Federal prosecutors have charged a South Florida rapper of conspiring with others to steal tens of millions of dollars in federal relief funds meant to aid small businesses amid the coronavirus pandemic.
The Justice Department in a release said Diamond Blue Smith, 36, a member of the music group Pretty Ricky, and Tonye C. Johnson, 28, of Flourtown, Pa., have been charged in federal criminal complaints unsealed Tuesday for wire fraud, bank fraud and conspiracy to commit wire fraud and bank fraud.
The complaints said the pair were charged in a scheme involving 11 other defendants, including former NFL wide receiver Joshua Bellamy, to steal $24 million in loans from the Paycheck Protection Program.
The Paycheck Protection Program was included in the $2 trillion CARES Act that President Donald Trump signed in March to help small businesses struggling amid the coronavirus pandemic to keep employees on their payrolls.
Prosecutors said Tuesday that Smith obtained more than $1 million from the program through filing falsified documents on behalf of his two companies, Throwbackjersey.com and Blue Star Records.
Smith is accused of using the ill-gotten funds to buy luxury goods as well as a $96,000 Ferrari, which authorities confiscated Monday when Smith was arrested, the Justice Department said.
The complaint further accuses the rapper of seeking loans on behalf of others in order to receive kickbacks.
Johnson, the owner of Synergy Towing & Transport, is accused of using falsified documents to obtain nearly $400,000 in loans of which he paid a portion of to co-conspirators in the scheme.
According to the Justice Department, the scheme was hatched by Phillip J. Augustin, 51, who was charged in a criminal complaint in July.
The court document states that after Augustin obtained a fraudulent PPP loan for his company Clear Vision Music Group he focused on recruiting others to the scheme through his network of business contacts cultivated from his work as a manager for professional football players.
“The conspirators in the scheme planned or prepared at least 90 fraudulent applications, most of which were submitted,” the complaint said, adding that Augustin and his coconspirators applied for loans worth more than $24 million, with at least 42 of their applications being approved, equalling about $17.4 million.
“Because Augustin had originated the scheme with CHS and recruited so many loan applicants, Augustin expected to receive — and often did receive — sizable kickbacks,” the complaint said, referring to an unnamed source working with the investigation as CHS.
Charges against Bellamy, who played for the New York Jets and Chicago Bears of the NFL, were announced on Sept. 10.
That same day, the Justice Department said it had arrested 57 people with attempting to steal $175 million from the paycheck program.
During the press conference, Brian Rabbitt, the acting assistant attorney general, said those who have attempted to steal from the program fall into either those who lie about owning businesses or those in organized criminal rings.
“The involvement of these rings is unsurprising,” Rabbitt said, “but it is particularly troubling, and we will be focusing on these types of cases going forward.”
Other celebrities have also be charged with attempting to steal from the PPP, including television personality Maurice Fayne.