Saturday, October 31, 2020

Founder of tech startup Trustify indicted for defrauding investors


Trustify founder Danny Boice has been charged with fraud and money laundering for what Justice Department officials have described as a scheme that resulted “in millions of dollars of losses to investors” and in which Boice allegedly “misappropriated substantial portions of the investments” in Trustify for his own personal gain.

Boice, 41, is charged with five counts of wire fraud, one count of securities fraud and two counts of money laundering in an indictment dated July 22 and unsealed Friday. Acting Assistant Attorney General Brian Rabbitt of the Justice Department’s Criminal Division, U.S. Attorney G. Zachary Terwilliger for the Eastern District of Virginia, and Assistant Director in Charge Timothy Slater of the FBI’s Washington field office announced the charges.

Boice could not be immediately reached for comment.

The indictment alleges that between 2015 and 2019, Boice would “materially misrepresent the growth and size of Trustify’s business” in order to secure more money from investors. In all, during that time, more than 90 investors put a total $18.5 million into the now-defunct company, according to the charging document. Trustify, previously based in Arlington, had provided a platform meant to quickly connect customers with private investigators.

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The DOJ charges that Boice allegedly told a representative of one investor in 2016 that the startup was earning $500,000 per month in revenue, when the actual revenue was far less. In another instance, per the indictment, Boice allegedly sent an email to a potential third-party investor posing as a representative of an investment bank to suggest it was investing in Trustify in order to secure nearly $2 million in funding from that third party.

The indictment does not include any names of investors or entities.

In a separate filing last year to Delaware’s Chancery Court as part of bankruptcy proceedings for Trustify, investor Anchorage Illiquid Opportunities Offshore Master V LP had alleged that it was tricked into investing nearly $2 million in Trustify in 2018 through an email it said was purported to be from a well-known investment bank.

According to the Justice Department’s charging document released Friday, Boice also allegedly “diverted millions of dollars of investor funds to his own personal benefit … to fund his lavish lifestyle.” That included a wire transfer of $291,190 as part of a down payment for a home in Alexandria and another for $83,000 for travel by private jet to Vermont, the indictment states.

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In early 2019, Boice allegedly told a representative of an investment firm that Trustify had around $18 million in its corporate bank account, when, in fact, that account’s balance was less than $10,000, DOJ authorities said.

If Boice is found guilty, he would be expected to forfeit $7.4 million, according to the indictment.

Last year, Trustify’s creditors had successfully petitioned to place the company into bankruptcy. The court-appointed receiver for that case had, in January, found no “viable assets” remaining of the company, but did find that Trustify principals “appear to have withdrawn inexplicable large sums from the accounts through wire transfers,” according to a report that he submitted to Chancery Court in Delaware and was obtained by the Washington Business Journal.

That included wire transfers of about $800,000 that appeared to go to Boice, and another $300,000 to accounts jointly held by Boice and Jennifer Mellon, his wife at the time and former president of Trustify, though the receiver said the investigation was ongoing and could not determine whether the withdrawals were for an improper use or if there was a way to recover those funds.

Mellon, who is now listed as the confidential assistant to the chairman of the Federal Energy Regulatory Commission, is not named in the indictment released Friday.

Trustify has separately been battling various stakeholders in court for more than two years. The company was sued for payment by its law firm and a communications firm. In March 2019, several former employees of Trustify also won a default judgment against the firm, while Trustify’s Arlington landlord, JBG Smith Properties, also won a judgmentagainst the company for back rent.

In August 2019, the company was hit with a $600,000 Virginia state lien. The company has since relinquished its Arlington headquarters space.

Boice has had ties to another Arlington tech company, CommuniClique, whose CEO, Andy Powers was just sentenced last week to more than 12 years in prison for what the U.S. Department of Justice called an investment fraud and money laundering conspiracy that caused $25 million in losses. Boice was listed as a director for CommuniClique in a 2010 Securities and Exchange Commission filing, and Powers was listed as an executive officer in another startup Boice had helped found, Speek Inc.


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