Binance and CEO Plead Guilty to Federal Charges in $4B Resolution

 

Binance Admits It Engaged in Anti-Money Laundering, Unlicensed Money Transmitting, and Sanctions Violations in Largest Corporate Resolution to Include Criminal Charges for an Executive

Binance Holdings Limited (Binance), the entity that operates the world’s largest cryptocurrency exchange, Binance.com, pleaded guilty and has agreed to pay over $4 billion to resolve the Justice Department’s investigation into violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA).

Binance’s founder and chief executive officer (CEO), Changpeng Zhao, a Canadian national, also pleaded guilty to failing to maintain an effective anti-money laundering (AML) program, in violation of the BSA and has resigned as CEO of Binance.

Binance’s guilty plea is part of coordinated resolutions with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC).

“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed – now it is paying one of the largest corporate penalties in U.S. history,” said Attorney General Merrick B. Garland. “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases.  The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”

“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen. “Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”

“A corporate strategy that puts profits over compliance isn’t a path to riches; it’s a path to federal prosecution,” said Deputy Attorney General Lisa O. Monaco. “Today’s charges and guilty pleas – combined with a more than $4 billion financial penalty – sends an unmistakable message to crypto and defi companies: if you serve U.S. customers, you must obey U.S. law.” 

“Changpeng Zhao made Binance, the company he founded and ran as CEO, into the largest cryptocurrency exchange in the world by targeting U.S. customers, but refused to comply with U.S. law,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “Binance’s and Zhao’s willful violations of anti-money laundering and sanctions laws threatened the U.S. financial system and our national security, and each of them has now pleaded guilty. Make no mistake: when you place profits over compliance with the law, you will answer for your crimes in the United States.”

“Binance’s crimes gave sanctioned customers unfettered access to American capital and financial services,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division (NSD). “This prosecution is a warning that companies that do not build sanctions compliance into their services face serious criminal penalties, as do the executives who lead them.”

“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” said Acting U.S. Attorney Tessa M. Gorman for the Western District of Washington. “Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine – transactions for which Binance profited with significant fees.”

“Binance’s activities undermined the foundation of safe and sound financial markets by intentionally avoiding basic, fundamental obligations that apply to exchanges, all the while collecting approximately $1.35 billion in trading fees from U.S. customers,” said Chairman Rostin Behnam of the Commodity Futures Trading Commission (CFTC). “American investors, small and large, have demonstrated eagerness to incorporate digital asset products into their portfolios. It is our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place, and that illegal and illicit conduct is swiftly addressed. When, as here, an entity goes even further, deliberately avoiding to employ meaningful access controls, intentionally avoiding knowing customers’ identities, and actively concealing the presence of U.S. customers on its platforms, there is no question that the CFTC will strike hard and aggressively.”

“When you put growth above compliance, you end up in hot water,” said Chief Jim Lee of the IRS Criminal Investigation (IRS-CI). “Our team of investigators uncovered that Binance disregarded anti-money laundering Know Your Customer laws, failed to register as a money transmitter, and willfully violated U.S. sanctions tied to the International Emergency Economic Powers Act. When you do so, your business becomes a playground for bad actors. Hundreds of millions of dollars in illicit proceeds from ransomware variants, darknet transactions, and various internet-related scams moved through Binance in an attempt to evade detection by law enforcement.”

According to court documents, Binance admitted to prioritizing growth and profits over compliance with U.S. law. Binance launched in 2017 and focused on attracting high-volume customers, including U.S.-based customers. Binance quickly became the largest cryptocurrency exchange in the world, with the greatest share of its customers coming from the United States. As a result of serving U.S. customers, Binance was required to register with FinCEN as a money services business and to implement an effective AML program that was reasonably designed to prevent Binance from being used to facilitate money laundering. Binance chose not to comply with U.S. law and failed to implement controls and procedures to prevent money laundering. Binance also did not implement controls that would have prevented U.S. customers from conducting transactions with customers in sanctioned jurisdictions, despite knowing that the system it used to match customers for transactions would necessarily cause transactions in violation of IEEPA.

Instead of complying with U.S. law, in 2019, Binance announced that it would block U.S. customers and launched a separate U.S. exchange, Binance.US. Despite this announcement, Binance took steps to maintain a substantial number of U.S. customers. In particular, Binance focused on retaining valuable “VIP” customers, which were responsible for a large portion of Binance’s trading volume and revenue. These VIP customers were critical to Binance’s business because they helped provide the necessary liquidity to facilitate trades of digital assets. For example, Binance executives, including Zhao, made a plan to contact VIP customers and help the VIP register a new account for an offshore entity and transfer holdings to that account. Binance employees also called U.S. VIPs to encourage them to provide information that suggested the customer was not located in the United States.

