Edward Hernandez, Christopher Flagg, Daquan Lloyd, Corey Ortiz Convicted for Defrauding Global Financial Services Company of over $2m

Between June 4, 2024, and today, in federal court in Central Islip, four defendants, Edward Hernandez, Christopher Flagg, Daquan Lloyd and Corey Ortiz, pleaded guilty to money laundering conspiracy in connection with a scheme to steal millions of dollars from a global financial services company based in Menlo Park, California.

The proceedings were held before United States District Judge Gary R. Brown.  Each defendant faces a maximum sentence of 20 years’ imprisonment, restitution of up to $2,087,164, and forfeiture between $56,390 and $700,425.

Breon Peace, United States Attorney for the Eastern District of New York and Christie M. Curtis, Acting Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office, announced the guilty pleas.

“Each defendant was convicted of their roles in a sprawling and complex nationwide scheme organized from Long Island to steal millions of dollars that were intended for legitimate investors and launder the proceeds of their crime,” stated United States Attorney Breon Peace.  

Peace added, “Today’s guilty plea demonstrates how this Office will swiftly bring to justice those who fraudulently manipulate the financial system, no matter how complex the scheme.”

Mr. Peace thanked the Securities and Exchange Commission for their assistance with the case. 

Between December 2018 and January 2023, the defendants engaged in a scheme to defraud a global financial services company of millions of dollars of short-term cash advances called “Instant Deposits.” 

The Instant Deposits were intended to enable legitimate investors to immediately trade in their brokerage accounts without waiting for an incoming wire transfer to clear. 

To gain access to millions of dollars of Instant Deposits, typically capped at $5,000 per account, the defendants established a multi-state recruitment network through which the defendants opened hundreds of fraudulent accounts held in the names of straw account holders, or “Losing Accounts.” 

Using the Instant Deposits available to the Losing Accounts, the defendants repeatedly bought thinly traded and highly speculative stock options at above-market prices. 

Selecting these virtually worthless stock options enabled the defendants to match their bids in the Losing Accounts with offers to sell the same overpriced stock options initiated by other brokerage accounts, or “Winning Accounts,” that were also controlled by the defendants and their conspirators.  

In effect, the defendants transferred the Instant Deposits from the Losing Accounts to the Winning Accounts through fraudulent securities transactions. 

Meanwhile, the incoming wire transfers supposed to cover the Instant Deposits in the Losing Accounts had purposely been initiated by the defendants from bank accounts with little or no balance. 

These wire transfers, therefore, failed to clear, but not before the defendants drained the Instant Deposits, leaving the accounts with negative balances and worthless options. The defendants then laundered the stolen funds through multiple electronic banking platforms.  

The defendants recruited dozens of individuals to engage in their fraudulent scheme and stole more than $2 million.