Justia White Collar Crime Opinion Summaries

A group of former executives from an investment management company were prosecuted after the company collapsed and was placed in receivership. The company, which raised hundreds of millions of dollars from private investors, primarily through promissory notes and other investment vehicles, experienced severe financial distress following the default of a major asset. Despite this, the executives continued to solicit investments, representing to investors that their funds would be used to purchase secure receivables and that the company was financially healthy. In reality, most new investor funds were used to pay prior investors and cover operating expenses. The executives were accused of making material misrepresentations and misleading half-truths about the use of investor funds, the security of investments, and the company’s financial health.The United States District Court for the District of Oregon presided over the trial. The jury found all three defendants guilty of conspiracy to commit mail and wire fraud and multiple counts of wire fraud; one defendant was also convicted of making a false statement on a loan application. The defendants argued that they were improperly convicted on an omissions theory of fraud and that they were prevented from presenting a complete defense based on disclosures in offering documents and financial statements. They also challenged the sufficiency of the evidence and the materiality of their statements.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the government’s theory at trial was based on affirmative misrepresentations and misleading half-truths, not mere omissions, and that the jury instructions fairly stated the law. The court found that evidence of what was not disclosed was relevant to materiality, and that disclaimers in offering documents did not render other representations immaterial in a criminal fraud prosecution. The convictions were affirmed. View "USA V. JESENIK" on Justia Law

Earl Miller, who owned and operated several real estate investment companies under the 5 Star name, was responsible for soliciting funds from investors, primarily in the Amish community, with promises that their money would be used exclusively for real estate ventures. After becoming sole owner in 2014, Miller diverted substantial investor funds for personal use, unauthorized business ventures, and payments to friends’ companies, all in violation of the investment agreements. He also misled investors about the nature and use of their funds, including issuing false statements about new business activities. The scheme continued even as the business faltered, and Miller ultimately filed for bankruptcy.A federal grand jury in the Northern District of Indiana indicted Miller on multiple counts, including wire fraud and securities fraud. At trial, the government presented evidence, including testimony from an FBI forensic accountant, showing that Miller misappropriated approximately $4.5 million. The jury convicted Miller on one count of securities fraud and five counts of wire fraud, acquitting him on one wire fraud count and a bankruptcy-related charge. The United States District Court for the Northern District of Indiana sentenced Miller to 97 months’ imprisonment, applying an 18-level sentencing enhancement based on a $4.5 million intended loss, and ordered $2.3 million in restitution to victims.The United States Court of Appeals for the Seventh Circuit reviewed Miller’s appeal, in which he challenged the district court’s loss and restitution calculations. The Seventh Circuit held that the district court reasonably estimated the intended loss at $4.5 million, as this amount reflected the funds Miller placed at risk through his fraudulent scheme, regardless of when the investments were made. The court also upheld the restitution award, finding it properly included all victims harmed by the overall scheme. The Seventh Circuit affirmed the district court’s judgment. View "USA v Miller" on Justia Law

A group of plaintiffs, including an individual, a retirement fund, and several investment funds, traded derivatives based on the Euro Interbank Offered Rate (Euribor). They alleged that a group of banks and brokers conspired to manipulate Euribor, which affected the pricing of various over-the-counter (OTC) derivatives, such as FX forwards, interest-rate swaps, and forward rate agreements. The alleged conduct included coordinated false submissions to set Euribor at artificial levels, collusion among banks and brokers, and structural changes within banks to facilitate manipulation. Plaintiffs claimed this manipulation harmed them by distorting the prices of their Euribor-based derivative transactions.The United States District Court for the Southern District of New York dismissed the plaintiffs’ claims under the Sherman Act, the Commodity Exchange Act (CEA), the Racketeer Influenced and Corrupt Organizations Act (RICO), and state common law, finding it lacked personal jurisdiction over all defendants. The district court also found that the RICO claims were based on extraterritorial conduct and did not meet the particularity requirements of Federal Rule of Civil Procedure 9(b). It declined to exercise pendent personal jurisdiction over state-law claims.The United States Court of Appeals for the Second Circuit reviewed the case. It agreed that conspiracy-based personal jurisdiction was not established but held that two plaintiffs—Frontpoint Australian Opportunities Trust and the California State Teachers’ Retirement System—had established specific personal jurisdiction over UBS AG and The Royal Bank of Scotland PLC for Sherman Act and RICO claims related to OTC Euribor derivative transactions in the United States. The court affirmed dismissal of the RICO claims for lack of particularity, but held that the Sherman Act claims were sufficiently pleaded. It vacated the district court’s refusal to exercise pendent personal jurisdiction over state-law claims and remanded for further proceedings. The judgment was affirmed in part, reversed in part, and vacated in part. View "Sullivan v. UBS AG" on Justia Law

