Investigations Newsletter: COVID-19 Fraud Update

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COVID-19 Fraud Update

Khadijah Chapman of Georgia, Daniel Labrum of Utah, and Eric O’Neil of Connecticut were all charged in separate indictments with submitting fraudulent Paycheck Protection Program (PPP) loan applications. According to the DOJ, all three defendants submitted falsified information seeking PPP loans for fictitious businesses, and ultimately obtained a collective $2.4 million.

All defendants were charged with bank fraud, and Labrum was also charged with engaging in monetary transactions with criminally derived proceeds. Each bank fraud count carries a maximum of 30 years imprisonment, and Labrum faces an additional 10 years imprisonment for the additional count.

A copy of DOJ’s press release can be found here.

Cryptocurrency Exchange Employee Pleads Guilty to BSA Violations

Gregory Dwyer, the Head of Business Development for online cryptocurrency derivatives exchange BitMEX, pleaded guilty to violating the Bank Secrecy Act (BSA) by allegedly willfully failing to establish, implement, and maintain an anti-money laundering program at BitMEX. Dwyer faces up to five years imprisonment and has agreed to pay a $150,000 criminal fine.

According to the DOJ, from 2015 to around September 2020, Dwyer and BitMEX’s founders allowed BitMEX to essentially become a money laundering platform by failing to implement a “know your customer” (KYC) program. Dwyer is alleged to have implemented sham controls that purportedly prevented US trading in order to evidence BitMEX’s withdrawal from the US market in September 2015. In reality, these controls did not prevent users from trading on BitMEX in the United States.

BitMEX’s founders, Arthur Hayes, Benjamin Delo, and Samuel Reed, previously pleaded guilty to violating the BSA and have each been ordered to pay $10 million fines and serve varying home detention and probationary sentences.

A copy of DOJ’s press release can be found here.

PAC Operator Pleads Guilty to Fraud

Robert Reyes, Jr. of California pleaded guilty to one count of conspiracy to commit wire fraud and to cause false statements to the Federal Election Commission and one count of money laundering for his role in a conspiracy to solicit contributions to two political action committees based on fraudulent representations. According to the DOJ, Reyes and others operated two political action committees (PACs) from 2016 to around April 2017 that solicited approximately $3.5 million in contributions, which they represented would be used to support presidential candidates during and after the 2016 election cycle. According to court documents, only $19 was used for legitimate political causes.

The remaining contributions were allegedly used by Reyes and others for personal expenses and to fund additional fraudulent solicitations.

Reyes and his co-conspirators are also alleged to have made efforts to conceal the proceeds from the scheme by directing a vendor to withdraw funds from the two PACs in excess of the cost of services they provided, and to deposit the excess funds into shell companies controlled by the conspirators. Reyes reportedly also admitted to receiving an additional $95,000 as a result of issuing misleading solicitations to donors for additional fraudulent PACs he was operating during the 2016 election cycle.

Reyes has agreed to forfeit over $809,000 that he received for his participation in the PAC schemes, and faces a maximum of 20 years imprisonment.

A copy of the DOJ press release can be found here.

Jury Convicts Woman of $34 Million Health Care Fraud Scheme

Jaroslava Ruiz of North Carolina was convicted by a jury of one count of conspiracy to commit health care fraud and wire fraud, and nine counts of health care fraud for allegedly participating in a scheme to defraud health insurers by submitting claims for physical therapy services that were not actually provided.

According to evidence presented at trial, Ruiz and her co-conspirators submitted about $34 million in false claims for services that were not provided and supported these claims with falsified medical records. In total, insurers paid approximately $7.7 million. Ruiz was alleged to have paid bribes as well as kickbacks to patients and patient recruiters in exchange for allowing physical therapy clinics to bill for services that were never provided to the patients.

Ruiz faces up to 20 years imprisonment for the conspiracy count and 10 years imprisonment for each count of health care fraud. Sentencing is currently scheduled for October 26, 2022.

A copy of the DOJ press release can be found here.

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