Texas Man Indicted In Puerto Rico For Wire And Bank Fraud Scheme
Defendant is facing a forfeiture allegation of $98,429,205
WASHINGTON – On May 15, 2019, a Federal grand jury returned a 34-count indictment charging Gopalkrishna Pai, of Euless, Texas, and previously residing in Puerto Rico, with conspiracy to commit wire and bank fraud, 19 counts of wire fraud, five counts of aggravated identity theft, and nine counts of money laundering, announced Rosa Emilia Rodríguez-Vélez, U.S. Attorney for the District of Puerto Rico. The investigation was conducted by the FBI, and is ongoing.
The indictment alleges that from in or about May 2014, through in or about October 2018, defendant Gopalkrishna Pai conspired, devised, and engaged in a scheme to defraud merchant processors and others by submitting false information and falsified documentation to create merchant accounts in the name of Straw Companies, to process credit card and electronic payments, and to receive a substantial financial benefit. The fraudulent scheme employed by Gopalkrishna Pai disguised his involvement and use of over 100 companies formed to facilitate the processing of approximately $98 million in gross revenue in online retail sales.
As a part of the conspiracy, defendant Gopalkrishna Pai owned and operated F9 Advertising LLC (hereinafter F9), a for profit limited liability company organized in Puerto Rico in May 2014 and registered under the Export Services Act, Puerto Rico Act 20 of 2012. F9 engaged in the sale of personal care products, including skin creams, via the internet utilizing a negative option marketing model. Negative option marketing is a category of commercial transactions in which sellers interpret a customer’s failure to take an affirmative action, either to reject an offer or cancel an agreement, as assent to be charged for goods or services.
The defendant created over 100 liability companies (Straw Companies), obtained individual Employer ID Numbers (EINs) from the Internal Revenue Service (IRS) for each Straw Company and opened individual commercial bank accounts under his control for each Straw Company. False documents were then created and submitted to merchant processers to create merchant accounts to process online sales, and to disguise Gopalkrishna Pai’s involvement.
The merchant processors are companies that provide services to other businesses to process electronic payments, including but not limited to credit card payments. These companies include: Humboldt Merchant Services (Humboldt); Paysafe Group Limited (Paysafe); Global Merchant Advisors (Global); and Merchant Payment Acceptance Corp. (PayKings).
The true owner and operator of the Straw Companies was disguised through the falsification of bank records and EIN tax documents and other information in order to prevent merchant processors and their related financial institutions from having knowledge of the true owner and operator, which was the defendant. Credit card and other payments processed by the merchant processors were paid to accounts in the name of the Straw Companies, controlled by the defendant, and transferred to F9.
As part of the scheme to defraud the merchant processors, the defendant exchanged email communications and internet transmissions via interstate wire to submit documents, including applications, containing materially false representations, and falsified documentation, which included real individuals’ personal identification information like names, social security numbers, and signatures.
This fraud scheme and conspiracy generated approximately $98 million in total revenue, processed based on materially false information, through the Merchant Processors in the names of the Straw Companies.
“This individual took advantage of Puerto Rico and Law 20 to create a company, F9 Advertising, to generate significant revenue through a fraudulent scheme based on lies and falsified documents,” said U.S. Attorney Rosa Emilia Rodríguez-Vélez. “The indictment underscores the USAO’s commitment to the investigation and prosecution of all types of fraud, and to our continued efforts to ensure that Puerto Rico is not a safe haven for criminal activity.”
“The mission of the FBI San Juan Financial Investigation Strike Team is to identify patterns of sophisticated money laundering, determine the criminal conduct behind those transactions, and to partner with financial crimes experts at the U.S. Attorney’s Office to prosecute those responsible,” said Douglas A. Leff, Special Agent in Charge of the FBI-San Juan Field Office. “This case is an example of the successful use of financial intelligence to follow the money and to solve a series of crimes that might otherwise have gone undetected.”
The case is being prosecuted by Assistant United States Attorney Seth A. Erbe. If found guilty, the defendant is facing a maximum penalty of 20 years of imprisonment for each conspiracy and wire fraud count as well as a maximum two year term of imprisonment for each aggravated identity count and a maximum 10 years of imprisonment for each money laundering count. Indictments contain only charges and are not evidence of guilt. Defendants are presumed to be innocent unless and until proven guilty.
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