Three individuals who worked as precious metals futures traders at major financial institutions were prosecuted for engaging in a market manipulation scheme known as spoofing. This practice involved placing large orders on commodities exchanges with the intent to cancel them before execution, thereby creating a false impression of market supply or demand to benefit their genuine trades. The traders’ conduct was in violation of both exchange rules and their employers’ policies, and the government charged them with various offenses, including wire fraud, commodities fraud, attempted price manipulation, and violating the anti-spoofing provision of the Dodd-Frank Act.The United States District Court for the Northern District of Illinois, Eastern Division, presided over separate trials for the defendants. In the first trial, two defendants were convicted by a jury on all substantive counts except conspiracy, after the court denied their motions for acquittal and a new trial. The third defendant, tried separately, admitted to spoofing but argued he lacked the requisite criminal intent; he was convicted of wire fraud, and his post-trial motions were also denied. The district court made several evidentiary rulings, including admitting lay and investigator testimony, and excluded certain defense exhibits and instructions.The United States Court of Appeals for the Seventh Circuit reviewed the convictions and the district court’s rulings. The appellate court held that spoofing constitutes a scheme to defraud under the federal wire and commodities fraud statutes, and that the anti-spoofing statute is not unconstitutionally vague. The court found sufficient evidence supported all convictions, and that the district court did not abuse its discretion in its evidentiary or jury instruction decisions. The Seventh Circuit affirmed the convictions and the district court’s denial of post-trial motions for all three defendants. View "United States v. Smith" on Justia Law

Michael Hild, the Defendant-Appellant, was convicted by a jury in 2021 of securities fraud, wire fraud, bank fraud, and conspiracy. Hild, as the CEO of Live Well Financial, Inc., engaged in a scheme to inflate the value of a bond portfolio used as collateral for loans. This scheme allowed Live Well to grow its bond portfolio significantly from 2014 to 2016. Hild appealed his conviction, arguing that the evidence was insufficient and that a new trial was warranted due to a Supreme Court decision invalidating one of the fraud theories used in his jury instructions.The United States District Court for the Southern District of New York denied Hild's post-trial motions for acquittal and a new trial. Hild then appealed to the United States Court of Appeals for the Second Circuit, challenging the sufficiency of the evidence and the jury instructions.The Second Circuit reviewed the case and found that sufficient evidence supported Hild's conviction. The court noted that Hild misrepresented the value of the bonds to secure loans and acted with fraudulent intent. The court also addressed Hild's argument regarding the jury instructions, acknowledging that the instructions included an invalid right-to-control theory of fraud as per the Supreme Court's decision in Ciminelli v. United States. However, the court concluded that this error did not affect Hild's substantial rights because the jury would have convicted him based on a valid theory of fraud.Ultimately, the Second Circuit affirmed the judgment of the district court, upholding Hild's conviction on all counts. View "United States v. Hild" on Justia Law

In this case, the defendant, a radio talk show host and church founder, began selling bitcoin in 2014. The government investigated his bitcoin sales and charged him with conspiracy to operate an unlicensed money transmitting business, operation of an unlicensed money transmitting business, conspiracy to commit money laundering, money laundering, and tax evasion. After a jury convicted him on all counts, the district court acquitted him of the substantive money laundering count due to insufficient evidence but upheld the other convictions.The defendant appealed, arguing that the district court should not have allowed the money-transmitting-business charges to proceed to trial, citing the "major questions doctrine" which he claimed should exempt virtual currencies like bitcoin from regulatory statutes. He also contended that the evidence was insufficient to support his tax evasion conviction and that he should be granted a new trial on the money laundering conspiracy count due to prejudicial evidentiary spillover. Additionally, he argued that his 96-month sentence was substantively unreasonable.The United States Court of Appeals for the First Circuit reviewed the case. The court rejected the defendant's major questions doctrine argument, holding that the statutory definition of "money transmitting business" under 31 U.S.C. § 5330 includes businesses dealing in virtual currencies like bitcoin. The court found that the plain meaning of "funds" encompasses virtual currencies and that the legislative history and subsequent congressional actions supported this interpretation.The court also found sufficient evidence to support the tax evasion conviction, noting that the defendant had substantial unreported income and engaged in conduct suggesting willful evasion of taxes. The court rejected the claim of prejudicial spillover, concluding that the evidence related to the money laundering conspiracy was admissible and relevant.Finally, the court upheld the 96-month sentence, finding it substantively reasonable given the defendant's conduct and the factors considered by the district court. The court affirmed the district court's rulings and the defendant's convictions and sentence. View "United States v. Freeman" on Justia Law

Keith Berman, the appellant, pleaded guilty to securities fraud, wire fraud, and obstruction of proceedings related to a scheme to fraudulently increase the share price of his company, Decision Diagnostics Corp. (DECN). Berman issued false press releases claiming DECN had developed a blood test for coronavirus, which led to a significant increase in the company's stock price. The Securities and Exchange Commission (SEC) investigated and suspended trading of DECN's stock, revealing that Berman's claims were false. Despite this, Berman continued to issue misleading statements and used aliases to discredit the SEC's investigation.The United States District Court for the District of Columbia sentenced Berman to 84 months' imprisonment. The court calculated the loss caused by Berman's fraud using the modified rescissory method, determining a loss amount of $27.8 million. This calculation was based on the difference in DECN's stock price before and after the fraud was disclosed, multiplied by the number of outstanding shares. The court also applied enhancements for sophisticated means and substantial financial hardship to five or more individuals, resulting in a Guidelines range of 168 to 210 months, but ultimately imposed a downward variance.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. Berman challenged the district court's calculation of the loss amount, arguing that the fraud was disclosed earlier and that the loss was not solely attributable to his fraudulent statements. The appellate court found that the district court did not commit clear error in determining the disclosure date or in its loss causation analysis. The court also upheld the enhancements for sophisticated means and substantial financial hardship, finding sufficient evidence to support these determinations. Consequently, the appellate court affirmed the district court's judgment. View "United States v. Berman" on Justia Law

