Fraudsters Sentenced for Standby Letters of Credit Scheme

Fraudsters Sentenced for Standby Letters of Credit Scheme

A Michigan man was sentenced to 10 years in prison for his roles in running an advanced fee scheme involving phony Standby Letters of Credit supposedly issued by European banks. His co-defendant, also from Michigan, was sentenced to a lesser term.

According to the Superseding Indictment, the scheme took in approximately $1.2 million in proceeds from the fraud. Victims resided in Virginia, Arizona, Nevada, Wisconsin, Alaska, New York, South Dakota, Peru, Australia, and other locations.

According to court documents, Samuel John Abraham, 62, and Kenneth Ross Thomas, 52, conspired to defraud individuals and businesses desperate for credit by promising to arrange substantial lines of credit from European banks.

In exchange for an up-front deposit of approximately $150,000 into an escrow account, Abraham, operating as Advanced Funding Group, using aliases such as “J. Samuel Ibrahim” and “Jamal S. Ibrahim,” and also posing as an attorney calling himself “John Wynn,” claimed that he could “lease” for clients a Standby Letter of Credit (SBLC) from a European Bank in the “face amount” of approximately $100 million.

Of this large sum, clients were promised they could simply keep approximately $20 million as a “non-recourse loan.” A supposed “monetizer” would then use the remainder of the funds over the course of the year-long lease of the SBLC in order to engage in lucrative overseas trades (also known as “platform trading”), which would supposedly generate profits sufficient to repay the entire Standby Letter of Credit.

As part of the scheme, clients were directed to wire money to Escrow Agent Kenneth Thomas of “K. Thomas and Company Escrow Services.” In reality, the money was wired to the personal checking account of Kenneth Thomas, who was not an escrow agent, and who acted as Abraham’s chauffeur. Thomas promptly provided most of the money to Abraham. According to the Superseding Indictment, Abraham then spent large sums of the money gambling at the Motor City Casino in Detroit, and on vehicles and a condominium.

Standby Letters of Credit, as marketed by the defendants, do not exist and have long been the subject of public service announcements by the FBI and the Securities and Exchange Commission. Abraham has a prior federal conviction and also a permanent injunction entered against him by the SEC for operating the same scheme.

G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, and Timothy M. Dunham, Special Agent in Charge, Criminal Division, FBI Washington Field Office, made the announcement after sentencing by U.S. District Judge Leonie M. Brinkema. Special Assistant Russell L. Carlberg and Assistant U.S. Attorney Kimberly R. Pedersen are prosecuting the case.