Convicted Ponzi Schemer, Four Other Men, Charged with Multimillion-Dollar Fraud Scheme and Obstructing Justice

A New Jersey man whose 24-year federal prison sentence was commuted after being twice convicted of defrauding investors of a total of $230 million was charged today with four other men for committing additional crimes, including conspiring to defraud investors of more than $35 million, and with conspiracy to obstruct justice, U.S. Attorney Philip R. Sellinger announced.

A criminal complaint was unsealed today charging each of the five defendants with one count of wire fraud conspiracy and one count of conspiracy to obstruct justice. The three defendants who were arrested are scheduled to make their initial appearances today before U.S. Magistrate Judge Tonianne Bongiovanni in Trenton federal court. Two remain at large.

“As alleged in the complaint, [Defendant A], along with four other individuals, has once again perpetrated a sophisticated fraud scheme causing losses of millions of dollars. He did so by using a fake name and falsely promising access to deals involving scarce medical supplies, baby formula, and first-aid kits supposedly destined for wartime Ukraine. These were brazen and sophisticated crimes that involved multiple conspirators and drew right from [Defendant A]’s playbook of fraud. No matter how many times someone attempts to prey on innocent investors, my office will dedicate whatever resources are necessary to root out and punish fraudsters.”

–U.S. Attorney Philip R. Sellinger

“We allege [Defendant A] took part in a new scheme to rip off investors by hiding his real identity,” Special in Charge James E. Dennehy of the Newark FBI said. “He was aware his actions were against the terms of his release on a previous investment fraud conviction, and we allege he engaged in criminal activity anyway. I want to commend everyone who worked on this investigation. Cases like this can be tedious, and at times very frustrating, but the investigative team does the work to prevent more people from being victimized and to ensure career criminals face the justice they deserve.”

According to documents filed in this case and statements made in court:

[Defendant A] was convicted two times in New Jersey federal court for defrauding investors. His first case involved a real estate Ponzi scheme, and his second case stemmed from additional fraud [Defendant A] committed while on pretrial release. For these crimes, which resulted in combined losses to investors of approximately $230 million, [Defendant A] was sentenced to serve 24 years in prison, followed by three years of supervised release. On Jan. 19, 2021, after [Defendant A] had served less than eight years, the President of the United States at that time commuted [Defendant A]’s term to time served, leaving intact the rest of his sentence.

Soon after being released from prison, [Defendant A] began orchestrating a new scheme to solicit money from investors through a company called [Company A] Investments Inc. ([Company A]). Using the fake name “Mike Konig,” [Defendant A] ran [Company A] with [Defendant B] and [Defendant C]. They kept [Defendant A]’s true name and identity hidden because, as [Defendant A] acknowledged in a secretly recorded conversation, investors wouldn’t give them “a penny” if they learned of [Defendant A]’s involvement.

[Defendant A], [Defendant B], and [Defendant C] received the bulk of investor money through a second company, [Company B] Management Group LLC, which was owned and controlled by two other conspirators. [Company B] promised these individual investors – consisting mostly of friends and family – lucrative opportunities to invest in deals involving COVID-19 masks, scarce baby formula, and first-aid kits supposedly bound for wartime Ukraine. Posing as Mike Konig, [Defendant A] provided the information for these supposed deals. Based on that information, investors gave money to [Company B], believing the deals were legitimate and not knowing about [Defendant A]’s involvement. In turn, [Company B] transferred those funds to [Defendant A], through [Company A].

In February 2022, almost immediately after [Company B] and [Company A] started receiving investor money, [Company B] was unable to pay its investors.  Rather than reveal this information to investors, [Defendant A], [Defendant B], and [Defendant C] agreed with [Company B]’s owners to pool money from existing investors of both [Company A] and [Company B] and use it to make monthly payments to other investors in a Ponzi-like fashion. [Defendant B], [Defendant C], and the [Company B] owners concealed this arrangement from investors by falsely telling investors that the payments derived from legitimate investment returns, not other investors’ money.

In late August 2022, [Defendant A] revealed his true identity to the [Company B] owners, admitting in a secretly recorded meeting, “I am [Defendant A].” In another recorded August 2022 meeting, [Defendant A] admitted to misappropriating [Company B] investor money and making various false statements about the purported [Company A] deals. [Defendant A] acknowledged that he was conducting a Ponzi scheme, stating, “I finagled, and Ponzied, and lied to people to cover us.”

[Defendant D] claimed to be [Defendant A]’s attorney and helped conceal [Defendant A]’s true identity by, among other things, receiving and managing money on [Defendant A]’s behalf.. [Defendant E] served as a broker for [Company A] and helped conceal [Defendant A]’s involvement from investors and his business activities from the United States Probation Office.

Once the [Company B] owners learned that Mike Konig was actually [Defendant A], they agreed with the defendants to continue concealing [Defendant A]’s identity from investors and to raise additional money to pay off existing [Company B] investors, all in an effort to stop the Ponzi scheme from falling apart and to cover up the fraud.

In addition to defrauding investors, the defendants also conspired to obstruct justice. They helped hide [Defendant A]’s assets that should have been used to pay over $200 million in restitution that he still owes his previous victims. The defendants also concealed [Defendant A]’s myriad business activities, which he was required to disclose to the court and which were expressly prohibited by the terms of his supervised release. In multiple secretly recorded conversations, [Defendant A] discussed his intent to conceal his various assets from the government. In one such conversation, [Defendant A] referenced hidden assets that he “can’t touch” while on supervised release because he’d otherwise “go to jail.” [Defendant A] then boasted, “I just told you something that no one in the world knows because I hid money. Get it?”

The wire fraud conspiracy charge is punishable by a maximum of 20 years in prison. The obstruction conspiracy charge is punishable by a maximum of five years in prison. Each count is also punishable by a maximum fine of either $250,000 or twice the gain or loss from the offense, whichever is greatest.

The U.S. Securities and Exchange Commission (SEC) also filed a civil complaint against [Defendant A], [Defendant B], [Defendant C], [Defendant E], and two other individuals based on the same and additional conduct.

U.S. Attorney Sellinger credited special agents of the FBI, under the direction of Special Agent in Charge Dennehy, with the investigation leading to the charges in this case. He also expressed appreciation for the Securities and Exchange Commission, under the direction of Antonia Apps, Director of the SEC’s New York Regional Office.

The government is represented by Assistant U.S. Attorneys Jonathan Fayer and Emma Spiro of the Economic Crimes Unit in Newark.

The charges and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

{Matzav.com}