FOR IMMEDIATE RELEASE|
FRIDAY, MAY 13, 2005
TDD (202) 514-1888
NINE CHARGED WITH FRAUD AND MONEY LAUNDERING IN $80 MILLION OFFSHORE INVESTMENT SCHEME
Investors Allegedly Deceived Into Believing Funds Invested in
Profitable Foreign Currency Trading
WASHINGTON, D.C. - Five people in Southern California and three others in Costa Rica were arrested this week in a federal fraud and tax case that alleges hundreds of victims were duped into investing tens of millions of dollars in a fraudulent offshore fund that claimed to invest money in highly-profitable foreign currency trading. The eight defendants, along with a ninth who is a fugitive, were affiliated with the Genesis Fund, a defunct private investment fund that the indictment calls a Ponzi scheme.
The arrests made pursuant to an 83-count indictment, which was unsealed this morning in Los Angeles, were announced today by Eileen J. OConnor, Assistant Attorney General for the Tax Division at the Department of Justice; Debra W. Yang, the United States Attorney in Los Angeles; and Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division. The following nine individuals were charged with conspiracy, obstruction, mail fraud, wire fraud, money laundering, tax evasion, failure to pay taxes, and seeking the forfeiture of assets:
A special agent with the State Departments Bureau of Diplomatic Security assigned to the United States Embassy in San Jose, Costa Rica, working with the IRS attaché in Mexico City, coordinated the arrests with the Costa Rican Judicial Police and Interpol. Lipton and Leonard were arrested in Tango Mar, and Preston was taken into custody in San Jose. They are currently in the custody of the Costa Rican Judicial Police, and the United States intends to seek their extradition.
The indictment alleges between May 1998 and June 2002, Genesis Fund investors entrusted over $80,000,000 with the defendants. The defendants—through promotional materials, account agreements, and other means—allegedly told investors that their funds would be pooled and invested in highly-profitable foreign currency trading. Instead, the indictment alleges virtually all investor funds were used to make payments to investors and to personally enrich the defendants.
The indictment also alleges that in June 2002, within weeks after advising investors that the Genesis Fund was worth $1.3 billion, investment, trading, and payment activities in the fund were suspended. After the collapse of the Genesis Fund, investors were allegedly lulled into believing that their investments would be recovered through a new investment plan.
The indictment also alleges that the defendants promoted the Genesis Fund as having no reporting obligations to the IRS. Bank accounts in the names of trusts and offshore bank accounts were allegedly used to receive distributions from the Genesis Fund that were not reported to the IRS. Some of the defendants allegedly created disclosed and undisclosed Genesis Fund accounts for themselves and certain Genesis Fund investors in order to conceal from the IRS all but a small portion of Genesis Fund distributions. In addition, some Genesis Fund investors were allegedly advised to create nominee offshore corporations and bank accounts to receive distributions from the Genesis Fund.
The indictment further alleges that to obscure the operations of the Genesis Fund and to limit scrutiny of its operations by investors and the government, the defendants caused the Genesis Fund to maintain no financial statements or other statements of operation. The indictment also alleges that in or about April 2000, to conceal the true nature of its operations from investors and the government, Genesis Funds administrative operations were relocated from Anaheim, California to Costa Rica. The indictment alleges that at about the same time paper records were moved to Costa Rica and electronic data on computers was destroyed.
The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.
Additional information about the Justice Departments Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.