On January 4, 2023, French footballer, Aurélien Michel, was arrested by US authorities as he passed through JFK airport.

He was immediately taken into custody and brought before a federal judge in Brooklyn, where he was arraigned on a complaint charging him with being the leader of a scheme involving NFT fraud. He posted bail on February 1, 2023 and has been at liberty in the U.S. since that time.

According to a complaint sworn by an FBI agent, Mr. Michel is accused of “knowingly and intentionally devising a scheme or artifice to defraud individual cryptocurrency holders in order to obtain money or property from them by means of one or more materially false and fraudulent pretenses, representations and promises, and for the purpose of executing such a scheme and artifice, did transmit or cause to be transmitted, by means of wire communication in interstate and foreign commerce, writings, signs, signals, pictures and sounds ». (Title 18, United States Code, Sections 1343, 2 and 3551 et seq.)

In order for him to be found guilty of this crime, the government must prove that:

1. The defendant engaged in a scheme to defraud;
2. The defendant acted with specific intent to defraud;
3. The scheme resulted, or would result upon completion, in the loss of money, property, and/or honest services;
4. The defendant utilized the courier, mail services or wires in furtherance of the scheme to defraud.

Since April 2022, federal law enforcement officers – in particular, members of the multi-agency Dark Web and Cryptocurrency Task Force – have been investigating a scheme to defraud buyers of NFTs from a collection called “Mutant Ape Planet”, based on the aesthetics of the world-famous and highly prized “Mutant Ape Yacht Club” collection.

The scheme involved soliciting funds from potential buyers, promising them certain benefits before abruptly abandoning the project and keeping the acquired funds. This phenomenon is called a “rug pull” and is well known in the world of cybercrime.

The promised benefits were many and varied: prize draws, exclusive access to other crypto-currency assets and support for a community wallet whose funds would be used to market NFTs.

From January 2022 accounts on social medias platforms such as Twitter and Discord began advertising the NFT “Mutant Ape Planet” project. Messages on social medias described Mutant Ape Planet as a “spin-off collection” of ape-centric NFTs, and directed users to specific websites for more information on the Mutant Ape Planet NFT acquisition, including “mutantapeplanet.com” and a Discord channel for Mutant Ape Planet.

The “mutantapeplanet.com” website presented all the possibilities offered by the purchase of an NFT Mutant Ape Planet and the promise of a vast online marketing campaign designed to highly increase the value of the virtual images.

NFTs, sold on the Ethereum blockchain, cost around $468 each when the collection was launched, based on the price of Ether at the time.

However, once the NFTs had sold out, Aurélien Michel reportedly ceased all communication and withdrew buyers’ funds from the company’s crypto-currency wallets.

According to the US authorities, Aurélien Michel transferred around $2.9 million in crypto-currencies from the buyers to, among other things, asset portfolios controlled by himself.

Subsequently, the only procedural steps taken were orders to continue granted by the magistrate judge overseeing the case at the request of the parties. These various “Orders to continue” can mean several things:

The first possibility is that the parties, i.e. the defendant and the prosecutor, are currently negotiating a “plea”, which is an arrangement enabling Aurélien Michel to plead guilty without having to endure a trial. This type of arrangement is particularly common in the United States. Typically, defendants who plead guilty through a negotiated plea tend to receive more lenient sentences than those who are convicted after jury trials.

The second possibility is that Aurélien Michel’s lawyer, Ira Sorkin (Bernard Madoff’s lawyer, among others), is currently still analyzing the case’s incriminating and exculpatory evidence.

Finally, as permitted by American criminal procedure, it is also possible that Aurélien Michel is a cooperator. This means that, in exchange for a reduced sentence or a more favorable plea bargain, Aurélien Michel would be willing to supply information about co-conspirators in his crime and possibly even testify for the prosecution at the trials of other indicted defendants.

Wire fraud is a federal crime. It is punishable by up to 20 years in prison and a $250,000 fine may also be levied.

The case is USA v. Michel, 1:23-mj-00007, US District Court for the Eastern District of New York (Brooklyn).

Matthew Galluzzo is a federal criminal defense attorney and former Manhattan prosecutor. He speaks fluent French and is a Chevalier in the French National Order of Merit. This article was prepared with the assistance of Marie-Lou Serna, a French trainee lawyer.

Matthew Galluzzo is a former sex crimes prosecutor who now represents both plaintiffs and defendants in civil sex abuse cases. He also regularly defends individuals accused of white collar crimes and fraud in federal court.

The link to the interview is available here.

As a preliminary matter, it seems reasonably likely that a trial will in fact happen. Having indicted a former president on numerous felony counts, it seems unlikely that they will make Mr. Trump a plea bargain offer to anything less than a felony. To anyone who knows Mr. Trump at all, it seems inconceivable that he would admit to any guilt of a crime, especially with a looming presidential election. Thus, in the absence of a plea bargain (which resolves most cases), a trial should happen.

That being said, it is quite likely that the trial might not happen before the presidential election next year. One can only imagine what would happen to the indictment if Mr. Trump were elected president prior to the trial taking place.

However, in the event that the trial actually takes place on Manhattan soil, the selection of the jury will undoubtedly be one of the most difficult aspects for Trump’s trial team.

To reach a verdict in a felony case, a jury of twelve must be unanimous in its decision. To convict, the jury must agree that a defendant is guilty beyond a reasonable doubt. In the event that one or more jurors disagrees with the others, then the judge must declare a mistrial (or “hung jury”) and the case has to be retried, as it is neither a conviction nor an acquittal.

From the defense perspective, a hung jury represents a victory. Certainly, Mr. Trump would tout it as such on social media and in his political campaign. Also, the delay in scheduling the re-trial would likely propel Mr. Trump past the election date. So, the defense team will likely employ a common defense strategy of searching for a rogue or contrarian juror who will disagree with the other jurors just to disagree, or to prove a point, or to seek fame and fortune on the speaking circuit for himself/herself. In short, the prosecution needs a unified team of twelve, but the defense just needs to persuade one juror. Frankly, it might be impossible for the defense to find twelve jurors in Manhattan who want to acquit Trump, so they will likely be aiming for a hung jury. That might mean finding one juror who hopes to make a name for himself/herself by making a controversial decision of national importance in the hopes of attracting the spotlight.

Potential jurors will be drawn from the island of Manhattan – they will all be residents of New York County. Jury service is a duty of citizenship and cannot be refused. People are selected to receive jury summonses randomly through the mail. Normally, hundreds of people are called down to 100 Centre Street every week and told to wait in a jury waiting room until (or if) they are needed by a judge starting a trial. There is no requirement that people have a certain level of education or familiarity with the law. Generally, it is only required that jurors be able to speak and read English and be healthy enough to sit through the trial.

