New Charges Filed Against Stratos in $11.25 Million Investor Fraud Scheme
|U.S. Attorney’s Office May 23, 2013|
SACRAMENTO, CA—A federal grand jury returned a 20-count superseding indictment today charging Troy Stratos, 47, formerly of Los Angeles, with three counts of mail fraud, 12 counts of wire fraud, four counts of money laundering, and one count of obstruction of justice, United States Attorney Benjamin B. Wagner announced.
In December 2011, Stratos was indicted for mail fraud, wire fraud, money laundering, and obstruction of justice in relation to a scheme to defraud a woman of more than $7 million. The superseding indictment includes all the charges in the original indictment and adds four counts of wire fraud and two counts of money laundering relating to a different scheme to defraud a financial manager of $11.25 million in client funds.
The first indictment alleged that Stratos defrauded a woman of at least $7 million by convincing her that he would manage the proceeds of her divorce by investing them overseas where they would earn a high rate of return. Stratos represented to the woman that he was himself wealthy and successful and was involved in the entertainment industry. At Stratos’ request and instruction, the woman executed a revocable trust with Stratos into which she placed the cash proceeds of her divorce and property. Stratos never invested any money as promised but diverted substantial sums of money from the trust for his own personal use. He also used portions of the money to pay the woman’s expenses, misrepresenting to her that he was spending his own money to pay for her expenses while her assets were invested overseas. Stratos claimed that he could sell her Granite Bay house to Middle Eastern royal families but needed to lease luxury automobiles to make the property more enticing. In fact, Stratos lived in the house and made use of the automobiles. The charge of obstruction of justice alleges that in February 2007, when Stratos’ bookkeeper was served with a grand jury subpoena, Stratos instructed him to not produce some of the documents covered by the subpoena.
The superseding indictment newly alleges that beginning in December 2010, Stratos, using a false name, defrauded a Pennsylvania financial manager of at least $11.25 million. Stratos claimed that he could broker the sale of up to 40 million shares of Facebook stock prior to Facebook’s initial public offering. Stratos represented that he represented Mexican billionaire Carlos Slim, who is one of the wealthiest people in the world and that Carlos Slim was going to purchase a large block of Facebook stock at a very favorable price through a company called “Soumaya Securities.” Stratos told the investor that there were more shares available to Carlos Slim than he wanted and that others were going to purchase the excess. Stratos offered to include the investor in the deal to purchase the extra shares.
The investor agreed to purchase the shares and to pay Stratos for facilitating the deal. Between April 2011 and August 2011, Stratos was given $11.25 million by the investor towards the purchase of the shares. Stratos used the money for personal expenses and to pay those who filed civil claims against him or who had posted information on the Internet accusing him of fraud. Stratos repeatedly told the investor that that the deal would close soon but was being delayed for various reasons, including referring to a fictitious deal involving Steve Jobs, the founders of Google, and other Silicon Valley entrepreneurs. After Stratos was arrested and taken into federal custody on the original indictment in this case, Stratos, through text messages and a telephone call, continued to tell the investor that the deal was real and that he could refund the investor’s money. By this time, Stratos had spent nearly all of the $11.25 million.
This case is the product of an investigation by the Federal Bureau of Investigation. Assistant United States Attorney Todd Pickles is prosecuting the case.
The maximum statutory penalty for mail and wire fraud is 20 years in prison and a fine of up to twice the gain or loss from the fraud. The maximum statutory penalty for money laundering is 10 years in prison and a $10,000 fine or twice the value of the criminally derived property. The maximum penalty for obstruction of justice is 10 years in prison and a $250,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Stratos remains in custody and is scheduled to appear on July 23, 2013, for a status hearing before the Honorable Lawrence K. Karlton.