Here’s the press release from the US Attorney’s Office for the Southern District of New York:
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that LEV PARNAS and DAVID CORREIA were charged in a Superseding Indictment with conspiring to commit wire fraud in connection with their efforts to raise funds ostensibly for their business, “Fraud Guarantee.” The Superseding Indictment also includes additional campaign finance charges against the defendants.
In October 2019, PARNAS, CORREIA, IGOR FRUMAN, and ANDREY KUKUSHKIN were charged in a four-count indictment alleging that each of the defendants conspired to violate the ban on political donations and contributions by foreign nationals. In addition, PARNAS and FRUMAN were charged with conspiring to make contributions in connection with federal elections in the names of others, and with making false statements to and falsifying records to obstruct the administration of a matter within the jurisdiction of the Federal Election Commission (“FEC”).
The Superseding Indictment returned today – in addition to charging PARNAS and CORREIA with conspiracy to commit wire fraud – charges CORREIA with making false statements to and falsifying records to obstruct the administration of a matter within the jurisdiction of the FEC; charges PARNAS, FRUMAN, and CORREIA with soliciting a foreign national to make donations and contributions in connection with federal and state elections; and charges PARNAS, FRUMAN, and KUKUSHKIN with aiding and abetting the making of donations and contributions by a foreign national in connection with federal and state elections.
The case is assigned to U.S. District Judge J. Paul Oetken in the Southern District of New York. Trial is currently scheduled for February 1, 2021.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Lev Parnas and David Correia conspired in a fraud using a company called ‘Fraud Guarantee’ that purported to insure investors against corporate fraud while in fact, as alleged, they misled investors as to what would be done with their money. ‘Fraud Guarantee’ takes on a different meaning in light of today’s allegations that the company was a vehicle for committing fraud, not insuring against it. Parnas, Correia, Igor Fruman, and Andrey Kukushkin are also charged with additional violations of the laws prohibiting foreign nationals from donating or contributing to federal or state election campaigns. This Office remains committed to investigating and prosecuting those whose alleged criminal conduct threatens to undermine the integrity of our political process.”
FBI Assistant Director William F. Sweeney Jr. said: “We couldn’t say it better ourselves – the behavior alleged today is indeed fraudulent – guaranteed. The FBI and the American public expect that it will be our fellow citizens whose voices determine the outcome of our Nation’s elections, not deliberately corrupt behavior, or foreign influence disguised as legitimate activity. The FBI is determined to disrupt this type of behavior, and our investigation is ongoing.”
According to the Superseding Indictment filed in Manhattan federal court:
Between in or about late 2012 and in or about mid-2019, PARNAS and CORREIA conspired to defraud multiple victims by inducing them to invest in their company, “Fraud Guarantee,” based on materially false and misleading representations. Among other things, PARNAS and CORREIA falsely claimed that the investors’ funds would be used solely for legitimate business expenses of Fraud Guarantee, when in fact the funds were largely withdrawn as cash, transferred to personal accounts, and used for various apparently personal expenditures. PARNAS and CORREIA also made materially false representations concerning, among other things, how much money PARNAS had contributed to the company and how much money the company had raised overall. At least seven victims invested in Fraud Guarantee based at least in part on PARNAS’s and CORREIA’s false and misleading representations, with each victim being fraudulently induced to pay hundreds of thousands of dollars, for a total of more than $2 million.
The scheme started in or about late 2012, when PARNAS and CORREIA established Fraud Guarantee. Ironically, they pitched Fraud Guarantee to potential investors as a company that would provide services to protect investors from fraud. In particular, PARNAS and CORREIA claimed that Fraud Guarantee would offer an insurance product that would allow policyholders to recoup their losses in the event they lost money due to fraudulent conduct. Thus, for example, if an investor invested in “Company XYZ” and purchased a Fraud Guarantee policy, then in the event that the investor lost the value of the investment due to a criminal fraud at Company XYZ, Fraud Guarantee would enable the investor to recoup the investor’s losses. However, despite certain efforts by PARNAS and CORREIA to launch Fraud Guarantee and bring its products to market, the company never became operational.
PARNAS and CORREIA induced multiple victims to invest in Fraud Guarantee by claiming, among other things, that they were raising funds to facilitate the company’s development, that all of the money would be used for legitimate business expenses, and that PARNAS and CORREIA were not taking salaries. PARNAS and CORREIA even provided one victim with a contract providing that his funds would be used “to finance the development, promotion, and initial operation of an investment protection business” and would be “fully reserved and committed” for such purposes. In fact, while a portion of the victims’ funds was used for Fraud Guarantee business expenses, the majority was not. Rather, the funds were largely withdrawn as cash, transferred to accounts in the name of PARNAS or CORREIA or their family members, or spent on various apparently personal expenditures, including hundreds of thousands of dollars in rent for PARNAS’s personal residence and tens of thousands of dollars at luxury car leasing companies. PARNAS and CORREIA also used certain victim money to fund political donations.
PARNAS and CORREIA also induced certain victims to invest in Fraud Guarantee by misrepresenting, among other things, the amount of money PARNAS personally contributed to the company, and the amount raised overall. For example, PARNAS and CORREIA provided at least one victim with a table reflecting that PARNAS’s “capital account” was as high as $1.1 million; CORREIA told another victim via email that “[t]here was ‘significant’ investment from all parties in order to take ownership [in Fraud Guarantee] . . . equated to several millions of dollars invested”; and CORREIA told another victim – during a phone call that the victim recorded without CORREIA’s knowledge – that “[m]illions . . . $4 or $5 million probably” had been invested overall in Fraud Guarantee. These representations were false and misleading because the company had not only raised far less money than they claimed, but also the funds they had raised had largely been withdrawn as cash, transferred to personal accounts, and spent on various apparently personal expenditures, rather than being used solely for legitimate business expenses.
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PARNAS, 48, FRUMAN, 54, CORREIA, 45, and KUKUSHKIN, 47, are each charged with one count of conspiring to violate the ban on donations and contributions in connection with federal and state elections by foreign nationals, which carries a maximum sentence of five years in prison. PARNAS and FRUMAN are also charged with one count of conspiring to make contributions in connection with federal elections in the names of others, which carries a maximum sentence of five years in prison. PARNAS, FRUMAN, and CORREIA are each charged with one count of making false statements, which carries a maximum sentence of five years in prison; and one count of falsifying records to obstruct the administration of a matter within the jurisdiction of the FEC, which carries a maximum sentence of 20 years in prison. PARNAS, FRUMAN, and CORREIA are each charged with one count of soliciting a foreign national to make donations and contributions in connection with federal and state elections, which carries a maximum sentence of five years in prison; and PARNAS, FRUMAN, and KUKUSHKIN are each charged with one count of aiding and abetting the making of donations and contributions by a foreign national in connection with federal and state elections, which carries a maximum sentence of five years in prison. PARNAS and CORREIA are charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Ms. Strauss praised the outstanding work of the FBI.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Rebekah Donaleski, Nicolas Roos, and Douglas Zolkind are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations. The defendants are presumed innocent unless and until proven guilty.