WASHINGTON – Massachusetts-based DUSA Pharmaceuticals Inc. (DUSA), a subsidiary of Sun Pharmaceutical Industries Inc. (Sun Pharma), has agreed to pay the United States $20.75 million to resolve allegations that DUSA caused physicians to submit false claims to Medicare and the Federal Employee Health Benefit Program (FEHBP) by knowingly promoting an administration process for the drug Levulan Kerastick that contradicted the product instructions approved by the U.S. Food and Drug Administration (FDA) and was unsupported by sufficient clinical evidence.
“The department is committed to protecting taxpayer-supported health care programs from fraud and abuse,” said Acting Assistant Attorney General Ethan P. Davis for the Justice Department’s Civil Division. “We will hold drug manufacturers accountable when they knowingly promote ineffective uses of their products that undermine patient care or waste program funds.”
“While this scheme to provide false instructions on the use of its product may have resulted in more sales and bigger profits, it also meant customers endured the frustration of being repeatedly subjected to less effective treatments to try to get their skin lesions to clear,” said U.S. Attorney Brian T. Moran for the Western District of Washington. “This investigation seeks to restore money to taxpayers and discourage those who put profits over effective treatment.”
“Drug makers that push the inappropriate use of their products undermine the health of patients and the financial integrity of federal health care programs, said Special Agent in Charge Steven J. Ryan of the U.S. Department of Health and Human Services Office of Inspector General. “Our oversight agency, working closely with our law enforcement partners, will continue to thoroughly investigate those who engage in such schemes.”
“The OPM OIG will always seek to hold accountable those prioritizing profits over patient health and safety,” said Norbert E. Vint, Deputy Inspector General Performing the Duties of the Inspector General, Office of Personnel Management (OPM) OIG. “This settlement demonstrates the commitment of our investigative staff and partners at the Department of Justice to combat health care fraud against the FEHBP.”
Levulan Kerastick is a prescription topical solution approved by the United States Food and Drug Administration (FDA) for the treatment of minimally to moderately thick actinic keratosis (AKs) of the face or scalp. At all relevant times, the “Dosage and Administration” section of the drug’s FDA-approved instructions described a two-stage process involving application of the topical solution to the target lesions and then, following an incubation period of 14 to 18 hours, illumination of the target lesion with blue light.
The United States alleged that, by January 2014, senior management at both DUSA and Sun Pharma knew that administration of Levulan Kerastick employing short incubation periods ranging from one to three hours resulted in AK clearance rates significantly lower than those achieved in clinical trials using 14 to 18-hour incubation. Nonetheless, between January 2014 and December 2016, DUSA allegedly encouraged physicians to use these demonstrably less effective short incubation periods by using, among other things, paid physician speaker programs, paid physician peer-to-peer discussions, promotion by DUSA’s sales force, and the dissemination of incomplete or misleading responses to questions from prescribing doctors. The department further alleged that DUSA failed to inform physicians that administering the drug using short incubation periods resulted in significantly lower AK clearance rates than achieved with the longer incubation period described in the FDA-approved instructions, and, in some instances, the company falsely stated that AK clearance rates were the same for the shorter and less effective incubation periods.
As part of the settlement, DUSA and its parent company, Sun Pharma, have agreed to enter into a Corporate Integrity Agreement with HHS-OIG. That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
The settlement with DUSA resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The civil lawsuit was filed by Aaron Chung, who formerly worked for DUSA as a sales representative. As part of today’s resolution, Chung will receive approximately $3.5 million.
The settlement with DUSA was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of Washington and the Commercial Litigation Branch (Fraud Section) of the Justice Department’s Civil Division, with assistance from HHS’ Office of Counsel to the Inspector General, FDA’s Office of Chief Counsel, and HHS’ Office of General Counsel.
The settlement was handled by Assistant United States Attorneys Kayla Stahman for U.S. Attorney’s Office, Western District of Washington and Breanna Peterson of DOJ’s Civil Division Commercial Litigation Branch.
The claims resolved by this settlement are allegations only, and there has been no determination of liability. The lawsuit is captioned United States of America ex rel. Chung v. DUSA Pharmaceuticals, Inc., No. 16 cv 1614-JLR.
Seattle – A 48-year-old citizen of Romania, who has no legal status in the U.S., was indicted this week for thirteen federal crimes for his attempt to smuggle six other Romanian nationals into the U.S., announced Acting U.S. Attorney Tessa M. Gorman. Ionel Niculae, aka Adrian Dumitrescu, was taken into custody near Lynden, Washington, at an accident scene where the car he was driving flipped over, badly injuring three passengers.
“We are responding to an increase in dangerous smuggling events on our northern border,” said Acting U.S. Attorney Tessa M. Gorman. “This case illustrates how these illegal smuggling efforts endanger not only those being smuggled into the U.S., but also others traveling near the border. The driver who was hit by the fleeing SUV was injured and is still recovering from the crash.”
“We have seen an uptick in the number of human smuggling events here in Washington State along our northern border with Canada,” said Special Agent in Charge (SAC) Robert Hammer, who oversees HSI operations in the Pacific Northwest. “HSI will continue to prioritize investigations into these organizations using dangerous tactics that jeopardize not only the lives of the individuals being smuggled, but also the lives of those in our communities who may be in danger by this reckless behavior.”
The indictment charges Niculae with one count of improper entry by an undocumented individual, three counts of bringing an undocumented individual into the United States at a place other than a designated Port of Entry and causing serious bodily injury, three counts of bringing an undocumented individual into the United States at a place other than a designated Port of Entry, and six counts of aiding and abetting the improper entry of an undocumented individual.
According to the criminal complaint, the Jeep Niculae was driving was seen crossing into Canada illegally three days before the September 17, 2023, accident. On the day of the crash, Canadian Border officers obtained images of the Jeep traveling near the Canada/U.S. Border and, moments later, a camera on the U.S. side picked up images of the Jeep crossing the border via some agricultural fields near Lynden.
Border Patrol agents set out to find the Jeep and were quickly alerted by the Sumas Police Department that the Jeep was involved in a crash with another SUV. The Jeep had flipped and three of the six passengers in the car had broken bones – two had broken pelvises and one had a broken leg. Niculae was not injured.
“Due to the exceptional vigilance and response of our Border Patrol Agents, Blaine Sector agents were able to assist with the accident scene and link the accident to a recent vehicle that illegally crossed the border smuggling several Romanian citizens. Events like this highlight the disregard smugglers have for human life,” said Chief Rosario Vasquez, Blaine Sector Chief Patrol Agent.
None of the people in the Jeep were legally present in the United States. Niculae possessed drivers licenses for both Washington and California and appears to have been residing in Southern California. He has been detained at the Federal Detention Center at SeaTac since being charged by criminal complaint on September 20, 2023.
Bringing an undocumented individual into the U.S. at a place other than a designated Port of Entry resulting in serious bodily injury is punishable by up to 20 years in prison. Bringing an undocumented individual into the U.S. at a place other than a designated Port of Entry is punishable by up to ten years in prison. Aiding and abetting improper entry by an undocumented individual is punishable by up to six months in prison.
The case is being investigated by Homeland Security Investigations (HSI) and U.S. Border Patrol with assistance from the Washington State Patrol and Sumas Police Department.
The case is being prosecuted by Assistant United States Attorney Sanaa Nagi.
(Seattle)–U.S. Attorney Brian T. Moran of the Western District of Washington today announced that three Western Washington non-profit organizations received nearly $1.5 million from the Department of Justice’s Office of Justice Programs (OJP) and its component, the Office for Victims of Crime (OVC), to provide safe, stable housing and appropriate services to victims of human trafficking.
“Human trafficking is a barbaric criminal enterprise that subjects its victims to unspeakable cruelty and deprives them of the most basic of human needs, none more essential than a safe place to live,” said Attorney General William P. Barr. “Throughout this Administration, the Department of Justice has fought aggressively to bring human traffickers to justice and to deliver critical aid to trafficking survivors. These new resources, announced today, expand on our efforts to offer those who have suffered the shelter and support they need to begin a new and better life.”
“The Western District of Washington is a leader in investigating and prosecuting human trafficking, due to key partnerships between federal, state, and local law enforcement,” said U.S. Attorney Brian Moran. “Our relationships with non-profit organizations who provide support to human trafficking victims is key to rescuing victims from this modern day slavery.”
