Sitesh Patel, 35, of Irvine, California, the vice president of S.K. Laboratories, a California dietary supplement manufacturer, pleaded guilty on February 25 to conspiracy to introduce misbranded food into interstate commerce and to the introduction of misbranded food into interstate commerce. Jacobo Geissler, 42, of University Park, Texas, the CEO of USPlabs, pleaded guilty on February 28 to conspiracy to introduce misbranded food into interstate commerce. In addition, S.K. Laboratories pleaded guilty on February 25 to introduction of misbranded food into interstate commerce, and USPlabs pleaded guilty to conspiracy to introduce misbranded food into interstate commerce on March 5.

The misbranding charges all relate in part to OxyElite Pro, which was recalled in 2013 in the wake of an investigation by the Food and Drug Administration into whether the supplement caused liver injuries in consumers. All of the defendants were charged in a 2015 indictment returned by a Dallas federal grand jury in the Northern District of Texas.

“Dietary supplement makers may not disregard the law and trick consumers about what is in their products,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “Consumers are entitled to trust that the products they consume are safe. We will continue to investigate and prosecute those who enable the sale of mislabeled and potentially unsafe dietary supplements.”

The indictment alleged that the defendants participated in a conspiracy to import dietary supplement ingredients from China, including the stimulant known as “DMAA,” using false certificates of analysis and false labeling, and then lied about the source and nature of those ingredients. According to the indictment, the defendants told some of their retailers and wholesalers that USPlabs products contained natural plant extracts, when in fact they contained a synthetic stimulant manufactured in a Chinese chemical factory. The indictment also alleged that the defendants sold some of their products without determining whether they would be safe to use. According to the indictment, USPlabs products related to the conspiracy brought the company hundreds of millions of dollars.

In pleading guilty, Doyle, Geissler, and Patel admitted that they imported substances with false and misleading labeling in part to avoid law enforcement and regulatory agency attention. Willson and Hebert admitted that they helped to cause a dietary supplement to be shipped with false labeling regarding the ingredients it contained.

“Consumers deserve to know exactly what’s in their dietary supplements,” said U.S. Attorney for the Northern District of Texas Erin Nealy Cox. “We cannot stand by as supplement companies deceive customers – especially when they use untested, suspect ingredients in their products.”

“Americans who choose to take dietary supplements expect that those products are safe and properly labeled,” said FDA Commissioner Scott Gottlieb, M.D. “Dietary supplement labeling that falsely or misleadingly declares its contents presents a risk to the public, and the FDA will exercise its full authority under the law to bring to justice all those who produce and distribute misbranded dietary supplements.”

Doyle and Geissler pleaded guilty before U.S. Magistrate Judge Renee Harris Toliver. Patel, Willson, Hebert, S.K. Laboratories, and USPlabs pleaded guilty before U.S. District Judge Sam A. Lindsay. Patel faces a maximum sentence of six years’ imprisonment; Doyle and Geissler face up to five years’ imprisonment; and Willson and Hebert face up to three years’ imprisonment. The individual defendants, together with the companies, agreed to pay criminal fines and forfeitures totaling about $60 million. The court set sentencing hearings for Willson and Hebert on July 8, 2019, for Patel and S.K. Laboratories on Aug. 12, 2019, and for USPlabs on Aug. 19, 2019. The remaining sentencing dates have not yet been set.

The case was investigated by FDA’s Office of Criminal Investigations. The case is being prosecuted by Trial Attorneys David Sullivan, Patrick Runkle, and Raquel Toledo with the Department of Justice’s Consumer Protection Branch, and Assistant United States Attorneys Errin Martin and John DelaGarza of the U.S. Attorney’s Office for the Northern District of Texas.

Additional information about the Consumer Protection Branch and its enforcement efforts may be found at http://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Northern District of Texas, visit its website at https://www.justice.gov/usao-ndtx.

Investment Fraud: Donald Watkins Sr. And Jr. Plead Guilty On Multiple Charges For Their Roles In Investment Fraud And Bank Fraud Schemes

Investment Fraud

Father And Son Conviceted of Multimillion-Dollar Investment Fraud Scheme

BIRMINGHAM – A federal jury found a father and son guilty Friday of multiple charges for their roles in investment fraud and bank fraud schemes in which they stole over $10 million from individual investors—including multiple former professional athletes – and Alamerica Bank of Birmingham, Alabama.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Jay E. Town of the Northern District of Alabama and Special Agent in Charge Johnnie Sharp Jr. of the FBI Birmingham Field Office made the announcement.

Donald Watkins Sr., 70, of Atlanta, Georgia, was convicted on seven counts of wire fraud, two counts of bank fraud and one count of conspiracy. Donald Watkins Jr., 46, of Birmingham was convicted on one count of wire fraud and one count of conspiracy. Sentencing is set for July 16 before U.S. District Court Judge Karon O. Bowdre of the Northern District of Alabama, who presided over the trial.

