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DOJ announces nationwide coordinated law enforcement action to combat health care-related COVID-19 fraud

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Criminal Charges Brought Against Owners and Executives of Medical Businesses, Physicians, Marketers, and Manufacturers of Fake COVID-19 Vaccination Record Cards with Losses Exceeding $149 Million

The Department of Justice today announced criminal charges against 21 defendants in nine federal districts across the United States for their alleged participation in various health care related fraud schemes that exploited the COVID-19 pandemic. These cases allegedly resulted in over $149 million in COVID-19-related false billings to federal programs and theft from federally-funded pandemic assistance programs. In connection with the enforcement action, the department seized over $8 million in cash and other fraud proceeds.

“The Department of Justice’s Health Care Fraud Unit and our partners are dedicated to rooting out schemes that have exploited the pandemic,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “Today’s enforcement action reinforces our commitment to using all available tools to hold accountable medical professionals, corporate executives, and others who have placed greed above care during an unprecedented public health emergency.”

“This COVID-19 health care fraud enforcement action involves extraordinary efforts to prosecute some of the largest and most wide-ranging pandemic frauds detected to date,” said Director for COVID-19 Fraud Enforcement Kevin Chambers. “The scale and complexity of the schemes prosecuted today illustrates the success of our unprecedented interagency effort to quickly investigate and prosecute those who abuse our critical health care programs.”

This announcement builds on the success of the May 2021 COVID-19 Enforcement Action and involves the prosecution of various COVID-19 health care fraud schemes. For example, several cases announced today involve defendants who allegedly offered COVID-19 testing to induce patients to provide their personal identifying information and a saliva or blood sample. The defendants are alleged to have then used the information and samples to submit false and fraudulent claims to Medicare for unrelated, medically unnecessary, and far more expensive tests or services. In one such scheme in the Central District of California, two owners of a clinical laboratory were charged with a health care fraud, kickback, and money laundering scheme that involved the fraudulent billing of over $214 million for laboratory tests, over $125 million of which allegedly involved fraudulent claims during the pandemic for COVID-19 and respiratory pathogen tests. In two separate cases in the District of Maryland and the Eastern District of New York, owners of medical clinics allegedly obtained confidential information from patients seeking COVID-19 testing at drive-thru testing sites and then submitted fraudulent claims for lengthy office visits with the patients that did not, in fact, occur. The proceeds of these fraudulent schemes were allegedly laundered through shell corporations in the United States, transferred to foreign countries, and used to purchase real estate and luxury items.

“Throughout the pandemic, we have seen trusted medical professionals orchestrate and carry out egregious crimes against their patients all for financial gain,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “These health care fraud abuses erode the integrity and trust patients have with those in the health care industry, particularly during a vulnerable and worrisome time for many individuals. The actions of these criminals are unacceptable, and the FBI, working in coordination with our law enforcement partners, will continue to investigate and pursue those who exploit the integrity of the health care industry for profit.”

In another type of COVID-19 health care fraud scheme announced today, defendants allegedly exploited policies that the Centers for Medicare and Medicaid Services (CMS) put in place to enable increased access to care during the COVID-19 pandemic. For example, in the Southern District of Florida, one medical professional was charged with a health care fraud, wire fraud, and kickback scheme that allegedly involved billing for sham telemedicine encounters that did not occur and agreeing to order unnecessary genetic testing in exchange for access to telehealth patients. Late last year, one defendant previously was sentenced to 82 months in prison in connection with this scheme.

“The attempt to profit from the COVID-19 pandemic by targeting beneficiaries and stealing from federal health care programs is unconscionable,” said Inspector General Christi A. Grimm of the Department of Health and Human Services (HHS). “HHS-OIG is proud to work alongside our law enforcement partners at the federal and state levels to ensure that bad actors who perpetrate egregious and harmful crimes are held accountable.”

Today’s announcement includes charges against two additional defendants for schemes targeting the Provider Relief Fund (PRF). The PRF is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a federal law enacted in March 2020 that provided financial assistance to medical providers to provide needed medical care to Americans suffering from COVID-19. In total, 10 defendants have been charged with crimes related to misappropriating PRF monies intended for frontline medical providers and three have pleaded guilty.

Today’s announcement also includes charges against manufacturers and distributors of fake COVID-19 vaccination record cards who, according to the allegations, intentionally sought to obstruct the HHS and Centers for Disease Control and Prevention in their efforts to administer the nationwide vaccination program and provide Americans with accurate proof of vaccination. For example, in the Northern District of California, three additional defendants were charged in a scheme to sell homeoprophylaxis immunizations for COVID-19 and falsify COVID-19 vaccination record cards to make it appear that customers received government-authorized vaccines. One defendant allegedly misused her position as the Director of Pharmacy at a northern California hospital to obtain real lot numbers for the Moderna vaccine that were then used to falsify COVID-19 vaccination record cards. Another defendant pleaded guilty in April 2022. In a separate case in the Western District of Washington, one manufacturer was charged in the multistate distribution of fake COVID-19 vaccination record cards after allegedly telling an undercover federal agent that “until I get caught and go to jail, [expletive] it I’m taking the money, ha! I don’t care.”

