The Office prosecutes a wide variety of significant fraud cases involving both individual and corporate defendants, including frauds affecting the integrity of the financial markets.
The Securities and Commodities Fraud Task Force continues its long tradition of leadership in the prosecution of securities and commodities fraud and other cases affecting the integrity of the financial markets. For example:
- Founder and Chief Executive of International Crypto Exchange Convicted of Masterminding a Multi-Billion-Dollar Fraud: On November 2, 2023, less than a year after the collapse of FTX, the crypto exchange that he founded, Sam Bankman-Fried was convicted at trial of masterminding a wide-ranging scheme to misappropriate billions of dollars of customer funds deposited with FTX and mislead investors and lenders to FTX and to Alameda Research, Bankman-Fried’s crypto hedge fund. The proof at trial established that Bankman-Fried used billions of dollars of stolen FTX customer funds to pay for his personal luxuries, to make investments and millions of dollars of political contributions to federal political candidates and committees, and to repay billions of dollars in loans owed by Alameda. Bankman-Fried also defrauded lenders to Alameda Research and equity investors in FTX by concealing his misuse of customer deposits in financial information that was provided to them.
- Former U.S. Congressman Convicted of Insider Trading: In March 2023, Stephen Buyer, a former Congressman from Indiana, was convicted at trial of multiple counts of securities fraud based on insider trading. After leaving Congress, Buyer worked as consultant advising on confidential business transactions. In 2018 and 2019, Buyer engaged in two separate, but interrelated insider trading schemes to steal material non-public information that he obtained through his consulting work and to use that stolen information to profit in the stock market. In September 2023, Buyer was sentenced to 22 months in prison.
- Former Chief Investment Officer of Investment Adviser Prosecuted for Inflating Position Values and Falsifying Documents: In November 2022, James Velissaris, the founder and former chief investment officer of Infinity Q Capital Management, an investment adviser that ran a mutual fund and a hedge fund that purported to have approximately $3 billion in assets under management pled guilty to securities fraud based on a scheme to inflate the value of investment funds reported to investors and to falsify and alter documents to hide the scheme from auditors and the SEC. Velissaris represented to investors that Infinity Q valued its derivative positions based on fair value, and that in order to do so, it utilized the services of an independent third-party provider. In fact, Velissaris defrauded those investors making false entries in and secretly altering the computer code of the system used by the third-party provider to generate falsely inflated values and make it appear that the investments had been profitable. In order to escape detection by auditors and the SEC, Velissaris, among other things, altered documents that had been provided to investors and generated fake meeting notes. In April 2023, Velissaris was sentenced to 15 years in prison.
- Former CEO of Publicly Traded Fashion Brand Company Convicted of Accounting Fraud: In November 2022, Neil Cole, the former Chief Executive Officer of Iconix Brand Group, was convicted at trial for fraudulently inflating Iconix’s revenue and earnings per share, making false filings with the SEC, and misleading the conduct of audits. Cole engaged in a scheme to falsely inflate Iconix’s reported revenue and earnings per share by orchestrating a series of “round trip” transactions in which Cole induced a joint venture partner to pay artificially inflated purchase prices for joint venture interests, with the understanding that Iconix would then reimburse the partner for the overpayments, all in an effort to make it appear that Iconix was making more money that it was, to ensure that the reported figures met analyst consensus, and to convey the false impression to the investing public that Iconix was growing quarter after quarter, as Cole had touted. In October 2023, Cole was sentenced to 18 months in prison.
- Former Executive Chairman of Publicly Traded Electric Vehicle Company Convicted of Lying to Investors to Inflate Stock Price: In October 2022, Trevor Milton, the founder and former CEO and Executive Chairman of Nikola Corporation was convicted at trial of securities and wire fraud after making false and misleading claims about Nikola’s technology and products to drive retail investor demand in Nikola stock. Nikola, which sought to develop and bring to market hydrogen-powered commercial vehicles and pickup trucks, was founded by Milton in 2016 and went public via a merger with a special purpose acquisition company (or “SPAC”) in 2020. Before and after Nikola became a public company, Milton targeted individual, non-professional investors in an effort to increase interest in Nikola stock and increase its price by making false and misleading statements directly to the investing public through social media and television, print, and podcast interviews. Milton made false claims regarding nearly all aspects of Nikola’s business, including making claims that the company had early success in creating a “fully functioning” semi-truck prototype known as the “Nikola One,” when in fact the prototype was wholly inoperable. At one point during Milton’s scheme, Nikola’s stock price was driven high enough that the company’s market capitalization was higher than Ford’s, even though Nikola had not produced for the market or sold a single vehicle.
