By Christine Duhaime | July 7th, 2020

Murder in the Ozarks
Part 2

One doesn’t often come across murder as the predicate offence to a money laundering offence. The decision from the Supreme Court of the United States to allow the execution of four death row inmates this summer is one such case. Two of the four cases in the decision involved proceeds of crime from murder. Here are those two stories as Part 1 and Part 2.

Arkansas – murder for guns

Part 2, the second case, is like a modern day King Lear tragedy.

It took place in 1996, in the Ozark Mountains and involves the second death row inmate whose execution appeal was denied by SCOTUS, Daniel Lewis Lee (“Lee“).

Chevie Kehoe

Lee’s story, however, begins with Chevie O’Brian Kehoe (“Chevie“).

Chevie was the oldest of eight boys of Kirby Keith and Gloria Kehoe. A reporter produced a radio documentary and interviewed acquaintances of the Kehoe family and Chevie’s teachers.

By all accounts, Chevie was a polite, personable, hard working and competent young person. He was an honor student in the gifted program at junior high. He wanted to be a pilot. That is, until Gloria Kehoe removed him from school at 14. His parents believed schools were a threat.

Kehoe parents

Kirby and Gloria Kehoe

The parents, Kirby and Gloria Kehoe, were anti-government in the extreme – they forbid Chevie from applying for a social security number or a driver’s license so that he would be kept off the grid.

In 1985, the Kehoes moved into a rustic cabin in Deep Lake, near Colville, Washington. They had no electricity or running water, or access to knowledge and information.

In the radio documentary, people in Colville described Kirby Kehoe as an arrogant, controlling schemer who attempted to convert people in town to a white supremacist view and handed out racist material.

Father Kehoe ordered one child to kill the other

A flavor of their parenting can perhaps best be inferred from a family incident in which Kirby Kehoe once ordered Chevie to kill one of the younger Kehoe children. Chevie refused, sending Kirby Kehoe into a rage. No Kehoe reported their parents to the police over this incident.

Chevie did consider turning his parents in to the police.

In 1989, when he was 16, he left his parent’s cabin and set out on his own. He defied them and went on the grid. He registered for a social security number. He took on odd jobs, including at McDonalds. He paid taxes. During that time, he sought the help of a former school teacher to report his parents to law enforcement. He thought his younger brothers ought to be removed from his parents. Ultimately, he lost the courage to turn them in.

White supremacists

Over time, Chevie adopted the white supremacist views of his parents and began to advance the idea of white separatism. He formed an informal association of like-minded persons who advocated for violence and intolerance to achieve their goals.

In 1994, the Kehoe family moved to the wilderness of the Ozark Mountains in Arkansas.

Mueller family

In the Ozarks, the Kehoe family became friends with William and Nancy Mueller who lived in the area. Like Kirby Kehoe, William Mueller was a vet and an amateur gun dealer with strong anti-government views.

On or around February 12, 1995, while Chevie was visiting his family in the Ozarks, he and Kirby Kehoe went to the Mueller house.

There are different accounts of what happened next.

Guns disappear from the Muellers

Gloria Kehoe says she was told that Chevie and her husband robbed the Mueller house while they were at a gun show, stealing approximately $50,000 in coins and guns, which Chevie took to Washington.

Chevie says that Kirby Kehoe and William Mueller were involved in an insurance scam together that went badly, and they concocted a scheme whereby Kirby Kehoe would take guns and other items from the Mueller home and Mueller would report it as a fake robbery to collect insurance.

The police later asked Gloria Kehoe whether the Mueller robbery was “staged.”

“It crossed my mind,” she said.

Apparently, there was an insurance claim by Mueller which the insurer refused to pay.

After the break-in or insurance scam, Gloria and Kirby Kehoe traveled back and forth by car between Arkansas and Washington.

They sold property in Arkansas and registered the sale under a fake social security number to avoid the payment of taxes and remain off the grid.

Daniel Lewis Lee

Enter Daniel Lewis Lee.

He met Chevie in 1995 in Washington. There is little information about Lee. We know from the trial that, at 17, he pled guilty to taking property from a teenager who later was murdered by someone else. Lee shared in the Kehoe family vision of white separatism and supremacy.

In January 1996, Lee asked Chevie to drive him to Oklahoma so that he could visit his mother who was in hospital recovering from surgery.

The Mueller murders

Here too, there are different accounts of what happened next.

According to Gloria Kehoe and her second oldest son, Cheyne Kehoe, at the end of that trip, on January 11, 1996, Chevie and Lee detoured to the house rented by the Muellers. The Muellers were not home so they broke in but couldn’t find anything of value so they waited for the Muellers to return.

The Mueller family.

When the Muellers returned home, Lee and Chevie emerged from hiding. They were dressed in police gear. Lee was wearing an FBI cap. They overpowered the family, handcuffed them and demanded that William Mueller hand over his valuables.

After finding cash, guns and ammunition, they placed plastic bags over their heads. They used duct tape to hold the bags in place until they suffocated to death.

Lee refused to kill eight year old Sarah Powell, so Chevie killed her by himself.

The vehicle used for the murders was a 1985 GMC truck owned, at that time, by Kirby Kehoe.

After killing the Muellers, they took their bodies in the 1985 GMC truck to Pope County and threw them, weighted down with rocks, into the Illinois Bayou.

Lee and Chevie drove back to Washington with the proceeds of crime.

Gloria Kehoe told the police that Lee and Chevie confessed the murders to her a month after they had occurred and gave her details of how the murders were carried out.

She would wait two years before telling the police about the murders.

Chevie says that they never went to the Mueller home and that his parents, who had a relationship with the Muellers, were responsible for their murders.

Back in the Ozark Mountains, no one knew what had happed to the Muellers but foul play was not suspected at first.

Seattle gun sales

The Kehoe family began selling guns taken from the Muellers. One of the guns registered to Nancy Mueller was sold by Kirby Kehoe in Seattle, triggering an investigation into him. A second gun belonging to William Mueller was found in the possession of a Seattle man who said that he bought it from Chevie.

Bodies discovered

Then, on June 28, 1996, a woman fishing near a bridge that crosses the Illinois Bayou snagged her fishing line on two tennis shoes tied together. She yanked and reeled in her line and saw there was a leg bone attached. She went to the police. The police drag-netted the water and recovered parts of the bodies of the Muellers.

When two guns belonging to the Muellers sold by the Kehoes surfaced in Washington state, and bodies surfaced in the Ozarks, the Kehoe family, except Chevie, moved to Yaak, Montana.

Police shoot out in Ohio

Several months later, on February 15, 1997, Chevie and Cheyne Kehoe were driving to a campground in Ohio. Chevie was driving his car – an older blue Chevrolet Suburban. They were stopped by state troopers in Wilmington, Ohio. The truck had an expired license plate.

Chevie exited the truck and while he was talking to the troopers, Cheyne Kehoe jumped out of the passenger side of the truck with a loaded gun and started shooting at the troopers. They were not injured. Cheyne Kehoe then fled on foot and Chevie drove off in the truck.

Hours later, Chevie shot at two Wilmington police officers who pulled up behind the truck in a parking lot, and then fled on foot. A passenger was injured in the shoot out.

The dramatic shoot out was aired on several news stations across America. The police seized the Chevrolet Suburban.

February 1997 – Cheyne Kehoe exits with a loaded gun and shoots at police.

The FBI cap

In the Chevrolet Suburban, the police found law enforcement gear, guns, ammunition, handcuffs, duct tape and FBI caps.

Following the police shoot out, Chevie and Cheyne Kehoe became wanted fugitives. Their parents helped them flee.

Kirby Kehoe suggested Chevie pay him money for his truck – the 1985 GMC – to flee, which he did, and he then transferred the vehicle registration to his name. That was the truck used for the Mueller murders.

Ranching in Utah

Chevie and Cheyne Kehoe ended up in Beryl, Utah, where Chevie got a job managing a ranch. While in Utah, Cheyne Kehoe alleged that he became nervous when Chevie discussed murdering their parents.

Cheyne Kehoe stole Chevie’s GMC truck and left Utah. He drove to his parents’ place in Yaak, Montana.

Chevie says that Cheyne Kehoe went to obtain instructions from the parents and that it was decided by them, in essence, that Chevie and Lee should take the fall for the Mueller murders, which would allow Gloria Kehoe and Cheyne Kehoe’s family to collect an award of approximately $50,000 each for turning them in.

Cheyne Kehoe lied to the police and said that he had not gone to Yaak, Montana, to talk with Kirby and Gloria Kehoe before turning himself in and handing over Chevie.

End of the road

Cheyne Kehoe’s arrest in 1997

On June 16, 1997, Cheyne Kehoe turned himself in to authorities and told them that in February 1997, Chevie had confessed to him that he and Lee murdered the Muellers. He provided them with the GMC truck he had stolen from Chevie, and told them that they would be able to find evidence therein which would tie Chevie to the Mueller murders. The evidence? Duct tape which “had some paint on it,” he said, that would match. The jury must have wondered how Cheyne Kehoe could possibly know that duct tape on three dead bodies had minute paint chips.