Additionally, the Center for Program Integrity, Centers for Medicare & Medicaid Services (CPI/CMS) separately announced today that it has taken an additional 28 administrative actions against providers for their alleged involvement in fraud, waste, and abuse schemes related to the delivery of care for COVID-19, as well as schemes that capitalize upon the public health emergency.

“We are committed to working closely with our law enforcement partners to combat fraud, waste and abuse in our federal health care programs,” said CMS Administrator Chiquita Brooks-LaSure. “The administrative actions CMS has taken protect the Medicare Trust Funds while also safeguarding people enrolled in Medicare.”

Today’s enforcement actions were led and coordinated by Assistant Chief Jacob Foster and Trial Attorney D. Keith Clouser of the National Rapid Response Strike Force, and Assistant Chief Justin Woodard of the Health Care Fraud Unit’s Gulf Coast Strike Force in the Criminal Division’s Fraud Section. The Fraud Section’s National Rapid Response Strike Force and the Health Care Fraud Unit’s Strike Forces (SF) in Brooklyn, the Gulf Coast, Miami, Los Angeles, and Newark, as well as the U.S. Attorneys’ Offices for the District of Maryland, District of New Jersey, District of Utah, Northern District of California, and Western District of Tennessee are prosecuting these cases. Descriptions of each case involved in today’s enforcement action are available on the department’s website at: https://www.justice.gov/criminal-fraud/health-care-fraud-unit/case-summaries.

In addition to the FBI, HHS-OIG, and CPI/CMS, the U.S. Postal Inspection Service; Department of Defense Office of Inspector General; Department of the Interior Office of the Inspector General; Department of Labor Office of the Inspector General; Food and Drug Administration Office of Criminal Investigations; Homeland Security Investigations; U.S. Department of Veterans Affairs Office of the Inspector General; and other federal and local law enforcement agencies participated in the law enforcement action.

The Fraud Section leads the Health Care Fraud Strike Force. Since its inception in March 2007, the Health Care Fraud Strike Force, which maintains 15 strike forces operating in 24 federal districts, has charged more than 4,200 defendants who have collectively billed the Medicare program for nearly $19 billion. In addition, the CMS, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.

The Department of Justice needs the public’s assistance in remaining vigilant and reporting suspected fraudulent activity. To report suspected fraud, contact the National Center for Disaster Fraud (NCDF) at (866) 720-5721 or file an online complaint at: https://www.justice.gov/disaster-fraud/webform/ncdf-disaster-complaint-form. Complaints filed will be reviewed at the NCDF and referred to federal, state, local, or international law enforcement or regulatory agencies for investigation.

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

Press release distributed by the DOJ.

16 defendants charged in international $194M “pump and dump” plots

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Administrator
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SEC Uncovers $194 Million Penny Stock Schemes that Spanned Three Continents

This week the Securities and Exchange Commission announced charges against 16 defendants, located in the Bahamas, the British Virgin Islands, Bulgaria, Canada, the Cayman Islands, Monaco, Spain, Turkey, and the United Kingdom, for participating in multi-year fraudulent penny stock schemes that generated more than $194 million in illicit proceeds. The SEC investigations leading to these charges involved assistance from securities regulators and other law enforcement authorities in more than 20 countries and are associated, in part, with parallel criminal actions announced by the United States Attorney’s Office for the Southern District of New York.

“We allege that the defendants in these actions orchestrated some of the most complex microcap stock fraud schemes ever charged by the SEC,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “By locating their operations overseas, using encrypted messaging and operating through a convoluted network of offshore accounts, the defendants hoped to avoid detection of the massive frauds we allege they perpetrated on US markets and investors. However, investigative teams from three SEC offices doggedly kept on their trail, working across borders, and ended this alleged global scheme.”

The SEC’s complaints, filed in the United States District Court for the Southern District of New York, charge all of the defendants with violating the antifraud and registration provisions of the federal securities laws. The charges, contained in three separate complaints, allege that several defendants played a variety of roles to accumulate the majority of shares in penny stocks via difficult to unveil, offshore nominee companies. It is also alleged that some of the defendants frequently used encrypted text and phone applications to avoid detection by regulators, and arranged to buy and sell penny stocks from multiple offshore accounts, in furtherance of the fraud.

According to the complaints, once some of the defendants had amassed a significant majority of the shares of the stocks, certain defendants secretly funded promotional campaigns to promote the stocks to unsuspecting investors in the United States and elsewhere. As alleged, when those campaigns triggered increases in the demand for and price of the stocks, some of the defendants sold the stocks via trading platforms in Asia, Europe and the Caribbean for significant profits.

The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties against all the defendants; penny stock bars against all the individual defendants; conduct-based injunctions against 11 of the 15 individual defendants; and officer and director bars against eight of the individual defendants. On the emergency applications, the Court issued orders on April 12 and April 15 freezing and directing repatriation of the assets of six defendants.