The three grants, awarded to YouthCare, The YMCA of Greater Seattle, and the International Rescue Committee Inc., will provide 6 to 24 months of transitional or short-term housing assistance for trafficking victims, including rental, utilities, or related expenses, such as security deposits and relocation costs. The grant will also provide funding for support needed to help victims locate permanent housing, secure employment, as well as occupational training and counseling. YouthCare and the YMCA each are receiving $500,000. The International Rescue Committee Inc., is receiving $499,996. The three non-profits are among 73 organizations receiving more than $35 million in OVC grants to support housing services for human trafficking survivors.
“Human traffickers dangle the threat of homelessness over those they have entrapped, playing a ruthless game of psychological manipulation that victims are never in a position to win,” said OJP Principal Deputy Assistant Attorney General Kathrine T. Sullivan. “These grants will empower survivors on their path to independence and a life of self-sufficiency and hope.”
Human trafficking offenses are among the most difficult crimes to identify, and the scope of human trafficking victimization may be much greater than the limited data reflect. A new report issued by the National Institute of Justice, another component of the Office of Justice Programs, found that the number of human trafficking cases captured in police reports may represent only a fraction of all such cases. Expanding housing and other services to trafficking victims remains a top Justice Department priority.
The Office for Victims of Crime, for example, hosted listening sessions and roundtable discussions with stakeholders in the field in 2018 and launched the Human Trafficking Capacity Building Center. From July 2018 through June 2019, 118 OVC human trafficking grantees reported serving 8,375 total clients, including confirmed trafficking victims and individuals showing strong indicators of trafficking victimization.
For a complete list of individual award amounts and jurisdictions that will receive funding, visit: https://www.ojp.gov/sites/g/files/xyckuh241/files/media/document/htvictimsfactheet.pdf
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The Office of Justice Programs, directed by Principal Deputy Assistant Attorney General Katharine T. Sullivan, provides federal leadership, grants, training, technical assistance, and other resources to improve the nation’s capacity to prevent and reduce crime, assist victims, and enhance the rule of law by strengthening the criminal and juvenile justice systems. More information about OJP and its components can be found at www.ojp.gov.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
A Bellevue developer who fraudulently obtained over $235 million dollars during his real estate investment scheme, including over $140 million from immigrant investors, was sentenced today in U.S. District Court in Seattle to four years in prison, announced U.S. Attorney Annette L. Hayes. LOBSANG DARGEY, 43, entered guilty pleas in January 2017 to two federal felonies, admitting that he defrauded immigrant investors, federal regulators, and institutional investors. DARGEY promised to use the immigrant investors’ investment funds in compliance with a federal immigration program designed to stimulate growth and create jobs. Instead, he secretly diverted tens of millions of dollars of investor funds to unauthorized uses and used falsified financial records in an attempt to obtain additional funding to make up the shortfall. At the sentencing hearing, U. S. District Judge Robert S. Lasnik said DARGEY engaged in “reckless behavior . . . putting these people in jeopardy of never achieving their immigration dreams.”
“This defendant stole not just money but something that he knew from personal experience was much more valuable – the right to come to the United States and live the American dream,” said U. S. Attorney Annette L. Hayes. “Many of the investors that the defendant defrauded sold everything they had in China in reliance on his promises. They now live in limbo – with their money tied up in litigation and no idea of whether their dream to live in this country will come true.”
According to records filed in the case, between 2012 and 2015, DARGEY recruited overseas investors, primarily in China, to fund two development projects – one in Everett, Washington known as the “Path American Farmer’s Market” and one in Seattle’s Belltown neighborhood known as the “Potala Tower.” DARGEY promoted the projects under the federal “EB-5” program, which allows immigrant investors to qualify for permanent residency if they create American jobs by investing $500,000 in a qualifying American business project. DARGEY represented to the immigrant investors and to the U.S. Department of Homeland Security that he was investing all of investors’ funds in the Everett and Seattle projects in compliance with program requirements.
Contrary to his promises, DARGEY used tens of millions of investor dollars for uses not allowed under the federal program and not disclosed to investors. This included approximately $11.5 million of investor funds that DARGEY secretly used to pay unauthorized sales expenses, including sales commissions to Asian brokers. The money also went for lavish meals, expensive gifts, and cash withdrawals at casinos, and the purchase of a $1.4 million Bellevue home for a DARGEY business associate. DARGEY withdrew over $10 million in investor funds from the project as developer fees to fund his lavish lifestyle, including his purchase of a $2.5 million home in Bellevue.
In addition, DARGEY told investors and the United States government that DARGEY would contribute $32.5 million of his own money toward the projects. In fact, DARGEY admitted that he did not contribute any funds to the projects. DARGEY’s fraud resulted in tens of millions of dollars in funding shortfalls for the EB-5 approved projects. DARGEY attempted to fill these shortfalls by using a falsified bank statement to obtain a $25 million construction loan, and by using altered financial statements to obtain $60 million in additional funding from a private institutional investor.
Of the 281 foreign investors defrauded by DARGEY, none has received permanent resident status in the United States. A majority of the investors have had their applications denied because of DARGEY’s fraud, and are appealing the denials. Some wrote to the court explaining the damage DARGEY’s conduct caused:
Investor Y.Y. wrote: In order to provide our children with better lives and study environments, we sold our one and only real estate so as to accumulate money for the American EB-5 investment immigration [program]…. Lobsang’s illegal behavior has destroyed our immigration dream.
Investor Y.W. wrote: Many younger investors like me had to dramatically alter their life path. Some adults were forced to return to China without finishing their college degree.
Investor Z.C. wrote: “…because of defendant’s illegal behavior, it led us to live in fear and suffer huge mental damage because our lives can be cancelled at any moment…. My wife is so afraid that she dares not pick up the mail for fear of receiving a deportation notification.”
“Mr. Dargey’s selfish greed twice robbed his investors as he seized both their funds and jeopardized their dreams for a future life in the United States,” said Acting Director of U.S. Citizenship and Immigration Services James McCament. “We are grateful to our many law enforcement partners who helped to deliver justice in this case and uphold the integrity of the EB-5 Program.”
U.S. Citizenship and Immigration Services administers the EB-5 Program. Under this program, entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for permanent residence if they make the required investment in a commercial enterprise in the United States and plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.
DARGEY’s fraudulent conduct came to an end in August 2015, when the Securities and Exchange Commission filed a civil suit and won a court order freezing his assets. The FBI simultaneously executed search warrants at DARGEY’s offices in Bellevue and Everett.
As part of his plea agreement in this case, DARGEY agreed to provide restitution of more than $24 million to the investors.
The case was investigated by the FBI and is being prosecuted by Assistant United States Attorneys Justin Arnold and Seth Wilkinson. The Department of Justice appreciates the assistance of the Securities and Exchange Commission and U.S. Citizenship and Immigration Services in connection with this matter.
Seattle – The U.S. Attorney’s Office Western District of Washington has seen a recent increase in phone calls that “spoof,” or fake, the U.S. Attorney’s Office main phone number, so the call appears to originate from the office on the recipient’s caller ID. Fraudulent callers pose as a “Justice Department investigator.” The scammers attempt to use a fake name and nonexistent case number to trick the victim. The fraudsters have demanded money claiming it is “attorney fees” to resolve the case. In some instances, the scammers appear to have some personally identifiable information on the victim or have reviewed social media posts for information that makes their spiel sound credible.
Law enforcement defines this type of scam as government impersonation fraud, in which criminals impersonate government officials. The criminals often threaten to extort victims with physical or financial harm. Scammers are becoming more sophisticated and organized in their approach, are technologically savvy, and often target young persons and the elderly.
The U.S. Attorney’s Office staff will never ask for money or personally identifying information over the phone.
According to the Internet Crime Complaint Center (IC3), 12,334 people reported being victims of government impersonation scams in 2020, with losses totaling more than $106 million. In Washington State in 2020, 358 victims reported $2 million in losses. Since January 1, 2021, 106 victims have already reported $777,045 in losses in Washington State. To protect yourself from falling victim to this scam, be wary of answering phone calls from unrecognized numbers. Do not send money to anybody that you do not personally know and trust. Never give out your personal information, including banking information, Social Security number, or other personally identifiable information, over the phone or to individuals you do not know.
