The SEC charges Giuliani Associates Lev Parnas and David Correia

On February 4, 2021, the U.S. Securities and Exchange Commission announced charges against two associates of Rudy Giuliani, the former New York City mayor and lawyer for Donald Trump, alleging they raised $2 million from investors by making false and misleading representations.

According to the Complaint, Lev Parnas and David Correia raised the money for their company, Fraud Guarantee, between January 2013 and mid-2019, but instead of using the money to get the company off the ground as promised, Parnas and Correia misappropriated the bulk of those funds to pay for personal expenses, including travel, jewelry, cars, and disbursements at a casino.

Parnas and Correia falsely stated that they had raised millions of dollars from other investors and invested hundreds of thousands of dollars of their own money into Fraud Guarantee to entice people to invest.

Parnas and Correia are charged with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges Parnas and Correia with acting as unregistered brokers in violation of Section 15(a) of the Exchange Act.

Correia has agreed to settle the Commission’s charges by consenting to a bifurcated judgment enjoining him from violating the charged provisions, with disgorgement and penalties to be resolved at a future date upon motion by the Commission. The settlement is subject to court approval.

Today, Fraud Guarantee is defunct, and the investors’ membership interests are essentially worthless. 

From 2013 – mid-2019, the faux company touted itself as a company that changes the integrity risk paradigm by reducing the risk of fraud and protecting investors in the private equity space.

In September 2020, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Correia and Parnas related in part to the conduct described above.

Prosecutors said that Correia secured a $500,000 contribution from one investor in 2018 by emphasizing the former mayor Rudy Giuliani’s support of the project. According to information provided by Correia, the $500,000 went to Giuliani’s consulting firm in exchange for Giuliani being the “face of the company.”

Correia and Parnas were originally charged along with Igor Fruman (another Rudy Giuliani associate) and Andrey Kukushin on October 10, 2019 for conspiring to violate straw and foreign donor bans. According to the Indictment, Parnas and Fruman orchestrated a scheme to launder foreign funds into U.S. political campaigns and skirt contribution limits as part of a plot to oust America’s then-ambassador to Ukraine, in what became a subplot to Trump’s first impeachment. Correia and Kukishin were charged with conspiring to violate the ban on foreign donations and contributions in connection with federal and state elections.

The Superseded Indictment, filed on September 17, 2020, adding charges related to the Fraud Guarantee scheme.

Correia pleaded guilty in that matter on October 29, 2020, and was sentenced to 12 months in prison on February 8, 2021, followed by 3 years of supervised release. He is scheduled to surrender himself on March 22, 2021, and is expected to serve his time at FCI Jesup Federal Prison. 

Lev Parnas and Igor Fruman would find themselves dragged into the first impeachment inquiry targeting President Donald Trump over their political activities in Ukraine. According to information in the Whistleblower Complaint and widespread media accounts, Parnas and Fruman helped introduce Trump’s personal lawyer, Rudy Giuliani, to top Ukrainian political circles in an effort to dig up dirt on Trump’s political opponent, Joe Biden. 

Lev Parnas with Rudy Giuliani sitting at a table together at Trump’s hotel in Washington, D.C. in September 2019

At the time, Rudy Giuliani confirmed that Parnas and Fruman were his clients and said that his efforts in Ukraine were done with the president’s full support. 

After forming Fraud Guarantee, Giuliani wasn’t the only well-connected person in the political sphere that Parnas and Fruman rubbed elbows with. Through a Delaware shell company called Global Energy Producers, Parnas and Fruman gave more than $400,000 to Republican candidates and committees supporting them in federal elections. 

According to federal campaign finance records, most of the money, $325,000, went to America First Action, a pro-Trump super PAC. Republican Florida Sen. Rick Scott was another beneficiary. In 2018, Fruman gave $15,000 to a joint-fundraising committee backing Scott’s Senate race. They also gave $50,000 to the campaign of Ron DeSantis, a Trump ally, in June 2018 and $35,000 combined to a committee supporting failed Republican gubernatorial candidate Adam Putnam.

The donations didn’t go unnoticed, and in 2018, Parnas and Fruman joined Donald Trump Jr for breakfast in Beverly Hills. 

Donald Trump Jr., Tommy Hicks Jr., Lev Parnas, and Igor Fruman in May 2018

Lev Parnas has been pictured with Donald Trump, his associates, and his family members multiple times in recent years.

Before his newfound rise to political prominence, Parnas had a history of fraud connections.

Parnas was a long time stockbroker. FINRA scrubbed his broker record from their website after the 2019 Indictment, but archived records show that Parnas worked for Euro-Atlantic Securities from 1996 – 1997. During his time at Euro-Atlantic Securities, the firm was at the center of a $40 million penny-stock scam linked to the mafia that led to 12 people being federal charged. Parnas was not charged in the case.

In 1998, Parnas acquired Program Trading Corp together with Robert Grinberg.  The two operated the firm together until FINRA expelled the firm in 2003.

Two former Program Trading Corp brokers that worked under Parnas, Ian Kass and Steven Koifman, were later imprisoned for securities fraud. Kass was indicted in 2016 for his role in a massive shell factory scheme involving more than 30 publicly traded companies. Koifman was Indicted in 2013 along with Michael Vax and others in a gangster-style pump & dump run on Face Up Entertainment Group Inc (FUEG). FUEG was one of the more than 30 public companies from the shell factory scheme.

One of the main investors in Program Trading Corp, Mitchell Reisman, also later became wrapped up in fraud. He was sentenced in 2010 to 51 months in prison for his role in an investment fraud involving B.I.M. Mining Corp.

After Trading Program Corp, Lev Parnas became the CEO and control person of publicly-traded Edgetech International Inc (EGIL).  The company had the exclusive rights to distribute a mobile wireless computer known as the PocketSurfer and claimed to have the funding to make it a success. Through a parade of press releases between June 2006 and March 2007 touting celebrity and athlete sponsorships and a plan to launch in Russia, Parnas took the stock to a market cap of over $600 million. The company never accomplished anything that Parnas promised and eventually went defunct. 

After the Edgetech flop, Parnas set up Fraud Guarantee with David Correia.

It will be interesting to see how the case unfolds and if any new Indictments will be brought against any other individuals closely associated with Parnas and Fruman in the future. 

 


For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

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