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Tag: IRS-CI

  • Two Former Federal Agents Involved In Silk Road Probe Were Bitcoin Thieves And One Was An Extortionist, Justice Department Says

    recommendedreading1UPDATED 8:33 P.M. EDT U.S.A. There must be some long faces at the U.S. Drug Enforcement Administration and the U.S. Secret Service today. That’s because two federal agents once assigned to a Task Force investigating the illicit Silk Road marketplace have been charged with federal crimes.

    Carl M. Force, 46, of Baltimore, was a DEA special agent who earned a salary of about $150,000 a year, according to a criminal complaint. He was charged with wire fraud, theft of government property, money laundering and conflict of interest.

    Shaun W. Bridges, 32, of Laurel, Md., was a special agent for the Secret Service. He was charged with wire fraud and money laundering. His salary was not revealed. He was a member of the Secret Service’s Electronic Crimes Task Force.

    The law-enforcement community recoils at this type of thing, because it engenders mistrust and erodes public confidence in the police. Agents who read the narrative in the criminal complaint filed by a special agent for the IRS Criminal Investigations unit are simply going to wince.

    One specific allegation against Force is that he sought to extort $250,000 from a subject under investigation by posing as a different person known as “Death From Above.”

    Silk Road was the criminal marketplace allegedly operated by Ross Ulbricht, also known as “Dread Pirate Roberts.” Ulbricht was the target of Force’s extortion plot, according to the complaint.

    The alleged extortionate scam?  Posing as a killer and telling Ulbricht — already under investigation by Force in his official capacity — that he’d be permitted to live and would not be ratted out if he agreed to turn over a quarter of a million dollars.

    Force also posed as “French Maid,” allegedly mining cash from Ulbricht by telling him he could keep him informed about the government’s Silk Road probe.

    While these things were going on, Force allegedly was communicating with Ulbricht as “bop,” his official undercover name.

    Force, a 15-year DEA veteran, allegedly infiltrated Silk Road in his official capacity as an undercover agent. Here is part of what the Justice Department said today (italics/carriage returns added):

    According to the complaint, Force was a DEA agent assigned to investigate the Silk Road marketplace.  During the investigation, Force engaged in certain authorized undercover  operations by, among other things, communicating online with “Dread Pirate Roberts” (Ulbricht), the target of his investigation.

    The complaint alleges, however, that Force then, without authority, developed additional online personas and engaged in a broad range of illegal activities calculated to bring him personal financial gain.  In doing so, the complaint alleges, Force used fake online personas, and engaged in complex Bitcoin transactions to steal from the government and the targets of the investigation.  Specifically, Force allegedly solicited and received digital currency as part of the investigation, but failed to report his receipt of the funds, and instead transferred the currency to his personal account. 

    In one such transaction, Force allegedly sold information about the government’s investigation to the target of the investigation.  The complaint also alleges that Force invested in and worked for a digital currency exchange company while still working for the DEA, and that he directed the company to freeze a customer’s account with no legal basis to do so, then transferred the customer’s funds to his personal account.  Further, Force allegedly sent an unauthorized Justice Department subpoena to an online payment service directing that it unfreeze his personal account. 

    The “digital currency exchange company” at which Force was moonlighting as a “de facto compliance officer” while on the DEA payroll was CoinMKT. He also was a CoinMKT investor — apparently with funds he’d stolen — and even permitted his name and likeness to be used in CoinMKT materials.

    Rancid criminality also was alleged against Bridges, a six-year Secret Service veteran. From the Justice Department (italics added):

    Bridges allegedly diverted to his personal account over $800,000 in digital currency that he gained control of during the Silk Road investigation.  The complaint alleges that Bridges placed the assets into an account at Mt. Gox, the now-defunct digital currency exchange in Japan.  He then allegedly wired funds into one of his personal investment accounts in the United States mere days before he sought a $2.1 million seizure warrant for Mt. Gox’s accounts. 

     

     

  • BULLETIN: Stewart David Nozette, American Scientist Who Sold Out His Country For The Price Of A Used Car, Sentenced To 13 Years In Federal Prison

    BULLETIN: Stewart David Nozette, the Maryland man with a PhD from the Massachusetts Institute of Technology and a “Top Secret” security clearance, has been sentenced to 13 years in federal prison on charges of tax fraud and attempted espionage.