Anyone who feels they were the victim of this or any other online scam should report the incident immediately using the IC3 website at www.ic3.gov. More information about government impersonation schemes and other online fraud schemes can be found at https://www.fbi.gov/scams-and-safety/common-fraud-schemes.
Seattle – The U.S. Department of Justice and Kaiser Foundation Health Plan of Washington (KFHPW) today resolved allegations from several complainants that it repeatedly failed to provide interpreters to patients who are deaf or deaf-blind, in violation of the Americans with Disabilities Act (ADA), announced U.S. Attorney Nicholas W. Brown. The settlement establishes a $1 million fund to pay claims to those patients whose rights were violated. KFHPW also agrees to update and improve procedures for evaluating the need for interpreters, contracting with interpreters, and training staff surrounding those procedures.
“When health care facilities fail to provide interpreters to patients and their families, including those who are who are deaf or hard of hearing, it creates a major barrier to safe and appropriate medical care.” said U.S. Attorney Brown. “Our investigation uncovered evidence of systemic failures to provide interpreters when necessary, leading patients to delayed care and problems with communication. This settlement is a necessary step to ensuring that people receiving care through this system are able to communicate timely and effectively about their medical needs.”
An investigation by the U.S. Attorney’s Office revealed that in approximately 400 instances over a 4-year period, an interpreter was requested by KFPW staff, but none was provided, or other problems related to effective communication were raised by patients or their companions.
Under the terms of the settlement, KFHPW will establish a third-party claims administrator to allocate the settlement funds based on the harm suffered by each complainant. The administrator will work with KFHPW records to locate claimants. The U.S. Attorney’s Office will review the allocations after the claims have been submitted and reviewed.
For a two-year period, the U.S. Attorney’s Office will review new procedures and training of KFHPW staff to ensure patients who are deaf or deaf-blind receive appropriate interpreter services at the 41 medical facilities it operates in Northwest Washington, Central Washington, Eastern Washington, the Coastal and Olympic region, and Puget Sound.
Under the settlement some of the changes include: consistent screening of patients for the need of interpreter services; contracting with two interpreter services companies per facility to better provide services; contracting with video interpreter services for those occasions when in-person interpretation is not possible. The policies surrounding interpreter services will be posted on the KFHPW website as well as in KFHPW facilities. KFHPW will keep logs of interpreter requests and how they were fulfilled.
In addition to the $1 million fund for claimants, KFHPW will pay $85,000 to the United States to resolve the allegations.
The investigation in this case was conducted by Assistant United States Attorney Christina Fogg, the Civil Rights Program Coordinator for the U.S. Attorney’s Office for the Western District of Washington.
Seattle – A 42-year-old Las Vegas man, who previously lived in Bellevue, Washington, is facing a 25-count indictment charging him with wire fraud and securities fraud, announced U.S. Attorney Nick Brown. Justin Costello allegedly victimized marijuana business owners, private investors and investors who purchased stock over-the-counter. The Securities and Exchange Commission also filed a civil suit against Costello today.
“Mr. Costello allegedly told many tall tales to convince victims to invest millions of dollars -- money he then used for his own benefit,” said U.S. Attorney Nick Brown. “In a complex scheme involving shell companies, penny stocks, and financial services for marijuana businesses, Mr. Costello used Twitter, press releases, securities filings, and claims of great wealth to paint a picture of fabulous financial success. In truth that picture was a mirage.”
According to the indictment, in 2017 Costello owned and operated a company called Pacific Banking Corp that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois, and Alaska. Between 2019 and 2021, Costello allegedly diverted money from three marijuana business to benefit himself and his companies. The diversions were contrary to the promises he had made to the marijuana businesses. The three marijuana businesses lost about $3.7 million.
As part of his scheme, Costello purchased two companies that were trading for pennies on the over-the-counter market and renamed them GRN Holding Corporation and Hempstract Inc. Costello also recruited investors in these companies, allegedly making numerous false statements about the size and success of his marijuana banking business. Costello told potential private investors several falsehoods – that he had an MBA from Harvard, that he had served in the military and had done two tours in Iraq and had been wounded twice, that he was a billionaire, that he had 14 years of experience on Wall Street and that GRN Funds LLC, a private equity and hedge fund he owned, had over $1 billion in assets under management. None of that is true.
With these falsehoods, Costello convinced various investors across the country to invest in his companies. One deceived couple provided Costello with more than $2 million for shares in companies that he controlled. Additionally, they opened a $4 million TD Ameritrade account at Costello’s direction and provided him with the passwords that allowed him to trade in their account. Costello allegedly used the account to purchase the penny stock of companies he controlled driving up the share price to enrich himself.
Costello used the same lies with other investors and allegedly used investor funds for his own expenses. For example, Costello used at least $42,000 of investor money for personal expenses include costs associated with his wedding. In all, some 29 investors invested directly with Costello and lost $6 million because they relied on Costello’s false representations.
In 2019, Costello’s entity GRN Funds, LLC purchased the outstanding shares of Discovery Gold Corp., changing the name to GRN Holding Corp. In SEC filings about the purchase Costello lied repeatedly about his background, education, and the financial success of the LLC. In various filings with the SEC, and in press releases, Costello lied about GRN Holding Corp’s possible acquisition of other companies and revenue – causing the share price to increase. From December 2019 and into January and February 2020, Costello directed others to issue ten press releases about acquiring other companies. None of the acquisitions occurred even though Costello controlled these other companies. Between July 2019 and May 2021, 7,500 investors lost about $25 million after purchasing and selling GRN Holding Corp stock.
Finally, between October 2019, and January 2021, Costello hired an unindicted coconspirator to use Twitter in a pump and dump stock scheme. Costello would acquire the penny stock of a company and then instruct his prolific Twitter user to tweet falsehoods about the company that would drive up the stock price. The coconspirator would tweet about the stock as often as 90 times a day. In one instance Costello didn’t just use Twitter, he also instructed some of his “investors” to purchase stock in the company, driving the share price from a nickel to $2 per share. After driving the share price up, Costello sold the shares for a profit of more than $355,000. The prolific Twitter user was given a share of Costello’s profits from the pump and dump scheme. In all Costello made $576,466 in the pump and dump scheme.
The charges contained in the indictment are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
Wire fraud is punishable by up to 20 years in prison and fine of $250,000 or twice the gain the Costello or the loss to the victims of his offenses. Securities Fraud is punishable by up to 20 years in prison and a $5,000,000 fine.
The case was investigated by the FBI. If you have information, or believe you were a victim in this fraud, please email: CostelloFraud@fbi.gov.
The SEC conducted their own separate investigation.
The case is being prosecuted by Assistant United States Attorney Justin Arnold and Michael Dion.
SEATTLE – Binance Holdings Limited (Binance), the entity that operates the world’s largest cryptocurrency exchange, Binance.com, pleaded guilty today and has agreed to pay over $4 billion to resolve the Justice Department’s investigation into violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA).
Binance’s founder and chief executive officer (CEO), Changpeng Zhao, a Canadian national, also pleaded guilty to failing to maintain an effective anti-money laundering (AML) program, in violation of the BSA and has resigned as CEO of Binance.
Binance’s guilty plea is part of coordinated resolutions with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC).
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed – now it is paying one of the largest corporate penalties in U.S. history,” said Attorney General Merrick B. Garland. “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”
“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen. “Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”
“A corporate strategy that puts profits over compliance isn’t a path to riches; it’s a path to federal prosecution,” said Deputy Attorney General Lisa O. Monaco. “Today’s charges and guilty pleas – combined with a more than $4 billion financial penalty – sends an unmistakable message to crypto and defi companies: if you serve U.S. customers, you must obey U.S. law.”
“Changpeng Zhao made Binance, the company he founded and ran as CEO, into the largest cryptocurrency exchange in the world by targeting U.S. customers, but refused to comply with U.S. law,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “Binance’s and Zhao’s willful violations of anti-money laundering and sanctions laws threatened the U.S. financial system and our national security, and each of them has now pleaded guilty. Make no mistake: when you place profits over compliance with the law, you will answer for your crimes in the United States.”