The SEC’s investigations were conducted by Trevor Donelan, Alicia Reed, Michael Moran, David D’Addio, and Amy Gwiazda in the SEC’s Boston Regional Office; Benjamin D. Brutlag, Shipra G. Wells, Karaz S. Zaki, and J. Lee Buck II in the SEC’s Headquarters, with the assistance of Yongping Zheng of the Enforcement Division’s Office of Investigative & Market Analytics; and by Kristine Zaleskas, Michael Paley, and Judith Weinstock in the New York Regional Office. All of the investigations received assistance from the SEC’s Office of International Affairs, including Owen Granke, Matthew Greiner, Andrew Lewczyk, and Marlee Miller. The litigations will be led, respectively, by David London and Martin Healey; Kenneth W. Donnelly, David Nasse, and Frederick L. Block; and Paul Gizzi and Ms. Zaleskas.

The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority. The investigations also involved assistance from the following securities regulators and other government authorities: the Alberta Securities Commission, the Securities Commission of the Bahamas, the British Columbia Securities Commission, the Cayman Islands Monetary Authority, the Curaçao Korps Landelijke Politiediensten, the Cyprus Securities and Exchange Commission, the Financial Supervisory Authority of Denmark, the Guernsey Financial Services Commission, the Hong Kong Securities and Futures Commission, the Italian Commissione Nazionale per le Società e la Borsa, the Japan Financial Services Agency, the Jersey Financial Services Commission, the Latvia Financial and Capital Market Commission, the Liechtenstein Financial Market Authority, the Malta Financial Services Authority, the Mauritius Financial Services Commission, the Mexican Comisión Nacional Bancaria y de Valores, the New Zealand Financial Markets Authority, the Ontario Securities Commission, the Panamanian Superintendencia del Mercado de Valores, the Securities Commission of Serbia, the Québec Autorité des Marchés Financiers, the Royal Canadian Mounted Police, the Monetary Authority of Singapore, the Swiss Financial Market Supervisory Authority, the United Arab Emirates Securities and Commodities Authority, the Dubai Financial Services Authority, and the United Kingdom Financial Conduct Authority.

Also see: An illustration of the alleged schemes’ global reach.

Defendants (in alphabetical order)

Antevorta Capital Partners, Ltd.

Craig James Auringer

Ronald Bauer

Domenic Calabrigo

Henry Clarke

Julius Csurgo

Daniel Mark Ferris

Alon Friedlander

Adam Christopher Kambeitz

Curtis Lehner

Petar Dmitrov Mihaylov

Massimiliano Pozzoni

Hasan Sario

Dean Shah

David Sidoo

Courtney Vasseur

Press release and featured illustration distributed by the SEC.

Former CFO of Publicly Traded Brazilian Company Charged in Fraud Scheme

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Administrator
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"Investing" by 401(K) 2013 is marked with CC BY-SA 2.0.

A superseding indictment was unsealed today in the Southern District of Iowa charging the former Chief Financial Officer (CFO) of publicly traded reinsurance company, IRB Brasil Resseguros SA, aka IRB Brasil RE (IRB), for fraudulently propping up its stock price by spreading false information that U.S. investment firm Berkshire Hathaway Inc. had invested in IRB.

According to court documents, Fernando Passos, 39, of Brazil, allegedly executed the fraud scheme beginning in February 2020, after an investment company published a report questioning the accuracy of IRB’s financial statements and announcing that the investment company had taken a short position against IRB’s stock. IRB’s stock price dropped in the wake of the report. In response, Passos allegedly developed and executed a scheme to mislead shareholders and the investing public by disseminating and causing to be disseminated materially false information that Berkshire Hathaway had invested in IRB, despite knowing the U.S. investment firm had not made such an investment. Passos discussed his plans to spread this materially false information with IRB investor relations employees. In one text message described in the indictment, Passos stated, “I will spread this story that berk [i.e., Berkshire Hathaway] bought 28MM of shares,” and added, “then it becomes true.”

As part of the fraud scheme, the superseding indictment alleges, Passos falsified documents and information to support his claims that Berkshire Hathaway was an IRB shareholder and caused this information to be provided to members of the press, several of IRB’s directors, and IRB investors. News outlets in both Brazil and the United States began incorrectly reporting that Berkshire Hathaway had invested in IRB. Following the news coverage, on the evening of March 3, 2020, Berkshire Hathaway issued a press release stating that it was not currently, had never been, and had no intention of becoming a shareholder in IRB. On March 4, 2020, after Berkshire Hathaway’s press release, IRB’s stock price dropped, causing significant shareholder losses.

IRB, which is based in Brazil, trades on Brazil’s B3 exchange and has shareholders around the world, including in the United States.

Passos is charged with one count of securities fraud and three counts of wire fraud. If convicted, he faces up to 20 years in prison on each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. He remains at large.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division and Inspector in Charge Eric Shen of the U.S. Postal Inspection Service’s Criminal Investigations Group made the announcement.

The U.S. Postal Inspection Service is investigating the case.

Trial Attorney Kate McCarthy of the Criminal Division’s Fraud Section is prosecuting the case.

The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing Victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit: https://www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas. If you believe you are a victim of the conduct described in the Passos indictment, please visit https://www.justice.gov/criminal-vns/case/Passos.

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

Press release distributed by the DOJ.

Featured image: by 401(K) 2013 is marked with CC BY-SA 2.0.

