Category: United States of America

Source: United States Attorneys General 1

A Nevada man was sentenced today to over 15 years in prison and five years of supervised release for fraudulently obtaining more than $11 million in Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and then laundering the funds through real estate transactions, gambling activity, and luxury purchases. The defendant was also ordered to pay restitution in the amount of $11,793,064.15, forfeiture in the amount of $11,231,186.52, and to forfeit two vehicles and five properties.

“This defendant stole more than $11 million in taxpayer funds that he used to finance luxury purchases and gambling,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “Prosecuting schemes like this is critical to protecting the contributions of hard-working Americans, preserving confidence in government relief programs, and ensuring that aid reaches those who truly need it. This sentence demonstrates the Criminal Division’s continuing commitment to protecting the public’s money from thieves and fraudsters.”

“The consequences of the defendant’s PPP loan fraud scheme have caught up with him and now he will be incarcerated for exploiting more than $11.2 million from a taxpayer-funded program,” said Acting U.S. Attorney Sigal Chattah for the District of Nevada. “Thanks to the diligent work of our law enforcement partners, the defendant is being held accountable for defrauding the government.”

“This lengthy sentence shows how seriously the American government takes PPP loan fraud,” said Special Agent in Charge Carissa Messick of IRS Criminal Investigation’s (IRS-CI) Phoenix Field Office. “This loan program was created to support small businesses and their employees during a once in a lifetime pandemic. When Mr. Dezfooli fraudulently obtained these loans, he not only stole from the Small Business Administration, but also from American taxpayers to the tune of $11.2 million. This sentencing is a testament to IRS-CI’s dedication to protecting American taxpayers and ensuring the integrity of our tax system.”

“Today’s sentencing holds accountable and brings to justice a fraudster who stole millions of taxpayer dollars intended to help small business owners,” said Special Agent in Charge Jon Ellwanger of the Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau Western Region. “We are proud to have worked with our federal law enforcement partners and the U.S. Attorney’s Office to achieve this result.”

“Mr. Dezfooli falsified loan applications to fraudulently obtain PPP loan proceeds that he used to enrich himself to the detriment of legitimate business struggling during the pandemic,” said Special Agent in Charge Ryan Korner of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG). “The defendant’s actions not only defrauded the PPP loan program but also disadvantaged business owners who were actually entitled to the benefits. FDIC OIG is committed to working alongside our law enforcement partners to protect the Nation’s Financial System and hold accountable those individuals, like Mr. Dezfooli, who steal benefits designated to help those in need.”

According to evidence presented at trial, Meelad Dezfooli, of Henderson, Nevada, submitted three fraudulent applications on behalf of entities he controlled, obtaining more than $11 million. Dezfooli supported these applications with false documents, including fabricated tax records and a utility bill, and grossly inflated the number of employees and payroll expenses of each entity.

After receiving the PPP funds, Dezfooli laundered the money by purchasing approximately 25 properties in Nevada, often using the alias “James Dez” or a fictitious entity called “Holdings Trust.” Even after he was indicted, Dezfooli continued laundering money, including selling property purchased with the illegally obtained PPP funds. He also used criminal proceeds to fund his personal investment account, buy luxury cars, and gamble extensively throughout Las Vegas. As part of this investigation, five homes were seized by law enforcement.

On Sept. 4, 2024, a jury found Dezfooli guilty of three counts of bank fraud, three counts of money laundering, and four counts of conducting transactions using criminally derived property. One of those violations related to a transaction that Dezfooli conducted after he had already been charged.

The IRS-CI, FRB-OIG, FDIC-OIG, and SBA-OIG investigated the case.

Trial Attorneys D. Zachary Adams and Taylor G. Stout of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and Assistant U.S. Attorney Daniel R. Schiess for the District of Nevada prosecuted the case. Legal Assistant Alexa Stiles and Paralegal Holly Butler of MLARS provided substantial assistance throughout the investigation and trial.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Justice Department’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

Source: United States Attorneys General

A Chinese national was sentenced today to four years in prison and three years of supervised release for writing and deploying malicious code on his then-employer’s network. 