The next day, the police arrested Chevie.

In September 1997, Lee was arrested in Oklahoma.

In March 1998, Gloria Kehoe also went to the police and told them that two years earlier, Chevie and Lee had confessed committing the murders to her.

She led police to a storage locker rented by Kirby Kehoe that contained items stolen from the Mueller house. Kirby Kehoe also had 30,000 rounds of ammunition, an AK-47, assault weapons, grenades and large quantities of guns in his storage locker.

She led police to a second storage locker that she said was rented by Chevie which had items similar to those in the Mueller home. Forensic scientists found the fingerprints of Lee and Chevie on some items in Chevie’s storage locker.

Gloria Kehoe told the police that Kirby Kehoe was going to kill her because she knew too much.

The indictments

On December 12, 1997, Chevie and Lee were indicted (with others) with several significant offences, superseded in July 1998, with charges that included racketeering and murder. The indictment alleged, among other things, that Chevie launched an enterprise designed to start a revolution in the US to create a new supremacist nation financed with the proceeds of crime derived from robberies, kidnapping and the murder of the Muellers.

Both Lee and Chevie denied involvement in the Mueller murders.

Lee and Chevie during their trial.

A strand of hair

The case in respect of the murders appears to have been mostly circumstantial, based on the testimony of Gloria Kehoe and Cheyne Kehoe.

But there were also two pieces of material evidence tied to the Mueller murders.

Experts testified that: there were paint samples taken from the GMC truck (owned by Kirby Kehoe at the time of the murders) that were consistent with paint chips found in duct tape removed from the Mueller bodies; and that one of the FBI caps located in Chevie’s Chevrolet Suburban was used in the Mueller murders and contained a hair that an expert testified was similar to Lee’s.

The hair strand in the FBI cap was the only physical evidence tying Lee to the Mueller murders.

No DNA testing was done on the hair.

The jury was told at closing that it was Lee’s hair in the FBI cap.

Only it was not.

In 2007, long after the trial was over, the hair was DNA tested and was excluded from being Lee’s hair.

On May 4, 1999, a jury found Lee and Chevie guilty of numerous offenses. Lee was found guilty of three counts of murder, racketeering and conspiracy to commit racketeering.

Lee was sentenced to death.

Chevie was not.

An appeal Court later called the disparity between the two sentenced given to Chevie and Lee “troubling” and “unfair.”

Both have appealed their sentences numerous times, all unsuccessfully.

Strand of hair DNA tested

Lee, in particular, as part of a broader set of appeals, appealed with the new evidence that proved from a DNA test that the strand of hair in the FBI cap worn by one of the men who committed the Mueller murders, was not his.

The argument, in effect, was that since it was proven that that particular FBI cap was worn to commit the Mueller murders and the strand of hair was not Lee’s or Chevie’s as the jury was told, there must have either been a third man in the Mueller home who participated in the murders, or there were two men, and Lee was not one of them. Either way, it was presumably argued, based on the DNA evidence, there was no longer physical evidence that tied Lee to the FBI cap, and therefore to the murders.

In 2008, the Court rejected the new evidence from the DNA test as a ground of appeal to vacate his sentence, finding that he was not prejudiced by it.

Execution of Lee scheduled

Lee has exhausted all of his appeals and his execution is scheduled for July 13, 2020.

Some members of the family of the victims do not support his execution. Neither do the prosecutors who prosecuted the case against Lee. The presiding judge over the case, now deceased, said that justice was not served in respect of Lee’s penalty. To be clear, none of them believe Lee is innocent but they object to the inequitable result of the jury’s sentence.

Where are they now?

Chevie is in prison in Colorado.

Gloria Kehoe disappeared after the case and is believed to have returned to Yaak, Montana, where she raised the remaining six Kehoe boys.

Kirby Kehoe and Cheyne Kehoe were both sentenced to terms of incarceration for various convictions related to their activities in the mid-1990s. Both were released and then resumed their lives of criminality and illegal weapons collecting together. Kirby Kehoe is incarcerated in California. Cheyne Kehoe is at an unknown location.

They and several other Kehoe sons were living off the grid on 40 acres of land in Ash Fork, Arizona, where over a dozen illegal guns and 15,000 rounds of ammunition were located and confiscated.

40 acres off the grid in Arizona where Kehoes lived in 2013.

These Kehoes were engaged in the production and commercialization of illegal drugs.

At that time, in 2014, a Kehoe son told law enforcement that his father, Kirby Kehoe, was unstable, had extreme anti-government views and would act on those views. 

An unsolved mystery

Flowing from the DNA test of the strand of hair, the identity of the person whose strand of hair was taken from the FBI cap used in the Mueller murders is an unsolved mystery.

Part 1 – the gruesome murders of Wesley Ira Purkey is here.

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By Christine Duhaime | July 3rd, 2020

Murder in the Ozarks
Part 1

One doesn’t often come across murder as the predicate offence to a money laundering offence. Monday’s decision from the Supreme Court of the United States to allow the execution of four death row inmates this summer is one such case. Two of the four cases in the decision involved proceeds of crime from murder. One takes place in Kansas, the other in the Ozarks. Here are those two stories.

Kansas – a murder for $70

It was 1998.

Wesley Ira Purkey was an ex-con recently out on parole and living in Lansing, Kansas. He had a lengthy criminal record for numerous violent crimes and had spent years in prison getting an education, and trying to improve his attitude for release.

Over the years, prison psychologists who evaluated Purkey labeled him “amoral … bright … manipulative” … a “classic psychopath” but their opinion was that his prison education and intelligence tempered his psychopathic nature.

A psychopath paroled

In March 1997, a state parole board felt that after more than a decade in prison, he was rehabilitated and ready to be a responsible citizen. He was released. He was 45 years old.

Like all parolees with a criminal record, Purkey had difficulty getting a job. After ten months, he got a job interview that seemed promising – to be a plumber across state lines.

On January 22, 1998, Purkey said goodbye to his wife and stepchildren, got into his white Ford pickup truck and drove from Lansing, Kansas, to Kansas City, Missouri, for his job interview.

After the interview, Purkey parked his truck and smoked half a rock of crack cocaine. He wasn’t allowed to use drugs and alcohol but, as would later emerge, he had started using drugs almost immediately after he got out of prison.

Kidnapping Jennifer Long

Purkey began driving around Kansas City. Eventually, he came upon a teenager on a sidewalk walking home from school. It was Jennifer Long (“Jennifer“). She had just turned 16 and was going for a test for her first drivers license with her stepfather later that afternoon.

Purkey slowed down his pickup truck, rolled down the window and talked to Jennifer. He had a boning knife and showed it to her. A boning knife is for removing bones from poultry, meat and fish. It isn’t meant to be used on teenage girls.

~ He had a boning knife
and showed it to her ~

Purkey kidnapped Jennifer and drove for 30 minutes back to his house in Lansing, across the state line.

No one has seen Jennifer since, except Purkey.

When they arrived at his house, Purkey forced Jennifer into the basement. His wife was at work and his stepchildren were at school. Purkey sexually assaulted Jennifer. Afterwards, she tried to escape. He grabbed her legs and forced her to the ground.

They struggled. Purkey grabbed the boning knife and repeatedly stabbed her in the face, neck and chest until she quit struggling.

Murder of Jennifer Long

She was dead.

He stabbed her so many times, the blade broke inside her body.

“It’s not like in the movies.
They don’t die right away”

He later described killing Jennifer and said: “it’s not like in the movies. They don’t die right away.”

Purkey stuffed Jennifer’s dead body into an industrial 60″ by 24″ steel toolbox – the type you see in the back of pickup trucks in a hundred towns across America. He hurriedly cleaned up the basement. He then went to drink at a local bar for several hours.

He left the bar and made a stop on his way home – to buy a chainsaw.

Thirty minutes away in Kansas City, Jennifer’s mother was frantically trying to locate her daughter. She went to the police; she put up posters around town; she sent flyers around; she listed her daughter on the national missing and exploited children’s website.


Not a tip, not a sighting was reported. Jennifer had vanished.

Meanwhile in Lansing, Purkey had a body in his basement he needed to do something with. He needed the house to be empty. It would have to wait until morning.

The gruesome clean-up

In the morning, when Purkey’s wife and stepchildren had left for the day, he went to the basement. He took his new chainsaw out of its box and began cutting Jennifer’s body up inside the steel toolbox.

Purkey hadn’t anticipated that the blade would send blood and human flesh flying in every which direction. He had to stop often to clean the chainsaw when it became too clogged with blood and body parts and quit rotating.

He did this for several days.