“The jury’s verdict today sends a clear message: Donald Watkins Sr. and Donald Watkins Jr. are frauds, plain and simple,” said Assistant Attorney General Benczkowski. “They induced their victims to part with more than $10 million of supposed ‘investment capital’ and used it to support their lavish lifestyle. I want to thank the prosecutors and law enforcement agents for their hard work investigating and prosecuting this case.”

“This was a case about deception and greed at the expense of too many,” said U.S. Attorney Town. “The findings of guilt for these two individuals should forewarn anyone who would seek to defraud investors so brazenly. We appreciate the labor of the jurors whose role as citizens in this process is so critical to our system of justice. We are also grateful to the Alabama Securities Commission and the Department of Justice’s Fraud Section for allowing their personnel to engage in this prosecution.”

“Both of the men found guilty today are financial predators who truly represent pure greed,” said FBI Special Agent in Charge Sharp. “We are pleased that the defendants in this case are being held accountable for their crimes and we will continue to work with our law enforcement partners to investigate and prosecute those who commit these types of financial crimes.”

According to evidence presented at trial, between approximately 2007 and 2013, Donald Watkins Sr. sold “economic participations” and promissory notes connected with Masada Resource Group, a company that he ran as manager and CEO. Investors paid millions of dollars after Donald Watkins Sr. and Donald Watkins Jr. falsely represented that the money would be used to grow Masada, which Donald Watkins Sr. described as a “pre-revenue” company that supposedly had technology that could convert garbage into ethanol. Instead of investing the money into Masada, however, Donald Watkins Sr. and Donald Watkins Jr. diverted funds to pay personal bills and the debts of their other business ventures. The evidence showed that victim money was used to pay for Donald Watkins Sr.’s alimony, hundreds of thousands of dollars in back taxes, personal loan payments, a private jet and clothing purchased by Donald Watkins Jr. and his wife. Emails introduced at trial also showed that Donald Watkins Jr. and Donald Watkins Sr. planned to obtain millions of dollars for these purposes from one victim on multiple occasions, when they knew that their victims trusted them to put their money to use in growing Masada. The defendants’ scheme eventually grew to include another business venture, Nabirm Global, a company that Donald Watkins Sr. claimed held mineral rights in Namibia.

Donald Watkins Sr. also defrauded Alamerica Bank, an entity in which Donald Watkins Sr. was the largest shareholder, the evidence showed. In order to pay hundreds of thousands in litigation expenses associated with another one of Donald Watkins Sr.’s business ventures, Donald Watkins Sr. executed a plan to use a straw borrower to take out money from Alamerica Bank and give it to them. This straw borrower—Donald Watkins Sr.’s long-time mentor and a prominent figure in the Birmingham community—took over $900,000 in loans from Alamerica Bank and then immediately permitted Donald Watkins Sr. and Donald Watkins Jr. to use those funds for their personal benefit.

The investigation was conducted by the FBI’s Birmingham Field Office. Trial Attorney Kyle C. Hankey of the Criminal Division’s Fraud Section and First Assistant U.S. Attorney Lloyd C. Peeples III, Special Assistant U.S. Attorney Beau Brown (on detail from the Alabama Securities Commission) and Special Assistant U.S. Attorney Xavier O. Carter Sr. of the Northern District of Alabama prosecuted the case.

Investment Fraud: DAVID MIDDENDORF And JEFFREY WADA Convicted Of Wire Fraud Charges In Connection With Their Scheme To Defraud The PCAOB

Investment Fraud

Former KPMG Executive And Former PCAOB Employee Convicted Of Wire Fraud For Scheme To Steal And Use Confidential PCAOB Information

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID MIDDENDORF, who was the National Managing Partner for audit quality at the accounting firm KPMG LLP (“KPMG”), and JEFFREY WADA a former employee of the Public Company Accounting Oversight Board (the “PCAOB”), were convicted of wire fraud charges in connection with their scheme to defraud the PCAOB by obtaining, disseminating, and using confidential lists of which KPMG audits the PCAOB would be reviewing so that KPMG could improve its performance in PCAOB inspections.

U.S. Attorney Geoffrey S. Berman said: “As this trial revealed, David Middendorf and Jeffrey Wada were two links in a chain of corruption, where confidential PCAOB inspection information was taken at the behest of high-level executives at KPMG so they could cheat on inspections. This confidential information was critical to the PCAOB and its core mission of ensuring audit quality. As a unanimous jury found, the actions of Middendorf and Wada defrauded the PCAOB.”

