As the PP Blog reported Oct. 19, federal prosecutors have opened a criminal probe involving Obopay and Payza and successfully asked a federal judge to pause civil litigation involving both payment-processing companies.
The Blog is reporting today that federal prosecutors in the Northern District of California and the District of Columbia specifically intervened in a lawsuit filed by Payza against Obopay and others on March 25, 2015. Payza’s lawsuit alleged Obopay had engaged in a multimillion-dollar fraud during business dealings. Prosecutors asked a judge to halt the case on June 23, advising her that a criminal investigation was under way.
The targets of the probe are unclear. It could be one or more parties involved in the litigation between Payza and Obopay.
One part of prosecutors’ filings — and it’s a part that appears before the actual motion to intervene is presented — reads: “The basis for this motion is that the United States Attorney’s Office for the District of Columbia in connection with Homeland Security Investigations and the Washington, D.C. Financial Crimes Taskforce, is actively conducting a criminal investigation into the illegal activities of [REDACTED.]”
On July 20, U.S. District Judge Phyllis J. Hamilton, presiding in Oakland, granted the intervention and ordered the case stayed until Jan. 22, 2016, according to docket entries.
The public portion of prosecutors’ filing is heavily redacted, leaving the targets of the criminal probe unclear.
This is a screen shot of one such redaction in the 16-page filing:
Among other things, prosecutors contended “there are a number of issues in the instant action that may be resolved by the criminal case.” After another redaction, prosecutors continued: “Given the high degree of overlap and interrelatedness of the cases, dual litigation does not serve the interests of efficiency or judicial economy.”
Here is another redaction:
In her July 20 ruling, Hamilton found that “proceeding with the present action would likely force one or more parties into the position of having to choose between waiving their Fifth Amendment rights or invoking the privilege (but with knowledge that adverse inferences could be drawn in the civil action).”
In the United States, the Fifth Amendment is a Constitutional protection against self-incrimination.
The judge also found that the government had an “interest in the stay because discovery in the civil action could affect its ability to pursue a parallel criminal investigation or could compromise existing confidential informants.”
Obopay and Payza have been clashing since at least November 2013.
Back then, a site styled obopayusa.com claimed “[t]he US Department of Homeland Security has seized all MH Pillars dba Payza money on deposit with UltraLight FS.”
Payza, meanwhile, contended that “we are unable to complete any requests to withdraw or transfer funds for a part of our U.S. members at this time, since they are being withheld by Ultralight Financial Services (formerly known as Obopay Inc.) a licensed U.S. money transmitter of which Payza was an agent.”
Federal prosecutors in the District of Columbia confirmed earlier this month that Homeland Security Investigations is conducting the criminal probe.
NOTE: Our thanks to the ASD Updates Blog.