FORMER SILK ROAD INVESTIGATOR PLEADS GUILTY TO CHARGES STEMMING FROM BITCOIN FRAUD

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, July 1, 2015
Former Silk Road Task Force Agent Pleads Guilty to Extortion, Money Laundering and Obstruction
Ex-DEA Agent Used Undercover Status to Fraudulently Obtain Digital Currency Worth Over $700,000

A former DEA agent pleaded guilty today to extortion, money laundering and obstruction of justice, which he committed while working as an undercover agent investigating Silk Road, an online marketplace used to facilitate the purchase and sale of illegal drugs and other contraband.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Chief Richard Weber of the IRS-Criminal Investigation (IRS-CI), Special Agent in Charge David J. Johnson of  FBI’s San Francisco Division, Special Agent in Charge Michael P. Tompkins of the Department of Justice Office of the Inspector General’s Washington, D.C. Field Office and Special Agent in Charge Lori Hazenstab of the Department of Homeland Security’s Office of the Inspector General in Washington D.C. made the announcement.

“While investigating the Silk Road, former DEA Agent Carl Force crossed the line from enforcing the law to breaking it,” said Assistant Attorney General Caldwell.  “Seduced by the perceived anonymity of virtual currency and the dark web, Force used invented online personas and encrypted messaging to fraudulently obtain bitcoin worth hundreds of thousands of dollars from the government and investigative targets alike.  This guilty plea should send a strong message: neither the supposed anonymity of the dark web nor the use of virtual currency nor the misuse of a law enforcement badge will serve as a shield from the reach of the law.”

“Mr. Force has admitted using his position of authority to weave a complex veil of deception for personal profit,” said U.S. Attorney Haag.  “Mr. Force’s actions put at risk other important investigations and betrayed the trust placed in him by his law enforcement partners and the public.  We are grateful for the work done by our federal partners to assist in unraveling this crime.”

“Through following the money in the Silk Road investigation it became clear that the defendant was engaged in wire fraud, money laundering, and other related offenses,” said Chief Weber.  “He used his position in the investigation to bring himself significant personal financial gain.  This investigation sends a clear message -- no person, especially those entrusted with the public’s trust such as federal law enforcement, is above the law and IRS-CI will use their financial investigative skills to track you down.”

Carl M. Force, 46, of Baltimore, Maryland, pleaded guilty before U.S. District Judge Richard Seeborg of the Northern District of California to an information charging him with money laundering, obstruction of justice and extortion under color of official right.  Force’s sentencing hearing is scheduled for Oct. 19, 2015.

Force was a Special Agent with the DEA for 15 years.  Between 2012 and 2014, he was assigned to the Baltimore Silk Road Task Force, a multi-agency group investigating illegal activity on the Silk Road.  Force was the lead undercover agent in communication with Ross Ulbricht, aka “Dread Pirate Roberts,” who ran the Silk Road.

In connection with his guilty plea, Force admitted that, while working in an undercover capacity using his DEA-sanctioned persona, “Nob,” in the summer of 2013, Force offered to sell Ulbricht fake drivers’ licenses and “inside” law enforcement information about the Silk Road investigation, which information Nob claimed to have accessed through a corrupt government employee.  Force admitted that he attempted to conceal his communications with Ulbricht about the payments by directing Ulbricht to use encrypted messaging.  Although Force understood these payments, which were made in bitcoin, to be government property, as they constituted evidence of a crime, he admitted that he falsified official reports and stole the funds, depositing the bitcoin into his own personal account and then converting them into dollars.  Force admitted that, at the time, the value of the bitcoin he received from Ulbricht was in excess of approximately $100,000.

Force also admitted that he devised and participated in a scheme to fraudulently obtain additional funds from Ulbricht through another online persona, “French Maid,” of which his Task Force colleagues were not aware.  Force admitted that, as French Maid, he solicited and received bitcoin payments from Ulbricht worth approximately $100,000 in exchange for information concerning the government’s investigation into the Silk Road.

In connection with his guilty plea, Force also admitted that, in late 2013, in his personal capacity, he invested $110,000 worth of bitcoin in CoinMKT, a digital currency exchange company.  Although he did not receive permission from the DEA to do so, he served as CoinMKT’s Chief Compliance Officer.  In this role, in February 2014, Force was alerted by CoinMKT to what the company initially believed to be suspicious activity in a particular account.  Force admitted that, thereafter, in his capacity as a DEA agent, but without authority or a legal basis to do so, he directed CoinMKT to freeze $337,000 in cash and digital currency from the account and he subsequently transferred the approximately $300,000 of digital currency funds into a personal account that he controlled.