    The espionage case was brought by the FBI after Nozette — believing he’d been recruited by Israel’s Mossad to spy on the United States — accepted $10,000 left by the FBI in an undercover sting.  In effect, Nozette sold out his country for the price of a used car and the expectation that more cash would be forthcoming.

    Nozette already was under investigation for tax evasion and financial fraud against the United States when he was arrested in the 2009 sting.

    “Stewart Nozette’s greed exceeded his loyalty to our country” said U.S. Attorney Ronald C. Machen Jr. of the District of Columbia. “He wasted his talent and ruined his reputation by agreeing to sell national secrets to someone he believed was a foreign agent.  His time in prison will provide him ample opportunity to reflect on his decision to betray the United States.”

    The case was notable for reasons other than Nozette’s bid to sell out his country. Indeed, elements of the case were prosecuted by Machen’s office — an office familiar to readers of the PP Blog because it brought the AdSurfDaily Ponzi scheme case (under then-U.S. Attorney Jeffrey A. Taylor) in 2008 and supervised the return in 2011 and 2012 of more than $59 million (under Machen) to defrauded ASD investors.

    Michael K. Atkinson, the assistant U.S. Attorney who led the Nozette tax and fraud prosecutions, once was assigned to the ASD case.

    Nozette “betrayed his country and the trust that was placed in him by attempting to sell some of America’s most closely-guarded secrets for profit,” said Assistant Attorney General Lisa Monaco.

    Monaco is from the Justice Department’s National Security division. She joined Machen in making the announcement about Nozette’s sentence, along with Principal Deputy Assistant Attorney General John A. DiCicco of the Tax Division.

    Also joining in the the announcement were James W. McJunkin, assistant director in charge of the FBI’s Washington Field Office; Paul K. Martin, inspector general for the National Aeronautics and Space Administration (NASA OIG); Eric Hylton, acting special agent in charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI); and John Wagner, special agent in charge of the Washington, D.C., Office of the Naval Criminal Investigative Service (NCIS).

    “Federal agents take an oath to protect our nation ‘against all enemies, foreign and domestic,” said Wagner.  “That would include ‘insider threats’ like Stewart Nozette.”

    Nozette, 54, parlayed his impressive academic credentials and MIT doctorate in planetary science into a career in which he conducted business with the U.S. government. He worked at the White House, for example, on the National Space Council through the Executive Office of the President of the United States.

    Prosecutors said he also worked as a physicist for the U.S. Department of Energy’s Lawrence Livermore National Laboratory, and also had access to the U.S. Naval Research Laboratory (NRL) in Washington, D.C., the Defense Advanced Research Projects Agency (DARPA) in Arlington, Va., and NASA’s Goddard Space Flight Center in Greenbelt, Md.

    “We are particularly proud that NASA OIG’s fraud investigation of Nozette, which began in 2006, served as the catalyst for further investigation and today’s outcome,” said Martin, NASA’s inspector general.

    The indictment did not allege that the government of Israel or anyone acting on its behalf committed any offense under U.S. laws in this case, prosecutors said.

  • FLORIDA — AGAIN (BOCA RATON VIA NEW YORK): John A. Mattera, Purported Philanthropist, Arrested By Feds And Sued By SEC Amid Allegations He Set Up Scam Using Names Of Groupon And Facebook; Suspect Also Traded On Name Of Red Cross; Investigators Call Him A Recidivist Felon

    John Mattera: Source: Mattera Foundation Nov. 2. 2011, news release

    EDITOR’S NOTE: So, you recognize the power of the names of  Groupon and Facebook and want to trade on their magnetism to drive traffic to your purported “opportunity” — and you want to further sanitize your scheme by describing yourself as a philanthropist and trading on the name of a charity such as the American Red Cross?

    And you perhaps want to give money from your scheme to your wife and your mother, a senior citizen?

    What follows is a story about the allegations against John Mattera and some of his activities in Florida . . .