“The defendant breached his employer’s trust by using his access and technical knowledge to sabotage company networks, wreaking havoc and causing hundreds of thousands of dollars in losses for a U.S. company,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “However, the defendant’s technical savvy and subterfuge did not save him from the consequences of his actions. The Criminal Division is committed to identifying and prosecuting those who attack U.S. companies, whether from within or without, to hold them responsible for their actions.”  

“The FBI works relentlessly every day to ensure that cyber actors who deploy malicious code and harm American businesses face the consequences of their actions,” said Assistant Director Brett Leatherman of the FBI’s Cyber Division. “I am proud of the FBI cyber team’s work which led to today’s sentencing and hope it sends a strong message to others who may consider engaging in similar unlawful activities. This case also underscores the importance of identifying insider threats early and highlights the need for proactive engagement with your local FBI field office to mitigate risks and prevent further harm.”

In March, a jury convicted Davis Lu, 55, legally residing in Houston, of causing intentional damage to protected computers. According to court documents and evidence presented at trial, Lu was employed as a software developer for the victim company headquartered in Beachwood, Ohio, from November 2007 to October 2019. Following a 2018 corporate realignment that reduced his responsibilities and system access, Lu began sabotaging his employer’s systems. By Aug. 4, 2019, he introduced malicious code that caused system crashes and prevented user logins. Specifically, he created “infinite loops” (in this case, code designed to exhaust Java threads by repeatedly creating new threads without proper termination, resulting in server crashes or hangs), deleted coworker profile files, and implemented a “kill switch” that would lock out all users if his credentials in the company’s active directory were disabled. The “kill switch” code — which Lu named “IsDLEnabledinAD”, abbreviating “Is Davis Lu enabled in Active Directory” — was automatically activated when he was placed on leave and asked to surrender his laptop on Sept. 9, 2019, and impacted thousands of company users globally.

Additionally, on the day he was directed to turn in his company laptop, Lu deleted encrypted data. His internet search history revealed he had researched methods to escalate privileges, hide processes, and rapidly delete files, indicating an intent to obstruct the efforts of his co-workers to resolve the system disruptions. Lu’s employer suffered hundreds of thousands of dollars in losses as a result of his actions.

The FBI Cleveland Field Office investigated the case.

Senior Counsel Candina S. Heath of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorneys Daniel J. Riedl and Brian S. Deckert for the Northern District of Ohio prosecuted the case.

CCIPS investigates and prosecutes cybercrime in coordination with domestic and international law enforcement agencies, often with assistance from the private sector. Since 2020, CCIPS has secured the conviction of over 180 cybercriminals, and court orders for the return of over $350 million in victim funds. 

Source: United States Attorneys General 6

Mark Tucci, 44, of Philadelphia, Pennsylvania, entered a plea of guilty today before U.S. District Judge Gerald A. McHugh to multiple charges arising from racist, violent threats made by phone, email, text message, and in person, that targeted African Americans.

The defendant was arrested on a criminal complaint and warrant in January of this year and charged by information in March with one count each of a threat to use a dangerous weapon, interfering with federally protected activities, cyberstalking, interstate communication of threats, and threats interfering with federally protected activities. Tucci pleaded guilty to all the charges.

As detailed in the information and other court filings, the defendant repeatedly called and sent text messages and emails that consisted of racial epithets and violent threats to harm an employee (Victim 1) of an agency of the City of Philadelphia (Philadelphia Agency 1), and Victim 1’s colleagues.

Between about April 18, 2024, and June 2, 2024, Tucci emailed Victim 1 multiple times regarding a records request he had made to the agency. This escalated on June 3, 2024, when he repeatedly called Philadelphia Agency 1, and during two of those calls, he spoke with Victim 1, identified himself by name, and screamed at Victim 1, who asked him to stop screaming. He continued to do so, causing Victim 1 to hang up each time.