“Binance’s crimes gave sanctioned customers unfettered access to American capital and financial services,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division (NSD). “This prosecution is a warning that companies that do not build sanctions compliance into their services face serious criminal penalties, as do the executives who lead them.”
“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” said Acting U.S. Attorney Tessa M. Gorman for the Western District of Washington. “Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine – transactions for which Binance profited with significant fees.”
“Binance’s activities undermined the foundation of safe and sound financial markets by intentionally avoiding basic, fundamental obligations that apply to exchanges, all the while collecting approximately $1.35 billion in trading fees from U.S. customers,” said Chairman Rostin Behnam of the Commodity Futures Trading Commission (CFTC). “American investors, small and large, have demonstrated eagerness to incorporate digital asset products into their portfolios. It is our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place, and that illegal and illicit conduct is swiftly addressed. When, as here, an entity goes even further, deliberately avoiding to employ meaningful access controls, intentionally avoiding knowing customers’ identities, and actively concealing the presence of U.S. customers on its platforms, there is no question that the CFTC will strike hard and aggressively.”
“When you put growth above compliance, you end up in hot water,” said Chief Jim Lee of the IRS Criminal Investigation (IRS-CI). “Our team of investigators uncovered that Binance disregarded anti-money laundering Know Your Customer laws, failed to register as a money transmitter, and willfully violated U.S. sanctions tied to the International Emergency Economic Powers Act. When you do so, your business becomes a playground for bad actors. Hundreds of millions of dollars in illicit proceeds from ransomware variants, darknet transactions, and various internet-related scams moved through Binance in an attempt to evade detection by law enforcement.”
According to court documents, Binance admitted to prioritizing growth and profits over compliance with U.S. law. Binance launched in 2017 and focused on attracting high-volume customers, including U.S.-based customers. Binance quickly became the largest cryptocurrency exchange in the world, with the greatest share of its customers coming from the United States. As a result of serving U.S. customers, Binance was required to register with FinCEN as a money services business and to implement an effective AML program that was reasonably designed to prevent Binance from being used to facilitate money laundering. Binance chose not to comply with U.S. law and failed to implement controls and procedures to prevent money laundering. Binance also did not implement controls that would have prevented U.S. customers from conducting transactions with customers in sanctioned jurisdictions, despite knowing that the system it used to match customers for transactions would necessarily cause transactions in violation of IEEPA.
Instead of complying with U.S. law, in 2019, Binance announced that it would block U.S. customers and launched a separate U.S. exchange, Binance.US. Despite this announcement, Binance took steps to maintain a substantial number of U.S. customers. In particular, Binance focused on retaining valuable “VIP” customers, which were responsible for a large portion of Binance’s trading volume and revenue. These VIP customers were critical to Binance’s business because they helped provide the necessary liquidity to facilitate trades of digital assets. For example, Binance executives, including Zhao, made a plan to contact VIP customers and help the VIP register a new account for an offshore entity and transfer holdings to that account. Binance employees also called U.S. VIPs to encourage them to provide information that suggested the customer was not located in the United States.
Binance also did not implement the core components of an effective AML program: Binance did not implement comprehensive know-your-customer (KYC) protocols or systematically monitor transactions, and Binance never filed a suspicious activity report (SAR) with FinCEN. For years, Binance allowed users to open accounts and trade without submitting any identifying information beyond an email address. Binance began requiring all users to provide KYC information in August 2021 but allowed users who had not provided KYC to continue trading on the exchange until May 2022. Between August 2017 and October 2022, U.S. users, including VIPs, conducted trillions of dollars in transactions on the platform, generating over $1.6 billion in profit for Binance.
As Binance’s internal communications showed, Binance’s compliance employees recognized that Binance did not have protocols to flag or report transactions for money laundering risks, which employees recognized would attract criminals to the exchange. As one compliance employee wrote, “we need a banner ‘is washing drug money too hard these days - come to binance we got cake for you.’” Due in part to Binance’s failure to implement an effective AML program, illicit actors used Binance’s exchange in various ways, including conducting transactions for mixing services that obfuscated the source and ownership of cryptocurrency; transferring illicit proceeds from ransomware variants; and moving proceeds of darknet market transactions, exchange hacks, and various internet-related scams.
Binance also knew that U.S. sanctions laws prohibited U.S. persons – including its U.S. customers – from trading with its customers subject to U.S. sanctions, including customers in comprehensively sanctioned jurisdictions, such as Iran. Binance knew that it had a significant number of users from comprehensively sanctioned jurisdictions and a substantial number of U.S. users and that its matching engine would necessarily cause U.S. users to transact with users in sanctioned jurisdictions in violation of U.S. law. Nonetheless, Binance did not implement controls that would prevent U.S. users from trading with users in Iran; and, because of this intentional failure, between January 2018 and May 2022, Binance willfully caused over $898 million in trades between U.S. users and users ordinarily resident in Iran.
As part of the plea agreement, Binance has agreed to forfeit $2,510,650,588 and to pay a criminal fine of $1,805,475,575 for a total financial penalty of $4,316,126,163. Binance has also agreed to retain an independent compliance monitor for three years and remediate and enhance their anti-money laundering and sanctions compliance programs. Binance separately has also reached agreements with the CFTC, FinCEN, and OFAC, and the Department will credit approximately $1.8 billion toward those resolutions.
The Department reached its resolution with Binance based on a number of factors, including the nature, seriousness, and pervasiveness of the offense, as a result of which Binance processed billions of dollars of cryptocurrency transactions for U.S. persons and caused U.S. customers to engage in transactions in violation of U.S. sanctions. Binance did not make a timely and voluntary disclosure of wrongdoing, but it received partial credit for its cooperation with the Department’s investigation, and it has taken steps to remediate its compliance program. Binance did not receive full credit for its cooperation because it delayed producing relevant evidence, including recorded meetings in which Binance executives discussed U.S. legal requirements. Accordingly, the total criminal penalty reflects a 20% reduction off the bottom of the applicable U.S. sentencing guidelines fine range.
In addition, according to court documents, Zhao, Binance’s founder, owner, and CEO, admitted that he understood that Binance served U.S. users and was thus required to register with FinCEN and implement an effective AML program. Zhao knew that U.S. users were essential to Binance’s growth and were a significant source of revenue and knew that an effective AML program would include KYC protocols that would mean that some customers would choose not to use Binance. Zhao told employees it was “better to ask for forgiveness than permission,” and prioritized Binance’s growth over compliance with U.S. law. Without an effective AML program, Binance caused transactions between U.S. users and users in jurisdictions subject to U.S. sanctions. These illegal transactions were a clear and foreseeable result of Zhao’s decision to prioritize Binance’s profit and growth over compliance with the BSA.
IRS-CI is investigating the case. The case is being prosecuted by Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley and Trial Attorney Elizabeth Carr of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), Trial Attorneys Beau Barnes and Alex Wharton of NSD’s Counterintelligence and Export Control Section (CES), and Assistant U.S. Attorney (AUSA) Mike Dion for the Western District of Washington. Trial Attorney Julia Jarrett, formerly of MLARS and currently an AUSA for the District of Oregon, and Trial Attorney Matthew Anzaldi, formerly of CES and currently with NSD’s National Security Cyber Section, made substantial contributions to this investigation and prosecution.
MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system. The Criminal Division has surged resources to the Bank Integrity Unit, which has imposed over $12 billion in penalties on financial institutions for sanctions violations over the last decade. NSD’s Counterintelligence and Export Control Section investigates and prosecutes individuals and corporations for violations of export control and sanctions laws, in addition to other national security crimes. NSD continues to expand its corporate enforcement efforts – including growing the ranks of prosecutors dedicated to this work and establishing a Chief Counsel and Deputy Chief Counsel for Corporate Enforcement.
Seattle – U.S. Attorney Nick Brown has named two veteran Assistant United States Attorneys to lead the Western District of Washington Environmental Justice Initiative. Criminal AUSA Seth Wilkinson and Civil AUSA Kayla Stahman will lead the district efforts on environmental prosecutions and civil enforcement.
