PPP and EIDL Fraud is as rampant as COVID-19. According to the front page story appearing in the New York Times April 26 edition, hundreds of millions of dollars in SBA bailout funds that were intended by the US Treasury to assist small businesses impacted by COVID-19 via the Paycheck Protection Program and EIDL Loan Program have been siphoned off by public companies, private equity-backed companies and thousands of small businesses, many of the latter don’t really exist other than in name only.
To many financial crime investigators who are fluent in the failings of US government’s effort to support businesses that have suffered from the pandemic, it is no surprise that tens of millions of dollars have gone to scamsters and fraud artists, including those who have been recently indicted or have been under investigation by federal law enforcement and federal and state regulatory agencies.
Shocking?! Nah. According to one senior investigator from The Financial Crimes Enforcement Network (FinCEN) “However well-intended, the PPP and EIDL loan programs created the perfect opportunity for serial financial fraud artists to exploit loopholes that a teenager could drive a Boeing jet through. PPP and EIDL fraud is rampant.”
In addition to the assortment of rogues that were outed in the above-referenced NYT coverage, it appears that individuals running a so-called fintech company called Seaquake.io, which claims to “specialize in digital asset infrastructure” along with “crypto currency trading applications” and profiled here and other online media outlets back in October, are back at it again.
Informed sources have indicated having direct knowledge that Seaquake.io principals Andrew Katz and Matthew Krueger, who have been cited in federal court for an assortment of investor fraud and wire fraud allegations, had recently filed SBA loan applications for as many as six different Seaquake entities, including Colorado-registered Seaquake Inc., Seaquake Manager LLC, Seaquake LP, Wyoming-based Seaquake OPS LLC, and a California entity, Seaquake Capital LP. Each of these entities list both Andrew R. Katz and Matthew Krueger as controlling officers.
AVEM Ventures LLC, a Colorado entity identified along with each of the above in a federal civil court action, lists Katz as the controlling officer and a Kenneth S. Katz as the registered agent. This entity is also believed to have applied for loans and grants intended for businesses that have been impaired by the COVID-19 pandemic.
There is only one problem, the company is a scam, according to a former business development executive for Seaquake, who worked for the company while he was also registered with Finra as a senior executive for San Francisco based brokerdealer US Capital Global. That former employee (his tenure lasted all of 7 months and he has since moved to the role of ” Director, Digital Wealth Solutions” for Apex Clearing Corp.” has stated “Seaquake is not a real business; the product(s) they claim to have are “nothing more than vaporware”; they have no employees drawing salaries other than Katz, (who recently added his wife Selen to the ‘payroll’, though it would appear that her full-time job is that of an Instagram influencer, along with Krueger and UK-based Dylan Knight, who is listed as the chief technology officer on corporate documents. This is all despite claims made on the company website as to having multiple employees; “a canard”, according to one source who says the “serial fabrications made by the company are advanced further by fraudulent representations made in an assortment of investor solicitation documents the company has sent to dozens of individuals and fund managers.”
Katz was seen in December vacationing at a resort in Cabo with his swimsuit model wife, a Turkish national whose opportunity to apply for US citizenship comes on the third anniversary of their marriage, August 2 2020. How the US Immigration and Naturalization Service (INS) or Department of Homeland Security view applicants who are married to accused money launders is only something those agencies can respond to. In early March 2020, the couple was spotted posing for photos on the beach in Southampton, New York. It is rumored that Katz is now hiding out in New York City. Neither he or his San Francisco-based partner Krueger, both accused of defrauding at least several investors, including a Florida-based family office this past August, have made themselves available for comment.
The San Francisco branch of BBVA Compass Bank, the bank of record for an assortment of Seaquake enterprises, had no comment has to whether they facilitated EIDL loan processing or payments to the Seaquake’s alleged criminal enterprise.
One can only hope that FBI and SEC efforts lead to a long-term quarantine for these individuals.
(Source: Law360.com ) Andrew R. Katz, aka Ross Katz, aka Stark Katz an Arvada, Colorado man who is last known to reside in either of New York City or Southern California, and uses California, Colorado, Florida and New York drivers licenses while claiming to be a former FX trader for EFG Bank, and who now presents himself as co-founder of Seaquake.io, a”digital asset infrastructure company”, along with Seaquake CFO Matthew J. Krueger of San Francisco, who claims to be a former PayPal “Finance Manager” and the former “Head of Finance” for Venmo, have both been named as Defendants in a Federal Court complaint alleging the two men advanced a systematic scheme to defraud a Florida-based investor group. Also named in the action is Dylan Knight, a UK man who is listed as a co-founder and Chief Technology Officer for the company. The Federal Court complaint cites multiple accounts of securities fraud, fraud in the inducement, and wire fraud.
