Category Archives: USDOJ Press Release

DOJ Compensates Madoff Victims

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Thursday, November 9, 2017

Department of Justice Compensates Victims of Bernard Madoff Fraud Scheme With Funds Recovered Through Asset Forfeiture

The Department of Justice today announced that on Nov. 9, the Madoff Victim Fund (MVF) began its initial distribution of $772.5 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme.  These funds will be sent to 24,631 victims across the globe. This distribution represents the first in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS.  The MVF has received over 65,000 petitions from victims in 136 countries. 

These payments mark the single largest distribution of forfeited funds in the history of the Department’s victim compensation program.

Deputy Attorney General Rod J. Rosenstein, Acting U.S. Attorney Joon H. Kim for the Southern District of New York and Assistant Director in Charge William F. Sweeney Jr., of the FBI’s New York Field Division made the announcement.

“Thanks to civil asset forfeiture, the Department of Justice is announcing today the record-setting distribution of restitution to victims of Bernard Madoff’s notorious investment fraud scheme,” said Deputy Attorney General Rosenstein.  “We have recovered billions of dollars from third parties – not Mr. Madoff – and are now returning that money to tens of thousands of victims. This is the largest restoration of forfeited property in history.”

“Bernie Madoff committed one of history’s largest and most devastating frauds,” said Acting U.S. Attorney Kim.  “This Office not only prosecuted Madoff himself and others who helped perpetrate his fraud, but has remained committed to recovering money for his victims.  To date, this Office has recovered more than $9 billion for the innocent victims of Madoff’s fraud, and today’s distribution of $770 million, the single largest distribution of forfeited funds in the Department’s history is part of our ongoing commitment to not only prosecute criminals but also find relief for victims.”

“No amount of money in the world could ever reverse the catastrophic effects Madoff’s historic Ponzi scheme had on individuals and businesses alike,” Assistant Director in Charge Sweeney.   “But now, nearly a decade after this crime was exposed, it is our hope that victims will finally be able to see the light at the end of a long, dark tunnel.”

For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients.  On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.  On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered Madoff to forfeit $170.799 billion as part of Madoff’s sentence.

Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action.  The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.

The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.  The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions.  Further questions may be directed to the MVF at 866-624-3670 or info@madoffvictimfund.com(link sends e-mail).

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Press Release Number:
17-1265

Avoid Disaster Frauds

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Wednesday, August 30, 2017

Tips on Avoiding Fraudulent Charitable Contribution Schemes

The National Center for Disaster Fraud reminds the public to be aware of and report any instances of alleged fraudulent activity related to relief operations and funding for victims. Unfortunately, criminals can exploit disasters, such as Hurricane Harvey, for their own gain by sending fraudulent communications through email or social media and by creating phony websites designed to solicit contributions.

Tips should be reported to the National Center for Disaster Fraud at (866) 720-5721. The line is staffed 24 hours a day, seven days a week. Additionally, e-mails can be sent to disaster@leo.gov(link sends e-mail), and information can be faxed to (225) 334-4707.

The U.S. Department of Justice established the National Center for Disaster Fraud to investigate, prosecute, and deter fraud in the wake of Hurricane Katrina, when billions of dollars in federal disaster relief poured into the Gulf Coast region. Its mission has expanded to include suspected fraud from any natural or manmade disaster. More than 30 federal, state, and local agencies participate in the National Center for Disaster Fraud, which allows the center to act as a centralized clearinghouse of information related to disaster relief fraud.

The public should remember to perform due diligence before giving contributions to anyone soliciting donations or individuals offering to provide assistance to those affected by the hurricane and tornadoes. Solicitations can originate from social media, e-mails, websites, door-to-door collections, flyers, mailings, telephone calls, and other similar methods.

Before making a donation of any kind, consumers should adhere to certain guidelines, including:

  • Do not respond to any unsolicited (spam) incoming e-mails, including clicking links contained within those messages, because they may contain computer viruses.
  • Be skeptical of individuals representing themselves as members of charitable organizations or officials asking for donations via e-mail or social networking sites.
  • Beware of organizations with copy-cat names similar to but not exactly the same as those of reputable charities.
  • Rather than follow a purported link to a website, verify the legitimacy of nonprofit organizations by utilizing various Internet-based resources that may assist in confirming the group’s existence and its nonprofit status.
  • Be cautious of e-mails that claim to show pictures of the disaster areas in attached files because the files may contain viruses. Only open attachments from known senders.
  • To ensure contributions are received and used for intended purposes, make contributions directly to known organizations rather than relying on others to make the donation on your behalf.
  • Do not be pressured into making contributions; reputable charities do not use such tactics.
  • Be aware of whom you are dealing with when providing your personal and financial information. Providing such information may compromise your identity and make you vulnerable to identity theft.
  • Avoid cash donations if possible. Pay by credit card or write a check directly to the charity. Do not make checks payable to individuals.
  • Legitimate charities do not normally solicit donations via money transfer services. Most legitimate charities’ websites end in .org rather than .com.
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Press Release Number:
17-953