Binance also did not implement the core components of an effective AML program: Binance did not implement comprehensive know-your-customer (KYC) protocols or systematically monitor transactions, and Binance never filed a suspicious activity report (SAR) with FinCEN. For years, Binance allowed users to open accounts and trade without submitting any identifying information beyond an email address. Binance began requiring all users to provide KYC information in August 2021 but allowed users who had not provided KYC to continue trading on the exchange until May 2022. Between August 2017 and October 2022, U.S. users, including VIPs, conducted trillions of dollars in transactions on the platform, generating over $1.6 billion in profit for Binance.

As Binance’s internal communications showed, Binance’s compliance employees recognized that Binance did not have protocols to flag or report transactions for money laundering risks, which employees recognized would attract criminals to the exchange. As one compliance employee wrote, “we need a banner ‘is washing drug money too hard these days - come to binance we got cake for you.’” Due in part to Binance’s failure to implement an effective AML program, illicit actors used Binance’s exchange in various ways, including conducting transactions for mixing services that obfuscated the source and ownership of cryptocurrency; transferring illicit proceeds from ransomware variants; and moving proceeds of darknet market transactions, exchange hacks, and various internet-related scams.

Binance also knew that U.S. sanctions laws prohibited U.S. persons – including its U.S. customers – from trading with its customers subject to U.S. sanctions, including customers in comprehensively sanctioned jurisdictions, such as Iran. Binance knew that it had a significant number of users from comprehensively sanctioned jurisdictions and a substantial number of U.S. users and that its matching engine would necessarily cause U.S. users to transact with users in sanctioned jurisdictions in violation of U.S. law. Nonetheless, Binance did not implement controls that would prevent U.S. users from trading with users in Iran; and, because of this intentional failure, between January 2018 and May 2022, Binance willfully caused over $898 million in trades between U.S. users and users ordinarily resident in Iran.

As part of the plea agreement, Binance has agreed to forfeit $2,510,650,588 and to pay a criminal fine of $1,805,475,575 for a total financial penalty of $4,316,126,163. Binance has also agreed to retain an independent compliance monitor for three years and remediate and enhance their anti-money laundering and sanctions compliance programs. Binance separately has also reached agreements with the CFTC, FinCEN, and OFAC, and the Department will credit approximately $1.8 billion toward those resolutions.

The Department reached its resolution with Binance based on a number of factors, including the nature, seriousness, and pervasiveness of the offense, as a result of which Binance processed billions of dollars of cryptocurrency transactions for U.S. persons and caused U.S. customers to engage in transactions in violation of U.S. sanctions. Binance did not make a timely and voluntary disclosure of wrongdoing, but it received partial credit for its cooperation with the Department’s investigation, and it has taken steps to remediate its compliance program. Binance did not receive full credit for its cooperation because it delayed producing relevant evidence, including recorded meetings in which Binance executives discussed U.S. legal requirements. Accordingly, the total criminal penalty reflects a 20% reduction off the bottom of the applicable U.S. sentencing guidelines fine range.

In addition, according to court documents, Zhao, Binance’s founder, owner, and CEO, admitted that he understood that Binance served U.S. users and was thus required to register with FinCEN and implement an effective AML program. Zhao knew that U.S. users were essential to Binance’s growth and were a significant source of revenue and knew that an effective AML program would include KYC protocols that would mean that some customers would choose not to use Binance. Zhao told employees it was “better to ask for forgiveness than permission,” and prioritized Binance’s growth over compliance with U.S. law. Without an effective AML program, Binance caused transactions between U.S. users and users in jurisdictions subject to U.S. sanctions. These illegal transactions were a clear and foreseeable result of Zhao’s decision to prioritize Binance’s profit and growth over compliance with the BSA.

IRS-CI is investigating the case. The case is being prosecuted by Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley and Trial Attorney Elizabeth Carr of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), Trial Attorneys Beau Barnes and Alex Wharton of NSD’s Counterintelligence and Export Control Section (CES), and Assistant U.S. Attorney (AUSA) Mike Dion for the Western District of Washington. Trial Attorney Julia Jarrett, formerly of MLARS and currently an AUSA for the District of Oregon, and Trial Attorney Matthew Anzaldi, formerly of CES and currently with NSD’s National Security Cyber Section, made substantial contributions to this investigation and prosecution.

MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system. The Criminal Division has surged resources to the Bank Integrity Unit, which has imposed over $12 billion in penalties on financial institutions for sanctions violations over the last decade. NSD’s Counterintelligence and Export Control Section investigates and prosecutes individuals and corporations for violations of export control and sanctions laws, in addition to other national security crimes. NSD continues to expand its corporate enforcement efforts – including growing the ranks of prosecutors dedicated to this work and establishing a Chief Counsel and Deputy Chief Counsel for Corporate Enforcement.

