Third of Three Posts in a Related Series on Recent AML and Money Laundering Prosecutions

As we have blogged, the Department of Justice (“DOJ”) has been busy lately in regards to money laundering and Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) prosecutions.

In our first blog post in this three-part series, we discussed a significant prosecution of an individual, and two related corporate non-prosecution agreements involving the gaming industry.  In our second blog post, we discussed two unusual prosecutions involving, respectively, an executive of a bank and an alleged AML specialist working with small financial institutions.

In our final post of this series, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the massive fraud and money laundering scheme perpetrated by his cryptocurrency client.  Specifically, on January 25, lawyer Mark Scott (“Scott”) was sentenced to 10 years in prison for allegedly laundering approximately $400 million in connection with a fraudulent cryptocurrency scheme known as “OneCoin.”  Scott was a former partner at the international law firm of Locke Lord.  Although the alleged facts and circumstances of this case are both extreme and lurid, it nonetheless reminds lawyers of the need to be careful about getting too involved in the businesses of their clients, particularly in the presence of multiple red flags.

The Superseding Indictment and Post-Trial Motions

The Superseding Indictment returned against Scott in the Southern District of New York was bare bones.  In five pages, with no detail, it alleged (1) a single count of conspiring to launder money, based on the “concealment” and “international” prongs of the primary federal money laundering statute, 18 U.S.C. § 1956; and (2) a single count of conspiring to commit bank fraud, in violation of 18 U.S.C. §§ 1344 and 1349.  It also contained related forfeiture allegations.  The specified unlawful activity, or SUA, generating the “dirty” funds which Scott allegedly laundered was identified as a wire fraud scheme involving $400 million in funds relating to the purported cryptocurrency “OneCoin.”

Scott was convicted on November 21, 2019 of both offenses after a jury trial.  He filed motions for new trial and for acquittal notwithstanding the verdict.  The Court denied these motions on September 14, 2023 (“Order”).  As the Order summarized (citations omitted):

OneCoin was founded in 2014 by Ruja Ignatove (“Ruja”) [the so-called “Crypto Queen” and now notorious fugitive and possible organized crime murder victim] and Sebastian Greenwood.  It is located in Sofia, Bulgaria and began operating in the United States in or around 2015.  OneCoin markets and sells a purported digital currency by the same name.  Apparently 3.5 million people have invested in OneCoin cryptocurrency packages, and OneCoin has taken in over $2 billion in proceeds.  It is undisputed that OneCoin is a fake cryptocurrency:  it is in fact a global multi-level marketing pyramid scheme.

The Order found that the evidence introduced at trial indicated that Scott received an email in April 2016 from OneCoin’s “chief money launderer” attaching an article detailing “many indicia that OneCoin was a fraudulent pyramid scheme.”  “Nonetheless, Scott agreed to work with OneCoin.”

Condensing greatly, the Order found that the trial evidence indicated that Scott set up a series of investment funds in the British Virgin Islands and Cayman Islands, each with its own offshore bank account, to receive approximately $400 million in OneCoin proceeds from shell companies controlled by OneCoin conspirators posing as investors.  “Scott worked to meticulously conceal from the banks any connection between OneCoin and the purported investors” in the funds.  According to the Order, as well as other pleadings and press releases, Scott lied to U.S. banks in order to conceal the true source of the funds being laundered and the true beneficial owners of the shell companies funneling OneCoin funds, and thereby attempted to evade the banks’ AML procedures.  The trial evidence also included one government cooperating witness and former conspirator who “testified at a high level as to OneCoin’s difficulties obtaining banking services and its use of money launderers, including Scott, to circumvent those issues.” 

Ultimately, the Court rejected the various arguments made by Scott that his convictions should be vacated, or that he should receive a new trial, due to lack of evidence regarding his knowledge; related issues pertaining to the alleged lack of credibility of a cooperating government witness; technical issues regarding the sufficiency of proof for a bank fraud conviction; venue; the propriety of the jury instructions; and a lack of nexus between certain financial transactions and the U.S.

The Sentencing

The government’s sentencing memorandum advocated for a sentence of imprisonment of at least 17 years.  We will skip a technical discussion of the U.S. Sentencing Guidelines, as they applied to Scott, other than to note that the U.S. Probation Office issued a Presentence Investigation Report which described an astounding advisory sentence of life imprisonment, which was “limited” to 600 months (i.e., 50 years) of imprisonment according to the statutory maximums of the two offenses, and which recommended a below-Guidelines sentence of “only” 20 years.   Instead, we will set forth the below portions of the introductory section of the government’s sentencing memorandum.  They convey the general flavor and tone of the government’s positions:

To succeed, the [OneCoin] scheme required the assistance of a money laundering operation that could match the scale and sophistication of the fraud scheme.  In late 2015, Ignatova turned to Scott, who was a successful corporate lawyer working in Miami, FL . . . where he earned upwards of $1 million a year.  Scott was tasked with building a custom money laundering vehicle that could withstand the scrutiny of anti-money laundering staff at financial institutions around the world, and a growing number of law enforcement investigations.  Scott was uniquely equipped for this challenge:  he used his know-how as a corporate lawyer with experience in private equity to disguise hundreds of millions of dollars in illicit proceeds from the OneCoin scheme as legitimate “investments” into a series of offshore investment funds that he created.  In doing so, Scott erased the connection between the funds and Ignatova/OneCoin and was then free to send Ignatova’s money anywhere she wanted.

Scott was motived by greed.  He already had a luxurious lifestyle afforded to him by being an equity law firm partner, living in a $1.5 million condo in Coral Gables and earning upwards of a million dollars a year.  But for Scott, that wasn’t enough.  So, Scott embarked on a quest to earn $50 million by the age of 50 by abusing the skills he acquired as a lawyer to orchestrate one of the world’s largest money laundering operations.  By the time Scott was arrested, he had managed to reach his unthinkable goal, receiving more than $50 million in OneCoin fraud proceeds as payment for his global money laundering operation.

In a similar vein, the government’s sentencing memorandum contains eye-catching photographs of Scott’s various high-end real estate holdings, his yacht, and his multiple Porsche automobiles.

The defense sentencing memorandum obviously argued vigorously for a different outcome, while attempting to deal with a conundrum facing defendants convicted at trial who apparently intend to appeal their convictions:  trying to express regret or remorse, without admitting to guilt.  The defense sought a sentence of no more than five years imprisonment.  The defense memo stressed Scott’s childhood circumstances, his commitment to the community, health problems, and disagreements with the technical calculations under the U.S. Sentencing Guidelines.

The defense sentencing memo states: “Mark also is well aware that his willingness to accept at face value [Ruja Ignatova’s] claims to Mark and others that her wealth was from lawful sources proved to be his own undoing.”  Likewise, the defense sentencing memo states that “to Mark and many others, OneCoin appeared to already be well established, and was a highly profitable enterprise bringing in vast amounts of money.  So when Ruja was interested in hiring Mark to set up various funds for her wealth, he jumped at the opportunity, a decision he now regrets.”  

Wherever objective truth lies here, the Scott case emphasizes the need for business lawyers to consider that their desire to please clients and obtain lucrative engagements must be tempered with sufficient due diligence regarding the client, their source of funds, and their business model.

In addition to the 10-year prison term, Scott’s sentence included three years of supervised release.  Scott also was ordered to forfeit a money judgment in the amount of $392,940,000, several bank accounts, a yacht, two Porsche automobiles, and four real estate properties. 

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch.  Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.  Please click here to read our article on potential money laundering and client due diligence issues facing attorneys.