In this case, the courts might elect to bring more people than usual down to 100 Centre Street for the date of Mr. Trump’s trial. Then, as Mr. Trump’s trial is set to begin, about 100-200 of them (maybe) will be brought into the courtroom and made to wait in the audience. Certain general instructions about jury service will be given to them by the judge, and then they will be made to swear under oath that their answers to questions will be the truth.

From there, about 14-20 of the potential jurors (panelists) will be randomly picked to sit in the front of the courtroom and endure questions from the attorneys on the case (both prosecution and defense). Usually, a wireless microphone is passed from panelist to panelist so that they can answer certain pedigree questions about themselves: their name, the neighborhood in which they live, their profession, their educational background, who they live with and who is in their family, whether they have ever been jurors before, whether they have ever been involved in litigation before, whether they have any friends or family members involved in the criminal justice process, and whether they have any issues that make them unable to be open-minded as jurors. Jurors answer these questions in open court before the attorneys and judge, though sometimes if issues are private or personal, they can be answered outside of the defendant’s presence.

Both sides – the prosecution and the defense – would be afforded ten peremptory challenges in total, meaning that they can remove possible jurors from consideration for the trial for any reason whatsoever without explanation or justification (though it is not supposed to be done for certain impermissible reasons, like race or gender). However, an unlimited number of panelists can be successfully challenged “for cause,” meaning that the panelist says something during voir dire (another term for jury selection) that indicates that they cannot be fair as a juror. CPL § 270.25(2)(c).

In a case like this, the court will almost certainly ask questions about pre-trial publicity and whether the jurors have formulated any opinions about this case. In high-profile criminal cases, panelists are not automatically excluded from jury service just because they have heard about the case, or because they may have an opinion about the defendant or the case. The threshold question is whether the juror can put aside his/her personal feelings about a person/case and whether he/she can evaluate the evidence with an open mind (and without considering any pretrial publicity or news reports he/she may have seen).

Any potential panelists who say they cannot be fair will be excluded from service. Of course, some of those people will be lying, as will some of the people who claim they are capable of being fair. But the judge cannot fail to exclude someone who does not give an “unequivocal assurance of impartiality” without risking a serious chance of reversal on appeal. This will be a very dicey area for the trial judge to oversee, as many potential jurors are likely to hesitate when answering this question about impartiality. On appeal, a defense attorney can even win a reversal of a conviction where the attorney had to use a peremptory challenge to exclude a juror who should have been dismissed for cause. Put another way, the problematic juror does not even have to have been on the jury for the defense to potentially win an appellate argument that an unfair juror was not excluded for cause.

As a practical matter, Donald Trump and his attorneys face an incredibly uphill battle in picking a jury in Manhattan. He only received 12% of the vote in Manhattan in the last presidential election, The remaining 88 percent or so of the residents of the island has a very unfavorable opinion of the former president. It is no stretch to say that there are likely many people in Manhattan who would want to get onto the jury(and say whatever was necessary during voir dire) just so that they could convict him at trial by any means necessary. Donald Trump is entitled to a fair trial just as anyone else, but he isn’t entitled to be tried by people who like him, either. After all, that might be impossible to arrange in Manhattan (or anywhere else near New York City).

Trump’s legal team might think it smarter to waive a jury and have the judge decide the case on the facts. This would be an interesting strategy. On the one hand, it would hopefully place the decision into the hands of a more objective jurist. On the other hand, should he be convicted, Trump could blame a single individual who he has already accused of being biased against him. Such a scenario might play well into his broader political objectives. Given the unfavorable landscape in Manhattan, the possibility of a “bench trial” by judge (instead of jury) seems significant here.

Matthew Galluzzo is a criminal defense attorney and former Manhattan Assistant D.A. He has appeared as a legal commentator on TV and in newspapers across the world, including CNN, MSNBC, Fox, NPR, The Economist, the New York Times, the Wall Street Journal, the BBC, and others.

A gag order basically instructs a party to a litigation to refrain from speaking publicly about the case. A New York judge overseeing a criminal case has the power to issue a gag order over one or more of the parties to the case. Gag orders are relatively rare, however. They certainly are not done as a matter of routine. The Constitution guarantees the right to free speech, after all, and courts are generally loath to abridge those rights. However, gag orders may be necessary to protect other valuable rights under the Constitution, such as the right to a fair trial (contained in the Sixth Amendment of the Bill of Rights), as well as the all-important “true administration of justice”.

Sometimes defense attorneys ask courts to order prosecutors not to talk about their clients’ cases publicly for fear that they would prejudice any potential jurors. For example, the attorneys for Ghislaine Maxwell – convicted in Manhattan federal court of assisting notorious sex trafficker Jeffrey Epstein – contended that the federal prosecutors had tainted potential jurors by hosting press conferences in which they laid out the facts of their case. Ultimately that application for a gag order was denied, but the federal judge did admonish the attorneys to adhere to the rules of professional conduct for lawyers, which generally prohibits attempts to unfairly influence juries (or potential juries) outside of the courtroom. After all, the paramount rule of trials was explained by Justice Holmes in 1907: “The theory of our system is that the conclusions to be reached in a case will be induced only by evidence and argument in open court, and not by any outside influence, whether private talk or public print.” Patterson v. Colorado, 205 U.S. 454, 462 (1907).

Sometimes defense attorneys work the media circuit and give pre-trial interviews to the press to try to influence potential jurors before their clients proceed to trial. Trump’s attorneys appear to be doing quite a bit of that lately. In one case, the attorneys for Joey Buttafuoco were gagged by a judge because of their admitted attempts to sway the jury pool with statements to the media. People v. Buttafuoco, 158 Misc. 2d 174 (County Court, Nassau 1993). That gag order was especially easy to justify in light of the Code of Professional Responsibility, DR 7-107 (22 NYCRR 1200.38) relating to trial publicity, which prohibits the sort of behavior done by the attorneys.

Prosecutors do not have a right to a fair trial, per se, because that right stems from the U.S. Constitution and protects individuals accused of crimes. One might think, then, that a defendant cannot be gagged. After all, the purpose of a gag order – normally – is to protect a defendant’s right to a fair trial. However, a gag order can be imposed upon a defendant where the defendant makes deliberate attempts to undermine the “true administration of justice” by tampering with the jury pool and making extrajudicial statements. Already, Mr. Trump has made numerous postings in social media (Truth Social etc) about the alleged bias of the prosecutor and the trial judge, and slammed the charges as being baseless and politically motivated, among other things. Mr. Trump might argue that his statements about the case relate to his campaign for president. While that may be true in part, there is no question that he hopes to persuade potential jurors of his innocence by making these claims about the case. In the least, he has to be aware of the fact that his public statements about the case – which immediately become the subject of numerous national media stores – could taint the jury pool in Manhattan. So, a gag order seems likely in this case. In short, if Mr. Trump wants to speak to the jurors in his case, he will have to take the oath and subject himself to cross-examination.

