Fraud Scheme Results in $56 Million Seized as Largest Recovery of Cryptocurrency by US
On November 12, 2021, the U.S. Department of Justice and U.S. Attorney’s Office for the Southern District of California’s request was granted to liquidate approximately $56 million (at current estimated prices) in fraud proceeds seized from the top North American promoter of cryptocurrency BitConnect. To date, the BitConnect scheme is the largest cryptocurrency fraud scheme charged criminally, and this liquidation is the largest single recovery of a cryptocurrency fraud by the United States.
Court documents indicate that the promoter pleaded guilty on September 1, 2021, to participating in a conspiracy to defraud BitConnect investors in the United States and abroad, admitting he earned no less than $24 million from the fraud and all of which he has agreed to repay to the defrauded investors. Investors were allegedly induced to invest over $2 billion in connection with the scheme. The government will now begin the process of restitution to the victims of the BitConnect scheme by selling the cryptocurrency and holding the proceeds in U.S. dollars. According to the DOJ press release, the government intends to maintain custody of the seized proceeds in cryptocurrency wallets and to use the funds to make the victims whole pursuant to a future restitution order entered by the court at sentencing.
The promoter faces a maximum penalty of 20 years in prison and is scheduled to be sentenced on January 7, 2022. The DOJ press release can be found here.
Seven Sentenced for $20 Million COVID-19 Fraud
On November 15, 2021, seven defendants were sentenced for a scheme to fraudulently obtain more than $20 million in Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) COVID-19 relief funds. The defendants were each individually sentenced, ranging from 10 months of probation to 17 years in prison.
Court documents and trial evidence from June 2021 indicate that defendants used dozens of fake, stolen or imitation identities to submit fraudulent applications for approximately 150 PPP and EIDL loans, seeking approximately $20 million in funds. The defendants allegedly created identities belonging to elderly or deceased people and foreign exchange students who never returned to the United States. In support of the loan applications, the defendants also allegedly submitted false and fake documents to both lenders and the Small Business Administration (SBA), including falsified tax documents and payroll records. After receiving the funds from the PPP and EIDL loans, the defendants then allegedly used the funds to purchase luxury homes, gold coins and luxury jewelry, designer handbags, and a Harley-Davidson motorcycle.
Four of the defendants were convicted after a jury trial in June 2021. Prior to the trial’s verdict, the remaining defendants pleaded guilty to combinations of bank fraud, aggravated identity theft, wire fraud, conspiracy to commit money laundering, and conspiracy to commit wire fraud and bank fraud.
The DOJ press release can be found here
Texas Woman Pleads Guilty to Bribery, Fraud to Obtain International Adoptions
On November 17, 2021, a program manager from Texas at an Ohio-based international adoption agency pleaded guilty in the Northern District of Ohio to schemes to obtain adoptions of international children by bribing Ugandan officials and defrauding United States authorities.
Court documents indicate that the manager participated in a scheme to bribe Ugandan officials to obtain adoptions of Polish and Ugandan children by families in the U.S. The bribes allegedly included payments to (1) judges to order favorable guardianships for the adoption agency’s clients; (2) probation officers to guarantee reports recommending that certain children be placed into an orphanage; and (3) court registrars to influence assignments of certain cases to “adoption-friendly” judges. The manager admitted in her plea agreement that she directed the adoption agency’s clients to work with her alleged co-conspirator despite knowing that the co-conspirator caused clients to provide false information to the U.S. State Department in order to mislead the State Department in its approval of visa applications.
The government further alleges a second scheme. Allegedly, another co-conspirator, the adoption agency’s Executive Director, discovered that clients of the adoption agency determined they were unable to care for one of two Polish children they intended to adopt. After this discovery, the manager and her co-conspirator allegedly set the Polish child to be adopted by manager’s relatives, who were not eligible for intercountry adoption.
The manager pleaded guilty to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and commit visa fraud in connection with the foreign adoption scheme. She also pleaded guilty to conspiracy to defraud the United States government. She is scheduled to be sentenced on March 9, 2022. The Executive Director is scheduled for trial on February 7, 2022, and the other co-conspirator remains at large.
The DOJ press release can be found here.