- Co-Founder And Chief Investment Officer Of London-Based Hedge Fund Convicted of FX Market Manipulation: In October 2023, Neil Phillips, the co-founder and chief investment officer of Glen Point Capital, a hedge fund based in New York and London, was convicted of commodities fraud in connection with a scheme to artificially manipulate the United States dollar (“USD”) / South African rand (“ZAR”) exchange rate to fraudulently trigger a $20 million payment under a barrier option.
- Registered Investment Advisor Pleads Guilty to Securities Fraud and Ordered to Pay Nearly $6 Billion in Penalties: In September 2022, Allianz Global Investors U.S. LLC (“AGI US”), an SEC-registered investment advisor, pled guilty to securities fraud in connection with a scheme to defraud investors in a series of private investment funds that, at their height, had over $11 billion in assets under management. In furtherance of the scheme, AGI US made false and misleading statements to current and prospective investors that substantially understated the risks being taken by the Funds, and also overstated the level of independent risk oversight over the Funds. AGI US also failed to disclose and sought affirmatively to withhold relevant risk information, in violation of its fiduciary duties as an investment adviser, including its duty of care and its duty of loyalty. In July 2023, AGI US was ordered to pay over $463 million in forfeiture, over $3.23 billion in restitution, and over $2.33 billion in fines.
- Former Coinbase Insider Sentenced to Two Years In Prison In First Ever Cryptocurrency Insider Trading Case: In May 2023, Ishan Wahi was sentenced to two years in prison for participating in a scheme to engage in insider trading in crypto assets using information stolen from Wahi’s employer, Coinbase Global, Inc. Beginning in approximately October 2020, Wahi worked at Coinbase as a product manager assigned to a Coinbase asset listing team. In that role, Wahi was involved in the highly confidential process of listing crypto assets on Coinbase’s exchanges and had detailed and advanced knowledge of which crypto assets Coinbase was planning to list and the timing of public announcements about those crypto asset listings. On multiple occasions between June 2021 and April 2022, Wahi violated his duties of trust and confidence to Coinbase by providing confidential business information that he learned in connection with his employment at Coinbase to two accomplices so that they could secretly engage in profitable trades around public announcements by Coinbase that it would be listing certain crypto assets on Coinbase’s exchanges.
The Office’s Complex Frauds and Cybercrime Unit as well as prosecutors assigned to the Office’s White Plains Division have pursued a wide range of significant fraud cases involving both individual and corporate defendants. For example:
- Former NBA Players and Doctors Prosecuted For Defrauding the NBA Players’ Health and Welfare Benefit Plan: In November 2023, former NBA players Ronald Glen Davis and William Bynum were convicted after trial for their roles in a prosecution charging more than 20 defendants in connection with a sprawling scheme to defraud the National Basketball Association Players' Health and Welfare Benefit Plan out of more than $5 million. In August 2023, former NBA player Terrence Williams, the leader of the scheme, was sentenced to 10 years in prison.
- Leaders of Multibillion-Dollar Cryptocurrency Scheme “OneCoin” Prosecuted: In September 2023, Sebastian Greenwood, one of the co-founders of OneCoin, a fake cryptocurrency multi-level marketing scheme, was sentenced to 20 years in prison for his role in stealing more than $4 billion from at least 3.5 million victims. In 2019, Mark Scott, a former equity partner at international law firm Locke Lord LLP, was convicted at trial for his role in laundering hundreds of millions of dollars of fraud proceeds on behalf of the leadership of OneCoin. Scott is awaiting sentencing. Ruja Ignatova, the co-founder of OneCoin, remains at large and was added to the Federal Bureau of Investigation’s Top Ten Most Wanted List in June 2022.