During subsequent calls on June 3 with Philadelphia Agency 1, Tucci spoke with two of Victim 1’s colleagues, using racial epithets and making threats. Specifically, the defendant said that he was going to come down to Philadelphia Agency 1 the next day and hurt everyone, and that he had Victim 1’s home address and was going to hurt Victim 1.

Tucci sent multiple emails to Victim 1 the same day, using similar racial epithets and threats. He also texted Victim 1 on their personal cell phone, a phone number that Victim 1 had never provided to the defendant. The text messages from Tucci to Victim 1 mentioned Victim 1 by name, and the name of the street on which Victim 1 resided at the time. The messages included a warning that “This is personal now,” and additional threatening language.

Tucci’s communications caused Victim 1 severe emotional distress, and fear that Tucci would find Victim 1 and seriously injure or kill them or their family members.

Tucci willfully intimidated and interfered, and attempted to intimidate and interfere, with Victim 1 because of Victim 1’s race and color, and because Victim 1 was enjoying employment by, and all perquisites of, an agency of the City of Philadelphia, a subdivision of the Commonwealth of Pennsylvania.

Also detailed in court filings, on the morning of Feb. 1, 2024, Tucci pulled up next to another car in heavy traffic on I-95 southbound, lowered his windows, and repeatedly screamed racial epithets and threats to kill and shoot the other car’s driver (Victim 2), who is African American. Tucci then reached down into his car, pulled out a glass mug containing coffee, and threw it at Victim 2’s vehicle, terrifying Victim 2 and damaging their car.

The defendant will be sentenced in December of 2025 and faces a maximum penalty of 21 years in prison.

This case was investigated by the FBI, the Pennsylvania State Police and the Philadelphia Police Department, and is being prosecuted by Assistant U.S. Attorney J. Jeanette Kang for the Eastern District of Pennsylvania and Trial Attorney Samuel Kuhn of the Civil Rights Division’s Criminal Section.

Source: United States Attorneys General 6

An Ohio brother and sister were sentenced to federal prison for their roles in collecting drug proceeds in the United States and laundering those funds, or their equivalent value, back to Mexico on behalf of a cartel.

According to court documents, Christopher Grover Reynolds, 52, of Toledo, Ohio, was sentenced to over six years in prison, and his sister, Claudette Reynolds, 51, of Toledo, was sentenced to two years in prison for their participation in a money laundering conspiracy. They were both sentenced to three years of supervised release.

“The defendants helped Mexican drug traffickers collect and disguise the profits from selling methamphetamine and fentanyl in Toledo,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “Their money laundering activities fueled the importation of dangerous drugs into the Midwest. This prosecution reflects the Criminal Division’s commitment to staunch the flow of cash to cartels and protect communities from the devastating consequences of drug trafficking.”

“Every dollar they laundered was done so on the backs of overdose victims and their families,” said Special Agent in Charge Jim Scott, head of DEA’s Louisville Division. “By acting as the cartel’s bankers, these siblings helped fuel the fentanyl and meth crisis tearing through Ohio. DEA will hunt down anyone who dares to wash cartel money — because if you launder blood money for drug traffickers, you will face justice alongside them.”

According to court documents, Christopher Reynolds collected proceeds from the sale of fentanyl, methamphetamine, and marijuana in Toledo and notified a Mexico-based cartel that the funds were ready for laundering and transfer to Mexico. On six occasions, Reynolds personally delivered the money – totaling $784,045 – or enlisted his sister to do so. The money was later transferred to Mexico via cryptocurrency.

A search of Christopher Reynolds’s residence and a traffic stop of Claudette Reynolds led to a seizure of $184,415 in bulk cash, several pounds of marijuana, counterfeit pills containing methamphetamine and fentanyl, two firearms (a .40 caliber pistol and an AR-15 rifle), and a money counting machine.