Mark Schena operated Arrayit, a medical testing laboratory in Northern California, which focused on blood tests for allergies. Schena marketed these tests as superior to skin tests, despite their limitations, and billed insurance providers up to $10,000 per test. To maintain a steady flow of patient samples, Schena paid marketers a percentage of the revenue they generated by pitching Arrayit’s services to medical professionals, often misleading them about the tests' efficacy. During the COVID-19 pandemic, Schena transitioned to COVID testing, using similar deceptive marketing practices to bundle allergy tests with COVID tests.The United States District Court for the Northern District of California denied Schena’s motion to dismiss the EKRA counts, arguing that his conduct did not violate the statute as a matter of law. The jury convicted Schena on all counts, including conspiracy to commit healthcare fraud, healthcare fraud, conspiracy to violate EKRA, EKRA violations, and securities fraud. The district court sentenced Schena to 96 months in prison and ordered him to pay over $24 million in restitution.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed Schena’s convictions. The court held that 18 U.S.C. § 220(a)(2)(A) of EKRA covers payments to marketing intermediaries who interface with those who do the referrals, and there is no requirement that the payments be made to a person who interfaces directly with patients. The court also concluded that a percentage-based compensation structure for marketing agents does not violate EKRA per se, but the evidence showed wrongful inducement when Schena paid marketers to unduly influence doctors’ referrals through false or fraudulent representations. The court affirmed Schena’s EKRA and other convictions, vacated in part the restitution order, and remanded in part. View "United States v. Schena" on Justia Law

The case involves codefendant brothers Joshua and Jamie Yafa, who were convicted of securities fraud and conspiracy to commit securities fraud for their involvement in a "pump-and-dump" stock manipulation scheme. They promoted the stock of Global Wholehealth Products Corporation (GWHP) through various means, including a "phone room" and social media, to inflate its price. Once the stock price rose significantly, they sold their shares, earning over $1 million. Following the sale, the stock price plummeted, causing significant losses to individual investors. A grand jury indicted the Yafas, along with their associates Charles Strongo and Brian Volmer, who pled guilty and testified against the Yafas at trial.The United States District Court for the Southern District of California sentenced the Yafas, applying the United States Sentencing Guidelines (U.S.S.G.) § 2B1.1. The court used Application Note 3(B) from the commentary to § 2B1.1, which allows courts to use the gain from the offense as an alternative measure for calculating loss when the actual loss cannot be reasonably determined. The district court found it difficult to calculate the full amount of investor losses and thus relied on the gain as a proxy. This resulted in a fourteen-level increase in the offense level for both brothers, leading to sentences of thirty-two months for Joshua and seventeen months for Jamie.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the term "loss" in § 2B1.1 is genuinely ambiguous and that Application Note 3(B)'s instruction to use gain as an alternative measure is a reasonable interpretation. The court concluded that the district court did not err in using the gain from the Yafas's offenses to calculate the loss and affirmed the district court's decision. View "USA V. YAFA" on Justia Law

Joseph Cammarata and his associates, Eric Cohen and David Punturieri, created Alpha Plus Recovery, LLC, a claims aggregator that submitted fraudulent claims to securities class action settlement funds. They falsely represented that three entities, Nimello, Quartis, and Invergasa, had traded in securities involved in class action settlements, obtaining over $40 million. The fraudulent claims included falsified trade data and fabricated reports. The scheme unraveled when a claims administrator, KCC, discovered the fraud, leading to the rejection of the claims and subsequent legal action.The United States District Court for the Eastern District of Pennsylvania charged the defendants with conspiracy to commit mail and wire fraud, wire fraud, conspiracy to commit money laundering, and money laundering. Cohen and Punturieri pled guilty, while Cammarata proceeded to trial and was found guilty on all counts. The District Court sentenced Cammarata to 120 months in prison, ordered restitution, and forfeiture of certain property.The United States Court of Appeals for the Third Circuit reviewed the case. The court upheld most of the District Court's rulings but found issues with the restitution order and the forfeiture of Cammarata's vacation home. The court held that the restitution order did not fully compensate the victims, as required by the Mandatory Victims Restitution Act (MVRA), and remanded for reconsideration. The court also found procedural error in the forfeiture process, as Cammarata was deprived of his right to a jury determination on the forfeitability of his property. The court vacated the forfeiture order in part and remanded for the Government to amend the order to reflect that the property is forfeitable as a substitute asset under 21 U.S.C. § 853(p). View "USA v. Cammarata" on Justia Law