U.S. Promoter of Foreign Cryptocurrency Companies Sentenced to 60 Months in Prison for His Role in Multi-Million Dollar Securities Fraud Scheme
Earlier today, in federal court in Central Islip, Phillip A. Kenner was sentenced by United States Circuit Judge Joseph F. Bianco to 17 years’ imprisonment for stealing millions of dollars in funds raised from Long Island residents and professional athletes that were intended for investment in land developments in Hawaii and a start-up business in Arizona, among other purposes. Kenner and co-defendant Tommy Constantine were convicted at trial in July 2015 of one count of conspiracy to commit wire fraud, four substantive counts of wire fraud, and one count of conspiracy to commit money laundering. The amount of restitution will be determined by the Court at a later date. Previously, the Court entered a forfeiture money judgment in the amount of approximately $17 million and ordered Kenner to forfeit all his right, title and interest in an oceanfront resort in Mexico, real property in Hawaii and a Falcon 10 jet airplane, among other assets. Kenner has been in the custody of the Bureau of Prisons since his arrest in 2013. Constantine is awaiting sentencing.
Seth D. DuCharme, Acting United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Jonathan D. Larsen, Special Agent-in-Charge, Internal Revenue Services—Criminal Investigation (IRS), announced the sentence.
“Today’s substantial sentence provides just punishment for the defendant’s victimization of clients, as well as his attempts to shift blame and scapegoat others as his scheme unraveled,” stated Acting United States Attorney DuCharme. “As Kenner has now learned, fraud may seem like easy money in the short run, but when justice catches up with you, the consequences can be significant.” Mr. DuCharme expressed his grateful appreciation to the FBI and IRS, the agencies responsible for leading the government’s investigation.
“Time and again, Kenner and his co-conspirator stole money from multiple investors and dumped millions in ill-gotten gains into entities that benefitted them rather than their victims. Kenner has received a significant sentence today, and the 17 years behind bars should give him ample time to think about his crimes and the consequences of his actions,” stated FBI Assistant Director-in-Charge Sweeney.
“Greed knows no boundaries, and anyone may fall victim to its promise of major returns on investment,” stated IRS-CI Special Agent in Charge Larsen. “IRS-CI special agents deal with perpetrators of fraud motivated by their desire for personal financial enrichment on a daily basis. “This sentence is just for Mr. Kenner who deserves his time in the ‘penalty box.’”
Kenner began his career as a Boston-based financial advisor and developed a roster of clients, including former New York Islander Michael Peca, former New York Islander and New York Ranger Brian Berard, and Darryl Sydor and Bill Ranford – both two-time Stanley Cup champions – and other NHL players.
At trial, the government presented testimony from nearly 40 witnesses and introduced more than 1,000 exhibits, including audio recordings made by several victim investors and proved that the defendants siphoned millions of investor dollars into a labyrinth of holding companies, diverting those dollars from their approved uses into companies, real estate and other ventures – including Constantine’s car racing endeavor – that solely benefited the defendants.
The Hawaii Real Estate Investment Scheme
Beginning in 2003, Kenner convinced Peca, Berard and several others to invest $100,000 each for the development of land in Hawaii into luxury estates and to open personal lines of credit at a bank, collateralized by their personal stock, bond and savings accounts worth at least $10 million. Kenner assured the investors that the lines of credit would be used only to pay for initial development costs associated with the Hawaii project, and would be fully replenished after Lehman Brothers Holdings, Inc. agreed to loan the project up to $105 million in August 2006. In fact, Kenner borrowed nearly all of investors’ lines of credit to acquire his personal interest in unrelated real estate projects in Hawaii and Mexico and to cover his own and Constantine’s personal expenses.
In an offshoot of the scheme, Constantine brokered a $3.5 million loan from an Arizona businessman ostensibly to close on a Hawaii parcel of land. Constantine put up no money of his own, but walked away from the transaction – funded with assets diverted from Peca, Berard and others – with approximately $2 million.
The Eufora LLC Scheme
In 2002, Constantine founded Eufora LLC, a prepaid debit card business. Between February 2008 and May 2009, Eufora was operating in the red, and as Constantine testified in civil depositions, the company was nearly worthless. Notwithstanding, Kenner persuaded clients to invest in Eufora. While representing that he was investing his clients’ funds in Eufora, Kenner instead wired $725,000 of his clients’ funds to Constantine’s personal account. Kenner also directed the wiring of an additional $700,000 of his clients’ funds to Eufora’s account, and promptly re-wired those funds to a co-conspirator’s personal account. The diverted funds were used to cover the costs of Kenner’s and Constantine’s home mortgages, credit card bills and other debts.
The Global Settlement Fund Scheme
In early 2009, Kenner’s clients who had opened lines of credit for the Hawaii venture received notices that their credit lines were in default. For years, Kenner concealed that he had wiped out most of his clients’ funds by borrowing against one line of credit to pay monthly interest charges for other another account. By late 2008, the concealment scheme collapsed. Notwithstanding, Kenner and Constantine persuaded their clients to invest additional funds to a “Global Settlement Fund.” The clients contributed more than $2.9 million toward the fund, but the vast majority of the money was diverted to the defendants’ personal use, which included Constantine buying his personal home out of foreclosure, Kenner and Constantine paying legal bills related to Kenner’s personal investment in a tequila company in Mexico, defending Constantine in Florida litigation over his race car sponsorship activities, and an exploratory and unsuccessful effort by Constantine to buy Playboy Enterprises.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Saritha Komatireddy and J. Matthew Haggans are in charge of the prosecution. Assistant United States Attorneys Diane Leonardo and Madeline O’Connor are handling the forfeiture of assets.
PHILLIP A. KENNER
Defendant To Be Sentenced:
E.D.N.Y. Docket No. 13-CR-607 (JFB)
United States Attorney’s Office