New Jersey Man Sentenced In Manhattan Federal Court To 10 Years In Prison For $3.5 Million Attempted Fraud Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, announced that KHADDY GARCIA was sentenced today to 10 years in prison in connection with a fraudulent scheme to withdraw funds from various bank accounts, and a second fraudulent scheme to induce a venture capital fund to wire $2 million to an account GARCIA controlled. He was sentenced in Manhattan federal court by U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “Khaddy Garcia employed a low-tech scheme of trickery and deceit in his attempts to commit a high-tech fraud. Fortunately, he was not able to do tremendous damage before he was caught, and he will now be punished.”

According to the Information, the Complaint previously filed in the case, and statements made during today’s sentencing proceeding:

Between February 2011and January 2012, GARCIA called customer service representatives at various banks, falsely representing that he was the owner or agent of a particular business with an account at the bank, and claiming that he had “forgotten” the username and password needed to access the business’s bank account on-line through the bank’s Internet banking system. During these calls, GARCIA “phished” for information concerning the account holder and sought to induce the representative to provide him with login information for the account. On those occasions when GARCIA was successful, he used this access to withdraw funds from the compromised account by issuing checks and wire transfers to himself and to his co-conspirators. Through this scheme, GARCIA fraudulently obtained on-line access to more than 20 different business bank accounts from which he attempted to withdraw over $1.5 million, and ultimately succeeded in withdrawing over $200,000.

In December 2011, GARCIA engaged in a separate scheme to defraud a venture capital firm located in New York, New York (the “Venture Capital Firm”) of $2 million. Specifically, after learning that the owner of the Venture Capital Firm had initiated a wire transfer of $2 million to a bank account maintained for the Venture Capital Firm by a clearing firm (the “Clearing Firm”), GARCIA made numerous phone calls to the owner and agents of the owner of the Venture Capital Firm, in which he falsely identified himself as a representative from the Clearing Firm. Over the course of these calls, GARCIA fraudulently represented to the owner and his agents that the $2 million had been deposited into the wrong account at the Clearing Firm, and that the funds needed to be re-wired to a different account, for which GARCIA gave certain routing and account information. In fact, the routing and account information corresponded to an account controlled by GARCIA. The fraud was detected before any funds were transferred.

In addition to the prison term, Judge Forrest sentenced GARCIA to five years of supervised release and ordered him to pay over $200,000 in restitution and forfeiture.

Judge FORREST said at sentencing: “This is theft no matter how sophisticated it may be. No matter the fact that it was over the telephone or in some instances using the Internet, it is theft. It is 21st century theft, but theft nonetheless.”