Governor Hochul Announces Crackdown on Unsafe Driving Through Thanksgiving Weekend

More Than 14,063 Tickets Issued and 213 People Arrested for DWI Statewide During Last Year’s Enforcement

Construction Related Lane Closures Limited From 6 A.M. Wednesday, November 22 Through 6 A.M. Monday, November 27

Governor Kathy Hochul today announced that the New York State Police will participate in a special traffic enforcement initiative to crack down on unsafe driving behaviors through Thanksgiving weekend. The special traffic enforcement period runs from Wednesday, November 22, 2023, through Sunday, November 26, 2023 and will focus on impaired and distracted driving as well as speeding and the Move Over Law.

“The Thanksgiving holiday is one of the busiest travel times of the year, and our goal is to ensure that everyone gets where they need to go safely,” Governor Hochul said. “State Troopers and local law enforcement will be out in force working to prevent needless accidents. I urge drivers to follow the rules of the road and make safety your top priority while traveling this holiday season.”

In an effort to ease travel during the busy Thanksgiving weekend, temporary lane closures for road and bridge construction projects on New York State highways will be suspended beginning at 6 a.m. on Wednesday, November 22 through 6 a.m. on Monday, November 27. Motorists are advised that some work may continue behind permanent concrete barriers for emergency repairs. The construction suspension aligns with New York State's Driver's First initiative, which prioritizes the convenience of motorists to minimize traffic congestion and travel delays due to road and bridge work.

The Thruway Authority reminds motorists that 12 service areas are closed and under construction as part of the $450 million private investment and modernization project. Fuel services remain open at all locations. Motorists can view the service areas and plan their stops on the Thruway Authority’s website and on the free mobile app.

The State Police will supplement regular patrols statewide, including fixed sobriety checkpoints, which targets distracted drivers by utilizing Concealed Identity Traffic Enforcement (CITE) patrol vehicles to better locate drivers talking or texting on handheld devices. These unmarked vehicles blend in with everyday traffic but are unmistakable as emergency vehicles once the emergency lighting is activated.

Elevated traffic volumes typically occur during the Thanksgiving holiday weekend. It is also a time when alcohol consumption is widespread. During the 2022 Thanksgiving holiday period, troopers arrested 213 drivers for DWI, issued 4,757 speeding tickets, and 425 tickets for distracted driving.

The Thanksgiving impaired driving enforcement initiative is funded by the Governor’s Traffic Safety Committee (GTSC). The GTSC and the New York State STOP-DWI Foundation remind motorists that their “Have a Plan” mobile app, is available for Apple, Android and Windows smartphones. The app enables New Yorkers to locate and call a taxi or rideshare service and program a designated driver list. It also provides information on DWI laws and penalties and provides a way to report a suspected impaired driver.

If you drive drunk or drugged, you not only put your life and the lives of others at risk, you could face arrest, jail time, and substantial fines and attorney fees. The average drinking and driving arrest costs up to $10,000.

Arrested drunk and drugged drivers face the loss of their driver’s license, higher insurance rates, and dozens of unanticipated expenses from attorney fees, fines and court costs, car towing and repairs, and lost time at work.

The New York State Police, GTSC and National Highway Traffic Safety Administration recommend these simple tips to prevent impaired driving:

• Plan a safe way home before the fun begins;
• Before drinking, designate a sober driver;
• If you’re impaired, use a taxi or ride sharing service, call a sober friend or family member, or use public transportation;
• Use your community’s sober ride program;
• If you suspect a driver is drunk or impaired on the road, don’t hesitate to contact local law enforcement;
• If you know someone who is about to drive or ride while impaired, take their keys and help them make other arrangements to get to where they are going safely.

OIG Report Details Spoilage of Over $500K in PPE at St Albans Veteran's Home During Pandemic

 

Over $560,000 worth of Personal Protective Equipment (PPE) purchased during the COVID-19 Pandemic by the New York State Department of Health (DOH) for use by the New York State Veterans Home at St. Albans in Jamaica, Queens, was ruined as result of being stockpiled on tarp-covered, weather-exposed pallets in a parking lot outside St. Albans due to a lack of storage space and significant deficiencies in both intra- and inter-agency communication. 

These, and additional findings were detailed in a report released today by New York State Inspector General Lucy Lang, who outlined her office’s comprehensive investigation into the issues surrounding DOH and St. Albans’ participation in a statewide “Aggregated Buy” of PPE organized by the New York State Office of General Services (OGS) in late 2020 in anticipation of a feared “third wave” in early 2021. 

While acknowledging that the events detailed in the report took place against the difficult backdrop of constantly changing scientific predictions about the spread of the virus and significant logistical challenges, the Inspector General’s investigation revealed that missed opportunities, insufficiencies in recordkeeping, staffing shortages and communication breakdowns both within DOH and with other agencies led to a significant waste of state resources. 

