Articles Posted in Wire fraud

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Recently, two Iranian citizens were arrested and indicted for allegedly smuggling items from America to Iran in violation of the International Emergency Economic Powers Act, 50 USC 1701 (see press release here). That law grants the President of the United States the authority to deal with unusual threats to national security and permits the President to issue Executive Orders with respect to national security issues. Between 1995 and 1997, the President issued several orders making it illegal to export certain items to Iran without a license. See 31 CFR 560. It is thus a crime to violate these executive orders. 50 USC 1705.

The aforementioned Iranian citizens, Abolfazl Bazzazi and Mohammad Resa Bazzazi, allegedly arranged for shipments of items and technology to Iran from the United States. These items included technology which could purportedly serve military purposes. It is not clear from the indictment whether the defendants allegedly knew that their shipments were in contravention of U.S. law, though they are also charged with attempted smuggling in violation of 18 USC Section 554(a). This latter charge generally requires a showing that the items being smuggled were deliberately concealed or sent fraudulently.

The defendants currently face a possible maximum sentence of 20 years in prison. The prosecution’s case may rely on suspicious informant testimony, or the cooperation of co-conspirators. The matter is nonviolent and may be resolved without significant jail time for the defendants, but the recent increases in tensions between the U.S. and Iran sparked by violence in the Middle East may prove to have serious negative consequences for these defendants.

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On Tuesday, federal prosecutors announced criminal charges against 70 current and former employees of the New York City Housing Authority for allegedly accepting bribes in exchange for work contracts. It purports to be the largest federal bribery prosecution in American history. The Southern District of New York’s press release is available here, and the complaints for the individual defendants are available here.

The gist of the crimes is that from time to time, construction or maintenance needs to be performed on buildings operated by the New York City Housing Authority (an agency which receives a tremendous amount of federal financing, notably). For large work projects, the NYCHA has to solicit multiple bids from various service providers. However, on smaller projects, there is a “no-bid” system by which an employee can simply choose the contractor that will do the work. This “no-bid” system appears to have given rise to a system of bribery, whereby contractors would simply pay the right NYCHA employee to win the work contract. It is remarkable that so many employees have been accused of this illegal conduct, and that the arrests all happened simultaneously. It is an impressively coordinated operation by law enforcement, to say the least.

Generally, the accused people are facing Conspiracy to Solicit and Receive a Bribe by Agent of Organization Receiving Federal Funds, which carries a five year maximum jail penalty. This applies to those NYCHA employees who agreed or discussed bribes in exchange for NYCHA funds. Some defendants are further accused of Soliciting and Receiving a Bribe by Agent of Organization Receiving Federal Funds, which carries a ten-year maximum jail penalty. Basically, the maximum penalty increases by five years for actually accepting the bribe. 18 USC 666(a)(1)(B). Some defendants are charged with Extortion Under Color of Official Right, a violation of the Hobbs Act under 18 USC 1951. That carries a maximum penalty of 20 years in prison.

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Recently, three men were indicted and arrested in New York City for allegedly working together to run an unlicensed money transmitting business servicing customers in the Middle East (specifically in Yemen, Turkey, Iraq, the UAE, and Jordan, among other places). Though many places in the Middle East have traditionally relied upon informal money transmitting systems known as hawala, this particular arrangement resulted in serious charges for Mohanad Al-Zubaidi, Shaker Saleh Mohammed Hauter, and Abdulkader Noori Hamza. They purportedly transmitted 65 million dollars for their clients over the years, typically keeping a few percent of each transaction for themselves as payment. Though hawala proponents might argue that this system is necessary in light of the shortcomings of the banking systems in the Middle East, it unfortunately also presents problems for American efforts to prevent the laundering of illegal proceeds from the United States, as there is no monitoring of these transactions. Money transmittal businesses can be operated legally with the proper licenses and registration, but obviously some operators prefer not to be openly registered or licensed for a variety of reasons. Each of these defendants now faces up to five years in prison for running this unregulated money transmittal business, in violation of 18 USC 1960. Notably, Mr. Al-Zubaidi also faces up to thirty years in prison for alleged bank fraud, for purportedly creating bank accounts in the names of fictitious “shell” corporations, in violation of 18 USC 1344. The government will also likely seek to impose huge financial penalties on these defendants, and to disgorge any and all profits they may have earned; indeed, they make seek to hold the transmitters responsible for the amount of money they illegal transmitted. A copy of the indictment is available here.