Given what we know of Mr. Trump’s personality and character, it seems inevitable that he would violate such a gag order and speak publicly about the charges. Notwithstanding his general inclination to talk about everything that crosses his mind, it would actually be difficult to run for president without discussing pending criminal charges against oneself. So, then, it is worth asking what would happen if Mr. Trump were to violate the gag order.

Violations of gag orders are prosecuted by courts pursuant to N.Y. Judiciary Law Section 750. A court would have to conduct an evidentiary hearing on the issue of the violation of the court order before rendering a decision. The decision would be made by the court and not a jury. The maximum jail punishment for a violation would be thirty days at Rikers Island. There could also be a fine up to $1000.00.

Courts in the past have considered whether judges who have been personally attacked or criticized by a litigant outside of the courtroom can be permitted to preside over the subsequent contempt proceeding. The Supreme Court has concluded that “[a] constitutional rule which disqualifies a Judge solely based upon criticism of rulings and disobedience to court orders during a trial is excessive and unwarranted.” In re Hirschfield, 184 Misc.2d 119, 122 (N.Y. County Sup. Ct. 1999) It should not be assumed “that judges are so irascible and sensitive that they cannot fairly and impartially deal with resistance to their authority or with highly charged arguments about the soundness of their decisions.” Ungar v. Sarafite, 376 U.S. 575, 584 (1964). But a judge might be disqualified from presiding over a contempt hearing on a gag order where the judge becomes so “embroiled in… controversy” that he should recuse himself based upon the “likelihood of bias.” Taylor v. Hayes, 418 U.S. 488, 501 (194).

Prosecutors might request a gag order at Mr. Trump’s arraignment on April 4. The court may decline to issue such an order at this point, and may instead admonish the parties not to speak publicly about the case. But if Mr. Trump and his attorneyscontinue to wage a public media campaign about the case, then the judge will likely be inclined to grant a gag order. One doubts that Mr. Trump could possibly abide by such an order, or that he would. In that case, it seems altogether plausible that we will have a violation hearing on a gag order with the very real possibility of Mr. Trump being incarcerated pre-trial for a violation of a gag order. But that of course remains to be seen.

Matthew Galluzzo is a criminal defense attorney in New York City and former Assistant D.A. in Manhattan. He has appeared as a legal commentator on CNN, MSNBC, Fox, ABC, Dateline, BBC, and other television news programs throughout the world. He has been quoted by newspapers including the New York Times, the Wall Street Journal, and the Economist, among others. Fluent in French, Mr. Galluzzo has also been interviewed countless times in French by European and Canadian news channels. For his services to the French government and French citizens facing criminal charges, Mr. Galluzzo was recently named a knight in the French National Order of Merit.

The truth of the matter is that the vast majority of federal defendants plead guilty. It is important for federal defense attorneys to be skillful in negotiating favorable plea bargains. But even more important for a federal defense attorney is the ability to craft persuasive sentencing arguments. These can make a real difference for federal defendants – sometimes it is the difference between a long sentence and a short sentence, or a sentence of probation instead of a prison sentence.

Matthew Galluzzo is a former Manhattan prosecutor and experienced federal criminal defense attorney. If you or a loved one have been charged with a federal crime, you should strongly consider retaining him. His significant experience advocating for defendants in federal court helps him obtain excellent results for his clients.

Mr. Galluzzo submitted to the court a detailed sentencing memorandum describing the client’s difficult upbringing and hard work providing for his family. Mr. Galluzzo submitted character letters from the client’s family, friends and pastor in support of his good character and reputation. The court reviewed these submissions and, after a sentencing hearing in the Southern District of New York, decided not to impose an additional prison sentence upon him. The client will be on supervised release and able to continue with his current employment. (The client spent about six days in prison before arranging for the posting of his bail at the outset of the case and following his arrest.)

In addition, the client could have been subject to millions of dollars in restitution, meaning he might have been ordered to pay back money to the conspiracy’s victims to compensate them for the crimes. However, Mr. Galluzzo argued to the Court that such an award would have been unfair in his client’s case, given his minor role in the offense and his limited finances. The Court agreed not to impose any forfeiture or restitution penalties, as well.

If you or a loved one have been arrested for a felony crime relating to fraud or larceny, you should strongly consider contacting Mr. Matthew Galluzzo, an experienced criminal defense attorney and former Manhattan prosecutor. He gets excellent results for his clients through persuasive advocacy and compassionate representation.

It would appear from the complaint that Mr. Michel has an obvious defense that he did not intend to defraud anyone, and that he fully intended to give his customers their NFTs eventually. He may have received the funds and then encountered difficulty in acquiring the NFTs for his customers due to volatile market conditions or other issues.

It is always difficult to estimate sentencing exposure at this stage of a criminal case, but preliminary estimates might suggest the following for Mr. Michel:

Under the federal sentencing guidelines, the base offense level for a wire fraud is usually 6.

For cases involving the alleged theft of over $1.5 million dollars, the sentencing guidelines require that 16 levels be added, resulted in an offense level of 22.

Where there are more than 10 victims of a fraud scheme (or the scheme involves mass-marketing), the guidelines require an additional two offense levels, resulting in a level 24. USSG 2B1.1(b)(2).

There might be an additional two levels relating to the fact that the fraud occurred in a foreign jurisdiction (USSG 2B1.1(b)(10)), but that is unclear.

So, if Mr. Michel is convicted at trial, assuming he has no criminal history (i.e. Criminal History Category I), his sentencing guidelines range would be 51-63 months, or about 4-5 years in prison. Judges use a Sentencing Table promulgated by the Sentencing Commission – see here.

If he pleaded guilty prior to trial, Mr. Michel would likely receive a reduction of 3 levels for acceptance of responsibility, resulting in an offense level of 21 and a range of 37-46 months (3-4 years).

However, there is no mandatory minimum sentence in this case, meaning that he could theoretically be convicted and receive a sentence of time served followed by supervised release.

Mr. Michel would likely be ordered to pay restitution to his victims equal to the amount of their losses, and, if he is not a citizen of the United States, then he would be almost certainly deported following his prison sentence and unable to ever return to the United States (inadmissible).

Matthew Galluzzo is an experienced criminal defense attorney and former Manhattan prosecutor. He specializes in the defense of federal criminal cases in New York City. He also speaks fluent French and has been knighted by the nation of France for his zealous defense of French nationals accused of crimes in the United States and his service to the French Consulate of New York City.

If you or a loved one have been arrested or accused of a federal crime involving wire fraud charges, you should strongly consider contacting Matthew Galluzzo. He has achieved excellent results for many clients accused of these crimes in New York City federal courts and may be able to assist you as well.