“Both these attorneys have deep experience not only with investigating and prosecuting environmental crimes, but with the Affirmative Civil Enforcement the Justice Department uses to hold companies accountable for their conduct,” said U.S. Attorney Nick Brown. “As we look at issues surrounding Environmental Justice in disadvantaged communities, it will take all our tools, civil and criminal, to make positive change and protect our fragile Northwest environment.”
For example, AUSA Wilkinson previously prosecuted the CEOs of Total Reclaim, the Northwest’s largest electronics recycler, for secretly exporting mercury-laden electronics to Hong Kong, potentially exposing local workers and residents to toxic material. AUSA Wilkinson is currently prosecuting the owners of a Washington company for removing federally-required emissions control devices from diesel vehicles in violation of the Clean Air Act.
AUSA Stahman has handled a variety of affirmative civil litigation from protecting the elderly from financial scams to holding medical labs accountable for overbilling government programs and accepting kickbacks.
AUSAs Wilkinson and Stahman recently coordinated the civil and criminal prosecution related to steel that did not meet military requirements being sold to the Navy. Coordinating the civil settlement as well as the criminal case required the close coordination that will now be brought to the environmental justice work of the U.S. Attorney’s Office.
The district’s Environmental Justice Coordinators will lead efforts to enforce environmental laws, including the Clean Air Act, Clean Water Act, and hazardous waste laws. An intentional decision to violate these laws may be a federal crime. For example, intentionally discharging pollutants into a river without a permit, or bypassing a required pollution control device, is a criminal act that carries the possibility of incarceration and monetary fines.
The district’s Environmental Justice Coordinators also will lead efforts to remedy environmental violations and contaminations by pursuing actions under the civil rights laws, worker safety and consumer protection statutes, and the False Claims Act. For example, a federal contractor who violates a contractual provision mandating the proper disposal of hazardous waste may be subject to liability under the False Claims Act; a landlord who leases a home without disclosing known information about lead-based paint may violate federal lead disclosure rules.
Other examples of civil or criminal environmental misconduct include:
Air emissions of toxic pollutants resulting from inadequate or nonexistent pollution control
Illegal asbestos removals that expose and create health risks for workers and the public
Illegal discharges into waters or sewer systems that threaten public safety and cause damage to our water infrastructure
Illegal handling, transportation, and disposal of hazardous wastes and pesticides
Oil spills or other incidents that compromise the fishing rights or practices of indigenous or disadvantaged communities
False statements to the EPA or other regulatory agencies that threaten the integrity of environmental protection programs
More information about the environmental justice initiative is on our website.
If you suspect an environmental violation report it to the Environmental Protection Agency.
Seattle - The suspect in the theft of nearly 40 firearms from two different gun stores was sentenced today in U.S. District Court in Seattle to 58 months in prison for two counts of theft of firearms from a federal firearms licensee, announced U.S. Attorney Brian T. Moran. JOEY A. MAILLET, 39, pleaded guilty in February 2020. At the sentencing hearing, U.S. District Judge Richard A. Jones ordered MAILLET to serve three years of supervised release following the prison term.
In May 2019, MAILLET was identified as the suspect in the April 13, 2019, burglary of Fred’s Guns in Sequim, Clallam County, and in the May 3, 2019, burglary of All American Armory in Bow, Skagit County. According to records filed in the case, forensic evidence, including blood and fingerprints, as well as surveillance video, link MAILLET to the crimes. In Sequim, MAILLET used a backhoe to ram the doors of the store and then broke glass display cases to steal 26 firearms. MAILLET cut his arm on the glass case and left blood and fingerprints at that scene. At All American Armory in Bow, surveillance video showed MAILLET used a stolen pick-up truck to back into the doors of the store, shattering them. MAILLET then used a garbage can, stolen from the neighboring post office, to load up 13 rifles from the store and drove away with them in the stolen pick-up.
The pick-up truck was ultimately found abandoned in Birch Bay State Park in Whatcom County, Washington. Shattered glass was in the truck bed, as well as a stolen boat motor and battery. The truck was reported stolen from an agricultural operation not far from the Bow gun store, and the boat motor and battery were reported stolen by a resident of Ferndale, Washington.
On May 10, 2019, a Ferndale Police Officer encountered MAILLET and arrested him on an outstanding warrant for an Everett, Washington, burglary. After obtaining a court-authorized search warrant, investigators determined items in MAILLET’s backpack linked him to the thefts at the Bow gun store. Additionally, video from the boat motor and battery theft clearly showed MAILLET was the thief.
As for the status of the guns, prosecutors noted in their sentencing memo: “To date, seven of the handguns have been recovered by law enforcement agencies in Canada. The government does not have the full information about these recoveries, but is aware that one was recovered from a woman arrested for theft in Vancouver, BC, and another was recovered from two men arrested in Calgary, AB, with about 250 fentanyl pills and several grams of methamphetamine.” None of the rifles taken in the Bow gun store burglary have been recovered.
Under the terms of the plea agreement, MAILLET is to pay restitution to both stores for the damages to the buildings and the value of the guns. MAILLET is also responsible for damages to the businesses from which he stole the truck and backhoe used in the burglaries. He also will pay restitution to the owner of the stolen boat motor and battery.
At the sentencing hearing, the owners of Fred’s Guns told the judge the burglary had severely impacted their business and their family’s sense of security and wellbeing.
The case was investigated by the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF), with assistance from the Clallam County Sheriff’s Office, Sequim Police Department, Washington State Patrol, Skagit County Sheriff’s Office, Ferndale Police Department, and Washington State Parks Rangers.
The case is being prosecuted by Assistant United States Attorney Erin H. Becker.
Seattle – A 42-year-old Ferndale, Washington woman was sentenced today in U.S. District Court in Seattle to three months in prison and three months home confinement for trafficking in counterfeit goods, announced U.S. Attorney Nick Brown. Kara Suneva Allen, aka Kara Suneva Mitchell, pleaded guilty in October 2022. At the sentencing hearing, U.S. District Judge Richard A. Jones said, “We cannot tolerate a robin hood mentality in the community…even though you thought you were helping other mothers afford luxury goods, you were actually helping them participate in criminal activity.”
According to records filed in the case, Allen operated a business named ‘Keepin Up With Kara’ LLC. The business was located in a warehouse space in Ferndale, Washington. As of March 2022, a website associated with the business advertised 467 different items for sale that appeared to be products made by Adidas, Burberry, Cartier, Chanel, Christian Dior, Fendi, Gucci, Hermès, Louis Vuitton, MCM, Nike, Prada, Saint Laurent, Tiffany & Co., Tory Burch, and UGG. All the products were priced substantially below the suggested retail price for the genuine items.
An investigation by Homeland Security Investigations, U.S. Customs and Border Protection, and the Whatcom County Sheriff’s Office revealed that in August and September 2021, three shipments destined for Allen and her company were seized from the mail in Oakland, California. The shipments, which originated in China and Hong Kong, contained a wide variety of counterfeit goods, including handbags, wallets, and jewelry. Allen was notified of these seizures, but never petitioned to have the goods in the shipments released. An analysis of shipping records revealed that between September 2021 and March 2022, approximately 46 shipments from China and Hong Kong had been sent to the Ferndale warehouse where ‘Keepin Up With Kara’ operated.
To document Allen’s sale of counterfeit goods, an undercover agent made online purchases from the company’s website. In one instance, the agent made an undercover purchase of a Louis Vuitton-branded handbag for $110. The suggested retail price for that specific authentic Louis Vuitton handbag is $1,690.00. A Louis Vuitton representative confirmed the handbag purchased from the website was counterfeit.
On May 2, 2022, law enforcement executed search and seizure warrants at Allen’s place of business, home, and vehicle. Over 1,800 items of suspected counterfeit merchandise were seized, including purses, scarves, belts, luggage tags, sunglasses, tumblers, and other accessories.
In total, between June 2021 and May 2022, Allen acquired, attempted to acquire, or sold more than 1,900 counterfeit items with an estimated retail value of $185,842. Her profit over that time was approximately $43,430.
As noted in the government’s sentencing memorandum, before the search warrant was executed, Allen was told more than once that what she was doing was illegal. Allen “received several letters from CBP and Louis Vuitton’s counsel putting her on notice that her business activities were unlawful. It is an aggravating factor that, despite these numerous opportunities to cease … operations, Allen nonetheless persisted in obtaining and selling counterfeit merchandise, and even instructed an employee to describe that merchandise using coded language to avoid detection,” Special Assistant United States Attorney Jessica M. Ly wrote in her sentencing memorandum.
