Friday, June 18, 2021

Montreal brothers jailed for laundering $250 million for criminal organizations


Two brothers who operated an online payment transfer company for years in Montreal were sentenced Tuesday at a courthouse in Washington, D.C., to prison terms for laundering more than $250 million for criminal organizations that dealt drugs and operated Ponzi schemes.

U.S. District Court Judge Ketanji Brown Jackson sentenced Firoz Patel to a three-year prison term and his younger brother Ferhan to an 18-month prison term, less the two months he has already served. A company they owned together was also sentenced on Tuesday and is not allowed to operate for three years.

“I’m obviously very deeply ashamed by my role and the mistakes I made, the lack of actions I should have taken and my lack of judgment,” Ferhan Patel said when the judge asked if he had anything to say before she sentenced him. “While we were making mistakes I tried to rectify them when we saw the opportunity to do so. We tried hiring regulatory lawyers. We made a lot of efforts on the compliance side. But, unfortunately, while we were trying to be compliant we were aware we were in violation of federal laws while doing so.”

While delivering her decision, the judge said she did not buy claims made by either brother during Tuesday’s hearing that they simply got in over their heads while trying to compete with major competitors like PayPal and sorting out compliance restrictions.

“At the end of the day they transferred $250 million in illicit funds,” the judge said, calling the Patel brothers’ claims “astonishing.”

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“You were facilitating that conduct in a very real way,” the judge said. “I don’t know if you ever thought of the drug addicts it was creating or how elderly people were losing their life savings (through fraud schemes).”

Through an agreement made before they were sentenced, the brothers agreed to forfeit more than $4 million each as part of their sentence.

Their lawyers have asked that the brothers serve their time behind bars at a federal penitentiary in Danbury, Conn., because its proximity to the Canadian border will allow their families to visit them. The correctional institution is 540 kilometres south of Montreal. The judge agreed with a request from Firoz Patel’s lawyer that he begin serving his sentence in February for personal reasons.

The prosecution had asked that Firoz Patel be sentenced to a 52-month prison term and that his brother be sentenced to a two-year prison term. The judge decided on lower sentences because the brothers had no criminal records and because of several letters of support from people in Canada, including an imam at a Montreal mosque, a federal law enforcement officer and a doctor.

In 2010, their company was the subject of a business profile published by the Montreal Gazette. They said they grew up in Brossard and, at the time, their business was based on the ground floor of a building on Mountain Sights Ave. in Snowdon. They described how they started AlertPay, an internet payment company similar to PayPal. Ferhan boasted that while he and his brother had taken a serious risk, the company was profitable from the first day it launched.

In the same interview, Firoz complained that the company “kept getting shut down for absolutely frivolous reasons.” He was referring to how regulators had shut the company for helping organizations that were committing crimes.

According to a sentencing memorandum filed by the prosecution in the U.S. case, shortly after it began operating, AlertPay “was transmitting the illegal proceeds of multi-level marketing fraud schemes, pyramid schemes and Ponzi schemes as customers and were thus aware of this illegal money laundering.

“In addition, Firoz Patel and Ferhan Patel were participating as customers in at least one of the Ponzi schemes for which AlertPay was providing money transfer services.”

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AlertPay was also not licensed to operate anywhere in the U.S., but it continued to do so while ignoring cease and desist letters sent from several state regulators. In 2011, AlertPay hired a U.S. compliance company to conduct an audit and the brothers were warned they were operating illegally without a licence in 45 states as well as the District of Columbia and that they should stop doing business in the U.S. immediately.

The brothers ignored the warning as well as others that followed and AlertPay continued to do hundreds of millions of dollars in unlicensed transactions.

In 2012, the brothers purchased another company called MH Pillars, which operated as Payza. It was found to have had several customers involved in illegal activities with whom financial institutions would not do business. So the brothers created another company, Egopay, to handle its questionable customers.

“Like Payza, Egopay did not collect any customer due diligence data, thus continuing the money-laundering activity that Payza had engaged in. Like Payza, EgoPay continued to act as a money service business in the United States without being licensed by individual states, including the District of Columbia,” the prosecution noted in its sentencing memorandum.


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