The allegations in these cases suggest that the defendants used the public enthusiasm and fervor around cryptocurrency investing to run what amounted to a Ponzi scheme with a crypto appearance. The defendants allegedly went to crypto conventions and investor events and flashed conspicuous wealth in order to persuade people to invest in their cryptocurrencies. The defendants allegedly used a software platform to allow investors to see their investments growing, but the defendants would not allow the investors to withdraw funds. Meanwhile, these defendants allegedly used the investor funds for their own purposes and spent the money lavishly.

The defendants might argue that there was in fact a real cryptocurrency investment that simply failed, as so many cryptocurrencies have. (Some reputable economists might even argue that the entire cryptocurrency industry is, at base, a Ponzi scheme in and of itself.) Prosecutors will use bank records and other evidence to show that these investor accounts ran dry because they were emptied by the defendants.

The charges here are predominately conspiracies to commit Wire Fraud (18 USC 1343) and Money Laundering (18 USC 1956(h)). A person commits wire fraud, basically, when he or she commits fraud using the internet or a telephone system. Money laundering involves taking stolen money (or proceeds from an illegal activity) and knowingly converting it into another form or depositing it into a bank account, for example.

The defendants face significant potential prison sentences. Generally, the penalties for wire fraud and money laundering depend largely on the amount of money stolen. However, the penalties can increase significantly where there are many victims, or when a person acts as a manager of others in the criminal conspiracy, or when the person has a criminal record. In addition to prison penalties, the defendants, if convicted, can expect to owe their victims significant amounts in restitution.

Matthew Galluzzo is an experienced criminal defense attorney and former Manhattan prosecutor. He has successfully represented many individuals accused of federal wire fraud and money laundering and understands how prosecutors investigate and build their cases. If you or a loved one have been accused of wire fraud in federal court, you should strongly consider contacting him today to discuss his potential representation.

For many small businesses, the SBA’s various COVID-relief programs, including the Paycheck Protection Program, were critical in helping those businesses survive the once-in-a-generation economic downturn created by the pandemic. However, the fraudulent abuses of the program have become almost legendary and have recently been the subject of many Congressional inquiries.

The Department of Justice this year launched a task force to prosecute – at the federal level – crimes involving abuse of the COVID relief programs. So, one should expect to see more such prosecutions launched against individuals in the near future.

Wire fraud is a very common federal charge prosecuted under 18 U.S.C. Section 1343. Basically, it makes it a federal felony to commit fraud using the telephone or the internet. So, submitting a false application for COVID relief funds online through the government’s portal would certainly qualify as an act of wire fraud. The penalties for this offense depend primarily on the amount of money defrauded from the victim and the criminal record of the defendant, though other factors can increase the potential penalties as well. These 17 individuals recently charged in Manhattan could all be facing potential jail sentences for their alleged offenses.

The lawyers at The Law Office of Matthew Galluzzo PLLC have successfully defended several individuals accused of federal wire fraud charges. If you have been arrested or charged with such an offense, you should strongly consider contacting them to defend you. It might be possible to argue that yourself did not submit the application, and/or that you relied on someone else’s advice in preparing the application. There could be reasonable disagreement about the nature of the business at issue in the loan application, too. To be sure, these cases are not indefensible.

According to a press release from the prosecutor, Mr. DiMassa supposedly formed an LLC with another person and used that LLC to bill the City of West Haven for consulting services that were not in fact provided. Allegedly, Mr. DiMassa made withdrawals from the LLC at about the same time he made large chip purchases at Mohegan Sun casino. One might suspect the government to argue that Mr. DiMassa’s fraud was the result of a gambling addiction.

Of course, nothing has been proven as of yet. But if Mr. DiMassa is in fact convicted of wire fraud for allegedly stealing $600,000, he is likely looking at a Federal Sentencing Guidelines range of between 33 and 57 months. In federal cases, crimes have minimum and maximum penalties, but judges use an advisory system called the Federal Sentencing Guidelines to narrow down the sentencing range. Those guidelines give defendants and attorneys an idea of what to expect at sentencing, but are nevertheless just approximations. This table provides the guidance.

Assuming that Mr. DiMassa has no significant criminal record, he would be categorized as Criminal History Category I (for first offenders). Then, people convicted of wire fraud begin at a base offense level of 7. A loss of $600,000 adds an additional 14 offense levels. He might also get an additional 2 level enhancement for defrauding a government agency. See USSG 2B1.1(b)(9). At a sentencing level of 23, he would be facing a Guidelines range of 46-57 months. If he were to plead guilty and accept responsibility, however, he would probably receive a three-level reduction for acceptance of responsibility, yielding a final offense level of 20 and a Guidelines range of 33-41 months in prison.

Most federal defendants plead guilty after negotiating the general terms of the guilty plea (i.e. the amount of fraudulent loss attributable to the defendant, the role of the defendant in the crime, etc), and then a judge determines the specific and appropriate sentence for the defendant after the guilty plea has been entered. Federal criminal practice differs significantly from state court practice in this regard, as most sentences are explicitly negotiated before pleading guilty in state court. In federal court, when defendants plead guilty, they have an idea of what they might receive, but they don’t really know for sure what will happen to them until after their guilty pleas have been irrevocably entered before the court.

Also, if he is convicted, Mr. DiMassa will also certainly be required to pay restitution in the full amount, and/or sign a forfeiture order such that property belonging to him can be seized by the government to pay back the criminal debts.

If you or a loved one have been arrested for federal wire fraud, you should strongly consider contacting Matthew Galluzzo. Mr. Galluzzo is a former Manhattan prosecutor and current resident of Connecticut, with over twenty years of experience in criminal law. He is a member of the Criminal Justice Act panels for both the Eastern and Southern Districts of New York, meaning that federal judges appoint him to represent defendants in difficult federal cases throughout New York City, and he is admitted to practice in federal court in Connecticut.

Of course some of these players may in fact be innocent. But you can expect the government’s case to be strong here. The prosecutors will probably be able to demonstrate that the medical/dental/chiropractic services detailed in these invoices submitted for reimbursement were not in fact provided. And the government almost certainly has the bank records, phone calls, emails, and text messages showing the transactions between Terrence Williams and the other participating defendants. There are probably several cooperating witnesses as well (i.e. former players who did not participate in the scheme though they were approached about it). So, most of these defendants – if not all of them – are likely to plead guilty. Indeed, the overwhelming majority of federal defendants do.