Force also admitted to entering into a $240,000 contract with 20th Century Fox Film Studios related to a film concerning the government’s investigation into the Silk Road.  Force admitted that he did not secure the necessary approvals from the DEA to do so.

According to his plea agreement, Force admitted that he had obstructed justice both by soliciting and accepting bitcoin from Ulricht and by lying to federal prosecutors and agents who were investigating potential misconduct by Force and others.

The investigation is ongoing.  To date, Force is one of two federal agents charged with crimes in connection to their roles in investigating the Silk Road.  Shaun W. Bridges, 32, of Laurel, Maryland, a former Special Agent with the U.S. Secret Service, is charged in a two-count information with money laundering and obstruction of justice related to his diversion of over $800,000 in digital currency that he gained control over as part of the Silk Road investigation.  The charges contained in an information are merely accusations, and a defendant is presumed innocent until and unless proven guilty.

The case was investigated by the FBI’s San Francisco Division, the IRS-CI’s San Francisco Division, the Department of Justice Office of the Inspector General and the Department of Homeland Security Office of the Inspector General in Washington, D.C.  The following additional components assisted with the investigation: IRS-CI’s New York Field Office, HSI’s Chicago/O’Hare Division, the U.S. Attorney’s Office for the Southern District of New York, the Criminal Division’s Computer Crime and Intellectual Property Section, the Criminal Division’s Office of International Affairs, the U.S. Embassy in Slovenia and the FBI Legal Attaché Office in Tokyo.

The case is being prosecuted by Assistant U.S. Attorneys Kathryn Haun and William Frentzen of the Northern District of California and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section, with assistance from Assistant U.S. Attorney Arvon Perteet.

FORMER FBI SPECIAL AGENT RECEIVES 10 YEAR PRISON SENTENCE FOR BRIBERY, OBSTRUCTION

FROM:  U.S. JUSTICE DEPARTMENT
Monday, March 30, 2015
Former FBI Special Agent Sentenced to 10 Years in Prison for Bribery And Obstruction Scheme
Co-Conspirators Sentenced to 24 Months and 13 Months in Prison for Their Roles

A former FBI special agent was sentenced today to 10 years in prison and ordered to forfeit $70,000 for soliciting and accepting bribes to obstruct a federal grand jury investigation into an alleged kickback scheme involving a defense contractor, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Carlie Christensen of the District of Utah and Justice Department Inspector General Michael E. Horowitz.

“FBI agents—like all federal law enforcement—must be above reproach, but former Special Agent Lustyik sold his badge and position of public trust to the highest bidder,” said Assistant Attorney General Caldwell.  “This sentence serves as a stark reminder that no one is above the law.  Corrupt officials who break the law and breach their oaths will be prosecuted and sent to prison, even if they come from within the ranks of federal law enforcement.”

“These three defendants attempted to thwart a significant criminal investigation in Utah,” said U.S. Attorney Christensen.  “Two of these defendants were entrusted with protecting our citizens and upholding the law.  Their conduct, in particular, stands in stark contrast to the integrity and sacrifice of the men and women in our military and law enforcement ranks and their sentences today send a powerful message that no one is above the law.”

“Today’s sentencings represent important steps toward justice in this case,” said Inspector General Horowitz.  “Department of Justice employees and their associates must be held accountable when they abuse their authority and betray the public’s trust.”

Robert G. Lustyik Jr., 52, of Sleepy Hollow, New York, a 24-year veteran of the FBI, pleaded guilty to all charges in an 11-count indictment on Sept. 29, 2014.  Specifically, Lustyik pleaded guilty to conspiracy to commit bribery and obstruction, eight counts of honest services wire fraud, obstruction of a grand jury investigation and obstruction of an agency proceeding.

Lustyik’s co-defendants, Michael L. Taylor, 54, of Harvard, Massachusetts, and Johannes W. Thaler, 51, of New Fairfield, Connecticut, were also sentenced today to 24 months in prison and 13 months in prison, respectively, for their roles in this scheme.  Thaler was also ordered to forfeit $70,000, joint and several with Lustyik.  U.S. District Senior Judge Tena Campbell of the District of Utah imposed all three sentences.

Lustyik and Thaler both pleaded guilty for their involvement in a similar bribery scheme in the Southern District of New York.  Thaler was sentenced to 30 months in prison in that case, and will serve the two sentences consecutively.  Lustyik is scheduled to be sentenced on April 30, 2015, in the Southern District of New York.