~ When he got to her heart, he stopped
and observed the two stab
wounds he had made ~

When he got to her heart, he stopped and examined it and observed, perhaps even marveled, at the two stab wounds he had made in Jennifer’s heart.

Once he finished chainsawing her into pieces, he placed her body parts in several plastic bags. He carried them outside and added leaves and debris from his yard to each plastic bag to obscure what was inside.

Purkey’s crime left a bloody mess in the basement and in the large toolbox. He went to buy cleaning supplies and bleach and forced his stepchildren to help clean up.

He wasn’t done.

He then went to buy several days worth of chopped firewood.

~ He burned each garbage bag with
Jennifer’s remains in the family fireplace ~

Day-by-day he burned each garbage bag with Jennifer’s remains in the family fireplace. The body parts didn’t burn as he expected.

He bought diesel fuel to keep the fire hot enough to cremate human remains. Even then, Jennifer’s bones did not burn completely so he crushed most of the remaining bone fragments. Her jaw bone was too hard to crush.

When he finished cremating Jennifer’s remains in the family fireplace, Purkey rented a wet vacuum and vacuumed up the ashes and residue in the fireplace, placing it in garbage bags.

He took the garbage bags of ashes and residue and drove 200 miles to Clearwater, Kansas, and dumped them in a septic pond. He then discarded her jaw bone and clothes in a field.

Months passed.

Jennifer’s mother kept looking for her. So did the police. No one knew she had been murdered except Purkey.

Purkey strikes again

Nine months after murdering Jennifer Long, Purkey struck again.

By October, Purkey had landed a job as plumber in Lansing.

On October 26, 1998, he answered a service call to repair a leaking kitchen faucet at the home of Mary Ruth Bales.

Mary Bales calls a plumber

Mary Bales was 80-years-old.

She had had crippling polio as a child and needed a cane to walk. Mary welcomed Purkey into her home and stayed with him while he looked at the leaking faucet in her kitchen. Purkey told her that he needed to buy a part to repair the faucet and asked her to give him $70 up front. She gave it to him.

Purkey left. He did not go buy plumbing parts for a leaky faucet.

He drove to the shady part of Lansing and used the $70 to hire a prostitute, buy crack cocaine and rent a cheap hotel room. He stayed overnight with the prostitute, taking drugs.

Murder of Mary Bales

The next morning, Purkey and the prostitute left the hotel and drove to Mary’s home. Purkey parked his truck, grabbed a claw hammer from his toolbox and entered Mary’s home.

He found her in the bedroom.

~ He smashed her head to smithereens
with the claw side of the hammer
until she was dead ~

He smashed her head to smithereens with the claw side of the hammer until she was dead. She put up a fight, to no avail. Purkey left Mary ‘s body on the floor.

Purkey went to his truck and invited the prostitute into Mary’s home, where they stayed for several hours, injecting drugs, smoking crack cocaine and eating Mary’s food.

Purkey stole Mary’s purse and a couple of watches to make the murder appear as if it was part of a break-in.

Purkey returned to the house again the next morning with two gallons of gasoline, intending set fire to the house to cover up his crime. A neighbor spotted him in Mary’s backyard and called the police. He was arrested when the police discovered Mary’s body inside the house.

Did he really murder Mary Bales over $70? He never did say.

Purkey was charged and held in remand in the Wyandotte County Jail in Kansas.

Deal-making for federal charges

After two months in remand, Purkey contacted a detective with the Kansas City police and offered to give him information about an unsolved kidnapping and murder that he had committed almost a year before.

He wanted an FBI agent at the meeting because he wanted a deal – he would confess to an interstate kidnap and murder they were not aware of and in exchange, they would let him serve his sentences in a federal prison.

Purkey met with the detective and the FBI agent and confessed to the kidnapping, sexual assault and murder of Missouri teen Jennifer Long. Over time, he provided more details of the crime and ultimately led them to the crime scene and where he discarded Jennifer’s clothes and jaw bone. Nothing was ever recovered.

Conviction for Bales murder

Eventually, Purkey pled guilty in a Kansas state court to the murder of Mary Bales. He claimed, at sentencing, that his wife put rat poison in his cocaine supply a year before the murder of Mary Bales, which he said had diminished his capacity. He was convicted on April 28, 2000, and was sentenced to life in prison.

Then, on October 10, 2001, the federal government charged him in connection with the kidnap, sexual assault and murder of Jennifer Long.

Conviction for Long murder

On November 5, 2003, after a lengthy trial, a federal jury in Missouri found Purkey guilty of interstate kidnapping, rape and murder of a child (Jennifer) and he was sentenced to death.

During the penalty phase of his trial, he affirmed earlier statements about sexually assaulting, killing and dismembering Jennifer but resiled from the kidnapping charge across state lines, saying that he fabricated the kidnapping to make sure he was prosecuted federally but had since changed his mind.

“I lost my house. I lost my job.
I lost my husband.
I lost a lot of things but
most of all, I lost her”

Jennifer’s mother, at sentencing said: “I lost my house․ I lost my job. I lost my husband. I lost a lot of great things but most of all I lost her.”

July execution scheduled

Purkey’s execution is scheduled for July 15, 2020. He has exhausted all appeals available to him. The execution is federal, which means that there is no prospect of the intervention of a state governor.

Before his execution, the US government intends to execute Daniel Lewis Lee for a series of murders in the Ozarks.

The US government has not carried out an execution in 17 years.

Part 2 – the Kehoe Family and Daniel Lewis Lee is here.

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Alberta Securities Commission issues temporary halt trade order against Vancouver’s Softlab9; and warns against Bitcoin binary financial asset recovery scam

By Christine Duhaime | June 29th, 2020

(1) Claim Central

The Alberta Securities Commission (“ASC“) issued two notices today. The first was a warning about a company called “Claim Central” which purports to be an asset recovery agency claiming to be capable of recovering funds from the numerous binary financial scams that have targeted Canadians in the past. In order to activate a claim, Claim Central asks claimants to send them $550 in Bitcoin upfront. The ASC says that the scam is using the names of real persons in order to give it legitimacy.

Asset recovery is only possible in Canada as a result of a Court ordered process (a litigation, for example) or by a regulator exercising its powers under statute. A private non-law company is not authorized to recover for victims of fraud absent one of the above authorizing the activity.

(2) Softlab9 Software Solutions Inc.

The second notice from the ASC was of a temporary halt trade order against a British Columbia incorporated reporting issuer named Softlab9 Software Solutions Inc. (“Softlab“). The order prohibits the trading in all the securities of Softlab. No reason is given for the halt trade except that the ASC notice mentioned the ASC’s ability to halt trade when there are unexplained fluctuations in the trading of securities. To that point, Stockwatch noted that the price of its securities went to $1.39 from $0.39, and that it was promoting a disinfectant and alleged facilities being erected in Alberta.

On SEDAR, the auditor of Softlab is listed as Saturna Group in Vancouver.

Its SEDAR profile says that it is in the business of industrial products. It’s press releases, however, say that it is a Blockchain incubator. There is no filing on SEDAR regarding a change of business to pivot into the disinfectant manufacturing industry, even though it appears that the existing disclosure record cannot be relied upon to fairly value its securities.

The company appears to have no office in British Columbia, despite being an issuer there. It has what is called an R&R in British Columbia.

Despite filings of press releases announcing material events including deals, contracts, acquisitions, debt covenants, joint ventures and allegedly a contract for the manufacturing of disinfectants, including for Covid-19 purposes, there appears to be not one material contract filed on SEDAR from 2018 to the present.

It recently released a press release in respect of Covid-19 and a prospective deal with something called “clean go green go” which it represents creates a “new line of defence against viral and bacterial agents, including the human coronavirus” which allegedly can help “curb the spread of the Covid-19 pandemic,” which then quotes a car wash person in Canada. There is no known cure for Covid-19 at this time and there is no basis in securities disclosure for a car wash person to opine in respect of Covid-19 for an issuer.

Not too long ago, the Vancouver issuer stated that it was a “FinTech and Blockchain incubator,” and alluded to having a US entity that rented space in South Carolina to focus on Blockchain technology that it said it created to streamline an alleged due diligence and compliance process with data intelligence allegedly obtained from 200 global parters with proprietary technology.

The issuer had also announced something called CatchCoin that is or was allegedly a Blockchain app with agreements allegedly entered into for the provision of services to catch coins. It says it raised $1.9 million to acquire that app. The app does not appear on the download pages on any app stores as at today’s date. Apparently, it disposed of substantially all of the undertaking of the CatchCoin $1.9 million investment but there are no material contracts in respect thereof on SEDAR. To whom it was disposed of and for what consideration for shareholders was not disclosed in that particular press release.

A website for different technology that it stated on SEDAR was fully operational and generating revenues does not open.

Subsequently, it announced it was getting into the cannabis space when that was a hot market.

And now the Covid-19 space because it is a hot market.

