Former Vikings Co-Owner Pleads Guilty to Providing Shadow Banking Services to Cryptocurrency Exchanges | USAO-SDNY

Damian Williams, the United States Attorney for the Southern District of New York, announced that earlier in the day, REGINALD FOWLER pleaded guilty to bank fraud, conspiracy to bank fraud, operating a money transfer business money transfer, conspiracy to operate an unlicensed money transfer business and wire fraud. FOWLER committed bank fraud and unlicensed money transmission while working for Crypto Capital, a payment processor that provided fiat currency banking services to various cryptocurrency exchanges through a series bank accounts opened under false pretenses. As part of the scheme, Crypto Capital and FOWLER fraudulently processed transactions equivalent to approximately $750 million in deposits and withdrawals from these exchanges. Further, FOWLER defrauded the Alliance of American Football (“AAF”) by claiming, among other things, that millions of dollars belonging to Crypto Capital and/or Global Trading Solutions clients were instead his own assets, that he was free to use to secure his investments in the AAF. Based on these misrepresentations, FOWLER acquired a significant stake in the AAF, but was unable to finance this investment, which contributed to the demise of the AAF.

Two of FOWLER’s accomplices, OZ YOSEF and RAVID YOSEF, are still at large.

US Attorney Damian Williams said: “Reginald Fowler has helped process hundreds of millions of dollars in unregulated transactions on behalf of numerous cryptocurrency exchanges, circumventing anti-money laundering safeguards required of licensed institutions. that ensure that the US financial system is not used for criminal purposes, and lie to US banks whose own policies would otherwise have prevented this.As cryptocurrency trading continues to grow, it is essential that it be conducted in a legal and transparent manner that does not permit its use by criminal actors. Today’s guilty plea reflects this Office’s ongoing commitment to the investigation and prosecution of people in the cryptocurrency that seek to continue operating in the shadows.

According to the allegations contained in the indictment, superseding indictments and statements made during the plea and other proceedings in the case^[1]:

On or about February 2018, REGINALD FOWLER formed Global Trading Solutions LLC (“GTS”) and began working with Crypto Capital and other related companies (the “Crypto Companies”), which were operated by Nationals Israelis OZ YOSEF and RAVID YOSEF, among others. . Crypto companies have marketed themselves as offering individuals a transparent way to exchange government-backed, or “fiat,” currencies for cryptocurrencies. Crypto companies offered these services at a time when traditional banks were reluctant to handle cryptocurrency transactions. Due to the demand for the services of crypto companies, a number of cryptocurrency exchanges have started using crypto companies to process their fiat-to-cryptocurrency transactions.

In reality, crypto companies lied to banks in order to open accounts that were used to process cryptocurrency transactions without the banks’ knowledge. FOWLER has opened dozens of such accounts in the United States and around the world. In general, he told the banks that GTS and related companies were engaged in real estate and that funds entering GTS bank accounts represented real estate investments or rental payments from properties developed by GTS. FOWLER did not disclose GTS’s involvement with crypto companies and the fact that it operated as a payment processor for hundreds of millions of dollars in cryptocurrency transactions.

Additionally, FOWLER ordered others to include false information on wire transfer instructions to further mislead banks about the nature of GTS’s business. These false declarations would suggest that the outgoing transfers were linked to real estate transactions. In email communications with RAVID YOSEF and others, the co-conspirators discussed the need to ensure the telegraph accounts were consistent with the false information FOWLER had provided to the banks when opening the account. As the banks became aware of FOWLER’s misrepresentations, they closed GTS’s bank accounts and FOWLER transferred the system to new banks. In less than ten months, FOWLER processed approximately $750 million in cryptocurrency transactions in various currencies, including nearly $600 million in US dollars.

Even though FOWLER received and conducted monetary transactions on behalf of third parties, neither it nor GTS nor any of the crypto companies have ever been licensed as a money transfer business in the United States, as the requires federal law.

Additionally, in 2018, FOWLER defrauded the AAF, a short-lived professional football league, in connection with its acquisition of a significant stake in the league. During the negotiation of his investment in AAF, FOWLER falsely claimed personal ownership of GTS funds which actually belonged to customers of FOWLER’s illegal money transmission service established in support of crypto companies. As he did when opening bank accounts, FOWLER told AAF leaders that the funds in GTS’s bank accounts came from real estate investments as well as government contracts and that the tens of millions of dollars GTS accounts were liquid assets he could use to invest. in the AAF. FOWLER has not disclosed its involvement with the crypto companies. Further, although FOWLER experienced account closures and government seizure of GTS funds in the month prior to its investment in AAF, FOWLER did not disclose these facts to AAF. FOWLER acquired a significant stake in AAF in November 2018, but was unable to fund the investment.

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FOWLER, 63, of Chandler, Arizona, pleaded guilty today to one count of bank fraud, one count of conspiracy to commit bank fraud, a chief operating officer of a wireless money transfer business license, one count of conspiracy to operate an unlicensed money transfer business, and one count of wire fraud. These offenses carry a maximum aggregate penalty of 90 years in prison.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as FOWLER’s sentence will be determined by the judge.

FOWLER is scheduled to be sentenced by U.S. District Judge Andrew Carter at 2 p.m. on August 30, 2022.

Mr. Williams praised the outstanding investigative work of special agents from the Federal Bureau of Investigation’s Money Laundering Investigation Squad in New York and special agents from the Internal Revenue Service-Criminal Investigations.

The prosecution of this case is being handled by the Bureau’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Jessica Fender, Jessica Greenwood, Samuel Raymond, Samuel Rothschild and Sheb Swett are charged with the prosecution.