Disbarred Attorney Arrested For Involvement In Multi-Million-Dollar Fraud Scheme

Source: United States Department of Justice News

Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced the arrest today of GERALD SHAW, a convicted felon and disbarred attorney, in connection with his involvement in a multi-million-dollar fraud scheme.  SHAW is accused of serving as the purported “Chief Compliance Officer” for a purported financial institution, Dominion Bank and Trust Company Limited (“Dominion Bank”), which claimed to be able to extend financing for small businesses but, in fact, operated an advance fee fraud scheme.  SHAW was arrested this morning in Claremont, California, and will be presented later today in the United States District Court for the Central District of California.

U.S. Attorney Damian Williams said: “As alleged, Gerald Shaw served as the supposed ‘Chief Compliance Officer’ for Dominion Bank, which held itself out as a legitimate financial institution that could extend or facilitate millions of dollars in financing for small businesses.  But in fact, Dominion Bank was also a fraud.  In his role, Shaw, a disbarred attorney and convicted felon, drafted financial instruments that were worthless.  Shaw knew that Dominion Bank was a fraud, but he continued to draft these financial instruments anyway.  Shaw now faces serious charges for his alleged crimes.” 

FBI Assistant Director in Charge Michael J. Driscoll said: “The defendant is alleged to have participated in a scheme which defrauded clients of millions of dollars through the promise of financing in exchange for an advance fee.  Complex financial frauds of this nature damage faith in our financial systems and institutions, and they can cause untold harm to the victims of the fraud.   The FBI is dedicated to investigating individuals who operate unscrupulous businesses and ensuring that their crimes are answered for in the criminal justice system.”

HSI Special Agent in Charge Ivan J. Arvelo said: “As Dominion Bank and Trust’s purported Chief Compliance Officer, Gerald Shaw is alleged to have participated in a conspiracy that defrauded investors of millions of dollars through the issuance of fraudulent financial instruments.  These types of crimes have devastating effects on the victims and can erode trust in the financial system.  HSI will aggressively pursue individuals and organizations that perpetrate these fraudulent schemes to bring justice to the victims and restore faith in our financial institutions.  I am especially grateful for the dedication and investigative acumen of HSI New York’s El Dorado Task Force and HSI Los Angeles for their support in this investigation.”

According to the allegations in the Complaint:[1]

From its formation in or about late 2015 until in or about July 2020, Dominion Bank (along with its affiliates) was a purported financial institution that claimed to be able to extend and facilitate financing for small businesses in exchange for an advanced fee or deposit.  In fact, Dominion Bank operated an advance fee fraud scheme (the “Scheme”).  As part of the fraud, Scheme members instructed victims to wire tens or hundreds of thousands of dollars to Dominion Bank as a deposit or servicing fee for future financing or credit based on representations that Dominion Bank could provide such services.  Those representations were false.  In fact, no financing existed; the victims did not receive the promised credit; and the victims were generally unable to get their money back, as Dominion Bank typically did not return funds to victims but, instead, kept victims’ money and, in some instances, even responded to refund requests by sending invoices for additional amounts.  Dominion Bank defrauded at least approximately 60 victims in total (individual and corporate) out of more than approximately $4 million. 

One way that Dominion Bank defrauded victims was by issuing them worthless financial instruments — such as a standby letter of credit (“SBLC”) — in exchange for large upfront payments.  An SBLC is a legal document between a bank and its client, in which the bank vouches for the client’s creditworthiness and also becomes the guarantor, i.e., the bank promises that, if its client cannot meet its obligations, the bank will do so.  Among other things, Dominion Bank lacked the assets necessary to issue such financial instruments.  According to several victims of the Scheme, other financial institutions have described SBLCs issued by Dominion Bank as being worthless.  As one victim explained, a potential counterparty described Dominion Bank’s SBLC as a “worthless piece of paper.”  Another individual explained that a potential counterparty described Dominion Bank’s $4 million SBLC as not “worth the paper it’s printed on.”

From at least in or about October 2016 through in or about April 2020, Dominion Bank’s Chief Compliance Officer was SHAW.  In that role, SHAW’s responsibilities included drafting various documents, including SBLCs, that were sent to victims in exchange for payments from the victims.  In June 2018, SHAW sent an email to two Dominion Bank officers in which SHAW acknowledged that Dominion Bank lacked funds.  SHAW wrote that Dominion Bank was “20 weeks behind” in paying SHAW’s “$500 a week salary,” and SHAW added that, “On several occasions, I have indicated to you that I know Dominion does not have the money to pay my $500 a week [salary].”  Nonetheless, SHAW continued his involvement in the Scheme thereafter, despite his awareness that Dominion Bank was selling worthless financial instruments because it lacked the assets and ability to back up its representations.  For instance, in December 2018, SHAW was involved in Dominion Bank’s issuance or sale of an approximately $50 million financial instrument and an approximately $25 million financial instrument.  In each instance, Dominion Bank represented, as guarantor, that it had assets sufficient to cover each financial instrument when it did not.

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SHAW, 75, of Claremont, California, is charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carry a maximum potential prison sentence of 20 years. 

The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the FBI and HSI.  He also thanked FBI Los Angeles, HSI Los Angeles, and the U.S. Attorney’s Office for the Central District of California for their assistance.

Mr. Williams also noted that the investigation is ongoing.  If you believe you have information about the defendant, this case, or if you believe you are a victim of any crimes related to Dominion Bank, please email: USANYS.DominionBankCase@usdoj.gov.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Michael D. Neff and Sheb Swett are in charge of the prosecution.

The charges in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.