Alleged Fraudster Indicted In $2.7 Million Scam Against Bank
SAN FRANCISCO – A federal grand jury indicted Alan Safahi on charges related to an alleged bank fraud scheme, announced United States Attorney David L. Anderson and Internal Revenue Service, Criminal Investigation (IRS-CI), Special Agent in Charge Kareem Carter.
The indictment alleges that between June 2013 and September 2014, Safahi, 58, of Orinda, Calif., fraudulently entered into an agreement with a bank by which the bank was to be a backer for prepaid charge cards. According to the agreement, Safahi’s company, Card Express, would issue and service the charge cards. Further, the agreement required Card Express to fund 100% of the value of the cards and to turn over to the bank the total amount that the cards were supposed to be worth. Instead of complying with the agreement, Safahi allegedly directed the employees of Card Express to maintain two sets of books. One set of books maintained by Card Express was accessible to the cardholders and accurately reported the total amount for which the prepaid charge card was purchased, as well as the balance after any purchases. The second set of books, however, was provided to the bank and fraudulently stated that the amount the cardholder spent on the day the card was used was the total value of the prepaid card. Thus, Safahi caused the bank to believe the sponsored cards had much lower balances overall than they actually did have.
The indictment further alleges Safahi fraudulently diverted funds that should have been turned over to the bank, i.e., the difference between the value of the cards and the amount Card Express reported to the bank was prepaid for the cards. Safahi allegedly used some of the diverted funds to fund Card Express. Safahi allegedly used other diverted funds to maintain his personal lifestyle, including by purchasing his home. According to the indictment, on or about September 24, 2014, Safahi no longer was able to maintain sufficient cash flow to conceal his fraud and reported the true overall balance of the prepaid charge cards to the bank. After reporting the true balance of the cards to the bank, Safahi promptly shut down Card Express, causing the bank and its customers to lose money. According to the indictment, the overall balance of the charge cards Safahi reported to the banks on September 24, 2014, was approximately $2,735,531.27 larger than previously reported.
In sum, the indictment charges Safahi with bank fraud, in violation of 18 U.S.C. § 1344, four counts of wire fraud, in violation of 18 U.S.C. § 1343, and one count of money laundering, in violation of 18 U.S.C. § 1957. Safahi made his initial appearance today and was released on a $250,000 bond. The defendant was ordered to appear on September 13, 2019, at 11:00 a.m. before the Honorable Susan Illston for a status and trial setting conference.
Read more: https://www.justice.gov/usao-ndca/pr/alleged-fraudster-indicted-27-million-scam-against-bank