“Collaboration is vital to the effective operation of government, especially during times of crisis, including the one we are now facing in accommodating migrant and asylum-seeking communities.” said New York State Inspector General Lucy Lang. “As New York State continues to prioritize public safety and living our shared values by efficiently deploying resources, our report calls for increased and consistent communication to mitigate waste and save lives.”

More specifically, in November 2020, using its rate of PPE consumption from the height of the pandemic as a guide, as was suggested by OGS, but without taking into account on-site storage space, St. Albans ordered over five million units of PPE. While administrators at St. Albans believed this PPE would be delivered monthly starting in December, purchase orders were not able to be submitted by DOH until February 2021. This delay, which was not communicated to St. Albans, resulted in a larger than anticipated, and ultimately not needed, delivery of PPE being made to St. Albans in mid-February 2021, exhausting their storage space. In the months that followed, PPE continued to arrive, and when communication between the various stakeholders with an ability to address the growing storage crisis failed, the PPE was moved to the St. Albans parking lot, where it would slowly decay. 

To facilitate the accurate and ongoing exchange of information, particularly during times of crisis, the Inspector General made several recommendations to the NYS Department of Health’s Health Facilities Management (HFM) unit, which has oversight of State Veterans Homes, including:

• Codifying a process to ensure proper communication with the State Veterans Homes it oversees, including memorializing meetings and action items to ensure that all stakeholders, including the Veteran Home administrators and representatives of other relevant DOH subunits, have the same information to facilitate constructive problem-solving;
• Continuing to prioritize hiring for vacancies to lessen the burden on existing employees and provide additional avenues for information flow;
• Incorporating the consideration of facility storage space into all procurement processes;
• Promulgating policies and procedures to ensure proper records are maintained for the tracking of inventory and provide training to involved staff; and
• Ensuring staff awareness of the role of the NYS Division of Homeland Security and Emergency Services (DHSES) in overseeing the State’s inventory of equipment during emergencies.

Read OIG’s complete report HERE, download included photos HERE, and follow the office’s work @NewYorkStateIG.

State Labor Department Releases Preliminary October 2023 Area Unemployment Rates

 

The New York State Department of Labor today released preliminary local area unemployment rates for October 2023. Rates are calculated using methods prescribed by the U.S. Bureau of Labor Statistics. The State’s area unemployment rates rely in part on the results of the Current Population Survey, which contacts approximately 3,100 households in New York State each month. To recap last week’s statewide press release, New York State’s seasonally adjusted unemployment rate increased from 4.0% in September to 4.2% in October 2023.

Local Area Unemployment Rates* (%)
October 2022 and October 2023
(Not seasonally adjusted)

The data in the preceding table are not seasonally adjusted, which means they reflect seasonal influences (e.g., holiday and summer hires). Therefore, the most valid comparisons with this type of data are year-to-year comparisons of the same month, for example, October 2022 versus October 2023. Labor force data for the current month are preliminary and subject to revision as more information becomes available the following month. Revised estimates for prior months are available at: https://dol.ny.gov/local-area-unemployment-statistics Labor force statistics, including the unemployment rate, for New York and every other state are based on statistical regression models specified by the U.S. Bureau of Labor Statistics. These are the most up-to-date estimates of persons employed and unemployed by place of residence. Estimates are available for New York State, labor market regions, metropolitan areas, counties and municipalities with population of at least 25,000. Unemployment Rates By County, New York State, October 2023 Jobs and Unemployment Fact Sheet This fact sheet conveys important technical information that will contribute to a better understanding of labor force data (“household survey”), including resident employment/unemployment rates, and jobs by industry data (“business survey”), which are presented in the New York State Department of Labor’s monthly press release. State Unemployment Rates Based on Regression Model Beginning with data for January 1996, unemployment rates for New York State and all other states (as well as New York City and the City of Los Angeles) have been estimated using time-series regression statistical models developed by the U.S. Bureau of Labor Statistics (BLS). Advantage of Regression Model Use of a time-series regression model reduces the month-to-month variation in unemployment rates and resident employment by reducing variation caused by sampling errors and other components of statistical noise (irregularities). Benchmarking of Estimates Once each year, labor force estimates, such as civilian labor force and the unemployment rate, are revised to reflect updated input data including new Census Bureau populations controls, newly revised establishment jobs data and new state-level annual average data from the Current Population Survey (CPS). As part of this procedure, all state figures are reviewed, revised as necessary and then re-estimated. This process is commonly referred to as “benchmarking.” Changes in Methodology Labor force estimates are now produced with an improved time-series regression model, which utilizes “real-time” benchmarking. “Real-time” benchmarking reduces end-of-year revisions, which also means that major economic events will be reflected in a more timely manner in state labor force estimates. In addition, the new methodology includes an updated way of estimating for sub-state areas (e.g. counties, metro areas) the number of unemployed who are new entrants or re-entrants into the labor force. This change in methodology will result in lower unemployment rates in some areas and increased rates in others. Unemployed and UI Beneficiaries The estimate of the number of unemployed includes all persons who had no employment during the reference week (the week including the 12th of the month), were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Unemployment insurance (UI) beneficiaries include those who apply for and qualify for UI benefits. Consequently, the estimate of the number of unemployed and the number of UI beneficiaries do not necessarily move in tandem. Jobs Data Jobs data are obtained from a separate joint federal-state survey of business establishments. The survey, called the Current Employment Statistics of Establishments, samples establishments in New York State. It excludes self-employed workers, agricultural workers, unpaid family workers and domestic workers employed by private households. This data represents a count of jobs by place of work. Data for each month is revised the following month as more complete information becomes available. The New York State Department of Labor is an Equal Opportunity Employer/Program.

