Orinda Man Found Guilty Of Bank Fraud, Wire Fraud, And Money Laundering

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FILE PHOTO: Signage is seen at the United States Department of Justice headquarters in Washington, D.C.

SAN FRANCISCO – Alan Safahi was found guilty following a federal bench trial of bank fraud, wire fraud, and money laundering in a prepaid debit card scheme that caused losses of approximately $1.5 million, announced United States Attorney Stephanie M. Hinds and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge Mark H. Pearson.   

In a 39-page order filed late Thursday, United States District Judge Susan Illston convicted Safahi, 61, of Orinda, of one count of bank fraud, four counts of wire fraud, and one count of money laundering.  The order, handed down following a nearly four-week bench trial, detailed the evidence against Safahi. 

Evidence presented at trial demonstrated that Safahi developed an elaborate fraud scheme in which he collected money from clients to fund prepaid debit cards and, while accurately reporting the balances of the cards to the clients, created a system called “funding on demand” to defraud the bank that supported the cards.  In the fraud, Safahi reported to the bank only the amount the clients spent on the card as the card’s “balance,” while diverting to himself the remaining balance of the card’s value.  For example, a client of Safahi’s company, CardEx, would buy a prepaid debit card for $100 and spend $10 of that $100 balance.  Safahi’s fraudulent “funding on demand” system would then report to the bank the “balance” of that card as $10 instead of $100.  This allowed Safahi to access the money representing the difference between the actual card balance and the amount that had been spent on the card as reported to the bank.

Safahi used the fraudulently obtained funds not only to pay off his company’s debt to another bank but also to buy a house in Orinda.  Just two days before reporting the accurate balance to the bank, Safahi issued himself an $80,000 cashier’s check from his company’s account that, among other fraudulently obtained funds, he used to purchase the house.  This transaction provided the basis of his money laundering conviction.

The fraud scheme unraveled on September 25, 2014.  On the same day Safahi shut down his CardEx business, he directed an employee to provide the accurate balances of the prepaid debit cards to the bank.  According to trial evidence, Safahi had earlier reported to the bank a false balance of $93,734 on the cards he had sold.  The true balance on the cards reported to the bank that day was $2,774,953.  The difference was nearly $2.7 million, and further investigation revealed that Safahi had fraudulently appropriated approximately $1.5 million of that amount. 

United States District Judge Susan Illston has not yet set a sentencing date.

Safahi was convicted of one count of bank fraud in violation of 18 U.S.C. § 1344, which carries a maximum term of imprisonment of 30 years and a maximum fine of up to $1,000,000 or twice the gross gain or loss amount.  He was also convicted of four counts of wire fraud in violation of 18 U.S.C. § 1343, which carries a maximum term of imprisonment of 20 years and a maximum fine of $250,00.  Safahi was lastly convicted of one count of money laundering in violation of 18 U.S.C. § 1957, which carries a maximum term of imprisonment of 10 years and a maximum fine of $250,000.  However, any sentence for these convictions will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Robert David Rees and Benjamin Kurtis Kleinman are the Assistant U.S. Attorneys who prosecuted the case, with the assistance of Llessica Chan Fierro, Veronica Hernandez, Olivia Hawkins, Leeya Kekona, and Karina Ruiz.  The prosecution is the result of an investigation by IRS-CI.