Former Bank Employee Pleads Guilty to Manipulating U.S. Treasury Securities Prices

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"US Treasury Checks - 3D Illustration" by DonkeyHotey is marked with CC BY 2.0.

A former trader at a global financial institution pleaded guilty today to manipulating U.S. Treasury securities prices

According to court documents, Tyler Forbes, 27, of Manlius, New York, was employed as a trader on the U.S. Treasuries desk of a global financial institution. From approximately January to June 2019, Forbes engaged in an unlawful “spoofing” scheme to manipulate the price of certain U.S. Treasury securities traded in the secondary (or “cash”) market — predominantly two and three-year U.S. Treasury notes, as well as 10-year U.S. Treasury notes. Forbes’s spoofing strategy involved electronically placing large, non-bona fide “spoof orders” that he intended to cancel prior to execution on one side of the market, while simultaneously entering smaller, genuine orders that he intended to execute on the opposite side of the market. Many of Forbes’s genuine orders were “iceberg” orders, meaning that only a portion of the order’s full size was visible to other market participants at any given time, whereas all of Forbes’s spoof orders were fully displayed. The purpose of Forbes’s “spoof orders” was to create a false appearance of market depth and activity in order to mislead other traders, and to artificially raise or depress the prevailing market price so that Forbes could execute his genuine orders more easily or more profitably.

Forbes pleaded guilty to one count of manipulation of security prices. He is scheduled to be sentenced on July 28 in the Eastern District of New York and faces a maximum penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division and Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division made the announcement.

The FBI investigated the case.

Deputy Chief Avi Perry and Trial Attorney Sara Hallmark of the Criminal Division’s Fraud Section are prosecuting the case.

Press release distributed by the DOJ.

Featured image: by DonkeyHotey is marked with CC BY 2.0.

TRO and asset freeze against alleged perpetrators of nearly $450M Ponzi Scheme

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"Personal Injury Stethoscope" by sandiegopersonalinjuryattorney is marked with CC BY-SA 2.0.

Washington D.C. — The Securities and Exchange Commission today announced charges and an asset freeze against several Las Vegas-area individuals and companies allegedly behind a nearly half-billion dollar Ponzi scheme involving purported personal injury settlements. The SEC charged certain defendants with violations of the antifraud provisions of the federal securities laws, certain individual defendants with acting as unregistered brokers, and all defendants with engaging in an unregistered securities offering.

According to the SEC’s complaint filed in U.S. District Court for the District of Nevada, attorney Matthew Beasley and cohorts Jeffrey Judd and Christopher Humphries falsely told hundreds of investors, including many in their own church community, that they would earn 12.5 percent quarterly returns by making purportedly risk-free investments in J&J Consulting Services. Beasley and Judd created the company to supposedly advance funds to tort plaintiffs who had reached settlements with insurance companies. But according to the complaint, none of the $449 million raised from investors over a five-year period was used for this purpose. The alleged perpetrators instead used investor money to purchase luxury homes, cars, boats, and a private jet for themselves, and paid fictitious returns to investors in Ponzi-like fashion to keep the scheme going.

“As alleged in our complaint, Beasley, Judd, and others enriched themselves through lies and deception, using their religious and community networks to fleece investors out of hundreds of millions of dollars after promising them a nearly 50 percent annual increase on their initial investment,” said Tanya Beard, Acting Director of the SEC’s Salt Lake Regional Office.

The entities charged with fraud in this action are J&J Consulting Services, Inc. (Nevada), J&J Consulting Services Inc. (Alaska), J and J Purchasing LLC, and Beasley Law Group PC, whereas the affiliated individuals are Judd, Beasley, and Humphries. Individuals charged with acting as unregistered brokers are Judd, Humphries, Shane Jager, Jason Jongeward, Denny Seybert, and Roland Tanner. Finally, the entities and individuals named as relief defendants in this action are The Judd Irrevocable Trust, PAJ Consulting Inc, BJ Holdings LLC, Stirling Consulting L.L.C., CJ Investments, LLC, Rocking Horse Properties LLC, Triple Threat Basketball, LLC, ACAC LLC, Anthony Michael Alberto, Jr., and Monty Crew LLC.

The asset freeze obtained by the SEC against Beasley and the other defendants prevents any further dissipation of investor funds. The SEC is seeking permanent injunctions and disgorgement of ill-gotten gains plus interest and penalties.

The SEC’s continuing investigation is being conducted by Joni Ostler, Laurie Abbott, and Pasha Salimi of the Salt Lake Regional Office, and supervised by Tanya Beard. The litigation will be led by Tracy Combs and Casey Fronk.

Press release distributed by the SEC.

Featured image: by sandiegopersonalinjuryattorney is marked with CC BY-SA 2.0.

US Leads Seizure of One of the World’s Largest Hacker Forums and Arrests Administrator

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"Symposium Cisco Ecole Polytechnique 9-10 April 2018 Artificial Intelligence & Cybersecurity" by Ecole polytechnique / Paris / France is marked with CC BY-SA 2.0.