According to the evidence presented during the trial:

The PCAOB is a nonprofit corporation overseen by the SEC that inspects the audit work performed by registered accounting firms (“Auditors”) with respect to the financial statements of publicly traded companies (“Issuers”). The PCAOB inspects the largest U.S. accounting firms on an annual basis. As part of the inspection process, the PCAOB chooses a selection of audits performed by the accounting firm for a closer review, commonly referred to as an inspection. Until shortly before an inspection occurs, the PCAOB does not disclose which audits are being inspected, or the focus areas for those inspections, because it wants to ensure that an Auditor does not perform additional work or modify its work papers in anticipation of an inspection. Following the completion of an inspection, the PCAOB issues an Inspection Report containing any negative findings or “comments” with respect to both the specific audits reviewed and the accounting firm more generally.

KPMG is one of the largest accounting firms in the world. In recent years, KPMG fared poorly in PCAOB inspections, and in 2014 received approximately twice as many comments as its competitor firms. By at least in or about 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel. At the time, MIDDENDORF was head of KPMG’s National Office, also known as the Department of Professional Practice (the “DPP”), which was broadly responsible for the quality of KPMG’s audits and KPMG’s performance in PCAOB inspections.

KPMG’s efforts to improve inspection results, however, were not limited to legitimate means. Instead, between 2015 and 2017, MIDDENDORF and others worked illicitly to acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected in an effort to game the system and improve inspection results. For example, beginning in 2015, Brian Sweet, a former PCAOB employee who had joined KPMG, provided MIDDENDORF, Thomas Whittle, and others with the PCAOB’s confidential 2015 list of inspection selections, at MIDDENDORF’s request, so that the information could be used by MIDDENDORF, Whittle, and others, to improve KPMG’s performance on PCAOB inspections.

WADA was an Inspections Leader at the PCAOB, who was obligated to keep confidential the PCAOB’s nonpublic information. WADA joined the conspiracy in the fall of 2015 and began passing confidential information to KPMG. In March 2016, WADA provided Cynthia Holder, a KPMG employee, with confidential information on certain of the PCAOB’s 2016 inspection selections. Holder, in turn, provided the 2016 inspection selections to Sweet, who passed them to MIDDENDORF, Whittle, and others. MIDDENDORF, Whittle, Sweet, and others then agreed to launch a stealth program to “re-review” the audits that had been selected, and agreed to keep their stealth re-reviews within their “circle of trust.” In order to cover up their illicit conduct, other KPMG engagement partners were given a false explanation for the re-reviews. The stealth re-review program allowed KPMG to strengthen its work papers.

In January 2017, WADA, who had been passed over for promotion at the PCAOB, again stole valuable confidential PCAOB information, misappropriating a preliminary list of confidential 2017 inspection selections for KPMG audits and passing it on to Holder, referring to it in a voicemail as the “grocery list.” At the same time, WADA provided Holder with his resume and sought her assistance in helping him to acquire employment at KPMG. Sweet internally shared the preliminary inspection selections provided by WADA with Whittle, another co-conspirator, who in turn shared it with MIDDENDORF, who approved its use to improve the audits on the list.

In February 2017, WADA texted Holder saying, “I have the grocery list. . . . All the things you’ll need for the year.” WADA then spoke to Holder and provided her with the full confidential 2017 final inspection selections. Holder again shared the stolen information with Sweet, who shared it with MIDDENDORF, Whittle, and others, so that it could be acted upon to improve the audits on the list.

In 2017, a KPMG partner learned from Sweet that one of her audits was on the PCAOB inspection list, and she reported the matter to her supervisor. The matter was then ultimately reported to KPMG’s Office of General Counsel.


MIDDENDORF, 54, was convicted of one count of conspiracy to commit wire fraud (Count Two) and three counts of wire fraud (Counts Three, Four, and Five). WADA, 43, was convicted of one count of conspiracy to commit wire fraud (Count Two) and two counts of wire fraud (Counts Four and Five). The conspiracy to commit wire fraud and wire fraud charges each carry a maximum prison term of 20 years. MIDDENDORF and WADA were each acquitted of one count of conspiracy to defraud the United States (Count One).

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

Mr. Berman praised the outstanding investigative work of the United States Postal Inspection Service and also thanked the Securities and Exchange Commission.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Amanda Kramer, and Jordan Estes are in charge of the prosecution.

Financial Fraud: Covidien LP Has Agreed To Pay To Resolve Allegations That It Violated The False Claims Act

False Claim Act

Covidien To Pay Over $17 Million To The United States For Allegedly Providing Illegal Remuneration In The Form Of Practice And Market Development Support To Physicians

SAN FRANCISCO – Covidien LP has agreed to pay $17,477,947 to resolve allegations that it violated the False Claims Act by providing free or discounted practice development and market development support to physicians located in California and Florida to induce purchases of Covidien’s vein ablation products, the Department of Justice announced today.