USDOJ: Ripple Labs Resolves Criminal Ingestigation

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Tuesday, May 5, 2015
Ripple Labs Inc. Resolves Criminal Investigation

Ripple Labs Inc. and its wholly-owned subsidiary, XRP II LLC, formerly XRP Fund II LLC, have agreed to resolve a criminal investigation in exchange for a settlement agreement calling for a series of substantial remedial measures, including a migration of a portion of Ripple’s virtual currency business to a separate entity, the company’s ongoing cooperation in other investigations, an extensive remedial framework to ensure future compliance with federal laws and forfeiture and penalties totaling $700,000, announced U.S. Attorney Melinda Haag of the Northern District of California, Director Jennifer Shasky Calvery of the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN) and Chief Richard Weber of the Internal Revenue Service (IRS) Criminal Investigation Division.  The agreement will resolve allegations that Ripple and its subsidiary failed to follow the law while engaging in the exchange of virtual currency and that the entities failed to establish and maintain an appropriate anti-money laundering program.

Ripple Labs Inc. is headquartered in San Francisco, California, and developed and sold virtual currency known as “XRP.”  As of 2015, the currency of the Ripple network, XRP, is the second-largest digital currency by market capitalization.

The agreement formalizes the steps Ripple and its subsidiary must take to bring its virtual currency operation within the existing regulatory framework for money services businesses.  The agreement consists of a settlement agreement, an agreed statement of facts, and a remedial framework for the company going forward.  Aside from monetary penalties in the form of forfeiture, the remedial framework requires the migration of any component of Ripple’s business that is engaged in the exchange of virtual currency into an entity registered with FinCEN.  In addition, the agreement calls for continued enhancements to the company’s anti-money laundering (AML) controls and training program.  Further, the remedial framework calls for external audits through the year 2020, enhancements to the ripple protocol, increased transaction monitoring and an extensive review of historical activity.

“By these agreements, we demonstrate again that we will remain vigilant to ensure the security of and prevent the misuse of the financial markets,” said U.S. Attorney Haag.  “Ripple Labs Inc. and its wholly-owned subsidiary both have acknowledged that digital currency providers have an obligation not only to refrain from illegal activity, but also to ensure they are not profiting by creating products that allow would-be criminals to avoid detection.  We hope that this sets an industry standard in the important new space of digital currency.”

The agreement is the culmination of a criminal investigation conducted by U.S. Attorney’s Office and the Internal Revenue Service’s Criminal Investigation Division.  FinCEN joined the investigation with a parallel civil enforcement action.  In that action, Ripple Labs and XRP II have agreed to pay a $700,000 civil penalty, $450,000 of which will be designated a forfeiture to settle issues raised in the U.S. Attorney’s investigation.

“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws,” said Director Calvery for FinCEN.  “Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.”

“Federal laws that regulate the reporting of financial transactions are in place to detect and stop illegal activities, including those in the virtual currency arena,” said Chief Weber of the IRS Criminal Investigation Division.  “Unregulated, virtual currency opens the door for criminals to anonymously conduct illegal activities online, eroding our financial systems and creating a Wild West environment where following the law is a choice rather than a requirement.”

Ripple described itself as an exchanger of virtual currency in a December 2013 filing made in San Francisco, California, federal court in an unrelated case.  As an exchanger, Ripple was required to register with FinCEN and to comply with applicable federal laws and regulations.  Yet Ripple sold XRP even though it had not registered with FinCEN, effectuating sales of over approximately $1.3 million in April 2013 alone.  Ripple also failed to establish and maintain an appropriate AML program and failed to have policies, procedures and internal controls to ensure compliance with the Bank Secrecy Act and anti-money laundering laws.  In July 2013, Ripple incorporated a subsidiary, now known as XRP II, that replaced Ripple as the seller of XRP.  Although XRP II registered with FinCEN, it failed to have an effective AML program or to file appropriate suspicious activity reports.  In late 2013, for example, it negotiated a $250,000 transaction with an individual who had prior felony convictions for dealing in explosive devices and had been sentenced to prison, failing to follow its own internal “know your customer” requirements.

Assistant U.S. Attorneys Kathryn R. Haun and Arvon J. Perteet handled the matter on behalf of the U.S. Attorney’s Office with the assistance of Daniel Charlier-Smith and Leslie Cook.  The settlement agreement with Ripple Labs was the result of a coordinated effort by the U.S. Attorney’s Office and IRS Criminal Investigation, working in tandem with FinCEN.

USAO – California, Northern District                                          Ripple Labs Inc. Settlement Agreement
Updated May 5, 2015