Gilbert Armenta’s OneCoin cooperation dossier
On January 27th OneCoin defendant Gilbert Armenta’s attorneys filed a Sentencing Memorandum.
The filing was heavily redacted, prompting Inner City Press’ Matthew Lee to file a motion requesting access to an unredacted version.
At the request of the court, on February 10th Armenta’s attorneys clarified their position on the redactions.
Recognizing that Mr. Armenta’s cooperation has been referenced publicly we have removed redactions to general references to Mr. Armenta’s cooperation and have left redacted specific non-public details concerning his cooperation efforts and the Government’s investigation.
On the eve of Armenta’s sentencing, we take a look at the mostly unredacted Sentencing Memorandum.
Primarily to document the details of Armenta’s cooperation, and what led to the DOJ revoking its intent to file a supporting leniency letter with respect to Armenta’s sentencing.
It’s important to remember that Armenta’s Sentencing Memorandum has been filed with the aim of convincing a Judge to give him as lenient a sentence as possible.
There is a lot in the seventy-eight page filing I haven’t covered, mainly pertaining to Armenta’s personal history, his family and the usual “I’m actually a great guy!” narrative.
There are also redactions of non-public information. Some of this details Armenta’s time detention at MCC. Some of the redactions come up with respect to Ruja Ignatova.
It has long been suspected Ignatova had connections to organized crime in Eastern Europe. I can’t say for sure whether these redactions seek to keep this information from being confirmed but it sure does read that way.
Some of the redactions pertain to Sebastian Greenwood and, if unredacted, I believe would shed light on lengthy procedural delays in his case.
With that preamble out of the way, I’ve broken down information from Armenta’s filing into various headerable themes.
I’ve tried to quote from Armenta’s filing as much as possible, as it reads quite well on its own.
Armenta’s road to OneCoin money laundering
In 2001, Gilbert founded his own company called Mio Group, which had approximately 50 employees. Mio Group developed a multi-island network in the Caribbean that provided wireless, video-on-demand, gaming, and hospitality products to nearly 8.5 million subscribers.
However, the company collapsed in the 2009 financial crisis.
Between 2009 and 2013, Gilbert consulted for outside wireless ventures and focused on restructuring his personal finances.
He filed for Chapter 7 bankruptcy in March 2013, which was discharged in June 2014 and resulted in financial ruin for Gilbert.
To remain employable, Gilbert educated himself on the payment processing sector.
In 2013, Gilbert founded entities to provide card issuing and payment processing services. Gilbert’s companies offered prepaid cards that could be used for various purposes, including business expenses, payroll, direct deposit, and loyalty programs.
His companies also offered payment processing services—for example, he could help an online merchant utilize the banking relationships, card processors, and payment networks necessary to transform a customer’s mouse-click into a corresponding deposit of funds into the merchant’s accounts.
Armenta’s finance dealings would eventually see him become a key player in OneCoin’s US-based money laundering operations.
Armenta’s involvement in OneCoin
Gilbert met Ruja Ignatova, one of the founders of OneCoin, in June 2015 while he was in the process of purchasing a bank located in the country of Georgia called JSC Capital Bank (“JSC”).
Ruja was a pre-existing customer of JSC at the time.
Three months after meeting Ruja, Gilbert attended a OneCoin event in Macau.
At the time, Gilbert was completely unaware that OneCoin was a fraud, and was impressed by the crowd that Ruja’s business generated and the seeming professionalism of the operation.
Subsequently, he also began an intimate relationship with Ruja.
Gilbert became aware of Ruja’s connection to OneCoin, although he did not understand it to be problematic at the outset.
In October 2015, Ruja told Gilbert that she was receiving threats of bodily harm that required her to use a security detail, and that someone broke into her home in Bulgaria and tried to burn it down.
Early on in the relationship, Ruja convinced Gilbert that there were many on-line doubters of her business, even some who unfairly called her a fraud, which caused her difficulty in maintaining bank relationships.
She started to seek Gilbert’s help in managing around many of the banks’ concerns in doing business with her.
Gilbert did not have any personal knowledge of an underlying fraud, and agreed to assist Ruja in overcoming her banking difficulties.