The Department of Justice today announced the seizure of the RaidForums website, a popular marketplace for cybercriminals to buy and sell hacked data, and unsealed criminal charges against RaidForums’ founder and chief administrator, Diogo Santos Coelho, 21, of Portugal. Coelho was arrested in the United Kingdom on Jan. 31, at the United States’ request and remains in custody pending the resolution of his extradition proceedings.

Court records unsealed today indicate that the United States recently obtained judicial authorization to seize three domains that long hosted the RaidForums website. These domains were “raidforums.com,” “Rf.ws,” and “Raid.lol.” According to the affidavit filed in support of these seizures, from in or around 2016 through February 2022, RaidForums served as a major online marketplace for individuals to buy and sell hacked or stolen databases containing the sensitive personal and financial information of victims in the United States and elsewhere, including stolen bank routing and account numbers, credit card information, login credentials and social security numbers.

“The takedown of this online market for the resale of hacked or stolen data disrupts one of the major ways cybercriminals profit from the large-scale theft of sensitive personal and financial information,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “This is another example of how working with our international law enforcement partners has resulted in the shutdown of a criminal marketplace and the arrest of its administrator.”

“Our interagency efforts to dismantle this sophisticated online platform – which facilitated a wide range of criminal activity – should come as a relief to the millions victimized by it, and as a warning to those cybercriminals who participated in these types of nefarious activities,” said U.S. Attorney Jessica D. Aber for the Eastern District of Virginia. “Online anonymity was not able to protect the defendant in this case from prosecution, and it will not protect other online criminals either.”

“The seizure of the RaidForums website – which facilitated the sale of stolen data from millions of people throughout the world – and the charges against the marketplace’s administrator are a testament to the strength of the FBI’s international partnerships,” said Assistant Director in Charge Steven M. D’Antuono of the FBI’s Washington Field Office said. “Cybercrime transcends borders, which is why the FBI is committed to working with our partners to bring cybercriminals to justice – no matter where in the world they live or behind what device they try to hide.”

“This global investigation signifies the remarkable dedication of the U.S. Secret Service and highlights our partnerships with our foreign law enforcement counterparts essential to disrupting sophisticated networks of cyber criminals,” said Special Agent in Charge Jason D. Kane of the U.S. Secret Service’s Criminal Investigative Division. “This case exemplifies teamwork at all levels of law enforcement to stop these cyber criminals from defrauding citizens of the United States and in our partner countries.”

Prior to its seizure, RaidForums members used the platform to offer for sale hundreds of databases of stolen data containing more than 10 billion unique records for individuals residing in the United States and internationally. At the time of its founding in 2015, RaidForums also operated as an online venue for organizing and supporting forms of electronic harassment, including by “raiding” – posting or sending an overwhelming volume of contact to a victim’s online communications medium – or “swatting” – the practice of making false reports to public safety agencies of situations that would necessitate a significant, and immediate armed law enforcement response.

The seizure of these domains by the government will prevent RaidForums members from using the platform to traffic in data stolen from corporations, universities and governmental entities in the United States and elsewhere, including databases containing the sensitive, private data of millions of individuals around the world.

In addition, a six-count indictment against Coelho was unsealed in the Eastern District of Virginia charging him with conspiracy, access device fraud and aggravated identify theft in connection with his role as the chief administrator of RaidForums. According to the indictment, between Jan. 1, 2015, and on or about Jan. 31, 2022, Coelho allegedly controlled and served as the chief administrator of RaidForums, which he operated with the help of other website administrators. As administrators, Coelho and his co-conspirators are alleged to have designed and administered the platform’s software and computer infrastructure, established and enforced rules for its users, and created and managed sections of the website dedicated to promoting the buying and selling of contraband, including a subforum titled “Leaks Market” that described itself as “[a] place to buy/sell/trade databases and leaks.”

To profit from the illicit activity on the platform, RaidForums charged escalating prices for membership tiers that offered greater access and features, including a top-tier “God” membership status. RaidForums also sold “credits” that provided members access to privileged areas of the website and enabled members to “unlock,” and download stolen financial information, means of identification, and data from compromised databases, among other items. Members could also earn credits through other means, such as by posting instructions on how to commit certain illegal acts.

According to the indictment, Coelho also personally sold stolen data on the platform, and directly facilitated illicit transactions by operating a fee-based “Official Middleman” service. For the Official Middleman service, Coelho allegedly acted as a trusted intermediary between RaidForums members seeking to buy and sell contraband on the platform, including hacked data. Notably, to create confidence amongst transacting parties, the Official Middleman service enabled purchasers and sellers to verify the means of payment and contraband files being sold prior to executing the transaction.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division; U.S. Attorney Jessica D. Aber for the Eastern District of Virginia; Special Agent in Charge Jason D. Kane of the U.S. Secret Service’s Criminal Investigative Division; and Assistant Director Steven M. D’Antuono of the FBI’s Washington Field Office made the announcement.

Senior Trial Attorney Aarash Haghighat of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorney Carina A. Cuellar for the Eastern District of Virginia are prosecuting the case against Coelho. The Justice Department’s Office of International Affairs provided significant assistance throughout the criminal investigation.