The DEA Lexington Resident Office investigated the case, working closely with the Detroit Field Division and Rocky Mountain Field Division and assisted by DEA offices in Mexico, Toledo, Minneapolis, St. Louis, Birmingham, Chicago, Cincinnati, Tulsa, Oklahoma City, Louisville, Baltimore, Des Moines, Milwaukee, Portland, Columbia, and Rapid City, with the IRS Criminal Investigation Division.

Trial Attorney Elizabeth R. Rabe of the Criminal Division’s Money Laundering and Asset Recovery Section and Deputy Criminal Chief Gary Todd Bradbury of the U.S. Attorney’s Office for the Eastern District of Kentucky prosecuted this case.

This case is part of Operation Take Back America, a nationwide initiative that marshals the full resources of the Department of Justice to repel the invasion of illegal immigration, achieve the total elimination of cartels and other transnational criminal organizations and protect our communities from the perpetrators of violent crime. Operation Take Back America streamlines efforts and resources from the Department’s Organized Crime Drug Enforcement Task Forces and Project Safe Neighborhoods.

Source: United States Attorneys General 1

A California man who co-founded and served as board member of a company formerly known as Aspiration Partners, Inc. — a financial technology and sustainability services company — was charged today by criminal information and agreed to plead guilty to defrauding multiple investors and lenders.

“For years, Joseph Sanberg used his position at Aspiration to deceive investors and lenders for his own benefit, causing his victims over $248 million in losses,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “The Criminal Division is committed to pursuing, charging, and convicting fraudsters like Sanberg, who cause significant harm to their victims and undermine our financial institutions.”

“This so-called ‘anti-poverty’ activist has admitted to being nothing more than a self-serving fraudster, by seeking to enrich himself by defrauding lenders and investors out of hundreds of millions of dollars,” said Acting U.S. Attorney Bill Essayli for the Central District of California. “I commend our law enforcement partners for their efforts in this case, and I urge the investing public to use caution and beware of wolves in sheep’s clothing.”

“This is a case about greed and abuse of trust,” said Assistant Director Jose A. Perez of the FBI Criminal Investigative Division. “Today’s guilty plea is a direct result of the commitment by the FBI and our law enforcement partners to hold those accountable who set out to defraud victims and undermine our financial system. The FBI will continue to work with our partners to ensure this kind of malicious behavior is investigated and stopped.”

“The defendant didn’t just bend the truth, he built a business on a lie to boost the company’s value and line his own pockets,” said Inspector in Charge Eric Shen of the United States Postal Inspection Service (USPIS) Criminal Investigations Group. “The Postal Inspection Service will go after this kind of calculated deception. No matter who you are, you will be brought to justice.”

According to court documents, beginning in 2020 and continuing into 2025, Joseph Neal Sanberg, 46, of Orange, California, devised a scheme to use his role as a co-founder and board member of Aspiration as well as his shares of company stock to defraud various lenders and investors. Between 2020 and 2021, Sanberg and Ibrahim AlHusseini, both members of Aspiration’s board of directors, fraudulently obtained $145 million in loans from two lenders by pledging shares of Sanberg’s Aspiration stock. Sanberg and AlHusseini also falsified AlHusseini’s bank and brokerage statements to fraudulently inflate AlHusseini’s assets by tens of millions of dollars to secure the loans. Beginning in 2021, Sanberg also defrauded Aspiration’s investors by concealing that he was the source of certain revenue recognized by the company.

Court documents also state that Sanberg personally recruited companies and individuals to sign letters of intent with Aspiration in which they committed to pay tens of thousands of dollars per month for tree planting services. Sanberg used legal entities under his control to conceal that these payments came from Sanberg rather than from the customers. Sanberg instructed Aspiration employees not to contact the customers that he had recruited in order to conceal his scheme.

Aspiration booked revenue from these customers between March 2021 and November 2022, but Sanberg did not disclose that he was the source of the payments. As a result, Aspiration’s financial statements were inaccurate and reflected much higher revenue than the company in fact received. Sanberg continued to solicit investors to invest in Aspiration securities into 2025.