In an attempt to minimize bank scrutiny, Gilbert provided false information and documents to banks in order to move Ruja’s money.
However, over time, the explanations that Gilbert received from Ruja regarding the transfers she made and directed were often vague, illogical, and contradictory.
Ruja also asked Gilbert to cash multimillion-dollar checks for her because banks would not do business with her.
Throughout this period, several banks closed Gilbert’s accounts due to suspicious activity, but he continued to move money for Ruja. In total, Gilbert moved over $300 million for Ruja in many smaller increments between September 2015 and June 2016.
He was given very little information about the source, purpose, or ultimate destination of those funds.
Gilbert also assisted Ruja by issuing OneCoin prepaid cards through JSC. Once again, at the outset, Gilbert believed this was a legitimate business with significant business potential for his company.
Between September 2015 and January 2016, he issued approximately 1,200 to 1,400 OneCoin prepaid cards that were to be used to pay refunds and commissions to OneCoin members.
When prepaid or debit cards are offered by blatant Ponzi schemes, we often see the inference that Visa or MasterCard lends legitimacy to an otherwise fraudulent business model.
As you’ve read above, these cards are universally obtained via deception and typically through unrelated shell companies attached to a dodgy merchant.
In the aggregate, OneCoin members used approximately $780,000 through these prepaid cards.
Additionally, Gilbert introduced his long-time attorney, Mark Scott, to Ruja on September 30, 2015, as Ruja stated that she had potential business deals and required attorneys.
At some point in the Scott-Ruja relationship, Scott began to transfer funds for Ruja, and the two cut Gilbert out of their business relationship.
Gilbert worked with other individuals and entities to move Ruja’s money as well. In particular, Gilbert worked with a British company named Viola Asset Management (“VAM”) and its chairman, Christopher Hamilton.
Around February 2016, Gilbert arranged for approximately $39 million to be transferred into a VAM foreign exchange account in Hong Kong.
Hamilton then stole $32 million of those funds.
Gilbert subsequently retained “debt collection” specialists in the United Kingdom who tracked Hamilton, sent him threatening messages, and confronted him at his home.
Although Gilbert believed that the debt collection specialists might threaten Hamilton as part of their strategy to reclaim the stolen funds, he never thought that actual violence would be used.
Armenta’s illegal conduct outside of OneCoin
It seems the DOJ have an extended interest in Armenta beyond OneCoin.
Armenta’s filing details bribes to officials in Mexico and laundering of “illegal US gambling proceeds”.
In early 2014, Gilbert met a Mexico-based businessman who also worked in card payment processing and explored several card issuing and payment processing programs as collaboration opportunities, but none ultimately materialized.
Subsequently, in 2016, Gilbert paid approximately $250,000 to $300,000 to the businessman with the understanding that some or all of the funds might be paid to an official of the Mexican government to help secure a particular government contract.
Mr. Armenta’s business never received a government contract.
US gambling money laundering
Between approximately August 2015 and March 2017, Mr. Armenta helped process payments for online gambling websites that solicited bets from United States-based customers, in violation of United States law.
The credit card transactions related to online gambling payments were miscoded in order to conceal the true underlying merchant and the purpose of the payments.
Gilbert Armenta was arrested on September 13th, 2017.
Armenta was arrested at the airport upon his return from a business trip to Europe.
Federal agents informed him that he was arrested for extortion of an individual in the United Kingdom.
Armenta’s cooperation with the DOJ
The OneCoin investigation was in its early stages and lacking any witnesses. Mr. Armenta proceeded to provide the government with that evidence through an extraordinary 14 straight days of proffer sessions, which included weekends and days during which the investigating agents lived with Mr. Armenta in a hotel room.
Among other things, Mr. Armenta immediately provided the investigators with access to his email accounts, and permitted the investigating agents to conduct a consent search of his business office at night to avoid any leak of the investigation.
At the early stages of those proffer sessions, Gilbert provided critical and timely information to the Government about the Government’s main investigative target, Ruja Ignatova, the founder and leader of OneCoin.
Gilbert provided this information despite the fact that he had been in a romantic relationship with Ignatova at the time of his arrest.
[lengthy redactions] the Government was unable to apprehend Ignatova, and she remains at large today as one of the FBI’s ten most wanted fugitives.