According to a Zurich-based private equity fund manager who had been repeatedly approached by Katz to invest, “All of the patented elements of old-fashioned investor fraud have been perpetrated by these Seaquake characters, casting yet another shadow of skepticism on the entire digital asset industry. It is amazing how brazen these individuals are. Based on their apparent actions, one can hope that law enforcement officials will do their jobs and prosecute these people quickly. Even if the wheels of justice spin slow, anyone in the industry should be alert to these people and be aware they have already destroyed any future professional career in any industry.”
According to the Federal Court complaint, Katz lists former jobs at UBS Bank and EFG Capital in investor offering documents, the company’s website, as well as his Linkedin profile, despite Finra having no record of Katz being licensed by that securities industry regulator at any time, and despite EFG Capital having no record of his employment. More importantly, the court filings include a series of email communications, text messages, and group chat messages on Linkedin in which Katz and Krueger made a series of fraudulent representations that induced the investors to enter into a so-called “SAFE Agreement” with the company. Investors were of the belief the funds would be deployed to a high-frequency trading application that Seaquake principals, including so-called CTO Dylan Knight of the UK, claimed to be operating.
JANUARY 2021 UPDATE: SEAQUAKE CO-FOUNDER ANDREW KATZ CHARGED WITH FELONY ASSAULT AND GRAND LARCENY IN NEW YORK; FACES MINIMUM 2 YEAR PRISON SENTENCE
According to the complaint, only several days after the investors executed the agreement with the company and wiring funds to a Seaquake account at Signature Bank in New York, Katz then informed the investors the high-frequency trading application was “not in fact in production and the [investor] funds would be placed into a money market account until such time as the software was ‘production ready.” Defendants Krueger and Katz also made a series of assertions as to pending institutional investors who committed to providing capital to Seaquake, all of which turned out to be false, according to the filing. According to court documents and independent background searches, it turns out that Katz has driver licenses in New York, Florida, Colorado, and California, and is also registered to vote in Florida.
UPDATE MARCH 2021: SEAQUAKE ENTITY ‘SEAQUAKE OPS LLC’, A WYOMING CORPORATE SHELL NOW SUSPECTED OF SBA LOAN FRAUD; APPLIED FOR AND RECEIVED PPP-RELATED LOAN
This latest charge adds to a pending list of other criminal matters, including a likely bank loan fraud perpetrated by Katz and Krueger in connection with Seaquake OPS LLC, a Wyoming entity that is part of the web of Seaquake companies. Recently discovered, Seaquale OPS LLC did in fact apply for and did receive a Paycheck Protection Loan of $22,813 through Wells Fargo Bank, National Association, which was approved in May, 2020. In that loan application, Selen Katz, former wife of Andrew Katz, and the victim identified in the felony assault charge is identified as an employee of Seaquake. Her title, according to a LinkedIn profile is “creative director” and her date of employment is the same month in which the PPP Loan was applied for.
Katz has a history of criminal charges, from trespassing charges in New York to domestic abuse charges in Los Angeles. This private investigator’s backgroundreport is telling. Other background searches indicate that Katz, along with his mother, Alyson Katz of Arvada, Colorado were plaintiffs in a class action law suit brought against a Utah-based school for emotionally-challenged youth, a facility that Katz was apparently sent to by his parents and attended for at least two years while he was a teenager.
If only Andrew Katz’s wife, Selen Katz, a Turkish national and Instagram Influencer who apparently works as a swimsuit model, didn’t need Katz to help her secure a Green Card. Otherwise, perhaps she’d realize that being married to a scam artist is not the path to a happy future in the U.S. More important, actions pending against Katz could raise eyebrows from US immigration authorities who will be evaluating her request for citizenship. She should hope that more recent frauds committed by her husband and his partner in connection with PPP loans don’t add fuel to the criminal investigation fire burning under their butts.