Sentencing at the federal level is an inexact science. There is no statutory minimum here, and sentencing judges will look to the federal Sentencing Guidelines for guidance. However, the sentences suggested by those Guidelines are merely advisory, and not mandatory or binding. In fraud cases, the biggest variable in the Guidelines calculation is the amount of loss (assuming these defendants mostly do not have criminal records already). The defendants will likely be in Criminal History Category I, on the left hand column of the sentencing table provided for by the Sentencing Guidelines. Their base offense levels for Wire Fraud/Health Care fraud would be six. See U.S.S.G. 2B1.1. But then, you would have to add an additional offense level for the amount of fraud. There is some debate about whether this number should reflect “actual loss” or “intended loss,” which would make a difference here as the intended loss (i.e. the amount of false invoices submitted) was $3.9 million overall, but the actual loss was $2.5 million overall. Theoretically, each member of the group could be held responsible for the entire $3.9 million, as they were co-conspirators in a group effort to defraud the HRA. However, normally, in fraud cases, defendants are held accountable, so to speak, for the amount of money they themselves were actually involved in stealing (though that is not always the case, it is a fuzzy question of foreseeability). Terrence Williams, however, as the mastermind of the scheme, would probably have to add at least 16 levels to his sentencing offense level, in light of his being in charge of the entire scheme. Additionally, “masterminds” or managers of criminal enterprises can have their sentencing levels increased by another four levels. Pleading guilty tends to get a defendant an overall three-level reduction in sentencing offense level, so Terrence Williams could find himself at a suggested Guidelines sentencing range of 57-71 months (offense level 25), or roughly 5-6 years in federal prison.

Many of the other defendants are likely to have sentencing guidelines ranges of less than a year, meaning that they will have good chances of receiving sentences of probation. Judges, in addition to the Sentencing Guidelines, also must take into consideration a variety of sentencing factors set forth in 18 U.S.C. § 3553(a). These factors include things like the history and characteristics of a defendant, and his educational and medical and rehabilitative needs, among other things. Generally, a judge must impose a sentence that is just and “sufficient, but not greater than necessary” to serve the purposes of criminal sentencing. All of these defendants, should they be convicted, will also be ordered to pay restitution and/or forfeit the profits that they received from the scheme, as well.

Defendants in these sorts of cases can sometimes argue that they were unaware of the illegality of their actions, but that argument is rarely viable or plausible. They might also allege that someone else submitted the false claims on their behalf without their permission. Most defendants, however, simply make the best cases that they can to get non-jail sentences with restitution (i.e. repayment) of the fraudulent profits. Some defendants also choose to act as cooperating witnesses against defendants or health care providers in return for leniency. These options must be discussed with an experienced attorney.

Matthew Galluzzo is a federal criminal defense attorney and former Manhattan prosecutor with experience defending people against federal charges of wire fraud and health care fraud. He is also a huge fan of the NBA and still plays in a weekly pickup game with middle-aged men.

If you or a loved one have been arrested or accused of the federal crime of wire fraud or health care fraud, give him a call to schedule an appointment.

1. Understanding the Process

The criminal justice system can be intimidating for a victim, so much so that many crime victims decline to even make a report or complaint. As a longtime former Manhattan prosecutor, Matthew Galluzzo can answer questions a crime victim might have about the process, including: 1) whether, and how the perpetrator will be arrested, 2) what the perpetrator might be charged with and what penalties he/she would face, 3) whether the crime victim will have to testify, and/or when and how often, 4) whether the crime victim will ever have to confront the perpetrator in court, 5) whether the crime victim’s identity will ever be known to the perpetrator, and 6) what sort of outcome the crime victim might reasonably expect. Many crime victims have found these sorts of consultations with Mr. Galluzzo to be invaluable, in that it relieves some of the stress in the process and helps them decide what course of action to take.

2. Protecting your Rights and Interests

For those victims who have chosen to make reports, Mr. Galluzzo can help protect their rights and interests throughout the process. Oftentimes, crime victims may themselves be at some risk for arrest or criminal prosecution based upon their complaints, and need an attorney to ensure the proper invocation of their Fifth Amendment rights. Victims should not assume that just because they are cooperating with law enforcement that they themselves are immune from punishment fo their own actions.

3. Advocating for a Result

Crime victims may also wish to have an attorney communicating with the prosecution to skillfully advocate for a particular result. Attorneys for victims can possibly help victims get full restitution in fraud cases, for example, or convince prosecutors to seek certain penalties in assault cases. The advantage of having an attorney for this purpose is that he/she should have a better understanding of the prosecutorial options. Moreover, a former prosecutor will be more credible in discussing these options with a prosecutor.

4. Bringing a Lawsuit

Victims of crimes may wish to pursue civil lawsuits against the criminals or the establishments where the crimes happened. These suits can be sometimes be brought after the criminal justice process has concluded, but can also be brought while the criminal case is pending. The decision as to whether or not to bring such a suit depends not only on whether the facts can be proven, but on whether money damages can actually be recovered from the perpetrator. Mr. Galluzzo has also assisted crime victims in bringing civil lawsuits against perpetrators of crimes. In many ways, his background as a former prosecutor makes him ideally suited to “prosecuting” a crime in civil court. He has helped victims of rape, sexual assault, assault, and other crimes sue individuals and establishments for money damages sustained by crime victims, and has helped them navigate the criminal justice system so as to maximize their results in civil court. Mr. Galluzzo is very selective about the cases that he pursues in this way, but is prepared to discuss the possibility with you.

If you or a loved one have been the victim of a crime, you should strongly consider contacting the Law Office of Matthew Galluzzo PLLC and speaking with Matthew Galluzzo, a former Manhattan prosecutor.

Normally, in federal court, when a defendant chooses to plead guilty, he or she enters into a plea agreement with the prosecutors to establish certain terms and parameters for the sentencing. Plea agreements look like contracts and are usually at least five single-spaced pages long. A defendant acknowledges in the document that he/she is pleading guilty knowingly and voluntarily, and that he/she cannot take back the guilty plea once it has been entered before the court at a plea hearing. The agreements usually set forth the minimum and maximum possible penalties for the charged offenses, so that the defendant can acknowledge that he/she understands them. Also, a defendant agrees to plead guilty to certain charges in the indictment, and admits to certain conduct (for example, an amount of money fraudulently stolen, or a quantity of narcotics trafficked) that impacts the sentencing. Then, the parties to the plea agreement (the prosecutor and the defendant) agree to certain other factors (such as the defendant’s role in the offense, for example) that may establish where on the sentencing chart (for the Federal Sentencing Guidelines) that defendant’s sentence is likely to be. But, the agreements explicitly state that the ultimate decision as to the defendant’s sentence will be up to the sentencing judge to determine, based upon these established facts and parameters within the plea agreement, as well as the judge’s own considerations of the defendant and the defendant’s crime.