State Comptroller Thomas P. DiNapoli, and Oneida DA Announce Arrests of Utica School Superintendent and Former Utica Mayor For Theft of Public Funds

 

Officials Allegedly Used Nearly $15K in School Resources For Political and Non-School Related Causes State Comptroller Thomas P. DiNapoli, Oneida County District Attorney Scott McNamara, and the New York State Police today announced the arrest of the long-time superintendent of the Utica City School District (UCSD) Bruce Karam and the former Utica Mayor and UCSD School Board President Louis LaPolla for allegedly using taxpayer funds to pay for political campaigns and a non-school related fundraiser. “The diversion of funds meant to support the education and well-being of students by high-ranking school officials is an appalling betrayal of the public trust,” DiNapoli said. “Instead of serving the students of the district who they were duty-bound to help, these two defendants allegedly chose to serve themselves. Thanks to my partnership with District Attorney McNamara and the State Police they will now be held accountable for their crimes.”  District Attorney McNamara said: “I echo State Comptroller DiNapoli’s statements and I personally thank the Comptroller’s office and the New York State Police for their assistance in investigating this case of public corruption.”  New York State Police Acting Superintendent Dominick L. Chiumento said, “These individuals deliberately stole funds intended to enrich education for students of the Utica City School District, all for personal fulfillment. Because of the strong collaboration among law enforcement, we were able to expose this fraud. I thank the Comptroller’s office and Oneida County District Attorney’s Office for their partnership in these arrests. The State Police will continue to hold those accountable whose actions hurt our community, and the well-being of children.” Investigators with the Oneida District Attorney, the State Comptroller, and the State Police determined that Karam was using school money and resources including stamps, envelopes, and other supplies to send election mailers in support of school board candidates that he favored and who determined his contract, salary and authority. He also is accused of using school resources to send invitations for a non-school related fundraiser for a purported charity run by LaPolla. Fundraiser fliers for the charity were inserted by school district employees during school hours in envelopes the school district paid for, and were mailed using the district’s stamps. LaPolla was allegedly aware that school resources were being used on his behalf.   Karam also allegedly tried to cover up his actions by attempting to persuade school district employees to untruthfully say that these resources were being used for a valid purpose. The  value of the unlawful use of taxpayer funds totaled $14,649, including $9,775 in stamps, $1,015 in supplies, and $3,859 in compensation for hours of work.  Karam served as UCSD Superintendent from 2011 until he was put on leave Oct. 18, 2022. He currently remains on leave. Karam and LaPolla were both charged with Grand Larceny in the 4th degree and Public Corruption. Karam was also charged with additional counts of Grand Larceny in the 4th degree and Public Corruption, as well as Corruption of the Government in the 3rd degree. They were arraigned in Oneida County Court by Judge Michael L. Dwyer. Their next court date is Dec. 1, 2023.

U.S. Attorney Charges Head Of Hair Testing Company In $5.9 Million Fraud Scheme

 

Customers Submitted Hair Samples for Allergy Testing to Kyle Tsui’s Company, but Hair Was Tossed and Test Results Fabricated

Damian Williams, the United States Attorney for the Southern District of New York, and Daniel B. Brubaker, the Inspector in Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the unsealing of an Indictment charging KYLE TSUI with wire fraud and mail fraud in connection with a scheme that resulted in sales of approximately $5.9 million worth of fabricated allergy and sensitivity tests to customers.  TSUI was extradited from Spain to the U. S. based on the Indictment and will be presented today before U. S. Magistrate Judge Judith C. McCarthy. 

 

U.S. Attorney Damian Williams said: “As alleged, Kyle Tsui defrauded customers of millions of dollars by claiming he would perform allergy and sensitivity testing on customers’ hair samples.  However, Tsui performed no such testing and provided fabricated test results.  Tsui now stands charged with defrauding thousands of innocent victims whose health was put at risk with false results.”   