The law enforcement actions against RaidForums and Coelho are the result of an ongoing criminal investigation by the FBI’s Washington Field Office and the U.S. Secret Service. The department also thanks the support provided by Joint Cybercrime Action Taskforce (Europol), National Crime Agency (UK), Swedish Police Authority (Sweden), Romanian National Police (Romania), Judicial Police (Portugal), Internal Revenue Service Criminal Investigation, Federal Criminal Police Office (Germany) and other law enforcement partners.

Anyone that has any information regarding Coelho or RaidForums should file a complaint at ic3.gov with #RaidForums in the description.

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

Press release distributed by DOJ.

Featured image: by Ecole polytechnique / Paris / France is marked with CC BY-SA 2.0.

Former Goldman Sachs Investment Banker Convicted in Massive Bribery and Money Laundering Scheme

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Roger Ng Found Guilty of Conspiring to Violate the Foreign Corrupt Practices Act and Commit Money Laundering in Connection with 1MDB Scheme

A former Managing Director of The Goldman Sachs Group Inc. (Goldman Sachs) was convicted last week by a federal jury in the Eastern District of New York for conspiring to commit bribery, to circumvent internal accounting controls, and to commit money laundering in connection with a multibillion-dollar scheme involving Malaysia’s state-owned investment and development fund, 1Malaysia Development Berhad (1MDB).

“Roger Ng participated in a massive bribery and money laundering scheme involving the corruption of high-level foreign officials in Malaysia and the United Arab Emirates,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “This trial demonstrates the commitment by the Department of Justice to prosecute and hold accountable individuals who engage in corruption and use our financial system to launder funds related to their illicit schemes. We will continue to pursue criminal wrongdoers and will seek to bring them to justice, wherever they are, deprive them of their ill-gotten gains, and, wherever possible, return corrupt proceeds to those harmed by corruption — as we have throughout our longstanding investigation into the 1MDB scheme.”

Following an eight-week trial, Ng Chong Hwa, aka Roger Ng, of Malaysia, was found guilty of conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes to a dozen foreign officials in Malaysia and the United Arab Emirates, conspiring to violate the FCPA by circumventing the internal accounting controls of Goldman Sachs, and conspiring to launder billions of dollars related to the scheme.

“Today’s verdict is a resounding victory for justice and for the people of Malaysia who are the victims of this massive scheme carried out in a frenzy of greed by the defendant and his co-conspirators to get rich by stealing millions of dollars from the 1MDB fund intended to benefit that country’s economy,” said U.S. Attorney Breon Peace for the Eastern District of New York. “The Department of Justice and this office are committed to addressing corporate culture by vigorously combating white-collar crime and holding corrupt individuals accountable for violating U.S. laws here and abroad in order to enrich themselves.”

“The FBI and our domestic and international law enforcement partners maintain an unwavering commitment to combating international corruption,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “This conviction serves a reminder that the FBI will always hold accountable those who abuse the U.S. financial system to further their corrupt schemes, as well as the persons and companies that enable them.”

“Today’s conviction of Roger Ng demonstrates the cooperation of law enforcement and prosecutorial agencies around the world to combat foreign corruption,” said Special Agent in Charge Ryan L. Korner of IRS Criminal Investigation (IRS-CI), Los Angeles Field Office. “Roger Ng and his co-conspirators enriched themselves while depriving the citizens of Malaysia of billions of dollars that were supposed to be invested on their behalf. The Internal Revenue Service-Criminal Investigation is proud to stand with our law enforcement partners in the United States and around the world who participated in this most significant investigation.”

1MDB is a Malaysian state-owned and controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people.

Ng was employed as a Managing Director by various subsidiaries of Goldman Sachs and acted as an agent and employee of Goldman Sachs from approximately 2005 to May 2014, and was also a stockholder of Goldman Sachs.

According to evidence presented at trial, between approximately 2009 and 2014, Ng and his co-conspirators laundered billions of dollars misappropriated and fraudulently diverted from 1MDB, including funds 1MDB raised in 2012 and 2013 through three bond transactions it executed with Goldman Sachs, known as “Project Magnolia,” “Project Maximus” and “Project Catalyze.” As part of the scheme, Ng and others, including Tim Leissner, the former Southeast Asia Chairman and participating managing director of Goldman Sachs, conspired to and did pay more than $1 billion in bribes to 12 government officials in Malaysia and the United Arab Emirates to obtain and retain lucrative business for Goldman Sachs, including the 2012 and 2013 bond deals. They also conspired to and did launder the proceeds of their criminal conduct through the U.S. financial system, including funding major Hollywood films such as “The Wolf of Wall Street” and purchasing, among other things, a $51 million Jean-Michael Basquiat painting from New York-based Christie’s auction house, a $23 million diamond necklace from a New York jeweler, millions of dollars in Hermès handbags from a dealer based on Long Island, and a luxury real estate property in Manhattan.

Ng and his co-conspirators, including co-defendant Low Taek Jho, aka Jho Low, a wealthy Malaysian socialite, used Low’s close relationships with high-ranking government officials in Malaysia and the United Arab Emirates to obtain and retain business for Goldman Sachs through the promise and payment of hundreds of millions of dollars in bribes. In the course of executing the scheme, Ng conspired with others at Goldman Sachs to and did circumvent the investment bank’s internal accounting controls. Through its work for 1MDB during that time, Goldman Sachs received approximately $600 million in fees and revenues, while Ng received $35 million for his role in the bribery and money laundering scheme. In total, Ng and the other co-conspirators misappropriated more than $2.7 billion from 1MDB.