Back to the primary coverage….Once the investors realized they had been scammed and then demanded the return of the funds, Katz and Krueger took steps to dissolve “Seaquake Partners LP”, the corporate entity the investors sent their funds to, according to the corporate register agent. According to records in the filing, Defendants Katz and Krueger wrote to the investor informing “we will not communicate with your attorney and we have no obligation to provide any further information..” Concurrently, the Defendants transferred the investor funds from the company account at Signature Bank in New York to multiple, newly-created Seaquake entity accounts at a Compass Bank BBVA branch in California, near where Krueger lives. Thereafter, bank records indicate Katz and Krueger dispersed the funds to various internal company accounts, and then transferred a bulk of the investor’s funds to crypto exchange Coinbase, which they moved days later to crypto exchange and custody platform Binance.
As acknowledged by the defendants’ attorney, Yasin Daneshfar of Florida law firm Becker and Poliakoff, Katz and Krueger also moved tens of thousands of dollars to personal accounts the defendants established at Compass Bank. Attorney Daneshfar argued “the so-called “SAFE Agreement” did not preclude the defendants from dispersing the money as they saw fit.” Daneshfar further acknowledged in a recent court appearance that, in addition to the defendants enriching themselves with much of the investor’s funds, the investors’ funds have also been used by Katz and Krueger to pay the Becker law firm in their effort to defend themselves against the investors in federal court. When challenged with this use of funds by the federal court judge who pointed to the series of communications from Katz to the investors, Attorney Daneshfar was said to have responded to the judge with a smirk and a shrug of his shoulders.
While much of the information obtained in the federal court filings may seem to be the source of good fodder for a ten cent crime novel, according to one Switzerland-based venture capital executive who is focused on the digital currency space and who had also been solicited by Seaquake to serve as both an advisor and to provide investment funds, “All of the patented elements of old-fashioned investor fraud have been perpetrated by these Seaquake characters, casting yet another shadow of skepticism on the entire digital asset industry. It is amazing how brazen these individuals are. Based on their apparent actions, and whether or not they get caught by law enforcement officials, they have effectively destroyed any future professional career in any industry.”
Despite all of the shenanigans, David Streltsoff, a Senior Vice President for San Francisco broker-dealer “US Capital Global” and a former salesman for high-frequency trading firms was apparently not deterred from associating himself with Seaquake. According to his LinkedIn profile in the months of September through November 2019, Streltsoff served as “Business Development Executive” for the company, while also a registered broker-dealer for US Capital. Streltsoff’s rofile was updated at the end of November after Streltsoff was served with a federal court subpoena for information pertaining to his involvement with Seaquake. According to a former investigative journalist, now a due diligence advisor to fund managers evaluating crypto startups, Streltsoff told him “It took one too many days for me to figure out this company was peddling nothing more than vaporware, and the scam accusations against them were eye-opening, so I terminated my association with them.” Jeffrey Sweeney, the CEO of US Capital Global has not replied to inquiries.
Update: Since the litigation was filed, at least one other investor has been identified as having been scammed. That investor was apparently introduced to the company in June 2019 by a friend who was employed by Seaquake.io as “business development executive.” That friend sent the investor a so-called Safe Agreement, along with wire payment instructions to a Seaquake bank account held by a Bank of America branch in Colorado. Once that investor learned of the recent court action, the investor contacted Katz and demanded the return of the money sent to Seaquake in July. Katz replied via email stating “we have no record of having executed a Safe Agreement with you, and the former employee provided you with incorrect wire instructions, so we never received your money, and we don’t owe you anything.” When the investor provided Katz and Krueger with Bank of America correspondence that affirmed the Seaquake account information was correct and confirmation from the bank the wire payment had in fact been credited to the account Katz created, Katz ceased all further communication. That investor has since filed a criminal complaint and the former executive is said to be cooperating with law enforcement authorities. Perhaps Mr. William Bao Bean, a principal of SOSV Ventures / Chinaccelerator –which recently disclosed making an investment in “Seaquakes”, as did Jeremy Colless, Managing Partner of down-under VC “Artesian Capital” both failed to get the memo…(?)
In November, the federal court judge lifted the temporary restraining order on bank accounts controlled by Seaquake principals Katz and Krueger, and cited concerns as to whether the Florida court was the appropriate jurisdiction to litigate the action. Plaintiffs are expected to continue the litigation.
Katz was last seen in December at the Hotel Kai Tulum resort in Cabo San Lucas vacationing with his wife, who posted an assortment of photos baring ‘birthday bling’ while sipping margaritas.