Reginald Fowler, man tied to missing Bitfinex funds, out on $5 million bail

Screen Shot 2019-05-02 at 1.33.58 PMReginald Fowler, the ex-NFL owner arrested in connection with operating a “shadow bank” that processed hundreds of millions of dollars of unregulated transactions on behalf of crypto exchanges, is out on $5 million bail.  

The US Government previously argued that Fowler should be detained without bail. The government thought he was too much of a flight risk due to his overseas connections and access to bank accounts around the world. But for the time being, at least, Fowler is a free man, albeit, with restrictions.

Order and letter

The order setting conditions of release was filed with the District Court for the District of Arizona on May 9. A letter of motion, submitted by U.S. Attorney Geoffrey Berman and addressed to Judge Andrew Carter of the District Court of Southern New York, was entered on May 8.

Copies of the letter went to James McGovern and Michael Hefter, partners at law firm Hogan Lovells in New York. Presumably, these are Fowler’s defense attorneys. Fowler’s arraignment is set for 4:30 p.m. on May 15 at the Southern District Court of New York. 

Fowler was arrested in Arizona on April 30. The bond is being posted in New York, because the District of Arizona does not include secured bonds in bail packages. 

According to conditions set forth in the bond, Fowler cannot travel outside of the Southern District of New York, the Eastern District of New York, and Arizona. He also had to surrender his travel documents and his passport. 

The properties and the wealthy friends

Fowler’s $5 million personal recognizance bond is secured by two unnamed “financially responsible” co-signers and the following properties: 

  • 3965 Bayamon Street, Las Vegas, Nevada
  • 8337 Brittany Harbor Drive, Las Vegas, Nevada
  • 4670 Slippery Rock Drive, Fort Worth, Texas
  • 4417 Chaparral Creek Drive, Fort Worth, Texas
  • 8821 Friendswood Drive, Fort Worth, Texas

A quick look on Zillow indicates the properties are cheap investment houses, worth perhaps $1.5 million in total, if that. This would mean that the additional $3.5 million is secured by Fowler’s wealthy friends, whoever they are.

The LLC on the five properties is Eligibility LLC, 4939 Ray Road, #4-349 Chandler, Arizona 85226. The mailing address points to a UPS store, so it is basically a P.O. Box.

Global Trading Solutions LLC, a company linked to Fowler’s shadow banking operation, had the same mailing address for a time, but the address was later changed.

Indictment

On April 11, Fowler and Ravid Yosef, an Israeli woman who lived in Los Angeles and is still at large, were indicted on charges of bank fraud. Fowler was also charged with operating an unlicensed money services business. 

Fowler’s company—or one of his companies—was Global Trading Solutions LLC, which provided services for Global Trade Solutions AG, the Switzerland-based parent company of Crypto Capital Corp

Cryptocurrency exchanges used Crypto Capital as an intermediary to wire cash to their customers. The firm is allegedly withholding $851 million on behalf of Bitfinex, a crypto exchange that is currently being sued by the New York Attorney General.  

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Thanks to Nic Weaver for locating the court documents. He spends his beer money on PACER, so you don’t have to.

The HODLcast: “A deep dive into Bitfinex with Amy Castor”

I just did an interview with Sasha Hodder of The HODLcast. Sasha is attorney with DLT Law Group, P.A., which focuses on supporting crypto-related businesses.

We talked about crypto exchange Bitfinex and its legal tangle with the New York Attorney General. We also touched on Tether, Crypto Capital, Reginald Fowler, Ravid Yosef, and all of that good stuff you keep hearing about in the news lately.

I spoke to her for a full hour, so she got to test me on all the court documents I’ve been rummaging through lately. She wanted to talk about the now-defunct QuadrigaCX, too, but I was out of breath, so we decided to save that topic for another time

Literally, 15 minutes after we spoke, she had the podcast up online. The only thing I forgot to mention is that I’m reader supported.

I’m basically available for podcasts — including video, with advanced warning — and generally say “yes” to media.

News: More Bitfinex drama, Crypto Capital, a dodgy football businessman and a relationship coach

There is so much going on now with Bitfinex. My eyes are burning and my head hurts from reading piles of court docs. Here is a rundown of all the latest—and then some.