Here, in Ms. Loughlin’s case, the sentence has already been established by the agreement. This fact makes the agreement quite unusual for federal court, though hardly unprecedented. Pursuant to Federal Rule of Criminal Procedure 11(c)(1)(C), Ms. Loughlin has agreed to plead guilty to conspiracy to commit mail and wire fraud, and in exchange, she will receive a sentence of two months in prison, a fine of $150,000.00, 24 months of supervised release with 100 hours of community service, and a special assessment of $100. The prosecution also will agree to dismiss the remaining charges against Ms. Loughlin and not pursue any further charges in connection with what it knows about this affair. This all depends, however, upon the court accepting the agreement and Ms. Loughlin’s guilty plea.

Basically, pursuant to Rule 11(c)(1)(C), the court has to decide whether to accept this agreement with these terms before it will officially count. Tomorrow, during the sentencing hearing, the judge will ask Ms. Loughlin (with her attorney) whether she understands the agreement and its terms, and whether she is pleading guilty knowingly and voluntarily. The judge will then likely ask the prosecutor why the government feels this disposition is appropriate. Then, in the ensuing months, the prosecutor and the defense attorneys will submit written memoranda to the judge about why this disposition is appropriate. The defense memoranda will likely include a statement from Ms. Loughlin and supporting “character letters” from friends and family and people in the community. Ms. Loughlin will also undergo a biographical interview by a federal probation officer (usually a social worker) to be used to prepare a pre-sentence report about Ms. Loughlin for the judge. At the sentencing hearing, the court will indicate once and for all whether it considers the disposition to be appropriate. Assuming the judge does in fact find the disposition appropriate, the judge will sentence Ms. Loughlin as set forth in the agreement. In response, the prosecutor will move to dismiss the remaining criminal charges against Ms. Loughlin. If the court rejects Ms. Loughlin’s plea agreement, then the matter will start over as if Ms. Loughlin had not pleaded guilty.

These Rule 11(c)(1)(C) pleas can be advantageous in that they tend to provide more certainty for the parties. Normally, defendants plead guilty and find out their sentence at the sentencing date; sometimes the possible sentencing ranges can vary enormously. As a former state prosecutor accustomed to negotiating plea deals with fixed and expected penalties, it has always been somewhat confusing to me about how reluctant federal prosecutors are when it comes to these types of agreements. Federal prosecutors in New York and elsewhere routinely say “our office just doesn’t do that,” when asked about possible Rule 11(c)(1)(C) pleas. For whatever reason, most federal prosecutors just feel far more comfortable having courts decide upon appropriate sentences, rather than negotiate them themselves. Regardless, it seems highly unlikely here that Ms. Loughlin’s plea agreement will be rejected, or that she will not receive the expected sentence. The terms are not out of line with what other defendants in the “Varsity Blues” case have already received, and she might have received a sentence like this one with a “typical” open-ended plea agreement, anyway. Indeed, it might have been possible for her to avoid a prison sentence altogether in this case, but in light of the sentences handed out to other defendants by this court, it was probably in Ms. Loughlin’s best interests to eliminate the downside risk of receiving a more significant prison sentence by negotiating for this Rule 11(c)(1)(C) plea.

If you or a loved one have been charged with federal mail or wire fraud, you should strongly consider contacting an experienced federal criminal defense attorney. Matthew Galluzzo, a former Manhattan prosecutor, regularly represents federal criminal defendants in federal courts across the country, and is a member of the Criminal Justice Act panels for both the Southern and Eastern District Courts of New York.

According to a Department of Justice press release, David Butziger and David Staveley sought over half a million in forgivable loans for various businesses that either were no longer operating, for which they had no employees, or in which they held no ownership stake. Though they have not yet been indicted, they have been charged by way of criminal complaint Conspiracy to Make a False Statement to Influence the SBA (18 U.S.C. § 371), Conspiracy to Commit Bank Fraud (18 U.S.C. § 1349), and Bank Fraud (18 U.S.C. § 1344[2]). Though it is difficult to estimate the prison penalties they may be facing, a fraud involving $500,000 might put them at an offense level of 18 for purposes of the Federal Sentencing Guidelines. As such, they might be facing a Guideline sentence of 18-24 months in prison following a guilty plea. However, there is no statutory minimum sentence, so they could receive in theory receive probation.

This arrest and prosecution should serve as a serious warning to any small business owners considering submitting false or exaggerated applications. However, it will be interesting to see whether the federal authorities will start making arrests or threatening to prosecute individuals whose applications might contain sloppy mistakes rather than outright falsehoods. Without the assistance of a competent accountant, or with a fluctuating and/or seasonal payroll, one could easily envision a small business owner submitting an “honest” application that raises eyebrows from SBA administrators.

If you have been contacted by law enforcement or federal investigators about a federal stimulus application you submitted for your business, you should strongly consider contacting Matthew Galluzzo, an experienced federal criminal defense attorney and former Manhattan prosecutor. He will take the time to understand your business so he can respond intelligently to investigators, and he is respected by federal investigators and judges throughout New York. Most importantly, he will defend you like you’re family.

Proffers can be done for many reasons: to initiate cooperation agreements, to attempt to persuade a prosecutor of one’s innocence, to offer information for an investigation, or to seek leniency at sentencing. Regardless of the reason, however, they should never be undertaken lightly.

First and foremost, a person proffering to federal law enforcement cannot lie. Obviously, if law enforcement discovers that the person has lied during a proffer, then that person’s credibility will be destroyed. Thus, any hope for a cooperation agreement or mitigation at sentencing will be eliminated. There are two other equally important reasons, however. First, a lie during a proffer can be prosecuted potentially as a violation of 18 U.S.C. § 1001, which makes it a federal crime to lie to a law enforcement officer. This is typically why prosecutors bring law enforcement agents (FBI, Homeland Security, etc.) to the proffers. Similarly, a lie during a proffer session can result in an enhanced sentence for any related convictions, under the theory that the lie “obstructed justice.” Finally, a lie during a proffer session could invalidate the proffer agreement, which otherwise protects a person from having those statements during the proffer session used against them.

Prior to doing a federal proffer, a person typically signs a “proffer agreement” like the one attached here. As you can see, it makes the statements “off the record” for the person talking to law enforcement. Basically, the prosecutor promises not to use any of the person’s statements against them on their direct case in the grand jury or at trial. There are some important exceptions, however. First, if the person lies during the proffer, then the entire promise is invalidated. Second, the prosecutor can use the information obtained during the proffer to find other evidence. Third, the prosecutor can cross-examine the person later with their statements should the person change their story at trial, for example.

Before doing a proffer, the attorney representing the person should understand everything and anything that the person might say. Thus, a practice proffer is a very good idea prior to walking into the real one. Moreover, the prosecutor should carefully consider the bigger picture from the prosecutor’s perspective: what does the prosecutor likely know, and what is the prosecutor trying to discover or accomplish with the investigation? Understanding how prosecutors think is critically important for defense attorneys representing people in federal proffers.