The time that Gilbert spent proffering to the Government with counsel is only the tip of the iceberg.
Gilbert also [redacted], (which) greatly expanded the Government’s understanding of OneCoin, the players involved in that scheme, and the [lengthy redactions].
Beyond proffers and recorded phone calls and in-person meetings, Gilbert spent hundreds of hours meeting, speaking, and texting with the agents assigned to his case, educating them on matters ranging from OneCoin [redacted].
Many of these subjects involved Gilbert shedding light on the illegal activities of dangerous and powerful individuals.
Following his arrest, Armenta would go on to plead guilty.
At the time of his guilty plea several months later, the supervising prosecutors characterized Mr. Armenta’s ongoing cooperation efforts as “extraordinary.”
Those efforts resulted in the indictment of both co-founders of OneCoin (including the original CEO), and the subsequent CEO as well, among others.
As a direct or indirect result of his cooperation, at least 14 additional defendants were indicted, including the architect of the OneCoin fraud and her heir apparent, her brother.
Personally I’m aware of nine OneCoin related indictments in the US:
- Ruja Ignatova – OneCoin co-founder and CEO of OneCoin)
- Sebastian Greenwood – OneCoin co-founder and joint Master Distributor
- Konstantin Ignatov – Ruja Ignatova’s brother, took over as CEO after she disappeared in 2017
- Frank Schneider – oversaw OneCoin’s money laundering operations and his intelligence background saw him placed as Ruja’s “right-hand man”
- Mark Scott – head of OneCoin’s money laundering operations in the US
- Gilbert Armenta – worked directly with Ruja Ignatova to launder OneCoin investor funds
- David Pike – worked closely with Mark Scott
- Christopher Hamilton – UK division of OneCoin’s money laundering operations
- Robert MacDonald – UK division of OneCoin’s money laundering operations
I don’t know who the other five indicted OneCoin related individuals are. This could tie into redactions confirming the involvement of organized crime figures.
Eight defendants have been convicted following Mr. Armenta’s invaluable cooperation and assistance and leads generated from that assistance.
I have considered OneCoin promoters but that seems unlikely given they are, for the most part, living out in the open (and in most instances continuing to scam consumers through various Ponzi schemes).
In addition, Mr. Armenta has forfeited more than $40 million to the Department of Justice in his effort to make amends for his crimes, and in addition has agreed to forfeit the proceeds from two properties each worth millions of dollars.
As to the specifics of Armenta’s cooperation;
For more than two years, he was repeatedly debriefed by prosecutors, engaged in dozens of recorded phone calls and in-person meetings in order to obtain evidence the Government could use to build cases against others, some of whom were connected with OneCoin, and others who were not.
Mr. Armenta’s cooperation directly led to the indictment of the kingpin of the OneCoin enterprise, Ruja Ignatova. At the Government’s request, he conducted approximately 44 tape recorded phone calls with Ignatova, totaling more than 30 hours of discussions with her.
Armenta’s time in the MCC
New York’s Metropolitan Correctional Center has a bit of a notorious history.
Armenta found himself there in 2019 after his cooperation deal with the DOJ fell through.
In 2019, Mr. Armenta was remanded to the MCC for eight months.
Gilbert entered the MCC on July 19, 2019 and spent the first 7 days in solitary confinement in the Special Housing Unit (“SHU”).
The SHU is normally reserved for inmates considered to be a danger to themselves or others, but in Gilbert’s case, he was held in the SHU because the Bureau of Prisons (the “BOP”) had failed to determine where he could be housed [redacted].
Unlike general population inmates, Gilbert was not allowed access to email, telephones, or non-legal visitors.
Further, because there were only two attorney rooms available to SHU inmates, and because Jeffery Epstein’s attorneys were monopolizing those rooms at the time, Gilbert could not even meet with his attorneys for the first week of his incarceration.
Then, as his eventual first visit with his attorneys concluded, Gilbert stood by the windowed door of the visitation room, awaiting a guard to retrieve him.
As (Konstantin) Ignatov’s own subsequent plea agreement and testimony demonstrate, Gilbert’s fear of reprisal was legitimate.
