Friday, October 30, 2020

Former Washington Resident Pleads Guilty to Wire Fraud and Money Laundering in Fraudulent IPO Stock Scheme

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Defrauded Investors of Millions of Dollars by Posing as a British Billionaire with Inside Track on New Companies

A former Seattle area resident who defrauded dozens of investors of at least $5.8 million pleaded guilty today in U.S. District Court in Seattle to wire fraud and money laundering, announced U.S. Attorney Brian T. Moran.  KEENAN A. GRACEY, 28, formerly of Newcastle, Washington, defrauded Seattle-area investors and others out of millions of dollars by pretending to sell them stock that GRACEY did not own and had no right to sell.  Under the terms of the plea agreement, both the prosecution and the defense will recommend a prison term of 153 months in custody when GRACEY is sentenced by Chief U.S. District Judge Ricardo S. Martinez on November 15, 2019.

According to records in the case, between 2016 and 2018, GRACEY posed as a British billionaire with degrees from the London School of Economics and Oxford University.  He drove expensive cars such as Bentleys and Ferraris and claimed to own expensive homes in Clyde Hill, Mercer Island, and Newcastle, Washington, as well as in Beverly Hills and San Diego, California.  GRACEY also used falsified bank statements to make it appear he had hundreds of millions of dollars of cash on hand.  The investigation revealed that GRACEY is Canadian, not British, and rented expensive homes and cars to make it appear he was wealthy.

GRACEY told potential investors he had special access to millions of shares of “pre IPO” stock that would produce returns of as much as 60 times the initial investment.  Some investors gave GRACEY as much as $745,000, believing that they were purchasing stock.  In fact, GRACEY did not own any of the stock he was pretending to sell and simply stole the victims’ money.  In all, GRACEY collected $5,894,676 from dozens of investors.

More: Maryland men charged with stealing $8M in disaster aid funds

The Securities and Exchange Commission filed a civil suit against GRACEY in May 2018 and obtained a temporary restraining order barring him from selling securities.  In September 2018, the order was made permanent, and GRACEY was ordered to disgorge $4.4 million in cash and wire transfers that he had fraudulently obtained from investors.  However, even after the SEC order, GRACEY continued to try to defraud investors by claiming he owned shares in a gene editing company.  Between June 2018 and December 2018, GRACEY collected $2.2 million for shares of stock he did not own.

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GRACEY’s fraud ended when he was arrested by the FBI on December 20, 2018.  A federal grand jury charged him with wire fraud on January 3, 2019.  On July 25, 2019, the grand jury returned a superseding indictment asserting additional charges, including money laundering charges.

On March 29, 2019, the United States seized $603,840 of fraud proceeds that GRACEY had paid to rent a luxury mansion in Beverly Hills, California.    According to court pleadings, the government intends to forfeit this money and request it be used to compensate GRACEY’s victims.

Money Laundering and Wire Fraud are each punishable by up to 20 years in prison.

The case is being investigated by the FBI.  The case is being prosecuted by Assistant United States Attorneys Seth Wilkinson, Lyndsie Schmalz, and Michelle Jensen.

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