Damian Williams, the United States Attorney for the Southern District of New York, announced that FRANKLIN RAY was sentenced today by U.S. District Judge Analisa Torres to 212 months in prison for engaging in multiple fraud schemes, including a $40 million Ponzi scheme and two COVID-19 loan fraud schemes, and committing aggravated identity theft in connection with one of those schemes. RAY previously pled guilty to four counts of wire fraud and one count of aggravated identity theft.
U.S. Attorney Damian Williams said: “In the span of less than two years, Franklin Ray engaged in four separate fraudulent schemes, including a $40 million Ponzi scheme that victimized hundreds of people and schemes that stole funds intended for those in need during the COVID-19 pandemic. Ray even had the audacity to continue his Ponzi scheme while on pretrial release after his arrest in March 2022, stealing approximately $2 million from unsuspecting victims after he was charged with federal crimes. Today’s sentence shows that engaging in fraudulent conduct will have severe consequences.”
As alleged in the previously filed Complaint and Indictment and other court documents:
Beginning in at least June 2021, FRANKLIN RAY began to offer investors an opportunity to invest in his trucking and logistics company, CSA Business Solutions LLC (the “Truck Investment Scheme”). Specifically, RAY and the investors entered into contracts pursuant to which CSA Business Solutions LLC would procure and operate a truck in its trucking business for each $20,000 contributed by the investor. RAY told investors that the trucks would perform delivery services for a multinational e-commerce company and/or a multinational shipping company and that the investors would be entitled to 77% of the net income of the trucks. In reality, CSA Business Solutions LLC operated few trucks and had minimal revenues from trucking activities. Instead, investors in the Truck Investment Scheme received payments from new investments into the scheme or from other sources. After the investors purchased the rights to trucks from CSA Business Solutions LLC, RAY sent them falsified spreadsheets at regular intervals, purporting to show the performance of their trucks during the relevant period. RAY ultimately persuaded approximately 275 investors to invest at least $40 million and fraudulently claimed to have purchased over 2,000 trucks with the investments.
RAY also carried out fraudulent schemes to obtain over $1.9 million in government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic on behalf of CSA Business Solutions LLC and another Michigan-based trucking company (the “SBA Loan Fraud Schemes”). In connection with the SBA Loan Fraud Schemes, RAY submitted false information and forged documents to the Small Business Administration and commercial lenders. RAY claimed that these businesses engaged in significant trucking business, but they had minimal revenues and trucking activity. RAY also committed aggravated identity theft with respect to one of the SBA Loan Fraud Schemes.
In addition, RAY fraudulently induced a New York City-based real estate company (the “Company”) to pay $175,000 in startup costs for a joint venture (the “Joint Venture”) between the Company and CSA Business Solutions LLC. In order to persuade the Company to enter into the Joint Venture and pay the $175,000, RAY lied about his personal business experience and the trucking business conducted by CSA Business Solutions LLC. Rather than pay for startup costs, RAY spent the funds on personal expenses, including private airplane trips. The Joint Venture was never formed.
RAY was arrested in early March 2022, and a CSA Business Solutions LLC bank account was seized at that time. After his arrest, up until his Indictment in April 2022, RAY continued to operate the Truck Investment Scheme. RAY hid the fact of his arrest and the seizure of the bank account and lied to investors about why he did not make expected payments after his arrest. During the period after his arrest, RAY opened new bank accounts on behalf of CSA Business Solutions LLC and continued to solicit and accept investor funds for trucks that did not exist. In the post-arrest period alone, RAY defrauded investors into paying at least $1.9 million into his scheme.
RAY previously pled guilty to bank fraud and wire fraud in the Eastern District of Michigan. He received a two-year sentence in connection with those crimes and was released from federal custody in 2010.
In addition to the prison term, RAY, 52, of Canton, Michigan, was sentenced to five years of supervised release and ordered to forfeit $42,128,912.00 and several assets, including a 1968 Chevy Camaro. The defendant was also ordered to pay restitution in an amount to be determined.
Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation.
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