According to the documents, Sanberg also defrauded other lenders and investors with fraudulent materials describing Aspiration’s financial condition, including a fabricated letter from Aspiration’s audit committee that falsely stated that Aspiration had $250 million in available cash and equivalents at a time that Aspiration had less than $1 million in available cash. Sanberg used these fraudulent financial materials to obtain millions of dollars in additional loans and investments in Aspiration securities. Sanberg’s victims sustained more than $248 million in losses.

Sanberg has agreed to plead guilty to two counts of wire fraud and faces a maximum penalty of 20 years in prison per count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

USPIS and the FBI are investigating the case.

Trial Attorneys Theodore Kneller and Adam L.D. Stempel of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Nisha Chandran and Jenna Williams for the Central District of California are prosecuting the case.

If you believe you are a victim in this case, please contact the Fraud Section’s Victim Witness Unit toll-free at (888) 549-3945 or by email at victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit www.justice.gov/criminal/criminal-vns/victim-rights-derechos-de-las-v-ctimas.
 

Source: United States Attorneys General

Thank you, Amanda, for that introduction, and thank you to the American Innovation Project for hosting this conference.

Let me start with a quick note about the critical work my Division is responsible for every day: enforcing criminal laws and vindicating victims’ rights in a wide variety of areas – from narcotics trafficking and violent crime to child exploitation to hacking to financial fraud and money laundering.

And, I know this is of particular interest to this audience: we are also focused on rooting out bad actors from the digital asset ecosystem. We’re doing that so responsible innovators can build and users can act with confidence to take advantage of the opportunities presented by these new technologies.

The digital asset industry plays an increasingly critical role in innovation and economic development in the United States. As digital assets become more commonplace, providing a safe environment for well-intentioned innovators and digital asset holders is central to our economic and national security.

That’s why our Deputy Attorney General, Todd Blanche, has asked me to come here to speak with you about the Justice Department’s focus on even-handed enforcement of the law that allows good actors in the digital asset industry to continue to flourish, while also ensuring bad actors who misuse this technology are held responsible. It is our job as law enforcement officers to provide fair notice and clarity around our enforcement policies. That is what I am here to do today.

In April, the Deputy Attorney General, more commonly known as “the DAG,” issued a Memorandum to the Department’s prosecutors around the country, including those in my Division, which makes plain that the Justice Department’s role is to enforce criminal laws. We are prosecutors, not regulators and not legislators. 

Our job, as prosecutors, is to follow the evidence, apply the appropriate legal framework, and seek justice.

As prosecutors, we are also governed by the Constitution, and, in particular, the right of due process. Criminal laws must give fair notice of what is illegal. As the Supreme Court has held, when the government prosecutes someone under a criminal law, “a defendant generally must know the facts that make his conduct fit the definition of the offense….”[1]

The Deputy Attorney General’s Memorandum re-commits the Department to these bedrock principles. The Department will not use federal criminal statutes to fashion a new regulatory regime over the digital assets industry. The Department will not use indictments as a lawmaking tool. The Department should not leave innovators guessing as to what could lead to criminal prosecution.

We know that the industry continues to seek clarity from the Department on its policies. We have received letters and presentations from defense counsel that raise concerns about holding developers of smart contracts criminally liable for operating unlicensed “money transmitting” businesses. We’ve heard arguments against imposing criminal liability on those who publish code and are not otherwise involved in peer-to-peer transactions.

These are complex questions of law and fact, and the Criminal Division will continue to rigorously evaluate each case to make sure that our actions are consistent with the letter and spirit of the Deputy Attorney General’s Guidance, which I’ve also incorporated into my own Guidance to Criminal Division prosecutors.

Our view is that merely writing code, without ill-intent, is not a crime. Innovating new ways for the economy to store and transmit value and create wealth, without ill-intent, is not a crime.

The Criminal Division will, however, continue to prosecute those who knowingly commit crimes — or who aid and abet the commission of crimes — including fraud, money laundering, and sanctions evasion. When bad actors exploit new technologies, it undermines public trust in those technologies and stifles innovation. 

