PPP, Money Laundering and Robinhood
Criminals got creative and busy during the Coronavirus pandemic. Go figure! Did you hear about the rampant fraud that took place last year in regards to the billions of government aid dollars paid out to small businesses through Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan, or EIDL? As of last April, the amount of money involved in fraudulent PPP cases was nearing $450 million and over 200 people had been charged with crimes. Certainly, it took a good dose of creativity to fraudulently apply for and receive in some cases millions of dollars.
The problem with receiving millions of dollars in illegitimate funds is that they don’t belong to you. If you are a pro, it is likely you stole a small business owner’s identity in order to get the PPP application approved, so you can’t just deposit the PPP check in your bank. Nor is it easy to open a checking account with a stolen identity. Banks have legit security systems in place.
Interviewed by CNBC, Rick McDonell, the executive director of the Association of Certified Anti-Money Laundering Specialists said, “if I were a good criminal, I would avoid banks like the plague.”
Therefore, the money needs to be laundered. That’s where, in this case, criminal creativity during COVID has crossed over into a new and digital realm, with the thieves using online investment platforms like Robinhood, Ameritrade, etc., as the vehicles for cleaning their cash. This is all new. According to the CNBC article, over $100 million has passed through the online investment platforms since congress passed the CARES Act in March, 2020.
Fortunately, crooks are still prone to silly mistakes or outright laziness. They get caught. One guy in particular hails from my hometown of Seattle and is a former engineering director at Microsoft. He even did time at Amazon! But then in July of 2020, Mukund Mohan pleaded guilty to wire fraud and money laundering charges in connection with PPP Loans. What happened?
Mohan’s first mistake was in applying for eight PPP loans (one cancelled, one withdrawn) for six different companies (and here is the key) to federally insured financial institutions, fraudulently, and in his own name! Somehow, Mohan did not understand the first rule of digital fraud — assume someone else’s identity.
In support of his loan applications Mohan:
- Made numerous false and misleading statements about the companies’ respective business operations and payroll expenses.
- Submitted fake and altered documents, including fake federal tax filings and altered incorporation documents.
- Misrepresented to a lender that, in 2019, his company Mahenjo, Inc. had dozens of employees and paid millions of dollars in employee wages and payroll taxes.
In reality, Mohan had bought the domain Mahenjo.com on the Internet in May 2020 and at that time it had no employees and no business activity. Mahenjo was basically nothing and his other five companies were suspect. Yet somehow the government awarded him and his ‘companies’ over $5.5 million, which was meant to pay for employee wages, business operational expenses and more.
He instead took the money and tried to structure it by depositing it across multiple bank accounts, and of course, his Robinhood account. As a result, he got busted quickly. The penalties for his actions are harsh and a good reminder to avoid shady financial dealings. They are also a good reminder that the banks especially, but also the online investment platforms take money laundering seriously. If you are a rookie, they will catch you.
As for the other $95 million estimated to have been laundered through Robinhood? Time will tell.
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