“Patients in federal health care programs deserve medical care that is free from improper financial incentives,” said U.S. Attorney David L. Anderson for the Northern District of California. “As this case makes clear, companies must steer clear of violating the Anti-Kickback Statute or risk being pursued.”

“Today’s settlement serves as an important reminder to those in the health care community that unlawful kickbacks come in many forms and are not limited to monetary payments to providers,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Providing free or discounted services to health care providers to induce the use of certain items or services can lead to excessive and unnecessary treatments, and drive up health care costs for everyone.”

The United States alleged that Covidien violated the Anti-Kickback Statute and, correspondingly, the False Claims Act by providing practice development and market development support to health care providers located in California and Florida from Jan. 1, 2011, through Sept. 30, 2014, to induce those providers to purchase ClosureFASTTM radiofrequency ablation catheters that were billed to Medicare and to the California and Florida Medicaid programs. ClosureFastTM catheters are used in procedures that treat venous reflux disease, a disease often marked by the presence of varicose veins. The practice and market development support Covidien provided included customized marketing plans for specific vein practices; scheduling and conducting “lunch and learn” meetings and dinners with other physicians to drive referrals to specific vein practices; and providing substantial assistance to specific vein practices in connection with planning, promoting, and conducting vein screening events to cultivate new patients for those practices.

The Anti-Kickback Act prohibits the payment of remuneration to induce the referral or use of items or services paid for by federal health care programs. Remuneration includes not only cash payments but also offers or payments made “in kind.”

“The government contended that Covidien provided discounted or free services to health providers — and so hoped to evade kickback charges,” said Steven J. Ryan, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Companies seeking to buy clients through such arrangements can expect to pay a steep price.”

“Kickback schemes don’t just victimize those directly involved, they undermine the public’s trust in our healthcare system and drive up costs for everyone,” said FBI San Francisco Special Agent in Charge John F. Bennett, “This significant settlement sends a clear message: healthcare providers who engage in this kind of activity and put their own greed before the needs of their patients will be aggressively pursued by the FBI and our federal partners.”

Under the settlement agreement, Covidien will pay an additional $1,474,892 to California and $1,047,160 to Florida for claims settled by these state Medicaid programs. The Medicaid program is a jointly funded federal and state program.

The settlement resolves allegations contained in lawsuits filed by Erin Hayes and Richard Ponder (former sales managers for Covidien) and Shawnea Howerton (a former employee of one of Covidien’s customers), which are pending in federal court in San Francisco, California. The lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the United States for false claims and to share in any recovery. Mr. Hayes and Mr. Ponder will receive $3,146,030 as their share of the federal recovery.

The settlement was the result of a coordinated effort by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Northern District of California, the Department of Health and Human Services Office of Inspector General, and the Federal Bureau of Investigation, as well as the California Attorney General’s Office and the Florida Attorney General’s Office. Covidien cooperated in the government’s investigation, including by sharing the results of its extensive internal investigation and by assisting in the development of a sophisticated damages model, and received credit for its cooperation.

The claims resolved by the settlement are allegations only, and there has been no determination of liability. This case is being handled by Assistant United States Attorney Kimberly Friday and U.S. Department of Justice Trial Attorney Amy Kossak with assistance from Garland He, Jonathan Birch, and Tina Louie.

Cyber Crime: Codrut Dumitrescu, Laurentiu Costea and Cosmin Draghici, Pleaded Guilty To Participating In a Multi-Million Dollar

Cyber Crime

Three Romanian citizens plead guilty to participating in a multi-million dollar “vishing and smishing” scheme

ATLANTA – Robert Codrut Dumitrescu pleaded guilty to federal charges of wire fraud conspiracy, computer fraud and abuse, and aggravated identity theft in connection with a scheme, orchestrated from Romania, which resulted in the illegal intrusion into computer servers in the United States, deployment of phishing messages to thousands of victims, and subsequent theft of victims’ social security numbers and bank account information. His conspirators, Teodor Laurentiu Costea and Cosmin Draghici, also pleaded guilty earlier this year to federal charges related to this scheme.

“These defendants thought they could hide behind their computers in Romania and defraud the citizens of the Northern District of Georgia and elsewhere across the United States,” said U.S. Attorney Byung J. “BJay” Pak. “These guilty pleas resulted from a tireless investigative effort to locate these fraudsters and bring them to justice in our District. We will continue to protect our citizens from cyber-criminals, no matter how far the investigation reaches.”

“Cyber criminals cannot hide in the shadows of the internet no matter where they are,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “The FBI won’t let geographic boundaries stop us from pursuing those persons who cause tremendous financial pain to U.S. citizens. To the victims of these three conspirators and other cyber criminals, we will continue to identify them and pursue justice.”