Before the ASC acted, it is likely that the securities of Softlab may have been halt traded by market regulators in any event because of its announced foray into manufacturing of industrial disinfectants, which appears to an average investor to be a change of business and a fundamental change.

As at December 31, 2019, according to its audited financial statements, Softlab had only approximately $7,000 in cash and had paid over $600,000 in consulting and management fees in the operating year. Its working capital as at that date was – $690,343.

And its accumulated deficit? – $7,474,729.

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Growing risks for AML compliance officers – client threats, intimidation and expanding personal liability

By Christine Duhaime | June 28th, 2020

Threats and intimidation

The story of how two reporters in London investigating the FinTech Wirecard were pursued by a government regulator in Germany, which commenced a bogus criminal investigation against them, and how those reporters were followed and intimidated by Wirecard and its lawyers, is reminiscent of what can happen to anti-money laundering (“AML“) compliance officers that work for problematic registered entities (reporting entities).

At reporting entities, such as banks, casinos or accounting firms, the AML compliance officer’s obligations to report are obligations owed to the state that arise as a matter of public law. That’s why legislation requires reporting by the registered entity and its employees. If the reporting entity does not report to the FIU, the compliance officer (who is, as a matter of law, an employee), must do so.

But often employees of reporting entities are not made to understand that they owe a duty to the FIU to report, irrespective of their relationship to their employer. If an employer instructs an AML compliance officer not to file a suspicious activity report (“SAR“, known as STR in Canada), the filing of which is triggered under federal legislation, the employee must file the SAR regardless. AML officers sometimes believe they must listen to their boss and not the legislation. That’s part of where they run into trouble as AML compliance officers when a prosecutor or regulator looks at their conduct because at the end of the day, the AML compliance officer who did not file a requisite report as an employee when the law requires it, is also non-law abiding and such a person will not be able to inculcate a culture of compliance at the organization.

The Cathy Scharf case

The most well-known case of an AML officer who battled a reporting entity with a non-law abiding and non-compliant culture, was Cathy Scharf, a US AML compliance officer at a Utah bank named SunFirst Bank, whose evidence helped lead to the online gambling world’s Black Friday and (to use the words of an FBI officer back then), the take-down of PokerStars and Full Tilt Poker, and several Canadian executives.

SunFirst Bank processed US$200 million in online illegal gambling payments in the US. The bank processed transactions from payment processors who manipulated merchant codes to obfuscate the type of merchant.

Merchant code fraud is a form bank fraud under the Criminal Code of Canada and is done so that high risk or illegal businesses such as digital currency exchanges, prostitution, cannabis sales or online gambling transactions are not flagged by credit card companies or banks and flow through the financial system.

When Ms. Scharf realized that the activity and the clients were problematic, she was prevented from filing SARs by the bank’s officers and owners. She was also threatened by lawyers hired by SunFirst Bank if she reported their conduct, or reported the activities to law enforcement or cooperated in a law enforcement investigation. Ms. Scharf went to the FBI anyway which led to an investigation of the bank and eventually the online gambling activities. During the course of her time there, she continued to be intimidated by the bank’s executives in various ways, including by stalking and threats that the bank would take action against her on trumped up charges. She stayed at the bank to assist law enforcement with their undercover criminal investigation. Similar to Wirecard, she was often followed by the reporting entity – once all the way to Las Vegas.

There are a number of common denominators in the Wirecard and SunFirst Bank cases, including the use of lawyers who appeared willing to break the rules for their clients to prevent the reporting of financial crime. Lawyers are prohibited from knowingly assisting a client’s dishonesty or fraud or doing anything that the lawyer ought to know assists in respect thereof. They also cannot assist a client to pursue or file, a claim that has no merit or that is based on untrue or unsubstantiated facts. It is a form of obstruction of justice to advance untrue facts in a matter associated with financial crime. Here is a case where a lawyer properly withdrew from a file that was plagued with statements made by a client that were inconsistent and untrue.

Increased fines against compliance officers

The personal liability of AML compliance officers is increasing as regulators and prosecutors appear more willing to prosecute and fine AML officers who fail in their duties to the public.

For example, on March 4, 2020, the US Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) announced a US$450,000 penalty against a chief risk officer, Michael LaFontaine, who worked at the US Bank National Association (“US Bank”) over, among other things, a failure to prevent violations of the Bank Secrecy Act and a failure to ensure its compliance function was financed, resourced and staffed to meet its AML compliance obligations. Fontaine put a cap on investigations and the filing of SARs, and did not hire enough staff to run a compliance department and fulfill the compliance function.

It’s not the first time that FinCEN has brought an action against a compliance officer for AML failures.

In 2017, FinCEN and the US Attorney’s Office for the SDNY entered into a settlement for the payment of US$250,000 by the chief compliance officer of MoneyGram, Thomas Haider, for AML failures. Among other things, Haider failed to de-risk some clients, failed to conduct due diligence on some files and failed to file many SARs.

Criminal actions against AML officers

AML and compliance officers have also been prosecuted criminally.

In 2018, George Martin, an officer of Rabobank National Association, a US subsidiary of Rabobank U.A., was charged in connection with AML failures and took a plea deal admitting that he had aided and abetted the bank’s failures to maintain an AML program. The bank provided services for Mexican drug activities close to the US – Mexico border.

Instead of undertaking AML compliance work, certain employees of the bank worked to aggressively onboard new clients and resources were not invested in operating a functioning AML department or to support investigations and filings of SARs. Certain officers of the bank then obstructed justice by, inter alia, making statements about the bank’s alleged adherence to compliance, when they knew that the organization was not adhering to compliance and participated in the making of untrue statements during a supervisory investigation. Martin cooperated with the federal investigation and was not fined.

However, the bank’s general counsel, David Weiss, entered into a settlement agreement that included payment of a fine of US$50,000 plus a lifetime ban working in the financial services sector.

In 2017, the US Department of Justice Criminal Division took action against three officers in the matter of the Banamex USA bank for AML violations – each were ordered prohibited from working in the financial services sector in the future and to pay civil penalties to the US Treasury Department. The action was part of a criminal investigation over Banamex USA, which resulted in a Deferred Prosecution Agreement.

Securities regulatory action against AML officers

The Securities and Exchange Commission (the “SEC“), has also commenced action against those in the securities sector who fail in their AML obligations.

In 2017, it took administrative action against an AML officer named John Telfer, who was with Windsor Street Capital LP, over his failures to perform his responsibilities as an AML officer for a registered broker-dealer. Among other things, Telfer failed to file SARs in respect of over US$24 million in suspicious transactions. In a final order in the matter, the SEC said that Telfer was “personally responsible for ensuring the firm’s compliance with SAR reporting requirements.” Telfer was banned from future securities law work in the US.

The SEC also commenced administrative proceedings against Wells Fargo Advisors LLC in connection with AML failures. The proceedings against Wells Fargo arose from failures to file SARs, and failures to have formal training and guidance available to staff in respect of their AML legal obligations. The filing of SARs decreased, rather than increased, over time at the company. The company agreed to pay a US$3.5 million fine to the SEC and to undertake remedial AML steps.

In another file, the SEC also took action against an AML chief compliance officer named Eugene Terracciano who failed to file SARs and to act on numerous red flags at an investment advisor and brokerage firm in New York.

Compliance officers believe culture will increase exposure to liability

Most of the enforcement actions against compliance and AML officers stem from their inability to inculcate a culture of compliance at institutions, or their acquiescence.

In a survey dated June 2020, 73% of compliance and AML officers said that they believe that a regulatory focus on culture will increase their personal liability, suggesting that AML officers remain at institutions and companies when they are aware that there are cultural and structural blocks that lead to a failure to comply with the law that will cost them reputationally or financially in the future.

To protect themselves reputationally and financially, AML and compliance officers should depart from an institution where there are issues that speak to unlawful conduct, including unlawful AML failures, before, not after, it emerges in the public that the organization is not law-abiding, or has senior officers or management that are not law-abiding and/or who acquiesce in respect of violations of law. An AML officer who departs only when it is already known that there are issues in the public domain, cannot recover reputationally. Staying for the pay cheque is precisely what AML officers are not permitted to do because it conflicts with their duties.

Besides acquiescence by a compliance or AML officer, other factors given weight in respect of prosecutions include whether a bank or financial firm compliance or AML officer made a pre (and not post) voluntarily disclosure to, and cooperated with, an agency with law enforcement powers.

Several law associations have looked at the issue of the increased personal liability imposed upon compliance officers at financial firms and have noted that compliance and AML officers are often isolated culturally at a company because of the “cop” role they must take on, with a growing risk of liability arising from the failure to prevent the misconduct of those at the top. One solution being bounced around the legal community to assist AML officers with compliance obligations who may not be lawyers, is to have platforms of open dialogues with regulators and prosecutors on the development of the law of AML.