USPIS Inspector in Charge Daniel B. Brubaker said: “It’s unconscionable to think anyone would put the health of their clients at risk for money, but allegedly in this case, greed won out over the lives of innocent, trusting victims.  Mr. Tsui’s alleged fabricated test results and lies were relied upon by many to make health-altering decisions, which we now know were worthless.  Postal Inspectors remind consumers to thoroughly read the fine print of any offer providing medical breakthroughs to avoid falling victim to a scam, especially one that could cause physical harm.”

According to the allegations contained in the Indictment:[1]

From September 2018 through April 2019, TSUI orchestrated a scheme to defraud customers of his company, the “Allergy Testing Company,” by purporting to sell food and environmental sensitivity testing services that TSUI knew were not, in fact, being performed.  In total, customers paid approximately $5.9 million through an online marketplace for tests that TSUI claimed would be done on their hair samples. 

TSUI’s company promoted its “[h]ighly-rated, top selling sensitivity and intolerance test” that “determines how your body responds to 800 different food and environmental items” with just “a small hair sample.”  But rather than test the hair samples as customers were promised, TSUI directed that the hair samples be discarded in the trash without any laboratory analysis.  Customers then received fabricated test results purporting to identify certain foods and environmental factors that were “safe” for them and others that the customers were supposedly “sensitive” to and should avoid.       

KYLE TSUI, 41, of Ontario, Canada is charged with wire fraud, which carries a maximum sentence of 20 years in prison, and mail fraud, which carries a maximum sentence of 20 years in prison.  

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Williams praised the outstanding investigative work of the USPIS.  Mr. Williams also thanked the Hyde Park Police Department, the New York State Troopers, the Toronto Police Service, the Department of Justice Criminal Division’s Office of International Affairs, the Canadian Anti-Fraud Centre, and the Government of Spain for their assistance in the investigation.

The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Qais Ghafary and Benjamin Levander are in charge of the prosecution, which was previously handled by former Assistant U.S. Attorney Daniel Loss.

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitutes only allegations, and every fact described therein should be treated as an allegation.

Following Significant Uptick in Anti-Muslim and Antisemitic Rhetoric on Social Media, Governor Hochul Deploys New Resources to Combat Online Hate

Data Tracked by New York State Division of Homeland Security and Emergency Services Shows 425 Percent Increase in Online Hate Speech Against Jewish Communities and 417 Percent Increase Against Muslim Communities

Governor Deploys $3 Million to Expand State’s Successful Threat Assessment and Management Team Model to All College Campuses; Builds on State Efforts to Combat Extremist Violence Launched in the Wake of White Supremacist Mass Shooting in Buffalo

Governor Directs Division of Homeland Security and Emergency Services to develop a Media Literacy Tool Kit for K-12 Schools to Provide Critical Training and Resources to Youth; State Creates Informational Guide For Parents to Talk to Their Children About Online Hate Speech this Holiday Weekend

Following Viral TikTok Content Praising Osama Bin Laden, Governor Calls on Social Media Corporate Leadership to Implement Stronger Anti-Hate Guardrails for Users

Governor Kathy Hochul today deployed new resources to continue combating the ongoing rise in online hate speech across New York. Governor Hochul announced $3 million would be allocated to expand the Division of Homeland Security and Emergency Services’ Domestic Terrorism Prevention Unit’s Threat Assessment and Management training to all colleges and universities in New York State. The Governor also directed the Division of Homeland Security and Emergency Services to develop and distribute a media literacy toolkit to help public school educators teach their students how to spot misinformation/disinformation/malinformation (“MDM”) online, sent a letter to major social media companies calling for increased monitoring of content that could incite violence, and released an informational guide for parents to help start conversations around the destructive impacts of hate and hate speech with young adults upon their returns home during the holiday season. These actions follow a 400 percent increase in nationwide antisemitic and Islamophobic threats online since the beginning of October and the continued spread of hate speech in online spaces.

“The rising tide of hate is putting all New Yorkers at risk - and as Governor, I'm committed to tackling this crisis head-on,” Governor Hochul said. “We're deploying physical security resources, expanding our Threat Management and Assessment teams, calling for stronger action from social media companies, and encouraging families and communities to come together to fight hate. New York has always been a beacon of hope, tolerance and inclusivity, and we will be defined by how we come together to condemn hate in all forms."

With a new $3 million investment in the DHSES’ Domestic Terrorism Prevention Unit’s (DTPU) the State will expand its Threat Assessment and Management (TAM) training and support to all colleges and universities statewide.