Low remains a fugitive. In August 2018, Leissner pleaded guilty to conspiring to launder money and conspiring to violate the FCPA by both paying bribes to various Malaysian and United Arab Emirates officials and circumventing the internal accounting controls of Goldman Sachs. Leissner agreed to forfeit $43 million and shares of stock valued at more than $200 million, and is awaiting sentencing.

In October 2020, Goldman Sachs and Goldman Sachs (Malaysia) Sdn. Bhd. (GS Malaysia), its Malaysian subsidiary, admitted to conspiring to violate the anti-bribery provisions of the FCPA in connection with the scheme. Goldman Sachs entered into a deferred prosecution agreement with the Department of Justice’s Criminal Division’s Fraud Section and Money Laundering and Asset Recovery Section (MLARS), and the U.S. Attorney’s Office for the Eastern District of New York. GS Malaysia pleaded guilty in the U.S. District Court for the Eastern District of New York. Goldman Sachs paid more than $2.9 billion as part of a coordinated resolution with criminal and civil authorities in the United States, the United Kingdom, Singapore, and elsewhere.

The investigation was jointly conducted by the FBI’s International Corruption Unit and IRS-Criminal Investigation. The government’s criminal case is being handled by the Criminal Division’s Fraud Section, MLARS, and the U.S. Attorney’s Office for the Eastern District of New York. Co-Principal Deputy Chief Brent Wible of the Fraud Section, Bank Integrity Unit Chief Jennifer E. Ambuehl of MLARS, and Assistant U.S. Attorneys Alixandra E. Smith, Drew G. Rolle, and Dylan Stern of the Eastern District of New York are prosecuting the case. The Justice Department’s Office of International Affairs provided critical assistance.

The department appreciates the significant assistance provided by the U.S. Securities and Exchange Commission; the Board of Governors of the Federal Reserve System, including the Federal Reserve Bank of New York; the Government of Malaysia, including the Attorney General’s Chambers of Malaysia, the Royal Malaysia Police and NCB Interpol Malaysia; the United Kingdom Financial Conduct Authority; the United Kingdom Prudential Regulation Authority; the Attorney General’s Chambers of Singapore; the Singapore Police Force – Commercial Affairs Division; the Monetary Authority of Singapore; the Office of the Attorney General and the Federal Office of Justice of Switzerland; the judicial investigating authority of the Grand Duchy of Luxembourg and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg; and the Ministry of Justice of France.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

The Bank Integrity Unit in MLARS investigates and prosecutes complex, multi-district, and international criminal cases involving financial institutions. The unit’s prosecutions focus on banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.

Note: Click to view a video statement from AAG Polite.

Press release distributed by the DOJ.

Featured image: by free pictures of money is marked with CC BY 2.0.

Former DHS Employee Convicted of Scheme to Defraud the US

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Administrator
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"Symposium Cisco Ecole Polytechnique 9-10 April 2018 Artificial Intelligence & Cybersecurity" by Ecole polytechnique / Paris / France is marked with CC BY-SA 2.0.

Charges Involved Theft of Proprietary Software and Sensitive Databases from U.S. Government

A former Acting Branch Chief of the Information Technology Division of the U.S. Department of Homeland Security (DHS-OIG) was convicted today by a jury of multiple federal charges stemming from the theft of proprietary software and sensitive databases from the U.S. government.

Murali Y. Venkata, 56, of Aldie, Virginia, was convicted of conspiracy to defraud the U.S. government, theft of government property, wire fraud, aggravated identity theft, and obstruction. Venkata, along with co-conspirators Charles K. Edwards, who previously served as the Acting Inspector General of DHS-OIG, and Sonal Patel, another official at DHS-OIG, executed a scheme to steal confidential and proprietary software from the government along with the personally identifying information (PII) of hundreds of thousands of federal employees. Venkata worked for DHS-OIG from June 2010 until he was placed on administrative leave in October 2017 following the charges in this case, including serving for a period as an Acting Branch Chief in the Information Technology Division. Before he joined DHS-OIG, Venkata worked at the U.S. Postal Service’s Office of Inspector General (USPS-OIG). At both agencies, Venkata had access to software systems, including one used for case management and other systems holding PII of federal employees.

Edwards pleaded guilty in January 2022 and Patel pleaded guilty in April 2019 to stealing property from the U.S. government for the purpose of developing a commercial version of a case management system to be offered for sale to government agencies. Venkata was convicted for his role in the conspiracy, which included exfiltrating proprietary source code and sensitive databases from DHS-OIG facilities, as well as assisting Edwards in setting up three computer servers in Edwards’s residence so that software developers in India could access the servers remotely and develop the commercial version of the case management system.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Matthew M. Graves for the District of Columbia, Inspector General Joseph V. Cuffari of DHS-OIG, and Inspector General Tammy Whitcomb of USPS-OIG made the announcement.

