Securities Industry Commentator by Bill Singer Esq

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.   

[F]rom April 2017 to December 2018, Veloso, together with co-conspirators Roda Taher a/k/a "Rezi," Karina Rosado, and Alvaro Lugo, and others participated in a scheme to help steal more than $1.5 million dollars from individual and corporate victims, which proceeds were later laundered. The scheme involved recruiting "money mules," including Veloso, who allowed their respective names and personal identifying information to be used by co-conspirators to incorporate a sham business through the Florida Department of State, Division of Corporations, under such mule's name.  As part of the scheme, a mule would then open bank accounts at multiple banks in the name of his or her shell company.  Several mules, including Veloso, later recruited and managed new money mules.  To date, more than 200 money mules and money mule recruiters have been identified as part of this international money laundering network.

As stated in court records, a related cyberattack aspect of the scheme involved the creation, by co-conspirators, of email addresses that mimicked, but differed slightly from, legitimate email addresses of supervisory employees at various companies. The conspirators used these deceptive email addresses to send emails that appeared to be requests for payment of legitimate invoices or debts owed by the victims. The victims were deceived into transferring funds by wire into the bank accounts opened by the money mules and controlled by Veloso and the co-conspirators.  After the victims complied with the fraudulent wiring instructions, Veloso, Rosado, and Lugo, under the direction of other conspirators, quickly debited thousands of dollars from the accounts through in-person withdrawals, ATM withdrawals, and debit card purchases. The co-conspirators also transferred funds to foreign bank accounts that co-conspirators controlled.

Veloso, Rosado, Lugo, and other co-conspirators kept a fraction of the proceeds as payment.  For example, over a two-day period in April 2017, Veloso's shell company, Veloso Bulk Trade, received incoming wires totaling more than $1,000,000 from four victims, which included two corporations, a law firm, and an individual.  Of these funds, Veloso withdrew or spent approximately $26,686. 

Veloso admitted that he recruited more than eight individuals to participate as mules in the money laundering scheme, many of whom were women he met through his kink pornography/adult film business. Veloso and his mules laundered between $1.5 to $3.5 million dollars.

Additionally, Veloso used his reptile business, known as Tri Reptiles and Xtreme Reptiles, to knowingly sell and ship wildlife in interstate commerce in 2018.  His yearly reptile sales volume was at least approximately $150,000.  Veloso acted as a reptile wholesaler, reselling hundreds of reptiles without obtaining the required Florida license.

[B]etween approximately Oct. 1, 2014 and Aug. 22, 2018, Schwartz stole, and directed others to steal for him, in excess of 500 federally-protected cactus plants from the Lake Mead National Recreation Area in Arizona.  Schwartz sold the stolen cacti through the Internet, and illegally shipped the cacti from Meadview to more than 20 countries throughout the world.  During a search warrant conducted on Schwartz's residence in August 2018, numerous stolen cacti were recovered by law enforcement agents.  Additionally, methamphetamine and related drug paraphernalia were found.

Bill Singer's Comment: Me again -- how ya doin? I had one other thought about the Schwartz a/k/a Meadview Man, who will be doing 24 months in the Big House and may find himself walkin' the Yard when some of the tougher inmates ask him what he's in for. How is Schwartz going to leverage his illegal sales of cacti into something that will earn him respect? I mean, you know, with Miami Man at least he could sort of jack his illegal sales of lizards into something like a Jurassic Park thing with Godzilla . . . but cacti? If I were Schwartz a/k/a Meadview man, I'd soft pedal the whole cacti thing and really work the whole meth aspect. 

[H]MA to pressure ED physicians to increase inpatient admissions by recommending admission without regard to medical necessity. The government claimed that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting. Hospitals generally receive significantly higher payments from Medicare for inpatient admissions as opposed to outpatient treatment; therefore, the admission of beneficiaries who do not need inpatient care, as alleged here, can result in substantial financial harm to the Medicare program. 

The United States also alleged that Newsome caused HMA to pay remuneration to EmCare, a company that provided physicians to staff HMA hospital EDs, to recommend admission when patients should have been treated on an outpatient basis.  As part of the alleged scheme, Newsome caused HMA to make certain bonus payments to EmCare ED physicians and tied EmCare's retention of existing contracts and receipt of new contracts to increased admissions of patients who came to the ED.

The only thing many people know about money laundering is what they've learned from Hollywood. So if you want to really understand what money laundering is, and more specifically, the efforts brokerage firms must take to prevent and detect it, tune in. On this episode we talk to two of FINRA's Anti-Money Laundering experts.

[S]mith and Griffin worked in a call center in Costa Rica in which conspirators, who posed as representatives of the U.S. Securities and Exchange Commission and the Federal Trade Commission (FTC), contacted victims in the United States to tell them that that they had won a substantial "sweepstakes" prize.  After convincing victims, many of whom were elderly, that they stood to receive a significant financial reward, the conspirators told victims that they needed to make a series of up-front payments before collecting their supposed prize, purportedly for items like insurance fees, taxes and import fees.  Conspirators used a variety of means to conceal their true identities, such as Voice over Internet Protocols, which made it appear that they were calling from Washington, D.C., and other places in the United States.  According to trial testimony, one elderly victim who indicated she was going to stop paying was warned by a conspirator that they knew where she and her family lived.

Smith and Griffin arranged for victims to transmit payments through international wire transfers directly to Costa Rica or through "runners," who collected money from victims in the United States and forwarded payment to Smith, Griffin and others in Costa Rica, according to evidence presented at trial.  Runners dispatched by Smith and his co-conspirators met elderly victims at their homes to collect bags of cash, which they in turn remitted to Costa Rica, the evidence showed. 

Smith, Griffin and their conspirators stole more than $10 million from victims, the evidence showed.     

[I]nvestors in Germany formed a limited partnership to invest in the United States real estate mortgage market.  The partnership made mortgage loans secured by commercial properties throughout the United States.  After the United States real estate market crash beginning in 2007, the partnership had to foreclose on many of the mortgages it owned domestically.  The partnership needed someone to oversee the foreclosure process and manage, maintain, and market the properties when the partnership acquired title.  The partnership retained Wood for that purpose.  From November 2009 to November 2013, Wood retained Theodore Gunter Gies, a bookkeeper, to assist him.  Wood and Gies, without disclosure to or authorization from the partnership, sold the properties to third parties.  Wood and Gies then submitted, via international e-mail, false financial and status reports indicating that the properties were still held by the partnership.  The loss to the partnership by the actions of Wood and Gies was $7,130,410. 

Gies previously pled guilty for his role in the conspiracy and was sentenced to 51 months in prison.

• Securities Industry Commentator
• Bill Singer