Shortly after entering the general population, [redacted]. He was advised to send an email requesting medical attention, which he did that day.
Mr. Armenta faced inhumane conditions at the Metropolitan Correctional Center, including rat and cockroach infestations, constant threats of violence, and rampant inmate drug use, which was particularly trying for him, as a 35-year clean former addict.
The facility was badly infested with cockroaches and rodents, which Gilbert’s attorneys heard running through the walls of the attorney meeting rooms during every legal visit throughout his incarceration.
Gilbert frequently noted that his commissary food, toiletries, clothing, and books had been gnawed to bits.
He would wake up several times throughout the night to chase rodents out of his locker and to clear out any feces that had been left behind. Requests for rodent and cockroach traps went ignored.
During Gilbert’s incarceration, lockdowns resulted from Jeffrey Epstein’s death, discovery of contraband or weapons, rape, stabbings, and a boiling water attack.
Conditions at the MCC were so deplorable that the Government shut the facility down in 2021, a remarkable concession by the Government that the facility was uninhabitable even for inmates.
Mr. Armenta faced not only the awful daily conditions of the MCC, [redacted].
From February 27, 2020 to March 11, 2020, the MCC entered its worst lockdown yet while law enforcement searched for a loaded gun brought into the facility by a correctional officer.
During this lockdown, MCC personnel were replaced by a Special Operations Response Team (“SORT”) sent from Arizona by the Bureau of Prisons.
Inmates were subject to multiple raids in the middle of the night, during which they were ordered to back out of their cells and sit on the floor with their hands raised above their head for hours at a time.
The SORT members destroyed cells in their search for the gun, and Gilbert spent days with nothing but the clothes on his back.
He had no clean underwear or clothing, no blankets, and no toiletries. Most of his personal possessions were never returned to him. He was not allowed to shower during this two-week period.
Inmates reported to attorneys that mice and water bugs ran through the units as guards unblocked holes in walls and vents that inmates had stuffed with clothing to prevent pests.
Toilets overflowed, spreading raw sewage. No clean drinking water was provided; inmates were forced to drink from their bathroom sinks, from which brown water often ran.
Elsewhere in the filing it is stated Armenta contracted “another medical condition” while at MCC. The name of the condition is redacted.
Making matters even worse during his incarceration, inmates were locked down repeatedly due to the high-profile death of Jeffrey Epstein inside the facility as well as the unrelated loss of a guard’s firearm.
Then, COVID-19 spread in the MCC, and Mr. Armenta contracted the virus.
From COVID, Gilbert lost his senses of smell and taste, neither of which has returned fully since.
The DOJ’s revokes Armenta’s 5K1 Letter
A 5K1 Letter is where the DOJ essentially puts in a good word for a cooperating defendant, with the aim of sentence reduction.
At the time of Gilbert’s remand in July 2019, the Government represented that while it had not yet made a final decision on whether he would receive a Section 5K1.1 letter, it was highly doubtful.
It was not until December 2, 2019, after the jury returned a guilty verdict in the Scott trial, that the Government formally informed Gilbert that it would not provide a 5K1.1 letter.
Armenta self-sabotaged his 5K1 letter, as detailed in his filing.
First, Gilbert sold a private airplane (the “Plane”) without consulting the Government.
Although the Plane was not expressly addressed in Gilbert’s cooperation agreement, and was not subject to a written forfeiture agreement or order, Gilbert knew that the Government would likely want to be involved in any sale.
Over the course of his cooperation, through his counsel, Gilbert raised with the Government several times that he could no longer afford to maintain the Plane.
Without maintenance and periodic use, the value of a plane declines dramatically.
Between the time of his arrest in September 2017 and December 2018, Gilbert spent over $1 million on maintaining the Plane, despite the fact that he was restricted from using it.
Gilbert also informed the Government that, without proper maintenance, the Plane would continue to decline steeply in value.
The Government responded in each instance that it was open to Gilbert selling the Plane to mitigate his maintenance expenses, but that it would seek to be involved in any sale.
On January 18, 2019, the Government learned that the Plane was en route to the Bahamas and contacted Gilbert’s counsel.
It turned out that Gilbert had sold the plane on December 28, 2018 without telling his attorneys or the Government, as the plane was causing him significant financial hardship.