The New York Attorney General (NYAG) is suing Bitfinex and Tether, saying tethers (USDT) are not fully backed—after $850 million funneled through third-party payment processor Crypto Capital has gone missing.  

Screen Shot 2019-05-04 at 2.10.08 PMIt’s still not clear where all that money went. Bitfinex says the funds were “seized and safeguarded” by government authorities in Portugal, Poland and the U.S. The NYAG says the money was lost. It wants Bitfinex to stop dipping into Tether’s reserves and to handover a mountain of documents.

In response to the NYAG’s ex parte order, Tether general counsel Stuart Hoegner filed an affidavit accompanied by a motion to vacate from outside counsel Zoe Phillips of Morgan Lewis. Hoegner admits $2.8 billion worth of tethers are only 74% backed, but claims “Tether is not at risk.” Morgan says New York has no jurisdiction over Tether or Bitfinex. Meanwhile, the NYAG has filed an opposition. It wants Bitfinex to stop messing around.

Football businessman Reggie Fowler and “co-conspirator” Ravid Yosef were charged with running a “shadow banking” service for crypto exchanges. This all loops back to Crypto Capital, which Bitfinex and Tether were using to solve their banking woes.    

In an odd twist, the cryptocurrency saga is crossing over into the sports world. Fowler was the original main investor in the Alliance of American Football (AAF), an attempt to create a new football league. The league filed for bankruptcy last month—after Fowler was unable to deliver, because the DoJ had frozen his bank accounts last fall.  

The US government thinks Fowler is a flight risk and wants him held without bail. The FBI has also found a “Master US Workbook,” detailing the operations of a massive “cryptocurrency scheme.” They found it with email subpoenas, which sounds like it was being kept on a Google Drive?

Yosef is still at large. She appears to have split her time between Tel Aviv and Los Angeles. This is her LinkedIn profile. She works as a relationship coach and looks to be the sister of Crypto Capital’s Oz Yosef (aka “Ozzie Joseph”), who was likely the “Oz” chatting with “Merlin” documented in NYAG’s suit against Bitfinex.  

All eyes are on Tether right now. Bloomberg reveals the Commodity and Futures Trading Commission (CFTC) has been investigating whether Tether actually had a stockpile of cash to support the currency. The DoJ is also looking into issues raised by the NYAG.

Meanwhile, bitcoin is selling for a $300 to $400 premium on Bitfinex — a sign that traders are willing to pay more for bitcoin, so they can dump their tethers and get their funds off the exchange. This isn’t the first time we’ve seen this sort of thing. Bitcoin sold at a premium on Mt. Gox and QuadrigaCX before those exchanges collapsed.

Bitfinex is still in the ring, but it needs cash. The exchange is now trying to cover its Tether shortfalls by raising money via—of all things—a token sale. It plans to raise $1 billion in an initial exchange offering (IEO) by selling its LEO token. CoinDesk wrote a story on it, and even linked to my Tether timeline.

Did a sex-trafficking site sparked the Crypto Capital investigation? Also, Decrypt’s Tim Copeland takes a look at the payment processor’s dark past.

Tether wants to move tethers from Omni to the Tron blockchain. Tron planned to offer a 20% incentive to Omni USDT holders to convert to Tron USDT on Huobi and OkEx exchanges. But given the “recent news” about Bitfinex and Tether, it is delaying the rewards program.  

Kara Haas has an article on AccountingWeb and a Twitter thread on the potential accounting implications of Tether’s definition of “reserves.”

Coinbase is bidding adieu to yet another executive. Earn.com founder Balaji Srinivasan, who served as the exchange’s CTO for a year, is leaving. It looks like his departure comes after he served the minimum agreed period with Coinbase. 

Elsewhere, BreakerMag is shutting down. The crypto publication had a lot of good stories in its short life, including this unforgettable one by Laurie Penny, who survived a bitcoin cruise to tell about it. David Gerard wrote an obituary for the magazine.