The case was investigated by Homeland Security Investigations with assistance from U.S. Customs and Border Protection, the Whatcom County Sheriff’s Office, U.S. Postal Inspection Service, the Ferndale Police Department, and the National Intellectual Property Rights Center.
The case was prosecuted by Special Assistant United States Attorney Jessica M. Ly.
SUNG HONG, 47, and HYUN JOO HONG, 42, of Clyde Hill, Washington were sentenced today in U.S. District Court in Seattle to lengthy prison terms for defrauding more than 55 clients out of $12.7 million, announced U.S. Attorney Annette L. Hayes. SUNG HONG, aka LAURENCE HONG or LAWRENCE HONG, was sentenced to 15 years in prison. His wife, HYUN JOO HONG, aka GRACE HONG, was sentenced to six years in prison. From 2010 until their arrest in June 2017, the couple held themselves out as experienced investment advisors with a track record of performance in order to solicit investor funds for their hedge fund, Pishon Holdings, and for management through separately managed accounts. In fact, SUNG HONG had just completed a 33 month sentence for committing investment fraud when he launched this new scheme in 2010. At the sentencing hearing U.S. District Judge Thomas S. Zilly said, “This scheme was a serious, complex fraud over seven years. You targeted religious victims. You used God as a way to gain trust…. You have emotionally and spiritually damaged these victims and most of them will never recover.”
“Using faith and fraud, this couple stole millions from people whose dreams of a better life have now been shattered,” said U.S. Attorney Annette L. Hayes. “Both repeatedly lied to their investors, all while spending their hard earned money on high-end shopping sprees, luxurious vacations, a yacht and an expensive rental home. Their victims now live paycheck to paycheck with college and retirement funds depleted and a very different financial future than they expected.”
According to records filed in the case, the HONGs recruited investors using religious organizations and shared religious beliefs. The couple claimed that LAURENCE HONG privately invested billions of dollars for wealthy Korean families and that GRACE HONG held a Series 65 securities license and previously worked for a large international investment firm. None of these statements were true. Likewise, the defendants did not disclose LAURENCE HONG’s past criminal conviction for investment fraud. The couple sent potential investors misleading and false investment prospectuses that contained an inaccurate record of their past investment performance and other plagiarized investment outlooks.
Throughout their fraudulent scheme, the HONGs used stolen investor funds for their own benefit, including payments for a 9,000 square foot rental home in Clyde Hill; a 45-foot yacht; multiple high-end vehicles, such as BMWs, a Maserati, an Aston Martin, and a Lamborghini; and numerous expensive vacations to locations such as the Bahamas and Beverly Hills.
One church in California invested $1 million with the HONGs and lost about $300,000 on a single trade. Still, despite the steep losses and a fee arrangement based on investment gains, the HONGs withdrew almost $150,000, ostensibly as advisor fees, from the church’s account. Another couple allowed the HONGs to manage their $180,000 in retirement funds only to lose $100,000 within less than a year. After meeting with the HONGs, that couple then invested their remaining retirement funds in the HONGs’ hedge fund, only for those funds to be redirected into GRACE HONG’s personal account. The HONGs used those funds to pay credit card bills and other personal expenses, including a $16,000 payment to a resort in the Bahamas for a HONG family vacation.
Speaking to LAWRENCE HONG, Judge Zilly noted his prior conviction for a similar fraud: “You clearly did not learn anything from the fact you were convicted and sentenced to prison…. You are one of those con men who will never be able to stop conning people.” Judge Zilly noted that GRACE HONG played “an intricate and important role in the entire scheme. She misrepresented her credentials… she took God’s name – she used that to entice investors to put money in their pockets.”
Judge Zilly ordered the pair to pay more than $12.7 million in restitution. The losses for certain investors represented their entire life or retirement savings.
The case was investigated by the FBI. The United States Attorney’s Office thanks the Commodity Futures Trading Commission (CFTC) for its assistance in the investigation.
The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Steven Masada.
Seattle – U.S. Attorney Brian T. Moran today announced that more than $65 million in Department of Justice grants is available to help communities combat human trafficking and serve adults and children who are victimized in trafficking operations.
“During this unprecedented time of anxiety and fear over COVID-19, it is critical that work continue to assist the vulnerable in our nation, especially the victims of human trafficking – modern day slavery,” said U.S. Attorney Brian Moran. “I want our partners in this work to be able to apply for this federal financial assistance, something that can happen even as we face the pressing need to combat the spread of the virus.”
“Our nation is facing difficult challenges, none more pressing than the scourge of human trafficking. Human traffickers pose a dire threat to public safety and countering this threat remains one of the Administration’s top domestic priorities,” said Katharine T. Sullivan, Principal Deputy Assistant Attorney General for the Office of Justice Programs. “The Department of Justice is front and center in the fight against this insidious crime. OJP is making historic amounts of grant funding available to ensure that our communities have access to innovative and diverse solutions.”
The funding is available through OJP, the federal government’s leading source of public safety funding and crime victim assistance in state, local and tribal jurisdictions. OJP’s programs support a wide array of activities and services, including programs that support human trafficking task forces and services for human trafficking survivors.
A number of funding opportunities are currently open, with several more opening in the near future.
Missing and Exploited Children Training and Technical Assistance Program
Tacoma - A 37-year-old former military spouse was sentenced today in U.S. District Court in Tacoma to 12 years in prison for attempted enticement of a minor, announced U.S. Attorney Nick Brown. Jonathan David Carpenter was arrested in September 2018. In April of 2022, Carpenter pleaded guilty, admitting not only the attempted enticement, but also that prosecutors would be able to prove that he sexually assaulted two children under the age of 12 who had been left in his care. At Sentencing U.S. District Judge Robert J. Bryan said, “There is no doubt what happened here requires a serious sentence.”
“Mr. Carpenter impersonated a child in text messages, to try to get 12-year-olds to send him nude photos for his sexual gratification,” said U.S. Attorney Nick Brown. “This sentence also recognizes the significant evidence that he sexually assaulted children, as young as 7, who were left in his care. The prison term, the supervised release, and the fact that he will be a registered sex offender is designed to protect the community for as long as possible.”
According to records filed in the case in 2018, two children disclosed that they had been sexually assaulted by Carpenter when they were left in his care. The investigation revealed that Carpenter had taken the cell phone of one of the children, and posing as that child, texted three of the child’s friends asking for nude photos. None of the children sent photos. One child reported Carpenter’s conduct to a counselor at school. That report triggered the investigation.
Speaking to the court at sentencing, Assistant United States Attorney Kristine Foerster said, “Here we have a pattern of victimizing children… Children that are particularly vulnerable…. He used extreme cruelty in these rapes… He irrevocably changed these children’s lives.”
In addition to the prison time, Carpenter will be on supervised release for 20 years following prison and will be required to register as a sex offender.
The case was investigated by the FBI and the Army (CID).
The case was prosecuted by Assistant United States Attorneys Kristine Foerster, Laura Harmon, and Grady Leupold.
Seattle – A 62-year-old Seattle woman was sentenced today in U.S. District Court in Seattle to 52 consecutive weekends (208 days) of confinement at FDC-SeaTac beginning on March 22, 2024 as a special condition of a 3-year term of supervision for her scheme to steal nearly half a million dollars in COVID 19 benefits, announced U.S. Attorney Tessa M. Gorman. Danni Walker was indicted on six counts of wire fraud in July 2022. She pleaded guilty to one count of wire fraud in August 2023. Prosecutors sought a 21-month custodial sentence, while the United States Probation Office recommended a custodial sentence of 12 months and 1 day. At today’s sentencing hearing U.S. District Judge Lauren King said, “this is a very serious offense” and noted the defendant’s use of pandemic relief funds for “lavish expenditures” that she “flaunted on social media.”
“This defendant took resources intended to help businesses struggling to stay afloat in the pandemic, and used them for a high-end car, luxury travel and shopping sprees and unsuccessful trading in cryptocurrency,” said U.S. Attorney Gorman. “Some businesses that needed loans did not get them, because Ms. Walker and others like her committed fraud on government programs.”