The loudest AML voice is a deflection

Perhaps one lesson we can learn from the Wirecard debacle, and what happened to the FT reporter, is that AML compliance professionals in high risk sectors who jump up and down publicly promoting their AML prowess and the reporting entity that hired them, and who attack other people in the ecosystem with made-up allegations, may be deflecting away from their own acquiescence in unlawful conduct or incompetence. The investigations light ought to shine on them more brightly.

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Canadian ‘serial scammer’ and fake ICO issuer sentenced to jail in Dubai

By Christine Duhaime | June 25th, 2020

He called himself a serial entrepreneur. A Court found him to be a serial scammer. Aziz Com Mirza, a Canadian dropout from Montreal was convicted of fraud in a Dubai criminal court this week, sentenced to six months in jail and fined US$75,000. A few days earlier, he had been sentenced to a term of incarceration of six months for a second instance of fraud and fined US$140,000, for a total of 12 months in jail, not including time spent in remand. There is also a deportation order in place to remove him from Dubai at the conclusion of his sentences and return him to Canada. There are still several civil cases against him in Dubai.

Mirza was arrested in October 2019, after several people who invested into one or more of Mirza’s schemes filed complaints with authorities.

Com Mirza wearing HabibiCoin hat merch

Mirza ran a number of investment schemes including a digital currency launched as an initial coin offering (“ICO“) called HabibiCoin, touted as the Bitcoin of the Middle East. Each coin was alleged by Mirza to be backed by real estate in Dubai and because of that, the price could not decrease, Mirza alleged. Each coin was priced at US$0.05, and was alleged to have been created using the ERC20 standard. According to Mirza’s own representations online, he raised US$39 million in pre-sales of the ICO. Where that US$39 million is remains a mystery.

HabibiCoin was a fake digital currency that did not exist.

Mirza appears to have ran or led other investment and securities related projects including one called Leverage Program and a so-called entrepreneurial retreat program where he charged people money to take master classes on how to be a successful entrepreneur like him under various brand names such as the Dream Chasing Family and the Intentional Success Group.

We wrote about him earlier here – which is where you can see his US$1.2 million diamond watch, his horse, his luxury cars and his penthouse in Dubai.

Mirza says he got his business start in life allegedly selling lemonade at the age of seven, before becoming a multimillionaire and allegedly feeding 18 million starving people in Pakistan.

Mirza pumped HabibiCoin and some of the other schemes with the help of at least four other Canadians who are in the Bitcoin space, one who has a criminal record for defrauding millions of dollars from the elderly in the US, who is now in the cannabis space in Vancouver.

One of those four Canadians in Montreal posted numerous photos on social media of his piles of cash, and trips made to Panama and Dubai with Mirza, including a photo below of US$1 million in cash.

Approximately US$1 million cash in the custody of Montreal man who helped Mirza promote the fake HabibiCoin around the world

Another of the four Canadians who pumped HabibiCoin with Mirza recently spoke at something called Futurist in Toronto for Bitcoin people.

US$90,000 used to spell IVC, an alleged VC fund to help entrepreneurs that Mirza and a Montrealer launched.

Coming Soon!! Exciting News

Posted by SuperHero Trainer on Thursday, August 17, 2017

Mirza on Facebook with #family

In Canada, one or more of the Canadians tied to Mirza also crossed over at something called a Blockchain boat event in 2018 in Vancouver.

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Six eBay workers charged with cyberstalking for conduct that included online hate against a woman, working on false police report and witness tampering

By Christine Duhaime | June 16th, 2020

The US Department of Justice has charged six former workers of eBay Inc. with cyberstalking and witness tampering over an online harassment campaign they are alleged to have launched against a woman blogger in Massachusetts. The federal crime of cyberbullying involves, among other things, harassing a person by means of a computer that causes emotional distress to that person.

According to an affidavit filed by the FBI in respect of two of the accused, the six employees appear to have been motivated to ensure that the woman’s reputation and business prospects were harmed. They are alleged to have established a plan to “take her down.” To operationalize that plan, they allegedly began sending anonymous negative messages and posting negative content directed at her on social media, calling her a “bitch”, among other things. They also allegedly threatened to show up at locations where they knew she would be located, and stalked her offline as well as online, for a number of weeks.

In a private social media channel, the eBay workers allegedly shared screenshots of her and of their activities so that they were kept up to speed on their harassment activities, and allegedly were proud of the damage their conduct was having on her. They then came up with a plan to embarrass her in her sphere of influence.

Former eBay workers charged (Source: CNBC TV YouTube Channel)

According to the FBI, the harassers became more aggressive and looked into the woman’s personal information, which they shared among each other in the private social media channel and then posted online. They allegedly created an anonymous twitter account with a picture of a skull as the account profile to use to send tweets to the victim, which the FBI says was done to intimidate her.

The harassers allegedly were aware that their online harassment was distressing the victim but they kept going anyway, and even sent her items in the mail.

They then are alleged to have created a file to report her to the police, having no evidence at all that she had committed a crime. The FBI affidavit states, in summary, that they worked on the creation of non-substantiated facts to create a report to falsely report her to the police, while they themselves were committing the cyberstalking crimes against her on Twitter and on other social media platforms as a way to harm her, and also so that if she reported the conduct to the police, they would have a fake justification for their actions.

The FBI says that when the six former employees learned that the victim had informed law enforcement of what was happening to her, they deleted their communications in the private social media channel, and wiped their phones to obstruct a federal investigation and obstruct justice.

The alleged stalking and online hate began in April 2019 and became a police matter shortly thereafter. According to the filings, a significant amount of IP investigations work was conducted to tie the online activity to the owners of the computers and devices used to send the anonymous online content, log in to the private social media channel and log in to social media platforms.

The defendants, James Baugh, David Harville, Stephanie Popp, Brian Gilbert, Stephanie Stockwell and Veronica Zea, if convicted, face a term of imprisonment of up to five years for the cyberstalking charges, twenty years for witness tampering, and an additional five years for conspiracy in respect of the harassing conduct and witness tampering.

eBay terminated the employees, but is likely to be held liable as a civil matter to the victim because the harassment occurred on company time, using the resources of eBay, including its email system, its Internet, company iPhones and company computers. By all accounts, the employer was not monitoring the activities of these employees, or trusted them too much. The employer is also likely to be held liable for economic damages for intentional interference with the woman’s business.

It’s possible that more charges may flow. If they made a statement to the police about the victim, filed a police report or aided or abetted someone else to file an unsubstantiated false police report, they may be subject to imprisonment on conviction of making a false statement to a federal investigator. The employer, eBay, is also likely to take action for the use of its corporate resources to commit the alleged crimes.

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SEC files 1st major Covid-19 fraud case against five Canadians; parallel criminal case against Vancouver man who allegedly stole the identity of a dead company

By Christine Duhaime | June 15th, 2020

Dead company revived

This story is a little wild. You know those true crime cases you hear about where a person steals the identity of a dead person from a gravestone, and then gets fake ID in the name of the dead person to commit fraud?

Well, a Vancouver man named Shane Kenneth Schmidt is alleged to have taken that scheme one step further.

Schmidt took the identity of a company called Sandy Steele Unlimited Inc. that had been dead for twelve years, brought it back to life with a slew of fake legal documents, and proceeded to be involved in a pump and dump scheme of its shares on the market, with four other Canadians, according to the US Securities and Exchange Commission (the “SEC“).

On June 9, 2020, the SEC filed a complaint (the “Complaint“) in the District Court of Massachusetts against Schmidt and four Canadians who they say were involved in securities fraud – Michael Luckhoo, Douglas Roe, Kelly-Ann Warawa and Nelson Gomes (the “Canadian Five“), as well as several corporate entities, one of which is Canadian. In a separate action, the US Government filed a criminal complaint against Schmidt, which includes many of the facts alleged in the Complaint.

Here is what each is alleged to have done.

(1) Allegations Michael Luckhoo

The first of the Canadian Five is Michael Luckhoo, aka Michael Luckhoo-Bouche (“Luckhoo“).

Luckhoo lives in the Toronto area according to the SEC, namely in Mississauga. According to the SEC, Luckhoo coordinated with a Canadian man named Nelson Gomes and several others to dump the shares of several companies that had been illegally pumped, and also acted as a nominee director to effect the scheme. One of the companies the SEC says Luckhoo fraudulently manipulated the trading of, in concert with others, was Sandy Steele Unlimited Inc.

In all, the SEC alleges that Luckhoo and Gomes generated more than US$25 million in illegal trades of shares. Luckhoo acted, in part, says the SEC, through a Hong Kong company called Paifang Trading Ltd. and he and Gomes used three different Mexican foreign nationals to act as purported beneficial owners of other entities as part of the scheme.

Luckhoo and the defendant Gomes are listed as the directors of a Canadian numbered company based in Mississauga.