The Los Angeles Ballet is suing MovieCoin, accusing the film finance startup of trying to pay a $200,000 pledge in worthless tokens—you can’t run a ballet on shit coins.

Police in Germany and Finland have shut down two dark markets, Wall Street Market and Valhalla. And a mystery Git ransomware is wiping Git repository commits and replacing them with a ransom note demanding Bitcoin, as this Redditor details.

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US Government wants man at center of massive “cryptocurrency scheme” held without bail

The US government wants a football businessman linked to an investigation into $850 million of missing Tether and Bitfinex funds to be held without bail.

According to a memorandum in support of detention filed with the District Court of Arizona on May 1, Reginald Fowler poses a serious fight risk due to his overseas connections and access to hundreds of millions of dollars.

The court doc also presents startling new twists in an already tangled plot—a “Master US Workbook,” which details the financial operations of the “cryptocurrency scheme,” fake bond certificates worth billions of dollars, and a counterfeit money operation.

Reggie Fowler

Screen Shot 2019-05-02 at 1.33.58 PMFowler, 60, is a football businessman. He was a former co-owner of the Minnesota Vikings and the original main investor in the Alliance of American Football (AAF)—an attempt to form a new football league. The AAF collapsed when Fowler withdrew funding—after the Department of Justice froze his bank accounts in late 2018.

I did a search on Pacer and got a number of hits showing Fowler has been in and out of courts for years. In fact, in 2005, ESPN reported that he had been sued 36 times.

Most recently, Fowler was charged with bank fraud and operating an unlicensed money services business (MSB). These crimes relate to his alleged involvement in a “shadow bank” on behalf of cryptocurrency exchanges, in which hundreds of millions of dollars passed through accounts that he controlled in jurisdictions around the world. 

Fowler operated Global Trading Solutions LLC in the US, which provided services for Global Trade Solutions AG, the Zug, Switzerland-based parent company of Crypto Capital Corp, a third-party payment processor. At one time or another, Crypto Capital serviced QuadrigaCX, Bitfinex, Kraken, Binance and BitMEX—some of the top crypto exchanges.

In October and November 2018, five US bank accounts were frozen—three of them were Fowler’s personal accounts and two were held under Global Trading Solutions. On April 11, Fowler was indicted in the Southern District of New York. And on April 30, he was arrested in Chandler, Arizona, where he lives. 

Fowler is looking at spending the rest of his life in prison—the bank fraud counts alone carry a maximum sentence of 30 years. 

The cryptocurrency scheme was not limited to the US. Fowler set up bank accounts around the world and coordinated the scheme with co-conspirators in Israel, Switzerland and Canada. The scheme involves a “staggering amount of money,” and the  government believes that Fowler still has access to overseas bank accounts.  

Master US Workbook

Even more revealing, via email search warrants, the government has obtained a document entitled “Master US Workbook,” which details the operations of the scheme. The workbook lists 60 bank accounts. It shows the scheme received over $740 million in 2018 alone. As of January 2019, the combined bank balance was $345 million. Approximately $50 million is held in US accounts. The rest is located overseas. 

Apparently, Fowler had “shown a willingness to help himself to these funds in the past.” In mid-2018, he sent $60 million from scheme accounts to his personal bank accounts. Scheme members set up a “10% fund” from client deposits, available for his personal use. The government does not know the location of those accounts.

After Fowler’s banks accounts were seized in October 2018, he agreed to cooperate with FBI agents and keep the investigation confidential, which he did not do. When agents sent him emails, he would share those with other scheme members.  

Other illegal activity

Fowler appears to have been involved with other illegal activities, such as wire fraud related to the 10% fund. He also tried to take out loans by presenting banks with fraudulent bond certificates worth billions of dollars. 

Even more shocking, FBI agents also found evidence that Fowler was involved in a counterfeit money operation. They found $14,000 in fake bills consisting of sheets of $100 bills in a filing cabinet in his Chandler, Arizona office.

After examining the sheets, a special agent for the US Secret Service “determined that they were undergoing a process common in counterfeiting schemes to turn paper bills into passable currency. In fact, the FBI also recovered black carbon paper from the office, which is often used as part of this process for making believable counterfeit bills.”

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