The DTPU will conduct training for New York State colleges and universities; educate school administrators, professors, and staff on how to develop and maintain TAM teams; and provide constant training to supported entities. DHSES will also help connect existing networks that are currently operational within the SUNY and CUNY systems and ensure information sharing between these new college and university TAM efforts and the county-led multidisciplinary TAM teams being established across the state since the May 2022 domestic terror attack in Buffalo, New York.

Under this effort, these new TAM Teams would:

• Use multidisciplinary teams of trained professionals to assess risk and create management plans for individuals on the pathway to violence;
• Recognize concerning behaviors and define appropriate escalation protocols;
• Establish a centralized reporting mechanism to receive reports of concerning behaviors from students and other bystanders; and
• Educate administrative staff and professors on risk factors and warning signs to identify concerning behaviors early before an escalation to violence.

Recent international events have had direct impacts here in New York, including the Israel-Hamas conflict and the War in Ukraine. Each have led to a surge in the on-line spread of misinformation, disinformation, and malinformation. MDM has been used by foreign adversaries and domestic extremists to sow divisions among New Yorkers and reduce community cohesion, as well as cause anxiety, fear, and confusion. With the prevalence of MDM, and an increasing percentage of young people receiving their news and information through online sources, its important students are prepared to think critically about the sources of information they engage with and how to interpret it.

As part of the new media literacy program, the Division of Homeland Security and Emergency Services (DHSES) will partner with education experts in media literacy to develop and distribute an age-appropriate, ideologically neutral toolkit on media literacy for students in primary and secondary schools throughout New York. This proven approach to understanding information will develop students’ ability to analyze, evaluate, and assess all forms of media including information delivered through social media. Utilizing various age-dependent trainings, this media literacy toolkit will encourage critical thinking and create a better understanding of how media systems work and the many equities that may be in play when someone chooses to distribute information online.

The holidays are also a time to reflect on the importance of family and what it means to be part of a community as unique and diverse as New York. As the holidays approach, the Governor is calling on New York families to discuss the importance of inclusivity, pluralism, and rejecting bigotry. With so many college and university students returning home for Thanksgiving, New York has produced an informational guide for parents to help start conversations around the destructive impacts of hate and hate speech.

New York State Division of Homeland Security and Emergency Services Commissioner Jackie Bray said, “There has been a disturbing rise in online hate, especially when it comes to antisemitic, Islamophobic and anti-Arab threats. Now more than ever, its critical young adults have the tools they need to be able to critically analyze what they see online and help prevent the further spread of hateful rhetoric.”

These new initiatives build on the extensive work already underway in New York to address the spread of hate and extremist violence.

In the immediate aftermath of May 2022’s racist mass shooting in Buffalo, Governor Hochul signed Executive Order 18 which required each county and New York City develop Domestic Terrorism Prevention Plans; and created the Domestic Terrorism Prevention Unit within DHSES, to support the creation of local Threat Assessment and Management – or TAM – teams. These multi-disciplinary teams bring together law enforcement, mental health professionals, school officials, and other community stakeholders to identify, assess, and manage threats of targeted violence.

Since the launch of this effort, 36 of the 58 counties outside of New York City have established TAM teams. Sixteen of the 36 teams are already meeting and hearing cases, while the remaining 20 are meeting and expected to begin hearing cases in the near future. All counties in New York have expressed their intent to create a TAM team. Prior to Governor Hochul’s Executive Order 18, there were only three county-based TAM teams statewide, which were supported through grants from DHSES.

In the last quarter alone, TAM teams held 53 meetings and reviewed dozens of cases that were referred by variety of community stakeholders:

• 94 percent of these teams had at least one case referred to them by law enforcement. 67 percent of these teams had at least one case referred to them by an educational partner. 53 percent of these teams had at least one case referred to them by a mental health partner; and 27 percent of these teams had at least one case referred to them by social services.

Other key stakeholders, such as public health professionals, religious and culture institutions, and private sector entities, also reported cases to TAM teams.

In November 2023, Governor Hochul has activated law enforcement to keep New Yorkers safe by mobilizing the State Police to increase protection. This included $50 million made available to law enforcement to expand the use of the red flag law and $25 million in security.

DEPARTMENT OF STATE’S CONSUMER PROTECTION DIVISION ISSUES SCAM PREVENTION TIPS FOR CONSUMERS AS HOLIDAY SEASON APPROACHES

 

As Black Friday & Cyber Monday Fast Approach, the Division of Consumer Protection Wants to Make Sure Consumers heed warnings of Scammers 

Tips to Help Consumers Shop Safely Online as Holiday Season Gets an Early Start 

Secretary Rodriguez, “Don’t let cybercriminals steal your holiday spirit by scamming you out of your hard-earned money” 

Follow the New York Department of State on Facebook, Twitter and Instagram for “Tuesday’s Tips” – Practical Tips to Educate and Empower New York Consumers on a Variety of Topics

For this week’s “Tuesday’s Tips,” the New York Department of State’s Division of Consumer Protection announces tips to help New Yorkers navigate the holiday shopping season.   