Covid-19 pumps

The SEC also alleges that when Covid-19 struck, Luckhoo, together with Gomes and their colleagues, used penny stock email marketing and boiler room call centre services to promote Sandy Steele Unlimited Inc.’s shares based on an untrue alleged ability to produce covid-19 PPE, representing inter alia, that its shares would increase 200%.

After the Sandy Steele Unlimited Inc. shares were pumped, the SEC says that they were dumped.

US$25 million in trades

And while Luckhoo and Gomes are alleged to have generated US$25 million in illegal trades, including of Sandy Steele Unlimited Inc., others were not so lucky.

The FBI says that an 87-year-old man from Massachusetts believed the pumps and lost his investment in Sandy Steele Unlimited Inc.

Temporary suspension orders

In order to stop Luckhoo and Gomes, the SEC says it was forced to issue an order on April 3, 2020, suspending the trading of Sandy Steel Unlimited Inc., and of other issuers in which Luckhoo and Gomes were by then principally dumping. We wrote about that order here.

Luckhoo is alleged by the SEC, among other violations, to have fraudulently sold securities and to have offered to sell unregistered securities.

(2) Allegations against Shane Schmidt

The case against Vancouver’s Shane Schmidt involves allegations that can only be described as next-level fraud.

Schmidt is the only Canadian Five criminally charged by the US Government. The charges against him are conspiracy to commit securities fraud and securities fraud.

The following alleged facts are based on an affidavit sworn by an FBI agent who was involved in the investigation in Canada.

Fake identity

The FBI says that in Vancouver, Schmidt created a fake identity as “John Scott”, and using that fake identity, created a fake passport in that name with his likeness.

In December 2018, the US Government alleges that he then used his John Scott persona to bring back to life Sandy Steele Unlimited Inc., which had ceased to exist as a corporate entity in 2006.

Fake change of control

In order to bring Sandy Steele Unlimited Inc. back to life, according to the FBI affidavit, he created change of control documents, including resignation forms dated in October 2017. They were fake, alleges the US Government, and in order to give effect to the rebirth of Sandy Steele Unlimited Inc., the signature of the former director and officer, a woman named Sandy Steele, was forged. Those documents were notarized in Vancouver, Canada; whether a real notary performed notarial services or a fake notarial event occurred, is not known.

Fake notarized documents

The FBI deposed that Schmidt, acting under the alias John Scott, filed the notarized corporate documents with the state corporate registrar to revive Sandy Steele Unlimited Inc.

Schmidt then registered a domain for it.

The real Sandy Steele says she was unaware of any of this. She informed the FBI that she did not resign, transfer control of the company, register a domain for the corporate entity and had no knowledge of John Scott.

The FBI deposed that Schmidt under the alias John Scott then caused Sandy Steele Unlimited Inc. to be revived on the OTC Markets in December 2018.

Fake financial statements

In March 2019, the FBI deposed that Schmidt under the alias John Scott then caused to be created fake financial statements for Sandy Steele Unlimited Inc. for a period of three years and published those financial statements as well as other disclosure documents on the OTC Markets platform for investors. It identified what the FBI deposed was the non-existent John Scott as the president, sole officer and director of Sandy Steele Unlimited Inc.

Fake promissory note

According to the SEC Complaint, Schmidt is alleged to have created a fake promissory note dated in 2016, for US$12,000 payable to an entity called Arctex Capital Inc. The alleged fake promissory note contained a clause for the right to exercise a conversion into shares at the election of the holder.

Ms. Steele informed the FBI that Sandy Steele Unlimited Inc. did not borrow US$12,000 from a company called Arctex Capital Inc., did not receive US$12,000 from it and did not execute the promissory note.

In January 2018, a month after Schmidt revived Sandy Steele Unlimited Inc., the SEC alleges that Arctex Capital Inc. assigned what it says is the fake promissory note to the four defendant companies.

Fake bank cheque

Subsequently, the SEC alleges that a US lawyer was asked to draft securities law opinions that affected the legending of the promissory note shares (so they could trade) and the lawyer agreed provided, among other things, that there was proof of the US$12,000 loan to Sandy Steele Unlimited Inc. The SEC alleges that a copy of a bank cheque for US$12,000 payable to Sandy Steele Unlimited Inc. dated in 2016, was provided to the lawyer, who issued four securities law opinions that the US Government says were incorrect and which contained false statements. The FBI deposed that it consulted with the relevant bank and no record exists of that cheque. One of the Canadian Five, Kelly-Ann Warawa, is alleged by the SEC to have paid the lawyer for the opinions.

The SEC says that the transfer agent was then able to issue unlegended shares of Sandy Steele Unlimited Inc. to the four corporate defendants.

According to the SEC, Schmidt then caused 40 million shares to be issued to himself so that those four corporate defendants would, in essence, be under the radar as control persons.

Fake business online

Then, the SEC says that Schmidt populated the Sandy Steele Unlimited Inc. website with fictitious information claiming the company manufactured clothing and had a battery division that had supplied to Russia.

When the website was live, the SEC alleges that a pumping scheme over the shares of Sandy Steele Unlimited Inc. began to artificially inflate its price. When Covid-19 hit, the marketing included promotions to provide PPE at the “facilities” of the company, of which the SEC says there were none. During that time, the entity that the SEC alleges that Luckhoo controlled, namely Paifang, allegedly received some of the shares from two of the corporate defendants that the SEC alleges benefitted from the promissory note arrangement.

IP tracing

As part of its investigation, the SEC and FBI undertook IP tracing and each describes in filings, the tracing the IP of Schmidt, tying his IP address to log-ins he made to access his bank account, brokerage accounts, the OTC Markets, the domain registrar, his Facebook account and his email account. They also traced his partner’s IP address – both are (Telus) and Although neither the Complaint not the affidavit filed in support of the criminal case mention it, it is now normal for investigations to involve significant IP investigations work of prospective defendants. Often, IP investigations can produce more compelling and reliable evidence than traditional methods, particularly for geo-locating.

(3) Allegations against Kelly-Ann Warawa

The third defendant among the Canadian Five is Vancouver’s Kelly-Ann Warawa.

The SEC alleges that, in the past, four Vancouver defendants – Schmidt, Warawa, Gomes and Roe – used a company called Wintercap S.A., which according to a different SEC complaint, was allegedly used by a person named Roger Knox to provide what the SEC alleges can be described as obfuscation services to insiders and control persons of public companies allegedly so that those insiders could secretly dump large blocks of pumped shares. Wintercap S.A. was sued by the SEC in connection with a US$165 million fraud scheme. Some assets connected to that case may be in British Columbia.

In the current Complaint, the SEC alleges that Warawa was part of the overall scheme and among other things, they allege that she acted as the bank authorized person for one of the four entities that the SEC alleges acquired shares from the promissory note scheme, paid the lawyer for the four opinions about unlegended shares and paid for the Sandy Steele Unlimited Inc. website.

(4) Allegations against Douglas Roe

The fourth Canadian, Vancouver resident Douglas Roe, is, according to the SEC, an officer and sole director of one of the four entities that the SEC alleges benefitted from the fake promissory note scheme, acquiring shares of Sandy Steele Unlimited Inc. for no consideration.

The SEC alleges that he, together with Warawa, sold shares of Sandy Steele Unlimited Inc. that they were not entitled to sell publicly because they were in fact, restricted shares, and further than the two of them dumped those shares on unsuspecting investors.

Roe brushed up against the SEC in 2016, in connection with a company called Blue Mountain Eco Tours Inc. over registration statements that the SEC says were untrue and settled with the SEC.

(5) Allegations against Nelson Gomes

The allegations against Nelson Gomes somewhat mirror those as against Luckhoo to a large extent. The essence of the complaint is that Gomes and a number of persons and entities, as well as three Mexican foreign nationals who acted as purported beneficial owners of several entities involved, were a “group” and the group undertook various conduct which amounted to a pump and dump scheme and violated several provisions of securities laws.

In all, Gomes is alleged to have been involved in the pump and dump of the shares of more than twenty penny stock companies for proceeds of US$25 million allegedly using brokerage accounts that he or Luckhoo allegedly controlled. The SEC alleges that Gomes dominated the market position in respect of those entities and used that position to trade shares and that the email marketing campaigns came from a single email marketing account associated with the group. The SEC says that those email marketing campaigns contained false and misleading information.

Like Warawa, Roe, Luckhoo and Schmidt, the SEC alleges that Gomes was not permitted to sell shares in unlegended form.

Restraint of assets

On June 6, 2020, the SEC obtained a temporary restraining order freezing the assets of the Canadian Five and the four corporate defendants because of the likelihood that they may dissipate and conceal assets.

The order was issued as against the defendants, their lawyers, employees and such, and obliges them, among other things, to retain funds and assets of the defendants and prevent the withdrawal, sale, conversion, payment, transfer or disposal of those assets and funds.