And to be clear, to be guilty of aiding and abetting a crime, one has to intend to aid the commission of an underlying crime. It requires specific intent. So does conspiracy. Therefore, if a developer merely contributes code to an open-source project, without the specific intent to assist criminal conduct, aid or abet a crime, or join a criminal conspiracy, he or she is not criminally liable.

When it comes to criminal prosecution, involvement in the digital asset ecosystem should not and will not subject individuals to a different level of scrutiny. It also does not provide someone with any more or any less protection from money laundering, sanctions evasion, and other criminal offenses. Criminals will be prosecuted, whether their tools are old or new. However, these tools must not be misused to target the lawful activities of law-abiding citizens. The law is technology neutral.

So, under the Attorney General’s and the Deputy Attorney General’s leadership, as the DAG’s memo states, the Department is simplifying things to hold bad actors accountable while avoiding the prosecution of unwitting regulatory violations.

Let me get a bit more concrete — in particular with respect to the Department’s use of 18 U.S.C. § 1960, the statute that prohibits unlicensed money transmission. Here are the key points on that topic:

As the DAG’s memo makes clear, the Justice Department will not charge regulatory violations in cases involving digital assets — like unlicensed money transmitting under 1960(b)(1)(A) or (B) — in the absence of evidence that a defendant knew of the specific legal requirement and willfully violated it.

We may, under certain circumstances, bring cases under Section 1960(b)(1)(C), which prohibits the transmission of funds that the defendant knows are derived from a criminal offense, or are intended to be used to support unlawful activity. However, going forward, consistent with principles of notice and fairness, let me make the following clear:

Many developers have relied on regulatory guidance to suggest that non-custodial cryptocurrency software does not constitute an unlicensed money transmitting business. While that guidance may not be binding on the Department, its implications can of course factor into prosecutors’ charging decisions. Therefore, where the evidence shows that software is truly decentralized and solely automates peer-to-peer transactions, and where a third party does not have custody and control over user assets, new 1960(b)(1)(C) charges against the third-party will not be approved. Though, if criminal intent is present, other charges may be appropriate. All of a subject’s conduct and the services they provide end-to-end will be considered.

Generally, developers of neutral tools, with no criminal intent, should not be held responsible for someone else’s misuse of those tools. If a third-party’s misuse violates criminal law, that third-party should be prosecuted — not the well-intentioned developer.

These principles should provide solace to good actors and should be cold comfort for bad actors. Plenty of innovators want to responsibly and lawfully create value. But those with criminal intent may be liable for money laundering or potentially the underlying unlawful activity, sanctions violations, or other applicable laws.

Our job as prosecutors is to root out bad actors from markets — including the cryptocurrency markets. Embezzlement and misappropriation of customers’ funds on exchanges; digital asset investment fraud scams; hacking activity; and exploitation of vulnerabilities in smart contracts have no place in fair markets. They undermine efforts to innovate and they keep the digital assets industry from reaching its full potential.

That is our focus, and we continue to take that work seriously across the Criminal Division.

By way of example, we have recently announced:

The prosecution of multiple members of a China-based money laundering syndicate being run out of the Los Angeles area that laundered millions of dollars belonging to innocent victims who fell prey to cryptocurrency investment scams.

The filing of a civil forfeiture complaint against $225 million linked to cryptocurrency investment fraud and money laundering schemes.

The prosecution of a defendant for a Ponzi scheme that falsely promised investors sky-high profits from investments in cryptocurrency markets purportedly using trading robots powered by AI.

It is good to have this discussion with you at the American Innovation Project. The digital assets industry has a critical role to play in this fight to protect the digital assets ecosystem from bad actors who would exploit consumers, and enrich themselves through theft, scams, or other attacks.

The organizers of this conference have told me that no one is more committed to rooting out bad actors than the software developers, users, and others in the audience – but that well-intentioned innovators should not fear for their liberty. That’s common sense on both fronts.

Thank you for your time.