According to U.S. Attorney Pak, the charges, and other information presented in court: From approximately October 2011 through February 2014, Robert Codrut Dumitrescu, Teodor Laurentiu Costea and Cosmin Draghici conducted a “vishing” and “smishing” scheme from Romania. “Vishing” is a type of phishing scheme that communicates a phishing message, that is, a message that purports to be from a legitimate source, in this case the victims’ banks, through a voice recording. “Smishing” is similar to “vishing,” but communicates a phishing message through text messages.

As part of the scheme, the defendants compromised computer servers located in the Northern District of Georgia, and elsewhere, and installed both interactive voice response and bulk emailing software which initiated thousands of telephone calls and text messages to victims in the Northern District of Georgia, and across the United States, tricking them into disclosing Personally Identifiable Information (PII) such as financial account numbers, PINs, and social security numbers. When a victim received a telephone call, the recipient would be greeted by a recorded message falsely claiming to be a bank. The interactive voice response software would then prompt the victim to enter their PII.

When a victim received a text message, the message purported to be from a bank and directed the recipient to call a telephone number hosted by a compromised Voice Over Internet Protocol server. When the victim called the telephone number, they were prompted by the interactive voice response software to enter their PII. The stolen PII was stored on the compromised computer servers and accessed by Dumitrescu and Costea, who then sold or used the fraudulently obtained information with the assistance of Draghici.

At the time of their arrests in Romania, Dumitrescu possessed 3,278 financial account numbers, Costea possessed 36,050 financial account numbers, and Draghici possessed 3,465 financial account numbers – all fraudulently obtained through this scheme. Based upon these numbers alone, the estimated loss amount is expected to exceed $21,000,000.

On August 16, 2017, a grand jury charged Robert Codrut Dumitrescu, 41, Teodor Laurentiu Costea, 42, and Cosmin Draghici, 29, all of Ploiesti, Romania, with multiple federal computer and fraud-related crimes in connection with this scheme. Dumitrescu, Draghici, and Costea were extradited from Romania to Atlanta last year to face these charges.

Sentencing is scheduled for Costea on June 11, 2019 at 2:00 p.m., for Draghici on June 12, 2019 at 11:00 a.m., and for Dumitrescu on July 23, 2019 at 2:00 p.m., all before U.S. District Judge Thomas W. Thrash.

This case was investigated by the Federal Bureau of Investigation.

Assistant U.S. Attorney Michael Herskowitz, Chief of the Cyber and Intellectual Property Crime Section, is prosecuting the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is http://www.justice.gov/usao-ndga.

Financial Fraud: Edward And Linda Mangano Guilty On Multiple Counts Of Accepting Bribes And Kickbacks in Exchange For Official Government Action

Financial Fraud

Former Nassau County Executive Edward Mangano and His Wife Linda Mangano Convicted of Corruption and Related Charges by a Federal Jury

Earlier today, following a seven-week trial, a federal jury in Central Islip, New York, returned guilty verdicts against former Nassau County Executive Edward Mangano on multiple counts of accepting bribes and kickbacks in exchange for official government action, and for conspiracy to obstruct justice. Linda Mangano, the wife of Edward Mangano, was also convicted of conspiracy to obstruct justice, obstruction of justice and making false statements to Federal Bureau of Investigation (FBI) agents in connection with her employment by Long Island restaurateur Harendra Singh.

When they are sentenced by United States District Judge Joan M. Azrack, Edward Mangano faces up to 20 years’ imprisonment on honest services wire fraud charges and conspiracy to commit honest services wire fraud, up to 10 years’ imprisonment for federal program bribery, and up to five years’ imprisonment for conspiracy to commit federal program bribery. Edward Mangano and Linda Mangano each face up to 20 years’ imprisonment for each obstruction of justice charge, and up to five years’ imprisonment for each false statement charge.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, FBI, New York Field Office, and Jonathan D. Larsen, Acting Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, New York (IRS-CI), announced the verdict.

“As found by the jury, Edward Mangano abused his power as a public official by taking bribes and kickbacks from a businessman in exchange for helping him obtain loans worth millions of taxpayer dollars,” stated U.S. Attorney Donoghue. “Among the personal benefits received was a lucrative no-show job for Linda Mangano. The defendants tried and failed to cover up their crimes by lying to the FBI and federal prosecutors, and will now be held responsible for these crimes. No one is above the law. The Eastern District and the FBI will be relentless in our efforts to root out corruption at all levels of government in New York.”

“In a quid-pro-quo wheeling and dealing, Edward Mangano effectively opened the door that unjustly benefitted restaurateur Harendra Singh, sat idly by while public funds were exchanged for favors, and waited patiently in the wings to accept a payout for the plan he put in motion,” stated FBI Assistant Director-in-Charge Sweeney. “In Linda Mangano’s case, she kept up the ruse with a bogus job as food taster and menu planner at one of Singh’s restaurants. Whether they believe it or not, today we’ve proven they bit off more than they could chew.”