Assets of the one or more of the defendants that are frozen that have been identified include those at Binance, Okex Exchange, TD Bank, RBC Royal Bank, Scotiabank, HSBC Bank, National Bank, Tangerine Bank, DBS Bank, Standard Chartered Bank, Citibank, Satabank PLC in Canada, US, Cayman Island, Malta, Hong Kong and the Isle of Man.

The effect of the temporary freezing order on the defendants is that they cannot pay for counsel, even Canadian, without the consent of the SEC to vary the order because all lawyers are prohibited from not complying with a Court order.

All of the statements in the pleadings filed in Massachusetts against the defendants are merely allegations. Statements from the FBI are affidavit evidence in the criminal proceeding against Schmidt.

Update June 22, 2020. According to an article in Stockwatch, the SEC filed a motion for a preliminary injunction against Luckhoo and Gomes seeking to prevent them from transactions or carrying out any business that would operate as a fraud or deceit, and to prohibit them from disposing of shares of certain issuers. With respect to the assets already subject to a freeze in the accounts of lawyers, accountants, brokers and banks and digital currency exchanges related to Luckhoo and Gomes, in Canada and elsewhere, while the freeze remains in place, the SEC motion would extend the terms of the freeze of assets. The earlier asset freeze has the effect of preventing any of the defendants from hiring, engaging or paying for lawyers or to use any funds in trust previously paid to a lawyer or law firm, including in Canada without the consent of the SEC or a Court order and this motion would extend the term of the consequences of the initial freeze order.

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UK Appeal Court rules that complying with some US MLATs to hand over evidence in an investigation is unlawful; relevant for Canada as well

By Christine Duhaime | June 12th, 2020

Cruel and unusual punishment

Everything I know about the Eighth Amendment and death penalty jurisprudence, I learned from former US Supreme Court Justice Anthony Kennedy, from whom I had the privilege of studying law during a course on international human rights and constitutional law. US Supreme Court Justice Kennedy, as he was then, was not my law professor but he educated our American law school class on death penalty jurisprudence. I mention Justice Kennedy because what emerged from his class was the foreseeability that the day would come when a foreign country may cease to provide intelligence or evidence to US government agencies because of the Eighth Amendment of the US Constitution and the death penalty.

With then US Supreme Court Justice Anthony Kennedy

It seems that day has arrived.

UK pausing handing over MLAT evidence because of Court ruling

A few days ago, British authorities, according to media reports, informed the US Department of Justice that it has suspended providing evidence to the US government in connection with investigations because of the death penalty in the US (and by implication, its interpretation of the Eighth Amendment).

Relying upon the decision in the UK Supreme Court in Elgizouli v. Secretary of State for the Home Department [2020] UKSC 10, on appeal from [2019] EWHC 60 (“Elgizouli“), the UK government has apparently declined to provide assistance under a mutual legal assistance treaty (“MLAT“) to the US in connection with a Visa fraud case. All things considered, Visa fraud is not considered in all countries to be a major criminal offence.

The UK is said to have informed its US counterparts that it has paused the provision of evidence to all countries with the death penalty on the books, not just the US, because of the Elgizouli decision. But the Elgizouli decision is about more than the death penalty.

So, what happened in the Elgizouli case that altered the legal landscape and paused international MLAT cooperation for law enforcement investigations, even low grade ones, among the US and the UK?

ISIS terrorist activities against humanity

Elgizouli is a case that has to do with the prosecution of members of a terrorist organization who engaged in terrorist activities.

During the time in which the Sunni terrorist organization called the Islamic State (“ISIS“) controlled territory in Iraq and Syria and set up a pseudo state, it commenced a campaign of kidnapping foreign nationals, beheading them, filming the beheadings and publishing the filming of the murders on Twitter and other social media channels. Among those captured and beheaded were James Foley, Steven Sotloff, Peter Kassig, David Haines and Alan Henning. In one case, a Jordanian member of the military was set on fire in a cage and his death was filmed and posted on Twitter. Thousands of Yazidi children and teenage girls were kidnapped, trafficked, sold and forced into sexual slavery by ISIS.

With the collapse of ISIS, their members fled to refugee camps, fled to Turkey, fled to houses to pretend to be non-ISIS and others were captured by Iraq, Syrian or Kurdish law enforcement agencies.

27 beheadings of US citizens and others

Two ISIS men implicated in the ISIS social media beheadings and killings of 27 foreigners, el Shafee el Sheikh and Alexanda Kotey, were captured by the Kurds in January 2018. el Sheikh lived in ar Raqqah during the time of ISIS.

It turns out that both are British foreign nationals. Because they originated from the UK and are implicated in the murder of US citizens in Syria, and are members of a terrorist organization which was responsible for the commission of heinous crimes against humanity, US law enforcement seeks their presence on US soil to prosecute them to provide justice for the families and for the global population harmed by ISIS. The UK Supreme Court called the acts in which they are implicated as “the worst of the worst” and noted that their prosecution is an aim “shared by all right-thinking members of our society.”

MLAT request from US for criminal investigation

The US Department of Justice, pursuant to a 1994 MLAT with the UK for criminal matters, made a request of the UK government for files, data, personal records and such in connection with both of the ISIS men. The UK government made a decision to provide to the US government, the personal and other information in respect of the two ISIS men and in its correspondence to the US government sought assurances that the death penalty would not be sought.

When making the decision to hand over personal information and evidence, the UK government did not consider the relevant UK privacy legislation, the Data Protection Act 2018 (the “Data Act“). In all, the UK government collected, processed and formulated over 600 separate documents of el Sheikh. It is clear that the UK government provided the information verbally to the US government in respect of el Sheikh but not clear whether it handed over any physical files comprising the 600 documents.

Sometime after July 2019, el Sheikh and Kotey were handed over to the US government in Syria by the Kurds. Their whereabouts are unknown. el Sheikh has since been stripped of UK citizenship in connection with his terrorist activities.

MLATs are treaties among countries for the provision of evidence and personal information restricted to criminal matters, even if the criminal matter is at the investigation stage, as was the case here. However, there is anecdotal evidence that MLATs are used (abused) for investigations and to collect foreign evidence for matters that are not criminal, such as for civil or regulatory matters under non-criminal statutes.

Concerns over cruel and unusual punishment

In response to the UK government, US authorities informed it that the death penalty under its federal law was an option and that if it sought the death penalty as against el Sheikh, it would not use evidence obtained from the UK under the MLAT for that purpose.

In the meantime, prosecutors in the UK determined that they did not have sufficient evidence to prosecute el Sheikh in the UK, meaning that if he returned to the UK, he would be free. The UK government then formed the belief, after consulting with US prosecutors, that the prosecution of el Sheikh would only be viable if the US relied upon the evidence obtained pursuant to the MLAT by UK authorities. In other words, it became a “but for” proposition according to the UK.

Judicial review of UK government decision to provide evidence to the US

A few years later, the mother of el Sheikh, Elgizouli, became aware from a newspaper article that personal information and evidence of her child had been provided (at least verbally) to the US government and that a decision had been made to physically provide it to the US government pursuant to an MLAT. She filed a judicial review for a review of the decision of the UK government employee(s) and official(s) who made the decision to hand over evidence to a foreign country.

Her solicitor sought a judicial review on two grounds: (a) at common law, it was unlawful for the UK government to provide information under an MLAT or otherwise, to a foreign state that may be used in furtherance of a prosecution in that state where, upon conviction, sentencing may involve the death penalty; and (b) irrespective of (a) above, the provision of personal information of a person by the UK government was unlawful under the Data Act (similar to Canada’s PIPEDA).

UK Supreme Court decisions

In January 2019, Elgizouli’s judicial review application was dismissed by a UK Court, which held that the provision of information to the US government was lawful on both grounds – as a matter of the MLAT and under the Data Act.

Elgizouli then successfully appealed the lower court decision to the UK Supreme Court.

Ground one – constitutional violation

Lord Kerr, writing for the majority, held that the decision of the UK government to provide evidence to the US government in such circumstances was unlawful on both grounds – the MLAT and as a matter of privacy legislation.

On ground one – the MLAT – relying upon the Bill of Rights, 1688 (which is the law in Canada as well), the constitutional instrument, the Court held that cruel and unusual punishment is prohibited, and that the death penalty ( and its average 12 year incarceration waiting time), constitutes cruel and unusual punishment. The material parts of the UK decision hold that a state agency cannot use its powers in furtherance of punishment that may be inhumane (an Eighth Amendment consideration). The cruel and unusual punishment is determined in reference to UK law (e.g., the law of the MLAT provider not the MLAT requester).

The Court held that it was fundamentally illogical to refuse to extradite persons to death penalty countries yet to proceed to provide those same countries with evidence pursuant to an MLAT for prosecution where the outcome may be the same, without obtaining written undertakings as a condition precedent that the person will be treated to punishment consistent with the MLAT providing country (e.g., no death penalty).