    John A. Mattera of Boca Raton, Fla., pleaded guilty in 2003 to seven counts of grand theft in three separate Florida criminal cases, according to court records. Among other things, “Mattera stole $34,000 from two Florida investors by promising to provide them with shares of stock that Mattera falsely represented he owned,” the SEC said of the 2003 cases.

    In 2009, the SEC charged Mattera “with fraudulently attempting to avoid registration requirements by backdating promissory notes to obtain improperly unrestricted shares of a company,” according to the agency.

    And now Mattera, 50, has been sued civilly by the SEC and charged criminally by federal prosecutors in New York in yet another alleged scheme — this one involving claims that Mattera traded on the names of Groupon, Facebook and others in a scam that netted between $11 million and $12.6 million.

    The SEC said it is seeking an emergency court order to freeze the assets of Mattera; John R. Arnold, 61, of Florida; Joseph Almazon, 22, of Hicksville, N.Y.; David E. Howard II, 32, of New York City;  Bradford Van Siclen, 43, of Montclair, N.J., and eight different business entities. (Ages in this paragraph approximate.)

    Authorities said Mattera and “cohorts” duped investors into believing that they could convert shares in Mattera’s purported hedge fund — a company that happened to be pushed by “a web of registered and unregistered broker-dealers” — into shares of companies such as Groupon and Facebook in advance of the famous firms’ IPOs.

    Both the SEC and federal prosecutors used descriptive verbs when describing what is alleged to be Mattera’s latest scam — a scam that allegedly involved a network of associates and a company with the high-sounding name of “The Praetorian Global Fund.”

    (Emphasis added to SEC’s choice of verbs.)

    “By conjuring up a seemingly prestigious hedge fund and touting the safety of an escrow agent, these men exploited investors’ desire to get an inside track on a wave of hyped future IPOs,” said George S. Canellos, director of the SEC’s New York Regional Office. “Even as investors believed their funds were sitting safely in escrow accounts, Mattera plundered those accounts to bankroll a lifestyle of private jets, luxury cars, and fine art.”

    (Emphasis added to U.S. Attorney’s choice of verbs and other descriptors.)

    “As alleged, John Mattera duped investors into believing they had bought rights to shares of coveted stock in Facebook and other highly visible and attractive companies which had not yet gone public,” said U.S. Attorney Preet Bharara of the the Southern District of New York. “As the complaint describes, Mattera told elaborate lies about stock he did not own and about how he would keep investors’ money safe in escrow accounts. Instead, Mattera took the investors’ money to fund his own extravagant lifestyle. With today’s charges, his charade is exposed and he will be held to account for his alleged crimes.”

    Named relief defendants in the SEC case are Ann Mattera, Mattera’s 71-year-old mother, and Lan T. Phan, Mattera’s wife. Phan, 43, is a physician and yoga practitioner. Authorities say the women, who are not charged with an offense, were beneficiaries of the scheme. (Ages in this paragraph approximate.)

    The publicity surrounding John Mattera’s alleged business misdeeds has caused embarrassment for a local chapter of the American Red Cross in South Florida. John Mattera, who is linked on the web to numerous companies or philanthropic organizations even in the wake of previous lawsuits and criminal charges against him, was on the Red Cross board in Broward County until last month, according to the Sun-Sentinel.

    On Nov. 2, just days before the SEC and the Feds came knocking, John Mattera was quoted in this news release about an entity known as the Mattera Foundation, which purported to look “to support those in need” by making it easier for them to find grant funding.

    “John Mattera hopes that organizations across South Florida will use the new grant application tool to contact The Mattera Foundation and secure funding for their causes,” the news release read in part.

    On March 24, 2011, meanwhile, John Mattera was quoted in this news release about a Red Cross golf tournament sponsored by the Mattera Foundation.

    From March 2011 news release by the Mattera Foundation.

    “Investor and American Red Cross board member John Mattera announced today that his eponymous The Mattera Foundation will sponsor the upcoming American Red Cross Golf Tournament,” the release read in part. “The tournament will be held at the Inverrary Country Club on April 1, and all proceeds will benefit the American Red Cross, South Florida Region.”

    It was not immediately clear if Mattera plowed investors’ money into charities. What is clear, according to federal prosecutors, is that he had high appetites and caused investors to believe their money was going into escrow accounts.