There are a variety of possible defenses in this case, most of which will depend upon the particular role that each individual is alleged to have played, and what if any knowledge they had of the overall scheme.

Matthew Galluzzo is an experienced federal criminal defense attorney. He has successfully represented individuals accused of operating unlicensed money transmittal businesses with connections to the Middle East. For many years, he has been one of the go-to criminal defense attorneys for the Consulate General of the Kingdom of Saudi Arabia, and has represented over sixty of their citizens in criminal cases across the United States. He practices primarily in federal court.

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French developer Aurélien Michel is charged with Fraud for alleged $ 2.9 NFT’s rug pull

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. 

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Recently, former prosecutor Matthew Galluzzo appeared on PBS Channel 13 to explain several legal issues relating both the recent verdict in the Trump civil sex abuse trial and the new indictment of Congressman George Santos.

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.

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Mr. Galluzzo recently obtained an excellent result for a client in Brooklyn federal court charged with Conspiracy to Commit Access Device Fraud, in violation of 18 U.S.C. Section 1029(b)(2) and (c)(1)(A)(ii). The client pleaded guilty pursuant to a plea agreement with a sentencing range under the Guidelines of 12-18 months in prison. Following the client’s guilty plea, Mr. Galluzzo presented to the federal judge the evidence of the defendant’s background, his immigration to the United States, his family, and his employment history. With a persuasive sentencing memorandum – including supporting documents and letters from the client’s family – Mr. Galluzzo successfully persuaded the federal judge to sentence the client to just over 7 months in prison, instead of the 12-18 months recommended by the Federal Sentencing Guidelines.

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.

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Recently, Matthew Galluzzo obtained an excellent result for a client in federal court. One of four co-defendants in a conspiracy to ship stolen cars to Africa, our client was charged with violating 18 USC Section 2312. As alleged in the indictment, the group shipped millions of dollars of stolen and fraudulent-obtained cars to Africa (primarily Ghana). Galluzzo’s client pleaded guilty and faced a sentencing range of 10-16 months under the Federal Sentencing Guidelines (offense level 12 and Criminal History Category I).

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.

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This week, American law enforcement officers arrested Aurelien Michel, a French national living in the UAE, as he passed through JFK International Airport in New York City. He has since been arraigned before a federal magistrate judge in the Eastern District of New York (Brooklyn) on federal wire fraud charges, pursuant to 18 USC Section 1343. A complaint unsealed in federal court alleges that Mr. Michel advertised and marketed a series of Mutant Ape NFTs (non-fungible tokens) and collected nearly three million dollars in sales of various cryptocurrencies from numerous buyers and investors. However, it is further alleged that Mr. Michel never delivered the NFTs to his investors, but instead transferred this money to various accounts controlled by him. The complaint alleges that he later apologized on the platform Discord for the “rug pull” (i.e. a slang term for failing to deliver after receiving funds) because the community had become too “toxic.”

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:

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On December 14, federal prosecutors in Manhattan announced two new indictments against several individuals accused of conspiring to commit wire fraud and money laundering through alleged phony cryptocurrency schemes called Forcount and IcomTech. These cases present interesting challenges for both prosecutors and defense attorneys, however, because of the high volatility of the cryptocurrency market and the oftentimes lax regulation of the industry.

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.

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Recently Manhattan federal prosecutors announced the arrests of 17 individuals for allegedly defrauding the federal government’s Small Business Administration (SBA) COVID-relief program called the Paycheck Protection Program. In a nutshell, these individuals are accused of wire fraud for purportedly applying for small business relief funds on behalf of small businesses (or sole proprietorships) that either did not exist or did not generate the revenues described in their loan applications.

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.

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