Manhattan U.S. Attorney Announces Charges Against Six Individuals In International High-Yield Investment Fraud Scheme
Scheme Participants Impersonated Federal Reserve Officials to Swindle Over $50 Million from Investors in the United States and Foreign Countries
Preet Bharara, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent In Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), and Deirdre L. Fike, Assistant Director in Charge of the Los Angeles Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment charging six defendants with conspiracy, wire fraud, impersonation of Federal Reserve Bank of New York (“New York Fed”) officials, money laundering, and other crimes in connection with a fraudulent high-yield investment scheme that resulted in the theft of over $50 million from investors in the United States and around the world.
Manhattan U.S. Attorney Preet Bharara said: “Edwards and his co-defendants allegedly concocted and carried out an audacious scam, promising investors exponential returns on investments they claimed were overseen by the New York Federal Reserve and backed by the U.S. government. In reality, it was all a lie; there was no government-backed program and no plan to invest, only an alleged plan to steal the investors’ money.”
HSI Special Agent in Charge Angel M. Melendez said: “Using forged and counterfeit Federal Reserve documents, these individuals allegedly orchestrated a complex international scheme that cost unwitting investors both here and abroad over $50 million dollars. This indictment shows the great length that criminals will go to steal the money of hard working individuals. HSI is up to the challenge to uncover these schemes and bring the participants to justice.”
FBI Assistant Director Deirdre L. Fike said: “The defendants in this case allegedly used complicated terminology and claimed to have international sophistication as they swindled their victims. Skilled investigators with the FBI and with the HSI will continue our joint efforts to mitigate the threat to capital markets around the world.”
According to the allegations contained in the Indictment:
From at least June 2013 through August 2016, RIENZI EDWARDS, MICHAEL JACOBS, RUBY HANDLER-JACOBS, F.K. HO, LAWRENCE LESTER, and RACHEL GENDREAU orchestrated and executed a fraudulent high-yield investment program known as the “Cities Upliftment Program,” or CUP, which the defendants falsely told investors was operated by the New York Fed. The scheme was principally designed and operated by EDWARDS, with the assistance of JACOBS and HANDLER-JACOBS, and was marketed to investors around the world through brokers, including HO, LESTER, and GENDREAU.
The defendants pitched the CUP to investors as a highly exclusive, invitation-only, public-private investment partnership designed to raise capital and generate large returns through a purported “trading program” run by the New York Fed. The defendants promised investors that the CUP would generate extremely high returns on their investments, in some cases as much as $150 million for every $1 million invested. The defendants claimed that half of the returns would be used to help revitalize American cities recovering from the 2008 financial crisis, and that the other half would be returned to the investors at the rate of $1 million per day for 75 banking days. The defendants told numerous other lies to victims to convince them to invest, including that their funds would be held in a trust account established by the New York Fed and that CUP investments were risk-free because they were “guaranteed” by the United States government. In truth, and as the defendants well knew, the CUP was a complete scam.
One of the primary ways in which the defendants tricked victims into investing millions of dollars in the CUP scheme was the use of forged and counterfeit New York Fed documents. On numerous occasions, the defendants sent, or caused to be sent, investment contracts, guarantees, correspondence, and other CUP-related documents printed on what appeared to be New York Fed letterhead and bearing the names and purported signatures of New York Fed officials, including the president, certain board members, and other senior officials of the New York Fed. In addition, EDWARDS, JACOBS, and HO, with the assistance of HANDLER-JACOBS, pretended to be New York Fed officials during in-person meetings and phone calls with investors to convince them to invest in the CUP.
Instead of holding investors’ funds in the purported trust accounts as promised, the defendants simply stole the money. EDWARDS, JACOBS, and HANDLER-JACOBS caused the bulk of the funds to be laundered through various domestic and overseas bank accounts in Hong Kong, Barbados, the United Kingdom, and Sri Lanka held in the names of shell companies that they controlled. A portion of the proceeds was then kicked back to the brokers who had recruited the investors. Altogether, the defendants stole over $50 million from investors in the United States and several foreign countries.
JACOBS was arrested at Los Angeles International Airport in California on December 11, 2016, and was presented in federal court before a U.S. Magistrate Judge in Santa Ana, California, on December 12. HANDLER-JACOBS was arrested in Albuquerque, New Mexico, on December 11, 2016, and was presented in federal court before a U.S. Magistrate Judge in Albuquerque on December 12. LESTER was arrested in Mount Vernon, Washington, on December 12, 2016, and presented the same day in federal court before a U.S. Magistrate Judge in Seattle, Washington. GENDREAU was arrested on December 12, 2016, in Savanna, Illinois, and was presented in federal court before a U.S. Magistrate Judge in Rockford, Illinois, earlier today. EDWARDS and HO are currently at large.
The case is assigned to U.S. District Judge Paul G. Gardephe. Arraignment is scheduled for December 20, 2016, in federal court in Manhattan.
EDWARDS, 55, of Sri Lanka, JACOBS, 64, of Albuquerque, New Mexico, and HANDLER-JACOBS, 64, of Albuquerque, New Mexico are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 10 years in prison; one count of conspiracy to commit money laundering and two counts of money laundering, each of which carries a maximum sentence of 20 years in prison; one count of conducting monetary transactions in unlawful funds, which carries a maximum sentence of 10 years in prison; one count of conspiracy to impersonate employees of the United States, which carries a maximum sentence of five years; one count of impersonating employees of the United States, which carries a maximum sentence of three years; and aggravated identity theft, which carries a maximum sentence of two years in prison.
HO, 80, of Singapore, LESTER, 71, of Mount Vernon, Washington, and GENDREAU, 46, of Savanna, Illinois, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 10 years in prison; and one count of aggravated identity theft, which carries a maximum sentence of two years in prison. In addition, HO is charged with one count of conspiracy to impersonate employees of the United States, which carries a maximum sentence of five years; and one count of impersonating employees of the United States, which carries a maximum sentence of three years.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
Mr. Bharara praised the investigative work of HSI and the FBI. Mr. Bharara also thanked the Federal Reserve Bank of New York for its ongoing cooperation in this investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Daniel S. Noble is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.