    “Based on the misrepresentations of Mattera and others, investors sent more than $11 million into escrow accounts maintained at a Florida bank,” prosecutors charged. “Mattera reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place, at which time the investors would receive their ownership interest in the particular special purpose entity. However, instead of maintaining the investor money in the escrow accounts as he promised, Mattera caused the vast majority of it to be transferred to other entities with which he was associated. Ultimately, Mattera misappropriated more than $11 million of investor money and spent nearly $4 million on personal items for his family and himself, such as expensive jewelry, interior decorating and luxury cars.”

    A veteran IRS agent also used strong language when describing Mattera’s latest alleged fraud scheme. (Emphasis added.)

    “The allegations against Mr. Mattera show that the appearance of success can be a tangled web of financial lies,” said Victor W. Lessoff, special agent-in-charge of the Newark (N.J.) Field Office of the IRS Criminal Investigation Unit (IRS-CI).

    Such descriptions also surfaced in the epic Scott Rothstein Ponzi caper, which also operated in South Florida.

    Read SEC news release on John Mattera’s latest alleged scam.

    Read the SEC complaint.

    Read Feds’ news release on John Mattera’s latest alleged scam.

  • BULLETIN: National Investment-Fraud Sweep Dubbed ‘Operation Broken Trust’ Nets 532 Defendants; AG Holder Says Capers Caused More Than $10 Billion In Losses; ‘Undercover Operations’ Part of Task Force Arsenal

    U.S. Attorney General Eric Holder and members of President Obama’s Financial Fraud Enforcement Task Force said this morning that a nationwide sweep known as “Operation Broken Trust” has netted 343 criminal defendants and 189 civil defendants.

    Among the targets of the sweep were purveyors of Ponzi schemes, affinity fraud, prime bank/high-yield investment scams, foreign exchange (FOREX) frauds, business-opportunity fraud and other similar schemes, investigators said.

    Some of the defendants “filed for bankruptcy in an attempt to avoid claims by victim-investors,” investigators said.

    The combined losses in the schemes, which affected 120,000 investors, were estimated at $10.4 billion, Holder said. He was joined in the announcement by FBI Executive Assistant Director Shawn Henry; U.S. Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami; U.S. Postal Inspection Service (USPIS) Chief Postal Inspector Guy Cottrell;  Deputy Chief Rick Raven of the Internal Revenue Service Criminal Investigation (IRS-CI); Acting Director of Enforcement Vince McGonagle of the U.S. Commodity Futures Trading Commission (CFTC); and other members of the Financial Fraud Enforcement Task Force.

    “With this operation, the Financial Fraud Enforcement Task Force is sending a strong message,” said Holder.  “To the public: be alert for these frauds, take appropriate measures to protect yourself, and report such schemes to proper authorities when they occur. And to anyone operating or attempting to operate an investment scam: cheating investors out of their earnings and savings is no longer a safe business plan — we will use every tool at our disposal to find you, to stop you, and to bring you to justice.”

    The calling card of the schemes was greed, Henry said, adding that undercover probes are part of the Task Force’s arsenal.

    “This operation highlights the scope of this problem, and its impact on individuals from all walks of life,” said Henry.  “This one sweep alone involves fraud schemes that harmed more than 120,000 victims. The schemes may change, but the underlying greed does not. Working with our partners, we in the FBI will use all the investigative techniques in our arsenal, including undercover operations, to bring those responsible to justice.”

    Khuzami, meanwhile, said the law-enforcement community was pursuing multiple forms of fraud.

    “Fraud by well-known companies or high-profile executives gets the biggest headlines, but other scams are equally devastating to hard working families and retirees,” said Khuzami. “Victims want justice and don’t much care who the fraudster is or how unique the fraud. Today’s actions underscore that law enforcement agrees and will pursue fraud in whatever form.”

    Read Holder’s announcement, made this morning in Washington.

    President Obama authorized the Financial Fraud Enforcement Task Force in November 2009. In January 2010, Holder ventured to Florida to speak about the aims of the Task Force and to warn scammers that the government was serious about putting them in jail.