As Black Friday and Cyber Monday fast approach, this week’s tips are meant to empower New Yorkers with actionable fraud prevention tips, so they have greater awareness and control when shopping online this holiday season.  

“During the busy holiday season, shopping online can be a convenient way to buy the perfect gift but unfortunately it’s also a way for holiday scammers to take advantage of consumers by stealing their financial or personal information,” said Secretary of State Robert J. Rodriguez. “Don’t let cybercriminals steal your holiday spirit by scamming you out of your hard-earned money. Protect yourself by following our tips from the Division of Consumer Protection.”

New York State Police Acting Superintendent Dominick L. Chiumento said, “Now that online shopping has become standard practice, consumers continue to be vulnerable targets for cyber criminals who seek to steal their financial information. Just as the public must be aware of their physical surroundings, we remind consumers to be aware of the online sites that they visit as well. Make sure the sites you shop are secure and that your computer and electronic devices are up-to-date with current security software. Don’t share your passwords and make sure you close your browsers when you are done shopping. Lastly, check your financial statements regularly to make sure you are not a victim of fraud. Consumers need to be vigilant in protecting themselves when shopping online.”

Tips to Help Avoid Online Shopping Scams:

1. Beware of fake websites: Unfortunately, fraudsters often imitate legitimate brands by creating fake shopping websites.Before you click, take the time to carefully read and review what you’re buying and from whom you’re buying it. There are a few ways to tell if it’s an imposter website. Here are a few to know:
   1. Domain name: If the domain name doesn’t match the official company name or website, it could be a scam site.
   2. Grammatical errors: Legitimate organizations spend resources to make sure their sites are error-free. If you notice obvious spelling mistakes or errors, that is a red flag.
   3. Check the contact page and website’s privacy policy. The absence of a legitimate (or any) address, working phone number and privacy policy should be a cause for concern that you are viewing a scam site. 
2. Be careful when shopping on social media:Scammers are using real store names and logos to advertise fake clearance sales on social media feeds. Pay attention to brand imposters and fake retailers with fake consumer reviews. The best way to detect a fake trader or social media online shopping scam is to search for reviews before purchasing. Don’t purchase a product directly from the social media site; open a new browser and make your purchase through the retailer’s website. Avoid placing orders on these copycat sites for products that will never arrive.
3. Beware of third-party seller scams:Use caution on trusted sites that host items from third-party sellers. If redirected from a trusted site to a third-party site, read the seller’s policies, review ratings, read consumer comments, and most importantly, do a broad internet search before making your purchase. Trusted retailers who host third-party sellers do not warranty their sales, thus you could get a substandard product or no product at all when you take the risk and purchase from an unknown third-party vendor.
4. Do your research if you want to try a new site or retailer. Performing a broad internet search will provide you with important feedback from other customers.
5. Learn how to spot a fake review:Watch out for fake reviews online. One red flag to look for is one-sided reviews with no specific details. Real reviews often reflect customer experiences that are balanced, descriptive and subjective. Also look for multiple reviews that look very similar and posted during the same timeframe. This is a sign that the reviewers are either copying information or were all written by the same person.
6. Read product specifications. Online marketing is geared to get you to buy, so it is important to understand the product you are purchasing and the terms of the sale to ensure you are getting what you want.
7. Beware of nonexistent return policies.If you notice that the return or refund policy of an online retailer is vague, missing or exceedingly limited, shop elsewhere. If you can’t return the item you’re buying for a full refund if you’re not satisfied, consider skipping it.

Tips for Using Credit Cards Online:

1. Check the website’s encryption; It’s easier than you think. Before entering your credit card information, make sure that the website’s address begins with “https” and that there is a closed lock on the website address bar or unbroken key symbol in the lower portion of your window.
2. Don’t keep the credit card on file for future purchases. Provide your credit card number each time you make a purchase.
3. Designate one credit card and one email address for online shopping. This will allow for easy review of purchases and provide protection in case of a dispute.

The New York State Division of Consumer Protection provides resources and education materials to consumers on product safety, as well as voluntary mediation services between consumers and businesses. The Consumer Assistance Helpline 1-800-697-1220 is available Monday to Friday from 8:30am to 4:30pm, excluding State Holidays, and consumer complaints can be filed at any time atwww.dos.ny.gov/consumer-protection.

Follow the New York Department of State onFacebook, Twitter and Instagram and check in every Tuesday for more practical tips that educate and empower New York consumers on a variety of topics. Sign up to receive consumer alerts directly to your email or phone here.

For more consumer protection tips, follow the Division on social media at Twitter: @NYSConsumer and Facebook:www.facebook.com/nysconsumer