If you or a loved one have been asked to speak with law enforcement about a crime or investigation, it is critical that you retain experienced counsel to assist you. Matthew Galluzzo is a former Manhattan prosecutor who has represented numerous people who have proffered with law enforcement, and has been able to use those proffers to his clients’ advantage on many occasions.

The crime of wire fraud occurs when someone voluntarily and intentionally uses an interstate communications device (such as a telephone) as a part of any scheme to defraud another of property, or anything else of value.

The main criminal statutes that apply to wire fraud are 18 U.S.C. §§ 1343 and 1349. Those statues refer to fraud by wire, radio, or television.

Section 1343 defines as guilty of wire fraud: “Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster ….. or emergency or affects a financial institution.”

Therefore, to be criminally culpable under 18 U.S.C. § 1343, a defendant must have intentionally and voluntarily used a communication device that sends information over state lines as part of a scheme to defraud another out of money or other valuables. It can involve the use of a landline telephone, cell phone, computer, tablet, or another electronic device.

U.S.C. 1349 applies to attempts to commit wire fraud. Indeed, “[a]ny person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.”

A person could be charged with wire fraud if the following four elements of the crime are established: (i) the person voluntarily or intentionally participated in or devised a scheme to defraud someone of money or other valuables; (ii) the person did so with the intent to defraud the person. Moreover (iii) It was reasonably foreseeable that interstate wire communications would be used, (iv) in the scheme.

The wire fraud statute does not make an explicit reference to materiality. Yet materiality is an element of the offense, because at the time of the statutes’ enactment, the word “defraud” was understood to “require a misrepresentation or concealment of [a] material fact.” Thus, other than in an honest services context, a “scheme to defraud” for mail or wire fraud purposes must involve a material misrepresentation of some kind. material if it is capable of influencing the intended victim.”

Wire fraud can involve many different schemes to defraud a person using electronic communications such as emails, webpages, and social media. The federal wire fraud statute specifically mentions wire, radio, and television communications, but it also includes many fraud offenses involving computers and the internet. The information transmitted can be any writes, signs, signals, pictures or sounds used in the scheme to defraud. In order for wire fraud to take place, the person must voluntarily and knowingly make misrepresentations of facts with the intent to defraud someone of money or property.

Fraudsters use various methods to get personal credentials and passwords including:

• Malware: Malware (short for “malicious software”) is designed to gain access, damage or disrupt a computer without the knowledge of the owner.
• Phishing: Phishing is a scam typically carried out through unsolicited email and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information.
• Vishing and Smishing: Thieves contact bank or credit union customers via live or automated phone calls (known as vishing attacks) or via text messages sent to cell phones (smishing attacks) that may warn of a security breach so as to obtain account information, PIN numbers and other account information they need to gain access to the account.
• Accessing Email Accounts: Hackers gain illicit access to an email account or email correspondence through spam, computer virus, and phishing.

For example, creating a webpage to ask for donations for a charity or a personal tragedy that is fraudulent could be prosecuted as a wire fraud. Moreover, stealing bank and other financial information to transfer money out of a person’s bank and other financial accounts, to make charges on his credit cards, or to take out credit cards in his name, or sending a mass email to a person’s email contacts with a tragic story as to why the person needs money immediately are other examples of wire fraud.

Wire fraud is a federal crime. Since November 1, 1987, federal judges have used the Federal Sentencing Guidelines to determine the sentence of a guilty defendant. A judge will look at the “base offense level” and then adjust the sentence based on the specific characteristics of the crime. With all fraud offenses, the base offense level is six. However, other factors will then influence that number, including, for example, the dollar amount stolen, how much planning went into the crime and the victims that were targeted.

Thus, for example, a wire fraud scheme that involved the theft of $300,000 through an intricate scheme to take advantage of the elderly will score higher than a wire fraud scheme that an individual planned in order to cheat their employer out of $1,000.

Other factors that will influence the final sentencing “score” include the defendant’s criminal history, whether or not the defendant tried to impede the investigation, and whether the defendant willingly helped investigators catch other people involved in the crime.

Usually, a person convicted of wire fraud faces significant potential penalties. A single act of wire fraud can result in fines and up to 20 years in prison. However, if the wire fraud scheme affects a financial institution or is connected to a presidentially declared disaster or emergency, the potential penalties are fines of up to $1,000,000 and up to 30 years in prison.

If you or a loved one have been accused of a federal wire fraud charge, you should strongly consider contacting the experienced federal criminal defense attorneys at the Law Office of Matthew Galluzzo.

The case began as many federal investigations do – with an undercover cooperator. Somehow, law enforcement investigators with the FBI identified William Rick Singer, the founder and chief executive officer of a nonprofit “college placement organization” called the Key, as a person engaged in unlawful activity. Though the precise details have not yet been shared, it is clear that they ultimately confronted him with the evidence of his illegal activity and made a deal with him: cooperate against the people who had enlisted his help in order to minimize his eventual punishment.

Mr. Singer then started recording his telephone calls and conversations with his criminal clients. Those calls apparently revealed a wide-ranging series of scams designed to get students into the schools of their choice. For example, Singer arranged for students who had struggled on the college entrance exams to get favorable disability diagnosis from an enlisted medical professional so as to get more time to take their tests. Then, he also arranged for the prospective students to take their college placement tests under the supervision of a paid-for proctor who either corrected their answers or permitted someone else to take their tests for them. Singer made arrangements to have students appear to be successful athletes when they were not, or flat-out bribed college athletic coaches into agreeing to tell the admissions office that they needed the students for their college sports teams. Some of the college coaches were allegedly paid hundreds of thousands of dollars to fraudulently accept students onto their teams (and therefore, into the school) without the relevant athletic credentials.

The evidence against some of these parents is going to be overwhelming and devastating. Of course the FBI is in possession of numerous recorded conversations about the details of the scheme, as well as emails and text messages, between the conspirators. There will inevitably be bank records and wire transfers showing the “donations” made by the parents to Singer in furtherance of the scheme. Some of the messages will be particularly damning; for example, the co-chairman of the international law firm Wilkie Farr & Gallagher, Gordon Caplan, is charged with paying Singer to help his daughter improve her college entrance exam scores, among other things. Caplan was allegedly recorded stating that he had no problem with the moral implications of his actions, but was only concerned about the consequences should he be caught. Statements like those make it virtually impossible to prevail at trial.

Some of these defendants may attempt to argue that they were unaware of what exactly they were paying Singer to do, or that there were other unrecorded conversations that paint their understandings in a different light. However, assuming that these defendants all eventually plead guilty, the next question is the sentencing exposure for the defendants. (Note: the ultimate charges are likely to be violations of 18 U.S.C. §§ 1341, 1343, and/or 1346).