The Court held that it was against the common law for the UK to facilitate a death penalty country in its prosecution of any person where that person’s life and liberty is in peril and they may be executed, irrespective of if the exercise of power to provide MLAT evidence is an exercise of the prerogative powers – a key point because a prerogative power is a residual power held by the Queen and her delegatees in places like Canada. Prerogative powers when exercised, are not subject to review in the same way, and hence the Court make the point of holding that the decision applied to the exercise of the prerogative power in MLAT matters.

Ground two – privacy law violation

On ground two – privacy legislation – the Court held that the decision to provide evidence of el Sheikh to the US government was unlawful as it was a violation of the Data Act. The UK government argued that in these circumstances, it was entitled to rely upon a provision of the Data Act that authorizes the disclosure of a person’s personal information, despite the violation of privacy, when a controller or competent authority provides the information for a law enforcement purpose upon request.

The UK Supreme Court said absolutely not. It held that the collection and processing of evidence of el Sheikh was not lawful and that the law enforcement purpose for which it was sought was not legitimate. The purpose cannot be legitimate if it is inconsistent with UK law and it is inconsistent with UK law because of the risk in this case, however remote, of the defendant being subject to cruel and unusual punishment by virtue of the death penalty being on the table. In addition, the fact that the UK government made a decision in respect of the sharing of personal data of a citizen to a foreign state without appropriate safeguards in place to protect its citizen made it unlawful. The Court held that the only circumstance in which personal information or intel may be provided in such circumstances as arose here, is in an emergency situation in order to save lives or to protect the security of a nation.

What about MLATs sent to Canada?

UK law is applicable in Canada, especially the Bill of Rights, which is a constitutional instrument in Canada that is part of constitutional law, considered to be an always-speaking statute.

As a result of the Elgizouli decision, one can imagine that eventually a number of defence lawyers in Canada may challenge evidence provided to US regulatory agencies and law enforcement under MLATs on the dual grounds of an Eighth Amendment (Bill of Rights) argument and on the PIPEDA argument, even irrespective of the death penalty. That’s because what is considered cruel and unusual is in reference to the requestee, not the requestor, state, and the jurisprudence in that regard has dealt primarily with the the lengthy terms of incarceration while appeals progress and such, leading up to the termination of a convicted prisoner. The position against cruel and unusual punishment is a fundamental principal of justice in Canada (and per the Burns case, implicates the right to life, liberty and security). Recollect that the UK is said to have refused an MLAT request for an alleged Visa fraud case, where no death penalty is implicated.

MLAT may become a prosecution by proxy

One needs to recollect as well, vis à vis Canada as a country in which the death penalty has been abolished, that the law is that there is an obligation not to expose an accused to the real risks of its application, and not to provide the crucial link in the causal chain that would make such possible, a principle that is considered to have a wider application than in extradition. While merely persuasive, the special rapporteur for the United Nations on human rights took the position that the above obligations of death penalty abolitionist countries “extends to intelligence and incriminating evidence.” A prosecution by proxy is the concern and here the “but for” analysis arises, mentioned above. If Canada undertakes a “but for” action against one of its citizens (but for Canada providing evidence under an MLAT or otherwise that leads to the imposition of cruel and unusual punishment of one of its people in a foreign country, which would not have happened but for Canada’s help), it is prosecuting by proxy.

The Elgizouli case suggests that MLATs must be strictly complied with as to their terms and that undertakings as to punishment consistent with the law of the requestee, may have to be given by the requestor as a condition precedent of evidence being provided, and must be given in cases where the criminal investigation could lead to charges where the death penalty is available upon a conviction. Pursuant to Elgizouli, any disclosure of person information must be consistent with federal privacy legislation and have attendant safeguards attached to the disclosure thereof. Otherwise, the provision of evidence may be challenged years later when a person learns that they were secretly the subject of an MLAT. The cause of action to challenge a secret MLAT under judicial review, based on this case, arises when the MLAT becomes known to the person.


(1) Carol Steiker and Jordan Steiker, Justice Kennedy: He swung left on the death penalty but declined to swing for the fences, SCOTUSblog, July 2, 2018.

(2) Elgizouli v. Secretary of State for the Home Department [2020] UKSC 10, The Supreme Court, March 25, 2020.

(3) Britain briefly suspends sending evidence to US law enforcement, in move some see as a sign of fraying relationship, Washington Post, June 10, 2020.

(4) MEMRI TV YouTube Channel, British ISIS ‘Beatle’ El Shafee El Sheikh in Interview from Captivity: I Don’t Denounce Slavery, April 11, 2018.

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Nigeria obtains asset seizure in Canada of fancy US$57 million Bombardier jet said to be owed by PEP and well-known convicted money launderer

By Christine Duhaime | June 9th, 2020

The government of Nigeria obtained an asset seizure order in a Quebec Court to restrain a jet made by Bombardier, a Canadian airplane manufacturer that makes luxury jets for the elite of the world.

The application in furtherance of the asset seizure was for a politically exposed person (“PEP“) from Nigeria, a former government official named Daniel Etete, who allegedly bought a Bombardier jet for US$57 million. The jet showed up in Montreal on May 29, 2020, and on May 30, 2020, the Quebec Superior Court granted a restraint order.

Etete was the Minister of Petroleum in Nigeria. He is a convicted money launderer in France and there is an outstanding arrest warrant for him in connection with a US$1.3 billion oil deal in Nigeria in which it is alleged that bribes were paid, and not only that, it is alleged that a huge portion of the US$1.3 billion from the oil deal went to a company controlled beneficially by Etete. His conviction for money laundering involved his misappropriation of money belonging to the people of Nigeria to buy a chateau in France and other luxuries. At one point, he had five tons in US cash in France.

Despite a quite low salary, Etete was allegedly able to fund the purchase of a jet from Bombardier and to finance its operations and pilots. He is implicated in a corruption trial in Milan, Italy and is facing charges there. He allegedly paid US$57 million towards the jet and at the same time, bought some luxury vehicles.

Nigeria claims that Etete used his position to remove state assets from the country. Etete denies any wrongdoing.

To make things interesting, the jet appears to be registered to a company formed in the AML-lax jurisdiction of BVI, whose nominee is a former Bombardier employee, a Canadian named Giuseppina Russa.

To make things even more interesting, Etete appears to own a mansion in the same complex in Dubai, Emirates Hills, where another PEP from South Africa lives who also bought a luxury jet from Bombardier without impediment and with financing from an agency called the Export Development Canada.

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Mexico’s FIU freezes bank accounts used to launder money of 1,937 suspected CJNG cartel members and their lawyers, while 5 cartels continue turf wars to export fentanyl to US and Canada

By Christine Duhaime | June 4th, 2020

Mexico’s financial intelligence unit, working with the DEA, yesterday announced that it had frozen the bank accounts of 1,770 men and women and 167 companies believed to be tied to, or working for, the Cártel Jalisco Nueva Generación (“CJNG“), believed to have been used to launder approximately US$1.1 billion in proceeds of crime from the drug trafficking activities of the CJNG.

The head of Mexico’s FIU, Santiago Nieto, tweeted the freezing of the CJNG bank accounts.

The operation, dubbed Operation Blue Agave, named after the drink of Jalisco, went after CJNG cartel leaders, politically exposed persons in Mexico, CJNG lawyers and family members of the CJNG who are believed to have participated in, or benefited from, the alleged money laundering activities of the CJNG.

On Friday night, Francisco Navarette Serna, an alleged local leader of the CJNG was killed on stage singing during a live concern in Tierra Blanca, Mexico.

The CJNG is based in Guadalajara. Operation Blue Agave also targeted the Sinaloa cartel. The Sinaloa is known to be in charge of heroin and fentanyl trafficking in the US.

The CJNG is fighting for territory from the Sinaloa to control the lucrative fentanyl and counterfeit pill trafficking business into the US and Canada. The CJNG is the most powerful cartel in Mexico today as well as the richest. In some states, there are five cartels fighting to control the business of making and exporting fentanyl to the US, and onwards to Canada.

The leader of the CJNG is a former police officer named El Mencho. The cartel operates in at least 35 US states and in Puerto Rico. 

In February, El Mencho’s son, Rubén Oseguera González, was extradited from Mexico to the US to face drug trafficking charges in Washington, DC. He is known as “El Menchito,” or “Lil’ Mencho,” and was No. 2 within the CJNG, which has an army of 5,000 soldiers. 

His sister, Jessica Johanna Oseguera González, known as “La Negra” traveled from Mexico to Washington for his Court appearance but was arrested upon entering the courthouse.

And in May, Gerardo González Valencia, one of El Mencho’s brothers-in-law, was extradited from Uruguay to the US on charges of conspiracy to import cocaine and methamphetamine into the US.

The CJNG is a designated drug kingpin, as are many of its leaders.

The head of Mexico’s FIU subsequently tweeted that Mexico is going to continue to confront organized crime and exchange information with the DEA.

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