Arizona Man And Israeli Woman Charged In Connection With Providing Shadow Banking Services To Cryptocurrency Exchanges
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Jonathan D. Larsen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced the arrest today of REGINALD FOWLER on charges of bank fraud and operating an unlicensed money transmitting business. Bank fraud charges were also unsealed against co-conspirator RAVID YOSEF, who remains at large. FOWLER and YOSEF, who worked for several related companies that provided fiat-currency banking services to various cryptocurrency exchanges (the “Crypto Companies”), allegedly participated in a conspiracy in which FOWLER made numerous false and misleading statements to banks to open bank accounts that were used to receive deposits from individuals purchasing cryptocurrency, and in which FOWLER and YOSEF falsified electronic wire payment instructions to conceal the true nature of a voluminous cryptocurrency exchange business. Hundreds of millions of dollars flowed through the Crypto Companies’ accounts from banks located across the globe. FOWLER will be presented today in federal court in Phoenix, Arizona. The case is assigned to U.S. District Judge Andrew L. Carter Jr.
U.S. Attorney Geoffrey S. Berman said: “Reginald Fowler and Ravid Yosef allegedly ran a shadow bank that processed hundreds of millions of dollars of unregulated transactions on behalf of numerous cryptocurrency exchanges. Their organization allegedly skirted the anti-money laundering safeguards required of licensed institutions that ensure the U.S. financial system is not used for criminal purposes, and did so through lies and deceit. Thanks to the investigative work of the FBI and the IRS-CI, they will be prosecuted for their actions.”
FBI Assistant Director William F. Sweeney Jr. said: “Lying to banks and skirting the regulations put in place by the banking industry is a violation of federal law, a crime both Fowler and Yosef are charged with today. Taking it one step further, as alleged, Fowler himself directed the ebb and flow of significant amounts of money to and from these various bank accounts, despite the fact that he was not licensed to do so. May this be a reminder to all that there are consequences to engaging in fraudulent behavior and risky business practices.”
IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said: “As this indictment shows, IRS-CI will continue to follow the money, no matter if it's virtual currency, to bring criminals to justice. This should serve as a warning to cyber-criminals who think they can hide behind virtual currency that IRS-CI is fully committed to unraveling these schemes.”
According to the allegations in the Indictment unsealed today:
In or about 2018, REGINALD FOWLER, RAVID YOSEF, and others operated the Crypto Companies, and FOWLER opened and maintained bank accounts at various banks around the world on behalf of the Crypto Companies. One of the Crypto Companies markets itself as a company that allows clients to deposit and withdraw government-backed, or “fiat,” currency to numerous crypto exchanges, which are platforms where people can buy and sell cryptocurrency or “virtual currency.” Users of one particular crypto exchange (“Exchange-1”) deposited government-backed currency into a bank account of the Crypto Companies (“Account-1”) that was opened and maintained by FOWLER at a specific international bank (“Bank-1”). Although Exchange-1 advertised itself as providing required “know your customer” and anti-money laundering verification services in connection with Exchange-1’s platform, this was false with respect to the shadow banking services provided by FOWLER and YOSEF.
As described in the Indictment, FOWLER and YOSEF conspired to, and did, misrepresent the nature of the Crypto Companies’ business and falsely stated to Bank-1 that Account-1 would be used to process real estate investments. These misrepresentations also appeared on wire transfer instructions sent out from bank accounts opened and maintained by FOWLER and YOSEF, among others, on behalf of the Crypto Companies. Records from Bank-1 reveal that dozens of individuals from various countries wired millions of dollars into Account-1, and, at the same time, Account-1 also wired millions of dollars to other individuals and companies. Even though FOWLER was receiving and directing these monetary transactions, neither he nor any of the Crypto Companies were ever licensed as a money transmitting business, as required by federal law.
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FOWLER, 60, of Chandler, Arizona, and YOSEF, 36, of Tel Aviv, Israel, are each charged with one count of bank fraud and one count of conspiracy to commit bank fraud, each of which carries a maximum sentence of 30 years in prison. FOWLER is also charged with one count of operating an unlicensed money transmitting business and one count of conspiracy to do the same, each of which carries a maximum sentence of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of Special Agents from the FBI New York Money Laundering Investigations Squad and Special Agents from the IRS-CI.
The prosecution of this case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Sheb Swett, David Zhou, and Jessica Fender are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.