- Prosecution of Founders of AirBit Cryptocurrency Ponzi Scheme: In September 2023, Pablo Renato Rodriguez and Gutemberg Dos Santos, the co-founders of AirBit Club, were each sentenced to 12 years in prison for orchestrating a massive global pyramid scheme. Victims of the scheme were induced to invest in AirBit Club based on the false promise of guaranteed profits in exchange for cash investments in club “memberships.” Promoters falsely promised Victims that AirBit Club earned returns on cryptocurrency mining and trading and that Victims would earn passive, guaranteed daily returns on any membership purchased. Additional co-defendants have pled guilty and are awaiting sentencing.
- CEO of Paycheck Protection Program Lender Sentenced to 54 Months In Prison in First of Its Kind Prosecution for Fraud on the Small Business Administration: In July 2023, Rafael Martinez was sentenced to 54 months in prison for his role in a scheme to submit fraudulent loan and lender applications related to the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”). Martinez was the CEO of MBE Capital, which fraudulently obtained more than $70 million in fees from the SBA after lying to the SBA and others to become certified as a PPP lender that issued loans totaling almost $1 billion. Martinez is the first individual convicted of defrauding the SBA as a PPP lender.
- “Lottery Lawyer” Sentenced to 13 Years in Prison For Defrauding Lottery Winner Clients of More than $100 Million: In June 2023, Jason Kurland, a partner at a New York law firm, was sentenced to 13 years in prison, following his conviction at trial on charges arising from a scheme to defraud lottery winners who had hired Kurland as their attorney of more than $100 million. Kurland was charged alongside three co-conspirators, all of whom pled guilty to their crimes.
- Lawyers and Doctor Convicted for Roles in Massive Trip-and-Fall Fraud Scheme: In April 2023, George Constantine and Andrew Dowd, an attorney and an orthopedic surgeon, were each sentenced to 102 months in prison, after conviction at trial, for their role in a long-running conspiracy to defraud businesses and insurance companies by staging trip-and-fall accidents and filing fraudulent lawsuits arising from those staged accidents. A third defendant, another attorney, pled guilty and was sentenced to 24 months in prison. The defendants filed hundreds of fraudulent lawsuits, conducted hundreds of medically unnecessary surgeries, and attempted to defraud victims of more than $31 million.
- Prosecution of Danske Bank: In December 2022, Danske Bank A/S, a global financial institution headquartered in Denmark, pleaded guilty in the Southern District of New York to conspiring to commit bank fraud and agreed to forfeit $2 billion to resolve the United States’ investigation into Danske Bank’s fraud on U.S. banks. The guilty plea followed an investigation by the Office’s Money Laundering and Transnational Criminal Enterprises Unit, in conjunction with the Department of Justice. Between 2008 and 2016, Danske Bank defrauded U.S. banks regarding Danske Bank Estonia’s customers and anti-money laundering controls. This fraud was designed to facilitate access to the U.S. financial system for Danske Bank Estonia’s high-risk customers, who resided outside of Estonia – including in Russia and who otherwise would not have been able to access U.S. banks.
- Multi-National Commodity Trading and Mining Firm Pleads Guilty to Foreign Bribery and Market Manipulation: In May 2022, Glencore International A.G. and Glencore Ltd., both part of a multi-national commodity trading and mining firm headquartered in Switzerland, pled guilty to charges arising from more than a decade of criminal conduct, including bribery of public officials and commodity and price manipulation. In connection with their guilty pleas, the Glencore entities agreed to pay more than $1.1 billion.
- Israel’s Largest Bank Admits to Conspiring with U.S. Taxpayers to Hide Assets Offshore: In April 2020, Bank Hapoalim (Switzerland) Ltd., the Swiss subsidiary of Israel’s largest bank, pled guilty to criminal charges arising from its participation in a conspiracy with U.S. taxpayers to hide more than $7.6 billion in more than 5,500 secret Swiss and Israeli bank accounts, evading U.S. taxes. At the same time, Bank Hapoalim B.M., the Israeli parent bank, entered into a deferred prosecution agreement. As part of the resolution, Bank Hapoalim agreed to pay almost $875 million in restitution to the Internal Revenue Service.