Thursday, October 29, 2020

Tales From The Cryptocurrency

The New York Appellate Division for the Third Judicial Department has disbarred an attorney who is awaited sentencing on a federal felony conviction

In November 2019, following a jury trial before the United States District Court for the Southern District of New York, respondent was convicted of two federal felonies, conspiracy to commit money laundering (see 18 USC § 1956 [a] [1] [B] [i]; [2] [B] [i]) and conspiracy to commit bank fraud (see 18 USC §§ 1344, 1349). These convictions stem from respondent's involvement in a wire fraud scheme in which $400 million in cryptocurrency was transferred to and from accounts in the United States and foreign locations, as well as his role in defrauding federally backed financial institutions of moneys and other property through the misrepresentation of material facts. Respondent has not yet been sentenced.

The conviction and New York state felonies

Respondent's conviction for conspiracy to commit money laundering fails to meet this standard (see 18 USC § 1956 [a] [1] [B] [i]; [2] [B] [i]; Penal Law § 470.10; Matter of Bristol, 94 AD3d 85, 87 [2012]; Matter of Stern, 205 AD2d 162, 164 [1994]). Nevertheless, we find that, under the circumstances presented, respondent's conviction of conspiracy to commit bank fraud in violation of 18 USC §§ 1344 and 1349 is sufficiently similar to the New York felonies of scheme to defraud in the first degree (see Penal Law § 190.65 [1]) and grand larceny in the second degree (see Penal Law § 155.40 [1]) so as to trigger his automatic disbarment in this state.

As to proceeding now

To the extent that respondent argues that disciplinary action in this state is premature in light of his pending posttrial motion, such circumstances to do not entitle him to a stay of disciplinary proceedings (see Matter of Mitchell, 40 NY2d 153, 157 [1976]; Matter of Tzeuton, 66 AD3d 1082, 1082 [2009]). Should respondent's posttrial motion or potential future appeal be successful, "he may move to vacate the sanction imposed by this Court in accordance with Judiciary Law § 90 (5) (a)" (Matter of Tzeuton, 66 AD3d at 1082; see Judiciary Law § 90 [5] [a]).

A press release on the conviction from the Southern District of New York  Office of the United States Attorney notes that he is a former Locke Lord LLP equity partner.

SCOTT – who was employed between June 2015 and September 2016 as an equity partner at Locke Lord LLP, a prominent international law firm – was first introduced to Ignatova in September 2015.  Beginning in 2016, SCOTT formed a series of fake private equity investment funds in the British Virgin Islands known as the “Fenero Funds.”  SCOTT then disguised incoming transfers of approximately $400 million into the Fenero Funds as investments from “wealthy European families,” when in fact the money represented proceeds of the OneCoin fraud scheme.  SCOTT layered the money through various Fenero Fund bank accounts in the Cayman Islands and the Republic of Ireland.  SCOTT subsequently transferred the funds back to Ignatova and other OneCoin associated entities, this time disguising the transfers as outbound investments from the Fenero Funds.  As part of the scheme, SCOTT and his co-conspirators lied to banks and other financial institutions all over the world, including to banks in the United States, to cause those institutions to make transfers of OneCoin proceeds and evade anti-money laundering procedures...

SCOTT, who boasted about earning “50 by 50,” was paid more than $50 million for his money laundering services.  He used that money to purchase, among other things, a collection of luxury watches worth hundreds of thousands of dollars, a Ferrari and several Porsches, a 57-foot Sunseeker yacht, and three multimillion-dollar seaside homes in Cape Cod, Massachusetts.

SCOTT was arrested near one of his seaside homes in Barnstable, Massachusetts, on September 5, 2018.

(Mike Frisch)

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