The crimes with which these defendants are charged – mail/wire and honest services fraud – do not carry mandatory minimum prison sentences, meaning that they could receive non-incarceratory sentences. The sentencing judge will be required to consider the Federal Sentencing Guidelines in deciding how to sentence them, but the judge need not be bound by the recommendations set forth by those Guidelines. Most defendants can realistically expect to be sentenced within the Guidelines unless there are mitigating factors justifying a downward departure or reduction in the sentence.

The Sentencing Guidelines include a table with an X and Y axis that helps judges determine the appropriate sentence for a defendant. On the X axis lies the criminal history of the defendant. Given that the defendants appears to be wealthy professionals, it is probably safe to assume that they will all be classified as having the lowest criminal history score, Level I. On the Y-axis is the factor called the sentencing level, which corresponds to the seriousness of the crime.

To calculate the Guidelines sentencing level in a fraud case, one looks to 2B1.1 of the Federal Sentencing Guidelines. The base offense level would be 6 in this case, and then the level is increased according to the amount of money at issue in the fraud. Here, with the parents having allegedly donated from between $200,000 and $6.5 million in fraudulent payments, the sentencing levels would be increased anywhere from 12 to 18 levels, resulting in base offense levels between 18 and 24. Typically, when one pleads guilty in federal court, however, a judge will credit a defendant with a 2-3 level reduction in sentencing level for “acceptance of responsibility”. U.S.S.C. § 3E1.1 (the 3 level reductions are for base offense levels at level 16 or higher). Thus, the defendants in this case might be getting sentenced in the range of Level 10-15. At Level 10, the Guidelines recommend a sentence of 6-12 months in prison, and at Level 15, they recommend a sentence of between 18-24 months in prison. Admittedly, there may be other factors that could influence the base offense level calculation, but that is a reasonable estimate at this stage.

Some people may scoff and say that there is no way that wealthy and powerful parents will actually go to federal prison. They may have a point. Pursuant to Section 3551, a judge is supposed to impose a sentence “sufficient, but not greater than necessary,” to advance the interests of sentencing. A good argument can be made that these individuals do not need to be incarcerated to protect the public. These defendants have been publicly shamed, and some, like Gordon Caplan, are likely to suffer other significant punishments, like disbarment. However, a judge needs to promote a healthy respect for the law, and arguably these defendants brazenly and knowingly cheated the system. Prison sentences may be necessary to send the appropriate message to other people thinking about trying to unlawfully bribe their children into an elite university. Also, the recent prison sentences imposed in the somewhat-comparable college basketball federal scandal suggest that these parents could realistically be looking at short but meaningful prison sentences.

The author, Matthew Galluzzo, is a former Manhattan prosecutor and current criminal defense attorney with the law firm of Matthew Galluzzo PLLC. He regularly represents defendants in federal criminal cases throughout the United States. He most often practices in the Southern and Eastern Districts of New York, where he is a member of the Criminal Justice Act panels.

Nike’s Air Jordan line of sneakers are some of the most popular and expensive athletic shoes in circulation. Nike has released a different Air Jordan model almost every year since the shoe line was first introduced in 1984. Many of these models are known by their model number, like the Air Jordan XIII, the 13^th model, and some models are known by the year of introduction, like the Air Jordan 2009. Air Jordan sneakers can cost from approximately 100$ to the thousands of dollars, depending on color and design.

More than 42 containers carrying nearly 400 000 pairs of the trendy fake sneakers traveled from factories in China to Port Newark. These sneakers were produced to resemble Air Jordan sneakers in design and color but are “generic” (the “Generic Air Jordan”). They were imported into the U.S. without the inclusion of logos that are trademarks registered with the United States Patent and Trademark Office (“USPTO”). Once the Generic Air Jordan arrived in the U.S., they were altered within the New York area to add trademarked logos to the shoes in warehouses in Queens and Brooklyn. Once this alteration took place, the shoes were considered “counterfeit”. Finally, the Counterfeit Sneaker Ring processed with the distribution of the fake shoes within the U.S. at a significant profit.

The case is being prosecuted by the U.S. Attorney in Manhattan, Geoffrey Berman, because many of the shoes were shipped in and out of that jurisdiction. The U.S Attorney said in a statement that he commends “our law enforcement partners for helping to bring today’s charges, which send a clear message to would-be counterfeiters: ‘Just don’t do it’ ”.

Indeed, the 5 defendants face two charges according to the complaint:

• Counterfeit trafficking conspiracy (Title 18 United States Code Section 2320(a) (1))
• Trafficking in counterfeit goods (Title 18 United States Code Section 2320 and 2.)

Under Title 18 United States Code section 2320, it is unlawful to willfully and knowingly perform, attempt, or conspire to perform any of the following acts:

• traffic in goods or services and knowingly use a counterfeit mark on or in connection with such goods or services;
• traffic in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature, knowing that a counterfeit mark has been applied thereto, the use of which is likely to cause confusion, to cause mistake, or to deceive;
• traffic in goods or services knowing that such good or service is a counterfeit military good or service the use, malfunction, or failure of which is likely to cause serious bodily injury or death, the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or to national security; or
• traffic in a counterfeit drug.

In order for the five defendants to be found guilty of federal counterfeiting, the U.S. Attorney will have to prove all of the following beyond a reasonable doubt:

• They trafficked, attempted to traffic, or conspired to traffic in goods, services or pharmaceutical drugs;
• The goods, services or pharmaceutical drugs were counterfeit or unoriginal from those created by the trademark owner of these goods, services, or drugs;
• They knew the goods, services or pharmaceutical drugs were unoriginal or counterfeit in nature;
• And they intended for the goods, services, or pharmaceutical drugs to be fraudulently passed as original, and for them to be distributed as such.

The term “counterfeit mark” means a spurious mark:

• that is used in connection with trafficking in any goods, services, labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature;
• that is identical with, or substantially indistinguishable from, a mark registered on the principal register in the United StatesPatent and Trademark Office and in use, whether or not the defendant knew such mark was so registered;
• that is applied to or used in connection with the goods or services for which the mark is registered with the United StatesPatent and Trademark Office, or is applied to or consists of a label, patch, sticker, wrapper, badge, emblem, medallion, charm, box, container, can, case, hangtag, documentation, or packaging of any type or nature that is designed, marketed, or otherwise intended to be used on or in connection with the goods or services for which the mark is registered in the United States Patent and Trademark Office; and
• the use of which is likely to cause confusion, to cause mistake, or to deceive.

Under 18 USC 2320, counterfeiting is a federal offense. These defendants face a sentence of up to 10 years in federal prison and fines of up to $2 million if they are convicted of this crime. If it is their second or subsequent offense for federal counterfeiting, they face a fine of up $5 million and up to 20 years in prison.

The author of this article is a federal criminal defense attorney and former prosecutor. If you or a loved one have been arrested for a federal offense, you should strongly consider contacting him to discuss your case and his possible representation.