According to court documents, from October 2011 to September 2012, Lustyik and Thaler conspired to use Lustyik’s official position as an FBI counterintelligence special agent to obstruct a criminal investigation into Taylor, a businessman who owned and operated American International Security Corporation.  Taylor was under investigation for allegedly paying kickbacks to obtain a series of contracts from the Department of Defense worth approximately $54 million.  Taylor promised Lustyik and Thaler that, in exchange for their help, he would provide them cash and multimillion dollar business contracts.  In an email message, Taylor told the two men, “I’ll make you guys more money than you can believe, provided they don’t think I’m a bad guy and put me in jail.”

According to court documents, Lustyik attempted to obstruct the investigation into Taylor by identifying Taylor as an official FBI confidential source in an effort to persuade the FBI, the Justice Department and the prosecutors and law enforcement agents in Utah that Taylor’s usefulness to the government outweighed the government’s interest in prosecuting him.  Indeed, Lustyik emphasized that indicting Taylor would threaten the nation’s security.  Lustyik also sought to take steps to directly intervene in the investigation by interviewing key witnesses.

According to court documents, the defendants boasted about the success of their scheme.  In one email message, Lustyik wrote to Taylor, “The rate this is going.  I will be indicted way before u ever are !!”  Lustyik wrote separately to Thaler, “I can leave [the FBI] in June.  But I’m afraid to if [Taylor] gets indicted n I’m not an agent I’m no help.  Has he mentioned giving me‐u a salary?”

Taylor admitted at his plea hearing that, as part of this conspiracy, he offered Lustyik a six-figure salary and a share of the proceeds from various multi-million dollar business deals he was pursuing.  Acknowledging this, Lustyik wrote to Taylor, “Let’s just get Utah over with and get stinking rich,” to which Taylor replied, “Getting stinking rick [sic], we are well on the way with that so I have the ball.”

The investigation was conducted by the U.S. Department of Justice Office of Inspector General.  The case was prosecuted by Deputy Chief Peter Koski and Trial Attorney Maria Lerner of the Criminal Division’s Public Integrity Section and Trial Attorney Ann Marie Blaylock of the Criminal Division’s Asset Forfeiture and Money Laundering Section.  Trial Attorney Scott Ferber of the National Security Division’s Counterespionage Section also assisted in the prosecution.

HAMPTONS RESIDENT PLEADS GUILTY FOR ROLE IN SCHEME TO CONCEAL SWISS BANK ACCOUNTS

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, February 18, 2015
New York Man Residing in the Hamptons Pleads Guilty to Obstructing Internal Revenue Service for Concealing Swiss Bank Accounts

A Montauk, New York, resident pleaded guilty today in the U.S. District Court in the Eastern District of New York to corruptly endeavoring to obstruct and impede the Internal Revenue Service (IRS), Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division announced today.

According to court documents and statements, Georges Briguet, a naturalized U.S. citizen, had Swiss financial accounts at UBS AG and at Clariden Leu Ltd., which was a wholly owned subsidiary of Credit Suisse AG.  He opened the UBS account in Switzerland in or around 1992, with approximately 7 million Swiss francs.  In 2008, he transferred the UBS funds to a numbered account at Clariden Leu in Switzerland, which he maintained until at least 2011.  For tax years 2001 through 2010, Briguet filed false federal income tax returns on which he failed to report his foreign financial accounts, failed to report any income earned thereon and failed to pay any taxes on such foreign income.

In addition, Briguet was interviewed by an IRS revenue agent who was conducting a civil audit.  During the interview, Briguet falsely stated that he had no foreign income and no foreign financial accounts.  He then later repeated those false statements to an IRS special agent who interviewed Briguet as part of a criminal investigation.

At sentencing, Briguet faces a statutory maximum sentence of three years in prison and a $250,000 fine.  As part of his plea agreement, Briguet has agreed to pay the IRS restitution in the amount of $169,935.

Principal Deputy Assistant Attorney General Ciraolo commended special agents of IRS - Criminal Investigation who investigated the case, and Trial Attorneys Mark Kotila and Jeffrey Bender and Senior Litigation Counsel Mark Daly of the Tax Division, who are prosecuting the case.  She also thanked the U.S. Attorney’s Office in the Eastern District of New York for their assistance.