According to records filed in the case, between April 2020 and March 2021, Walker used false information to apply for and obtain $473,082 in Paycheck Protection Program (PPP) loans through the Small Business Administration. Walker submitted the applications on behalf of three different companies, only one of which was in operation, and none of which had the employees she claimed in her applications. Instead of using the PPP money for payroll and other legitimate business expenses, as intended by the program, Walker used it, among other things, to purchase a Jaguar coup; spent $34,000 on a luxury vacation to New York – including a Louis Vuitton shopping spree -; and invested unsuccessfully in cryptocurrency. She also gave large cash gifts to family and friends.
Walker also attempted to obtain two additional PPP loans through the Small Business Administration (SBA) totaling approximately $165,000. However, SBA caught the fraud and those loans were declined.
In asking for a 21-month prison sentence, prosecutors highlighted that Walker’s theft of tax dollars meant others did not get the financial support they needed. “This was a calculated and sophisticated offense…. Over a period of approximately 11 months, through six fraudulent PPP loan applications, Walker stole close to a half million dollars in pandemic relief funds. These funds could and should have been provided to businesses that actually qualified for them so those business could pay their employees and other approved business expenses– i.e., to stay afloat during a historic crisis,” Assistant United States Attorney Michelle Jensen wrote in her sentencing memo.
The case was investigated by the Small Business Administration Office of Inspector General (SBA-OIG) and the FBI.
The case was prosecuted by Assistant United States Attorneys Michelle Jensen and Sok Jiang.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form
Seattle – A 42-year-old Las Vegas man, who previously lived in Bellevue, Washington, pleaded guilty today in U.S. District Court in Seattle to securities fraud, announced U.S. Attorney Nick Brown. Justin Costello admits in his plea agreement that he victimized marijuana business owners, private investors and investors who purchased stock in the public market. Under the terms of the plea agreement, both the prosecutors and the defense will recommend a ten-year prison sentence when Costello is sentenced on April 21, 2023. U.S. District Judge Ricardo S. Martinez is not bound by the recommendation and can impose any sentence allowed by statute.
While Costello pleaded guilty to one count of securities fraud, the plea agreement specifies that the court can take into account all of Costello criminal conduct as relevant conduct for sentencing purposes. Costello not only defrauded investors, he stole from three marijuana business who trusted him for banking services.
As part of his securities fraud scheme, Costello purchased two companies that were trading for pennies on the over-the-counter market and renamed them GRN Holding Corporation and Hempstract Inc. Costello recruited investors in these companies, allegedly making numerous false statements. Costello told potential private investors that he had an MBA from Harvard, that his personal wealth was significantly larger than it was, and that GRN Funds LLC, a private equity and hedge fund he owned, had over $1 billion in assets under management. None of that is true.
With these falsehoods, Costello convinced various investors across the country to invest in his companies. Costello also had press releases and securities filings made with multiple false representations. Between July 1, 2019, and May 18, 2021, over 7,500 investors purchased and sold GRN Holding Corp. securities while Costello was making, and causing to be made, material misrepresentations concerning GRN Holding Corp. Collectively, these investors lost approximately $25 million. Similarly, with Hempstract Inc., he made false statements and defrauded investors. Between November 2018 and June 2021, 29 private investors lost about $6 million.
Between October 2019, and January 2021, Costello hired an unindicted coconspirator to use Twitter in a pump and dump stock scheme. Costello would acquire the penny stock of a company and then instruct his prolific Twitter user to tweet falsehoods about the company that would drive up the stock price. The coconspirator would tweet about the stock as often as 90 times a day. In one instance Costello didn’t just use Twitter, he also instructed some of his “investors” to purchase stock in the company, driving the share price from a nickel to $2 per share. After driving the share price up, Costello sold the shares for a profit of more than $355,000. The prolific Twitter user was given a share of Costello’s profits from the pump and dump scheme. In all Costello made $625,092 in the pump and dump scheme.
Along with the securities fraud, in 2017 Costello owned and operated a company called Pacific Banking Corp that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois, and Alaska. Costello sent false account statements to the marijuana businesses, so that they were lulled into thinking their money was secure. However, between 2019 and 2021, Costello diverted money from three marijuana business to benefit himself and his other companies. The three marijuana businesses lost about $3.7 million.
Costello was apprehended October 6, 2022, by law enforcement in Southern California. He had fake identification documents, cash and valuables indicating he hoped to flee to Mexico to avoid prosecution.
In the plea agreement Costello agrees to pay at least $35 million in restitution. He is also forfeiting assets that were seized at the time of his arrest including $60,000 in cash, gold bars, Mexican pesos, two designer watches, and gem encrusted jewelry.
The case was investigated by the FBI.
The case is being prosecuted by Assistant United States Attorney Justin Arnold and Michael Dion.
A former Seattle Police Officer was sentenced today to 6 years in prison, and his co-conspirator in an interstate marijuana distribution scheme was sentenced today to 14 years in prison, in U.S. District Court in Seattle, announced U.S. Attorney Annette L. Hayes. Former officer ALEX CHAPACKDEE, 44, of Seattle pleaded guilty in November 2017 to conspiracy to distribute marijuana and conspiracy to commit money laundering. Ring leader TUAN VAN LE, 43, of Maple Valley pleaded guilty in December 2017 to conspiracy to distribute marijuana and conspiracy to commit money laundering. At Chapackdee’s sentencing hearing U.S. District Judge Thomas S. Zilly said Chapackdee’s actions resulted in “[a] shame on his badge, his department, and on this community . . . and deserves to be punished accordingly.”
“These defendants – including a sworn law enforcement officer – flouted all applicable law when they shipped hundreds of pounds of marijuana to the East Coast in order to make the biggest possible buck,” said U.S. Attorney Annette L. Hayes. “Marijuana remains illegal under federal law and shipping unlicensed and untaxed marijuana across state lines certainly is illegal under state law as well. We will continue working with our federal, state, local and tribal partners to ensure that federal drug and money laundering laws are properly enforced.”
An investigation by the FBI’s Public Corruption Squad, the Drug Enforcement Administration (DEA), the Seattle Police Department, and Homeland Security Investigations revealed that on multiple occasions between January of 2015, and April 2017, LE and others made repeated trips between Seattle and Baltimore. While LE often flew one way or roundtrip, other members of the conspiracy made the trip by driving virtually non-stop. The vehicles carried hundreds of pounds of marijuana to the Baltimore area and the cash proceeds back to Seattle. CHAPACKDEE participated in multiple trips, driving his RV one or both ways in September, October and November, 2016, as well as in March and April 2017. CHAPACKDEE -- who was an SPD officer throughout the conspiracy -- admits that while he was furthering the conspiracy he was armed and carried his Seattle Police Department badge. CHAPACKDEE, LE and the other conspirators linked up at both ends of the trip, distributing the marijuana on the East Coast and then returning with the cash proceeds to Western Washington. Bank records indicate CHAPACKDEE repeatedly deposited his share of the cash in his personal account, in amounts just under $10,000, thereby avoiding reports to law enforcement. CHAPACKDEE used his status as a police officer to cover and protect the conspiracy.
The bulk of the proceeds were laundered into a marijuana growing/processing business, Tetra Holding Company (THC) that was ostensibly “legal” under Washington law and in the process of applying for a license from the State of Washington. On paper, the business was owned by two of the co-defendants, LE’s nephew, Hoang Le and his girlfriend, MEIFANG YU, 45. In reality, TUAN VAN LE was the primary investor, and was in control of the business. However, as a convicted felon, TUAN VAN LE is prohibited under Washington State law from being an owner/investor in any permitted marijuana business. TUAN VAN LE nonetheless provided his nephew, often through his girlfriend, with very large amounts of money to get THC up and running – close to $1 million dollars.
MEIFANG YU was sentenced today to 3 years of probation, including 180 days of home confinement and 150 hours of community service for her role in the conspiracy.
In addition to the prison terms both LE and CHAPACKDEE will be on federal supervision following prison of 5 years and 4 years, respectively. Both men have been in custody since their arrest on May 8, 2017.
Coconspirator Samath Khanhphongphane was sentenced to 5 years in prison on February 8, 2018. Defendants Phi Nguyen and Hoang Le will be sentenced on April 12, 2018.