“Serving the public is an honor, especially when that position is the result of being elected by the people,” stated IRS-Criminal Investigation Acting Special Agent-in-Charge Larsen. “Mr. Mangano abused his elected office and the trust of his constituents. Our agents from IRS-CI diligently utilized their investigative expertise to prove these complex financial transactions.”

The evidence at trial established that between January 2010 and February 2015, Edward Mangano engaged in schemes to solicit and receive bribes and kickbacks from Singh. In return for the cash and personal benefits he received, Mangano, who served as Nassau County Executive from January 2010 to December 2017, performed official actions to benefit Singh in connection with his businesses.

The TOB Loan Scheme

Several weeks after Edward Mangano took office as Nassau County Executive in January 2010, he urged the TOB Supervisor to help Singh obtain financing in order to make required capital improvements at TOBAY Beach and The Woodlands at the TOB golf course, by authorizing the TOB to indirectly guarantee four bank loans totaling approximately $20 million. Mangano used his official position to ensure that the TOB backed the loans. In April 2010, Singh hired Linda Mangano for a sham job as the purported Director of Marketing for Singh’s businesses. On June 8, 2010, the TOB board voted to authorize the town to back Singh’s personal loans for the beach and the golf course. Singh paid for five vacations, hardwood flooring, a custom-made office chair, a massage chair and a watch for the Manganos, as well as over $450,000 in total for Linda Mangano’s no-show job.

Obstruction of Justice

Edward and Linda Mangano conspired to obstruct a federal grand jury investigation when they schemed with Singh to fabricate examples of work never performed by Linda Mangano’s at the Water’s Edge, in an attempt to thwart a grand jury investigation. On May 20, 2015 and May 22, 2015, Linda Mangano made false statements to the FBI and federal prosecutors about the work she claimed to have performed for Singh.

The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Catherine M. Mirabile, Lara Treinis Gatz and Christopher Caffarone are in charge of the prosecution. Assistant United States Attorney Madeline O’Connor of the Office’s Civil Division is responsible for the forfeiture of assets.

The Defendants:

EDWARD MANGANO
Age: 56
Bethpage, New York

LINDA MANGANO
Age: 56
Bethpage, New York

E.D.N.Y. Docket No. 16-CR-540 (S-2) (JMA)

Cyber Crime: Konstantin Ignatov Charged International Pyramid Scheme That Involved The Marketing Of a Fraudulent Cryptocurrency

Cyber Crime

Manhattan U.S. Attorney Announces Charges Against Leaders Of “OneCoin,” A Multibillion-Dollar Pyramid Scheme Involving The Sale Of A Fraudulent Cryptocurrency

Current Leader Konstantin Ignatov Arrested at Los Angeles International Airport

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Cyrus R. Vance Jr., the District Attorney for the County of New York, John R. Tafur, the Special Agent in Charge of the Newark Field Office of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., and the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that KONSTANTIN IGNATOV was arrested March 6, 2019, at the Los Angeles International Airport, on a wire fraud conspiracy charge stemming from his role as the leader of an international pyramid scheme that involved the marketing of a fraudulent cryptocurrency called “OneCoin.” An Indictment charging IGNATOV’s sister, RUJA IGNATOVA – a founder and original leader of OneCoin – with wire fraud, securities fraud, and money laundering offenses was unsealed yesterday. As a result of misrepresentations that IGNATOV, IGNATOVA, and others made about OneCoin, victims invested billions of dollars worldwide in the fraudulent cryptocurrency. Following his arrest, IGNATOV appeared in Magistrate Court in the Central District of California, and was detained on the charge contained in the Complaint.

Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit. They promised big returns and minimal risk, but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones. Investors were victimized while the defendants got rich. Our Office has a history of successfully targeting, arresting, and convicting financial fraudsters, and this case is no different.”

New York County District Attorney Cyrus R. Vance, Jr., said: “As alleged in the indictment, these defendants executed an old-school pyramid scheme on a new-school platform, compromising the integrity of New York’s financial system and defrauding investors out of billions. Our Office urges all crypto investors to scrutinize investment opportunities, recognize the prevalence of fraud in this underregulated space, and proceed with caution. I commend U.S. Attorney Berman and my Office’s Major Economic Crimes Bureau for their globe-spanning investigative work and shared commitment to protecting our markets from sophisticated white-collar fraudsters.”

IRS Special Agent in Charge John R. Tafur said: “This is an old scam with a virtual twist. As alleged in court documents, the cryptocurrency OneCoin was established for the sole purpose of defrauding investors. IGNATOV and IGNATOVA allegedly convinced victims to invest in OneCoin based on complete lies about the virtual currency. IRS Criminal Investigation is committed to investigating cryptocurrency scams in an effort to protect the American public and bring cryptocurrency crooks to justice.”