MAN INDICTED FOR ALLEGEDLY TEACHING CUSTOMERS TO LIE DURING POLYGRAPH EXAMINATIONS

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, November 14, 2014
Owner of 'Polygraph.com' Indicted for Allegedly Training Customers to Lie During Federally Administered Polygraph Examinations

A former Oklahoma City law enforcement officer and owner of “Polygraph.com” has been indicted on obstruction of justice and mail fraud charges for allegedly training customers to lie and conceal crimes during polygraph examinations.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Assistant Commissioner Mark Morgan of U.S. Customs and Border Protection’s Office of Internal Affairs and Special Agent in Charge James E. Finch of the FBI’s Oklahoma City Field Office made the announcement.

Douglas Williams, 69, of Norman, Oklahoma, was charged in a five-count indictment in the Western District of Oklahoma with mail fraud and obstruction.  According to allegations in the indictment, Williams, the owner and operator of “Polygraph.com,” marketed his training services to people appearing for polygraph examinations before federal law enforcement agencies, federal intelligence agencies, and state and local law enforcement agencies, as well as people required to take polygraph examinations under the terms of their parole or probation.

The indictment further alleges that Williams trained an individual posing as a federal law enforcement officer to lie and conceal involvement in criminal activity from an internal agency investigation.  Williams is also alleged to have trained a second individual posing as an applicant seeking federal employment to lie and conceal crimes in a pre-employment polygraph examination.  Williams, who was paid for both training sessions, is alleged to have instructed the individuals to deny having received his polygraph training.

The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

The investigation is being investigated by U.S. Custom and Border Protection’s Office of Internal Affairs and the FBI’s Oklahoma City Field Office.  The case is being prosecuted by Trial Attorneys Mark Angehr and Brian K. Kidd of the Criminal Division’s Public Integrity Section.

TWO BUSINESSMEN SENTENCED FOR ILLEGAL CAMPAIGN CONTRIBTION REIMBURSEMENTS

FROM: U.S. DEPARTMENT OF JUSTICE

Friday, May 31, 2013
Two Virginia Businessmen Sentenced for Illegally Reimbursing Campaign Contributions

William P. Danielczyk Jr. was sentenced today to 28 months in prison and ordered to pay a $50,000 fine for illegally reimbursing $186,600 in contributions to the Senate and Presidential campaign committees of a candidate for federal office and then obstructing the subsequent law enforcement investigation.

Acting Assistant Attorney General Mythili Raman of the Criminal Division, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia and Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after sentencing by U.S. District Judge James C. Cacheris in the Eastern District of Virginia.

On Feb. 26, 2013, Danielczyk, 51, and Eugene R. Biagi, 78, both of Oakton, Va., pleaded guilty to making illegal conduit campaign contributions. Biagi was sentenced to two months’ supervised probation for his role in Danielczyk’s scheme.

According to court records, Danielczyk was the chairman of Galen Capital Corporation and Biagi served as the corporation’s secretary. In September 2006, Danielczyk co-hosted a fundraiser for a candidate’s campaign for the U.S. Senate and in March 2007 he co-hosted a fundraiser for the same candidate’s 2008 campaign for the President of the United States.

Danielczyk admitted that he recruited individuals, including Biagi and other corporate employees, to serve as "straw donors" to the campaigns, assuring the donors that they would be reimbursed for their contributions. Danielczyk’s assistant collected the contributions, and Danielczyk and Biagi then reimbursed the straw donors for their contributions using Galen Capital Corporation’s corporate funds.

Biagi admitted that he disguised the nature of the reimbursement payments by falsely identifying the purpose of the reimbursement checks on the memorandum line of the check itself and by issuing the checks for amounts slightly larger than the campaign contributions. As part of the obstruction scheme, Danielczyk directed the creation of back-dated letters addressed to individual contributors, which falsely characterized the reimbursement payments to them as "consulting fees." One set of the letters contained a check for $1,500 in order to further the charade that the reimbursement checks were consulting fees. Biagi furthered the scheme by, among other means, signing the back-dated letters and the checks, thereby supporting Danielczyk’s aims at covering up the true conduct and obstructing the investigations focused on the reimbursement scheme.

Danielczyk and Biagi admitted they used corporate funds to reimburse a total of $186,600 to the two campaigns. The campaigns unwittingly reported them as lawful contributions from the individual "straw donors."

This case was investigated by the FBI’s Washington Field Office. Assistant U.S. Attorneys Mark D. Lytle and Timothy D. Belevetz from the U.S. Attorney’s Office for the Eastern District of Virginia and Trial Attorney Eric L. Gibson of the Criminal Division’s Public Integrity Section prosecuted the case on behalf of the United States.