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.

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.

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.