FBI Assistant Director-in-Charge William Sweeney, Jr. said: “As we allege, OneCoin was a cryptocurrency existing only in the minds of its creators and their co-conspirators. Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction history, OneCoin had no real value. It offered investors no method of tracing their money, and it could not be used to purchase anything. In fact, the only ones who stood to benefit from its existence were its founders and co-conspirators. Whether you’re dealing with virtual currency or cold, hard cash, we urge the public to exercise due diligence with any investment.”

According to the allegations contained in the Complaint charging KONSTANTIN IGNATOV and the Indictment charging RUJA IGNATOVA, and in other court papers, and other documents in the public record:

IGNATOV currently serves as the top leader of OneCoin Ltd., a company marketing a purported cryptocurrency named “OneCoin,” which the investigation has revealed is in fact a fraudulent pyramid scheme. OneCoin Ltd. was co-founded in 2014 by IGNATOVA, and is based in Sofia, Bulgaria. IGNATOVA served as OneCoin’s top leader until her disappearance from public view, in October 2017. Starting in late 2017, IGNATOV, who is IGNATOVA’s younger brother, assumed high-level positions at OneCoin, rising to the top leadership position by mid-2018.

OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to purchase cryptocurrency packages. This multi-level marketing structure appears to have influenced rapid growth of the OneCoin member network. Indeed, OneCoin Ltd. has claimed to have more than 3 million members worldwide, including victims living and/or working within the Southern District of New York. OneCoin continues to operate to this day.

As a result of misrepresentations made by IGNATOV, IGNATOVA, and other OneCoin representatives, victims throughout the world wired investment funds to OneCoin-controlled bank accounts in order to purchase OneCoin packages. Records obtained in the course of the investigation show that, between the fourth quarter of 2014 and the third quarter of 2016 alone, OneCoin Ltd. generated €3.353 billion in sales revenue and earned “profits” of €2.232 billion.

Among a number of other representations, OneCoin Ltd. has claimed that the OneCoin cryptocurrency is “mined” using mining servers maintained and operated by the company, and that the value of OneCoin is based on market supply and demand. The purported value of a OneCoin has steadily grown from €0.50 to approximately €29.95 per coin, as of January 2019. In fact, the value of OneCoin is determined internally and not based on market supply and demand; and OneCoins are not mined using computer resources. Moreover, the investigation has revealed that IGNATOVA and her co-founder conceived of and built the OneCoin business fully intending to use it to defraud investors. For example, in one email between IGNATOVA and her co-founder, IGNATOVA described her thoughts on the “exit strategy” for OneCoin. The first option that IGNATOVA listed was, “Take the money and run and blame someone else for this . . . .”

Additionally, OneCoin Ltd. has claimed to have a private “blockchain,” or a digital ledger identifying OneCoins and recording historical transactions. The investigation has revealed that OneCoin lacks a true blockchain, that is, a public and verifiable blockchain. Moreover, by approximately March 2015, IGNATOVA and her co-founder had started allocating to OneCoin members coins that did not even exist in OneCoin’s purported private blockchain, referring to those coins as “fake coins.”

As the founder and leader of OneCoin Ltd., IGNATOVA participated in efforts to market OneCoin to U.S. victim-investors. For example, on July 4, 2015, IGNATOVA participated in an online webinar, later posted to YouTube.com, in which IGNATOVA announced the official opening of the United States market for OneCoin.

Since taking over leadership of OneCoin following IGNATOVA’s disappearance from publicly running the company, IGNATOV has himself made false representations to OneCoin members to solicit trader package purchases and investments into the company. For example, IGNATOV has repeatedly represented that an “initial public offering” of OneCoin would occur on various dates in 2018 and 2019, in an effort to generate excitement and solicit additional investments from member victims. However, the purported offering was repeatedly postponed, and no such offering has taken place. Moreover, IGNATOV has been personally involved in manually setting and increasing the purported Euro value of OneCoin, contradicting claims that the value is set by supply and demand. Finally, the investigation has revealed that IGNATOV is aware that OneCoin-derived funds have been routed through a series of purported “investment fund” accounts used to hide the origin of the money, i.e., to launder OneCoin fraud proceeds.

Between February 27, 2019, and March 6, 2019, IGNATOV travelled to the United States to conduct OneCoin-related business, including in Las Vegas, Nevada, where he stayed at a casino resort. While in Las Vegas, IGNATOV met with a number of OneCoin affiliates. During the meeting, one of the first questions posed to IGNATOV was when OneCoin members would be able to monetize, or “cash out,” their OneCoins. IGNATOV reportedly responded, “if you are here to cash out, leave this room now, because you don’t understand what this project is about.”

