Home » Jury Convicts Architects Of Scheme To Fraudulently Process Over $150 Million Through U.S. Financial Institutions

Jury Convicts Architects Of Scheme To Fraudulently Process Over $150 Million Through U.S. Financial Institutions

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Department of Justice
U.S. Attorney’s Office

                                                                          Southern District of New York


Audrey Strauss, the United States Attorney for the Southern District of New York, announced the conviction today of HAMID “Ray” AKHAVAN and RUBEN WEIGAND, following a four-week trial before the Honorable Jed S. Rakoff.  AKHAVAN and WEIGAND devised a complex scheme involving fake companies, false websites, and fake “customer service centers,” to deceive U.S. issuing banks and credit unions into effectuating more than $150 million of credit and debit card purchases of marijuana by disguising those purchases as being for other kinds of goods, such as face creams and dog products.  The defendants were each convicted of one count of conspiracy to commit bank fraud, in violation of Title 18, United States Code, Section 1349.

Manhattan U.S. Attorney Audrey Strauss said:  “As a jury has now found, Ray Akhavan and Ruben Weigand were in the business of selling lies.  Under the radar of U.S. banks and credit card companies screening for suspicious and illegal activity, these men offered their services: creating fake companies and fake websites, and ginning up fake web traffic to those fake websites, all in the service of fraudulently moving money through the United States financial system.  Today, a jury has seen through those lies and convicted Akhavan and Weigand of bank fraud.”

As reflected in the Indictment, public filings, and the evidence presented at trial:

From in or around 2016 through in or around 2019, AKHAVAN and WEIGAND, working with others, including principals from one of the leading on-demand marijuana delivery companies in the United States (the “Company”) planned and executed a scheme to deceive United States banks and other financial institutions into processing over $150 million in credit and debit card payments for the purchase and delivery of marijuana products (the “Scheme”).

The Scheme involved the deception of virtually all of the participants in the payment processing network, including issuing banks in the United States (the “Issuing Banks”) and Visa and MasterCard.  The primary method used by AKHAVAN, WEIGAND, and other coconspirators to deceive the Issuing Banks involved the purchase and use of shell companies that were used to disguise the marijuana transactions through the use of phony merchants (the “Phony Merchants”).  The shell companies were used to open offshore bank accounts with merchant acquiring banks and to initiate credit card charges for marijuana purchases made through the Company.  AKHAVAN and WEIGAND worked with other co-conspirators to create these phony merchant accounts – including phony online merchants purportedly selling dog products, diving gear, carbonated drinks, green tea, and face creams – and established Visa and MasterCard merchant processing accounts with one or more offshore acquiring banks.  They then arranged for more than a dozen Phony Merchants to be used by the Company to process debit and credit card purchases of marijuana products.  Many of the Phony Merchants purported to be based in the United Kingdom, but, despite being based outside the United States, claimed to maintain U.S.-based customer service numbers.

To facilitate the Scheme, webpages were created and deployed to lend legitimacy to the Phony Merchants.  The Phony Merchants typically had web pages suggesting that they were involved in selling legitimate goods, such as carbonated drinks, face cream, dog products, and diving gear.  Yet these companies were actually being used to facilitate the approval and processing of marijuana transactions.  The defendants’ scheme even involved fake visits to those websites to make it appear as though the websites had real customers and were operating legitimate online businesses.

The defendants’ scheme also involved the use of online tracking pixels.  Because the descriptors listed on Company customers’ credit card statements often were the URLs for the Phony Merchant websites, Company customers were sometimes confused and did not recognize the transactions on their credit card statements.  The defendants and their coconspirators were concerned that confused customers would call their Issuing Banks and inadvertently reveal the Scheme by indicating that they had purchased marijuana products and/or that they had made a purchase through the Company.  To lessen the risk that customers would be confused, the defendants used a number of techniques, including online tracking pixels to track which users had visited the Company’s website.  If a Company customer had visited the Company’s website and went to the URL listed on their credit card statement, they would automatically be re-routed to a webpage connected to the Company so that the customer would understand what the real purchase had been for (i.e., from the Company).  However, in order to hide the Scheme, the defendants ensured that if a third party such as a bank or credit card company investigator visited a URL of a Phony Merchant, they would not be re-routed, and would therefore be unable to discern any connection between the Phony Merchant website and the Company and/or the sale of marijuana products.

Over $150 million in marijuana credit and debit card transactions were processed using the Phony Merchants.  Some of the merchant websites listed for those transactions included: diverkingdom.com, desirescent.com, outdoormaxx.com, and happypuppybox.com.  Moreover, none of the Phony Merchant website names listed for those transactions referred to the Company or to marijuana.  AKHAVAN, WEIGAND, and others also worked with and directed others to apply incorrect merchant category codes (“MCCs”) to the marijuana transactions in order to disguise the nature of those transactions and create the false appearance that the transactions were completely unrelated to marijuana.  Some of the MCCs/categories listed for the transactions included freight carrier, trucking; clock, jewelry, watch, and silverware; stenographic services; department stores; music stores/pianos; and cosmetic stores.

AKHAVAN was the leader of the transaction laundering scheme and WEIGAND was responsible for overseeing the acquiring bank accounts used by the Phony Merchants and sending the proceeds from the marijuana transactions back to bank accounts in the United States.

AKHAVAN, 43, of, California, and WEIGAND, 38, of Germany, were each convicted of one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentencing of the defendants will be determined by the judge.  Sentencing before Judge Rakoff is scheduled for June 25, 2021.

Ms. Strauss praised the work of the Federal Bureau of Investigation.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Nicholas Folly, Tara La Morte, and Emily Deininger are in charge of the prosecution.

Source: Credit

Photo by Bermix Studio on Unsplash

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