This was an Organized Crime and Drug Enforcement Task Force (OCDETF) investigation, providing supplemental federal funding to the federal and state agencies involved. The case was investigated by the FBI, DEA, Seattle Police Department and Homeland Security Investigations (HSI). Multiple agencies assisted with the arrests and the serving of search warrants including the Port of Seattle Police Department.
The case is being prosecuted by Assistant United States Attorneys Vince Lombardi and Justin Arnold.
Seattle – A 42-year-old former Bellevue, Washington, man was sentenced today in U.S. District Court in Seattle to 12 years in prison for securities fraud, announced U.S. Attorney Nick Brown. Justin Costello victimized marijuana business owners, private investors, and investors who purchased stock in the public market. Costello used fraud proceeds for an expensive lifestyle, including an elaborate wedding with a James Bond theme. At the sentencing hearing, U.S. District Judge Ricardo S. Martinez said the frauds “caused a severe impact financially, and a severe emotional impact…. People felt betrayed and violated by (Costello’s) actions.
"Mr. Costello had ‘big dreams’ -- building a lifestyle that emulated his hero, 007 James Bond — but he did so by victimizing dozens of people and businesses who entrusted their personal savings to him,” said U.S. Attorney Nick Brown. “When he was indicted, he fled with fake ID, cash, gold, and jewelry to finance a life on the run. But his story is not fiction and the $35 million damage to his victims is all too real. This prison sentence is fully appropriate.”
“After finally having to answer for his crimes, Mr. Costello went on the run” said Richard A. Collodi, Special Agent in Charge of the FBI’s Seattle field office. “His flight to avoid prison demonstrates that is exactly where he belongs. I applaud the work of our investigators and prosecutors who finally put an end to his elaborate fraud, and to our partners who were able to apprehend him before he could leave the country.”
As part of his securities fraud scheme, Costello purchased two companies that were trading for pennies on the over-the-counter market and renamed them GRN Holding Corporation and Hempstract Inc. Costello recruited investors in these companies, allegedly making numerous false statements. Costello told potential private investors that he had an MBA from Harvard, that his personal wealth was significantly larger than it was, and that GRN Funds LLC, a private equity and hedge fund he owned, had over $1 billion in assets under management. None of that was true.
With these falsehoods, Costello convinced various investors across the country to invest in his companies.
Today., some of those recruited investors told the court how Costello preyed on their friendship to get them to invest. One told the court “Nothing with Costello was real… We were groomed by this predator… The stage was set for this big con.”
Another told the court “He is a liar, a financial psychopath, and a human wrecking ball.”
A third told the court that her husband was a changed man after losing all of their money investing with Costello. She described how her husband became depressed and took his own life.
Costello did not just defraud friends, he also committed fraud on those investing on public markets. He had press releases and securities filings made with multiple false representations. Between July 1, 2019, and May 18, 2021, over 7,500 investors purchased and sold GRN Holding Corp. securities while Costello was making, and causing to be made, material misrepresentations concerning GRN Holding Corp. Collectively, these investors lost approximately $25 million. Similarly, with Hempstract Inc., he made false statements and defrauded investors. Between November 2018 and June 2021, 29 private investors lost about $6 million.
Between October 2019, and January 2021, Costello hired an unindicted coconspirator to use Twitter in a pump and dump stock scheme. Costello would acquire the penny stock of a company and then instruct his prolific Twitter user to tweet falsehoods about the company that would drive up the stock price. The coconspirator would tweet about the stock as often as 90 times a day. In one instance Costello didn’t just use Twitter, he also instructed some of his “investors” to purchase stock in the company, driving the share price from a nickel to $2 per share. After driving the share price up, Costello sold the shares for a profit of more than $355,000. The prolific Twitter user was given a share of Costello’s profits from the pump and dump scheme. In all Costello made $625,092 in the pump and dump scheme.
Along with the securities fraud, in 2017 Costello owned and operated a company called Pacific Banking Corp that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois, and Alaska. Costello sent false account statements to the marijuana businesses, so that they were lulled into thinking their money was secure. However, between 2019 and 2021, Costello diverted money from three marijuana business to benefit himself and his other companies. The three marijuana businesses lost about $3.7 million.
Costello was apprehended October 6, 2022, by law enforcement in Southern California. He had fake identification documents, cash, and valuables indicating he hoped to flee to Mexico to avoid prosecution.
In addition to the financial harm, prosecutors noted that Costello’s investors suffered a betrayal that stays with them to this day. “Costello’s deceit – about his background, his education, and his purported success – was designed to convince unwitting investors to trust him. And trust him they did. But when lies and fraud are exposed, victims are left with significant emotional and psychological damage. They blame themselves for being gullible and overly trusting. The resulting stress, anxiety, and sense of betrayal causes great emotional and psychological harm, and damages the victims’ relationships with friends, family, and others,” prosecutors wrote in their sentencing memo.
Judge Martinez recognized that harm in imposing the sentence saying, “in many financial crimes the victims are not known to the fraudster… Financial crimes where the defendant befriends the individual and uses them to entice others to the scheme has a completely different emotional impact. It leaves victims feeling helpless and hopeless.”
In his Plea Agreement, Costello agreed to pay no less than $35 million in restitution, but the Court will enter the final restitution amount in August 2023. Costello is forfeiting assets that were seized at the time of his arrest including $60,000 in cash, gold bars, Mexican pesos, two designer watches, and gem encrusted jewelry.
The case was investigated by the FBI.
The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Michael Dion.
SUNG HONG, 45, and HYUN JOO HONG, 41, a Clyde Hill, Washington couple were arrested this morning on federal charges they defrauded multiple clients out of hundreds of thousands of dollars, announced U.S. Attorney Annette L. Hayes. SUNG HONG, aka LAURENCE HONG or LAWRENCE HONG, and his wife, HYUN JOO HONG, aka GRACE HONG, held themselves out as experienced investment advisors with a track record of performance in order to solicit investor funds for their hedge fund, Pishon Holdings, and for management through separately managed accounts. Authorities are still assessing the total amount of fraud in the case, but since 2011, the HONGs have solicited several million dollars in investor funds from numerous clients, and the losses to just three victims exceed $500,000. The HONGs will make their initial appearance in U.S. District Court in Seattle at 2:00 today.
According to records filed in the case, the HONGs recruited investors using religious organizations and shared religious beliefs. The couple claimed that LAURENCE HONG privately invests money for wealthy Korean families and that GRACE HONG holds a Series 65 securities license and previously worked for a large international investment firm. None of these statements appear to be true. Nor was LAURENCE HONG’s past history disclosed. The couple sent potential customers misleading and false investment prospectuses that contained an inaccurate record of their past investment performance and other plagiarized investment outlooks. They further misled investors as to the advisor fees they would charge and the amount of their funds that would be at risk.
The HONGs used investor funds for their own benefit. One church in California invested $1 million with the HONGs and lost about $300,000 on a single trade. Still, despite the steep losses and a fee arrangement based on investment gains, the HONGs withdrew almost $150,000, ostensibly as advisor fees, from the church’s account. Another couple allowed the HONGs to manage their $180,000 in retirement funds only to lose $100,000 within less than a year. After meeting with the HONGs, that couple then invested their remaining retirement funds in the HONGs’ hedge fund, only for those funds to be redirected into GRACE HONG’s personal account. The HONGs used those funds to pay credit card bills and other personal expenses, including a $16,000 payment to a resort in the Bahamas for a HONG family vacation.
Investigators have identified over $2 million in additional losses in several other investor accounts managed by the HONGs. The financial investigation to date has revealed investor money was used to pay for the HONGs’ extravagant lifestyle, which included a 9,000 square foot rental home in Clyde Hill; a 45-foot yacht; multiple high-end vehicles, such as BMWs, a Maserati, and a Lamborghini; and lavish vacations.
The FBI is investigating the case and is still determining the number of victims and the amount of fraud loss. Those who believe they have information about this case, please contact seattle.fbi@fbi.gov or call 206-622-0460.
The charges contained in the complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
Wire fraud is punishable by up to 20 years in prison.
The case is being prosecuted by Assistant United States Attorneys Justin Arnold and Steven Masada.