IGNATOVA, a third defendant, MARK S. SCOTT, and others agreed to launder the proceeds of the OneCoin fraud scheme. Specifically, IGNATOVA, SCOTT, and others agreed with others to conduct transactions involving OneCoin fraud proceeds in order to conceal and disguise the nature, location, source, ownership, and control of the proceeds. SCOTT, a former partner of a major United States law firm, assisted IGNATOVA and others in laundering more than $400 million through a series of purported investment funds holding bank accounts at financial institutions in the Cayman Islands and the Republic of Ireland, among other locations. The indictment charging SCOTT was previously unsealed, and SCOTT was arrested in Barnstable, Massachusetts, on September 5, 2018. SCOTT’s case is currently pending before U.S. District Judge Edgardo Ramos.


IGNATOVA, 38, of Sofia, Bulgaria, is charged with one count each of wire fraud, conspiracy to commit wire fraud, securities fraud, and conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years sentence, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison. IGNATOVA remains at large.

IGNATOV, 33, of Sofia, Bulgaria, is charged by Complaint with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.

SCOTT, 50, of Coral Gables, Florida, is charged by Indictment with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.

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

Mr. Berman and Mr. Vance praised the outstanding investigative work of IRS-CI and the FBI, which jointly conducted this investigation with the Special Agents from the U.S. Attorney’s Office and analysts from the New York County DA’s Office Major Economic Crimes Bureau.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Securities and Commodities Fraud Task Force. Assistant United States Attorneys Christopher J. DiMase and Nicholas Folly, and Special Assistant United States Attorney Julieta V. Lozano of the New York County District Attorney’s Office, are in charge of the prosecution.

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

If you think you may have been a victim in this case or have additional information, please contact the United States Attorney’s Office at 866-874-8900, or by email at USANYS.OneCoin@usa.doj.gov.

Financial Fraud: Brian Thomas Reynolds Convicted In Related to Defrauding Investors Of a Local Newspaper

Financial Fraud

Convicted Felon Arrested for Fraud Scheme Involving Local Newspaper

ALEXANDRIA, Va. – A previously convicted felon was arrested this morning on charges related to defrauding investors of a local newspaper, unlawful possession of firearms by a previously convicted felon, and making false statements to the FBI.

According to allegations in the indictments, Brian Thomas Reynolds, 52, of Leesburg, defrauded both investors and lenders to a company that he controlled that operates a local newspaper in Loudoun County. As alleged in that indictment, Reynolds made several materially false and fraudulent representations to actual and potential investors and lenders regarding the existence and value of advertising contracts held by the company, and created fake advertising contracts when no such agreements existed. Reynolds also allegedly made materially false and fraudulent representations regarding the company’s historical advertising revenues and the amount of money that Reynolds and others had invested in the company, falsely claimed that another individual had agreed to “match” the investments of certain investors, falsely claimed to at least one investor that the company lacked any debt, understated the amount of debt owed by the company to other investors, and materially overstated the amount of money held by the company in its bank accounts.

The indictment further alleges that Reynolds created altered loan documentation to defraud an individual who had lent money to the company by changing the language of the loan agreement to conditions that were materially more favorable to Reynolds and his company than had actually been agreed to by the lender. According to the indictment, Reynolds also made materially false representations regarding the number of issues previously distributed by the newspaper, and falsely claimed that a prominent businessperson served on the company’s advisory board, when in fact that individual held no position on the board and played no role in the operation of the business.

A second indictment charges Reynolds, who is a convicted felon, with unlawfully possessing eight firearms and associated ammunition, and with making false statements to the FBI regarding his use of firearms.

Reynolds is charged with 11 counts of wire fraud, one count of unlawful possession of firearms by a convicted felon, and one count of making false statements. If convicted, he faces a maximum penalty of 20 years in prison for each count of wire fraud, a maximum penalty of 10 years in prison for the unlawful possession of firearms, and a maximum penalty of 5 years in prison for making false statements. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

This case is part of Project Safe Neighborhoods (PSN), which is the centerpiece of the Department of Justice’s violent crime reduction efforts. PSN is an evidence-based program proven to be effective at reducing violent crime. Through PSN, a broad spectrum of stakeholders work together to identify the most pressing violent crime problems in the community and develop comprehensive solutions to address them. As part of this strategy, PSN focuses enforcement efforts on the most violent offenders and partners with locally based prevention and reentry programs for lasting reductions in crime.

G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, and Matthew J. DeSarno, Special Agent in Charge, Criminal Division, FBI Washington Field Office, made the announcement. Assistant U.S. Attorney Matthew Burke and Special Assistant U.S. Attorney Russell L. Carlberg are prosecuting the case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information is located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case Nos. 1:19-cr-70 and 1:19-cr-71.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.