Two Canadian Brothers and their Company, Payza, Sentenced for Conspiring to Launder Money Service Business
Payza.com Processed Over $250 million of Proceeds from Ponzi Schemes and Other Criminal Enterprises
WASHINGTON – On November 10, 2020, Firoz Patel and Ferhan Patel, the founders and operators of Payza.com, AlertPay.com, and Egopay.com, and their company MH Pillars were sentenced in the United States District Court for the District of Columbia for operating an Internet-based unlicensed money service business that processed more than $250 million in transactions.
Firoz Patel was sentenced to 36 months of incarceration; Ferhan Patel was sentenced to 18 months of incarceration; and MH Pillars, Inc., doing business as Payza, was sentenced to three years of corporate probation, announced Acting U.S. Attorney Michael R. Sherwin. The defendants were also ordered to forfeit more than $4.5 million that had already been seized by the United States. The defendants were also required to forfeit the websites through which they committed their offenses, Payza.com and AlertPay.com.
On July 17, 2020, Firoz Patel, 46, and Ferhan Patel, 39, both of Quebec, Canada, each pled guilty to Conspiracy to Commit Crimes against the United States by Operating an Unlicensed Money Transmitting Business and by Laundering Monetary Instruments. The Honorable Ketanji B. Jackson of the United States District Court took the defendants’ guilty pleas and sentenced them.
“Operating an unlicensed money transmitting business that launders the transactions of other crimes and frauds is a serious criminal offense. Without the money laundering, the frauds run by Payza’s customers could not have been completed,” said U.S. Attorney Sherwin. “These convictions will remind criminals that the United States will do everything within its power to take the profit out of crime and convict those who enable fraud.”
The defendants, through Payza.com, operated a money transmitting business that operated without the necessary state licenses and knowingly transmitted funds that were derived from illegal activity. Despite receiving cease and desist letters from States and being told by a consultant that operating a money transmission business without the necessary licenses was a crime, Firoz and Ferhan Patel continued their illegal activity. For example, Firoz Patel admitted to operating a prior money service business, AlertPay, which ignored repeated warnings from state regulators about its unlicensed activities. Firoz Patel transitioned AlertPay into Payza after Firoz Patel was the subject of a Tennessee indictment for laundering narcotics proceeds through AlertPay. The defendants admitted that no substantive changes took place during this rebrand.
Payza had numerous merchants which the defendants knew to be Ponzi/pyramid schemes. The defendants admitted to sanitizing Payza’s customers list by removing known illegal merchants, before producing that information to third parties requesting customer information. For example, a co-conspirator informed Ferhan Patel in a series of emails that he was looking through the merchant list to remove “any merchants who have gross violations such as adult, gambling, drugs, violence ect. [sic]. And what I think is the tricky part: Identify MLM’s [multi-level marketing schemes] that are set up as obvious illegal Pyramid schemes.” Payza failed to follow its own “Merchant Risk Guideline,” as internal documents revealed specific failures in relation to preventing the taking on and servicing of pyramid and Ponzi schemes.
The defendants further admitted that Payza struggled to maintain its relationships with financial institutions, because Payza so frequently was found to have customers engaged in illegal activity. Firoz Patel’s solution to this was to create a new company, Egopay, which took on all of Payza’s high risk customers. Firoz Patel and Ferhan Patel caused an email to be sent to high-risk Payza customers directing them to migrate their accounts to Egopay. Ferhan Patel told Firoz Patel that Egopay was a problem in the U.S. because Egopay collected no customer due diligence data which created “obvious money laundering concerns.” Ferhan Patel further admitted to Firoz Patel that Egopay was classified as a money service business and that it had no know your customer checks in place. In spite of these known money laundering problems, Firoz Patel continued to allow Egopay to operate freely via the Payza platform. Ultimately, Egopay was shut down by regulators in Belize, after which Payza began again directly servicing many of Egopay’s customers.
The defendants each admitted that their scheme caused over $250 million to be illegally transmitted and to failing to conduct proper due diligence of their customers. The defendants also acknowledged that their actions were done willfully, knowingly, and with the specific intent to violate the law.
In announcing the sentencing, Mr. Sherwin praised the efforts of those who have investigated and prosecuted the case. He expressed appreciation to the agents who worked on the investigation from the Department of Homeland Security, Immigration and Customs Enforcement, Homeland Security Investigations, Washington Field office. He also commended those who worked on the case from the U.S. Attorney’s Office, including former Paralegals C. Rosalind Pressley and Toni Donato, Paralegals Elizabeth Swienc and Brian Rickers, Records Examiner Angela De Falco, Contract Financial Analyst Jason Hall, Victim Witness Specialists Yvonne Bryant and Basizette Stribling, Legal Assistant Jessica McCormick, and Thomas Royal and Joshua Ellen from the Litigation Support Section.
Finally, he praised the work of Assistant United States Attorney Arvind Lal and former Assistant United States Attorneys Zia Faruqui and John Marston.