Senior Litigation Counsel Victor R. Salgado and Trial Attorney Celia Choy of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Christine M. Macey, of the Fraud, Public Corruption, and Civil Rights Section of the U.S. Attorney’s Office for the District of Columbia prosecuted the case. Assistant U.S. Attorney David B. Kent, also of the Fraud, Public Corruption, and Civil Rights Section for the District of Columbia, provided significant assistance in the investigation of this matter.

Press release distributed by the DOJ.

Featured image: by Ecole polytechnique / Paris / France is marked with CC BY-SA 2.0.

California Man Convicted for $27 Million PPP Fraud Scheme

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Administrator
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"Numbers And Finance" by kenteegardin is marked with CC BY-SA 2.0.

A federal jury convicted a California man for submitting fraudulent applications seeking money from the Paycheck Protection Program (PPP), submitting false statements to a financial institution, and money laundering.

According to court documents and evidence presented at trial, Robert Benlevi, 53, of Encino, submitted 27 PPP loan applications to four banks between April and June 2020 on behalf of eight companies solely owned by Benlevi. In the applications, Benlevi sought a total of $27 million in forgivable PPP loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In his fraudulent applications, Benlevi represented that each of his companies had 100 employees and average monthly payroll of $400,000, even though he knew that the companies did not have any employees or payroll expenses. The evidence further showed that Benlevi also submitted fabricated IRS documents falsely stating that each of the companies had an annual payroll of $4.8 million.

Based on Benlevi’s fraudulent loan applications, three of Benlevi’s companies — 1Stellar Health LLC, Bestways2 Health LLC, and Joyous-Health4U LLC — obtained $3 million in PPP funds. Although Benlevi falsely represented that the funds sought through the PPP loan applications would be used to pay payroll and certain other business expenses, the evidence showed that he instead used them for personal expenses, including cash withdrawals, payments on his personal credit cards, transfers to other personal and business accounts he controlled, and renting an oceanfront apartment in Santa Monica. In a single day, Benlevi withdrew from the Bestways2 Health account $248,000 of PPP funds in cashier’s checks, which were deposited into other accounts that Benlevi controlled.

Benlevi was convicted of bank fraud, false statements to a financial institution, and money laundering. He is scheduled to be sentenced on June 27 and faces up to 30 years in prison for each of the bank fraud and false statement charges, and up to 10 years in prison for each count of money laundering. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division; U.S. Attorney Tracy L. Wilkison of the Central District of California; Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division; Assistant Director in Charge Kristi K. Johnson of the FBI’s Los Angeles Field Office; Special Agent in Charge Jeffrey D. Pittano of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG); and Special Agent in Charge Weston King of the SBA Office of Inspector General (SBA-OIG) Western Region made the announcement.

The FBI, SBA-OIG, and FDIC-OIG investigated the case.

Trial Attorneys Emily Culbertson and Justin Givens of the Criminal Division’s Fraud Section are prosecuting the case.

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline via the NCDF Web Complaint Form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

Press release distributed by the DOJ.

Featured image: “Numbers And Finance” by kenteegardin is marked with CC BY-SA 2.0.

SEC Proposes Rules for the Registration and Regulation of Security-Based Swap Execution Facilities

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Administrator
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"New York Stock Exchange" by David Blaikie is marked with CC BY 2.0.

The Securities and Exchange Commission proposed this week new Regulation SE under the Securities Exchange Act of 1934 (the Exchange Act) to create a regime for the registration and regulation of security-based swap execution facilities (SBSEFs). The new regulatory framework was one of the major reforms required under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) relating to the over-the-counter derivatives market.

“This proposal would increase the transparency and integrity of the traditionally opaque over-the-counter security-based swap market, fulfilling a mandate under the Dodd-Frank Act of 2010 to register and regulate the platforms that trade these instruments,” said SEC Chair Gary Gensler. “Among other things, today’s proposal would create a framework for the registration of security-based swap execution facilities, based upon the 14 core principles for these entities spelled out in the Dodd-Frank Act. This framework would harmonize with the swap execution facility framework promulgated by our sibling agency, the Commodity Futures Trading Commission.”

If adopted, today’s proposal would implement the Exchange Act’s trade execution requirement for security-based swaps and address the cross-border application of that requirement; implement Section 765 of the Dodd-Frank Act to mitigate conflicts of interest at SBSEFs and national securities exchanges that trade security-based swaps; and promote consistency between proposed Regulation SE and existing rules under the Exchange Act.

In developing this proposal, the Commission sought to harmonize as closely as practicable with parallel rules of the Commodity Futures Trading Commission (CFTC) that govern swap execution facilities (SEFs) and swap execution generally. The Commission seeks to obtain regulatory benefits comparable to those under the CFTC regime while minimizing costs imposed on SBSEFs and their members.

The Commission previously proposed rules regarding SBSEFs in three separate releases between 2010 and 2013. Given the length of time that has passed since they were issued and the significant market changes that have taken place in the interim, the Commission is withdrawing all previously proposed rules, rule amendments, and interpretations regarding SBSEFs.

The proposing release will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.

Press release distributed by the SEC.

Featured image: by David Blaikie is marked with CC BY 2.0.

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