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.

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.

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.

Narcotics (21 U.S.C. 846 and 21 U.S.C. 841)

Wire fraud (18 U.S.C. 1343)

Bank fraud (18 U.S.C. 1344)

The Bribery/Travel Act (18 U.S.C. 1952)

Homicide (18 U.S.C. 1111, 18 U.S.C. 1117, 18 U.S.C. 1118)

RICO/organized crime/conspiracy (18 U.S.C. 1961)

Firearms (18 U.S.C. 922, 18 U.S.C. 924)

Trademark Counterfeiting (18 U.S.C. 2320)

Airplane Offenses (including assault and sexual assault) (e.g. 18 U.S.C. 113, 18 U.S.C. 2241-2244, 49 U.S.C. 46506)

Foreign Corrupt Practices Act (15 U.S.C. 78dd-1)

Tax Fraud (26 U.S.C. 7201)

Medicare/Medicaid/Health Care Fraud (18 U.S.C. 1347)

Human Trafficking (18 U.S.C. 1590, 18 U.S.C. 1591, 18 U.S.C. 1952)

Visa Fraud (18 U.S.C. 1546)

Misdemeanors – federal parks and monuments

Money Laundering (18 U.S.C. 1956)

Child exploitation (e.g. 18 U.S.C. 2251, 18 U.S.C. 2252, 18 U.S.C. 2252(a))

Give Mr. Galluzzo a call for a free case evaluation and a quote for his services. Serving Bridgeport, New Haven, and Hartford.

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.