US prosecutors requested a federal judge to sentence Reginald Fowler, who admitted to bank fraud in connection with Crypto Capital Corp, to 7 years in prison and the forfeiture of over $720 million.
64-year-old Fowler should get a substantial sentence because he played a “critical role in a serious criminal enterprise,” prosecutors said in a court document.
Prosecutors accused him of establishing a firm called Global Trading Solutions (GTS) around Feb. 2018, and working with Crypto Capital Corp, which had been set up by Israeli brothers Oz and Ravid Yosef, which helped customers exchange fiat money for crypto. Crypto Capital and GTS didn’t obtain a license to operate from US agencies, making it illegal for them to transmit money.
In April last year, Fowler pleaded guilty to five counts, including bank fraud conspiracy and operation of an unlicensed money-transmitting business.
The now-defunct Crypto Capital was headed by a Canadian-Panamanian Ivan Manuel Molina Lee, who himself was arrested in Poland in 2019 on money laundering allegations.
The “shadow bank” was essentially set up to handle payments for crypto startups that found it a hassle to find regular banks willing to work with cryptocurrencies at the time. It also had ties to several prominent crypto companies including Tether and Bitfinex, which handed $850 million to Crypto Capital to process customer withdrawal requests — funds were eventually lost, ultimately leading to an $18.5 million fine from the NY Attorney General’s office.
Fowler claimed he used funds for real estate, not crypto
Fowler opened bank accounts on behalf of GTS and other affiliates at several banks, including those backed by the Federal Deposit Insurance Corp.
And because banks were reluctant to engage with crypto companies, Fowler allegedly lied to them and claimed they would be used for real estate investments or rent payments from properties developed by GTS.
He also directed individuals to include false information on wire transfer instructions in order to deceive banks on the nature of the transactions.
Between Feb. 2018 and Oct. 2018, GTS and Crypto Capital processed about $750 million in crypto transactions, of which about $600 million was in US dollars.
Fowler’s fraud allegations don’t end there. Prosecutors allege that between June 2018 and Feb. 2019, he lied about the amount and source of his wealth in order to secure an ownership stake in the Alliance of American Football (AAF), an NFL rival that suddenly shut down within eight weeks of its inaugural. Fowler is a former minority owner of the Minnesota Vikings NFL team.
He showed AAF’s co-founder Charlie Ebersol and the team false information about his wealth, which he claimed was largely in cash. But actually, the accounts he showed were tied to his illegal money service business.
“Thus, when Fowler represented his net worth by relying on those accounts, he was lying about both the source of those funds (they were not from real estate or drone businesses) as well as the ownership of those funds (they belonged to GTS and, more generally, were necessary to redeem GTS/Crypto Capital clients who sold their cryptocurrency, not money Fowler could use),” prosecutors said.
Fowler entered a stock purchase agreement involving AAF’s parent company, which would make him the largest shareholder in the company. But he began to miss payment deadlines and sent payments that were not in line with the agreement, made up of the GTS/Crypto Capital funds. These were funds that Fowler “effectively stole” from his other clients.
Fowler is due to be sentenced in Manhattan court on Thursday by US District Judge Andrew L. Carter.
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Source: https://blockworks.co/news/reggie-fowler-shadow-bank-crypto-capital-corp