When questioned by his attorneys, Gilbert, realizing that he had made a huge mistake that was going to have serious repercussions, falsely reported that a prospective buyer was flying the Plane on a test run.
This explanation was not a reasoned attempt at ultimately deceiving the Government, but rather a panicked mistake made in a split second of weakness and fear.
He sold the Plane for $2.1 million on December 28, 2018; $1.2 million of which went to pay back his loan against the Plane.
Of the remaining funds, an additional $80,000 went to pay off the interest on the loan, another $30,000 went to pay off a maintenance lien on the Plane for hangar rent and fueling, and $5,000 went to services rendered by the lender in connection with the sale of the Plane.
In addition to selling his plane, Armenta also cashed a dodgy $5 million check.
On July 15, 2019, Gilbert flew to New York for a routine scheduled proffer session with the Government regarding his ongoing cooperation efforts.
At the start of the proffer, the Government informed Gilbert’s counsel for the first time that it had independently learned that Gilbert was involved in cashing a $5 million U.S. Treasury tax refund check (the “Check”) in April 2019.
Gilbert provided the Government with details during that and subsequent proffer sessions. He also offered the Government full and immediate access to his phone and emails at the July 15 proffer session when he was unexpectedly confronted about the Check.
FBI agents did in fact review his phone during the course of that meeting.
The Check was made out to a Japanese national named Yoshiteru Kawase, whom Gilbert had never met.
The Check was brought to Gilbert for cashing by a business associate named Armando Guzman, who informed Gilbert that Kawase was a client of his and promised Gilbert 20% of the Check proceeds in exchange for cashing the Check.
Gilbert believed that Armando owed him money from previous business dealings.
Gilbert thus decided not to give the $5 million to Armando once the check was cashed, and used the money for his own personal and business reasons.
Gilbert fully acknowledges that he ignored a series of red flags surrounding the Check that should have prevented him from participating in from cashing the Check.
Armenta puts his “poor decisions” down to “anxiety and stress”.
While fully acknowledging that the sale of the Plane and the cashing of the Check and subsequent use of its proceeds were tremendous, shameful errors in judgment for which Gilbert is fully responsible, in both these instances he was feeling tremendous financial pressure and
even had to take loans from his wife.
At both points in time, Gilbert was struggling to pay his employees, his office leases and other business expenses, and his legal fees. His business was not making money and his expenses were piling up.
His most valuable property was either securing his bail or potentially subject to forfeiture, so he had nothing to sell or leverage.
As a result of his conduct, Armenta was remanded to the MCC.
Why Armenta didn’t testify at Mark Scott’s trial
Because of Gilbert’s violations of his cooperation agreement and his remand, the Government ultimately elected not to call him as a witness in the Mark Scott trial shortly before that trial began in November 2019.
Thankfully, in part as a result of Gilbert’s cooperation, Ruja’s brother Konstantin Ignatov had been arrested back in March 2019 and decided to cooperate.
The cost of justice
Mr. Armenta’s cooperation put himself and his family at great risk, and the attendant safety and security concerns placed an added crippling strain on his marriage.
Gilbert married Basia Armenta in 2006 and the two had been very close even through Gilbert’s arrest and remand. Indeed, they spoke every day while he was at the MCC and she traveled from Florida to New York every week to visit him, except during the numerous lockdowns and when she was in Poland visiting her mother.
However, the stress of prolonged cooperation, ongoing safety concerns about retribution from Ms. Ignatova and the five years since Gilbert’s arrest finally took its toll on the relationship, as Gilbert and Basia separated within the past year.
Notwithstanding the separation, Basia remains supportive of Gilbert.
Oddly enough, Gilbert’s wife seemed fine with his documented affair with Ruja Ignatova.
During the course of his cooperation it was discovered that Ignatova had bugged Mr. Armenta’s apartment prior to his arrest, giving her information about his cooperation status and putting his family in harm’s way.
The safety threat was confirmed in the Government’s subsequent cooperation agreement with Ignatova’s brother (Konstantin), who was arrested based upon Mr. Armenta’s cooperation and ultimately cooperated with the Government as well.
[The paragraph after the above is redacted]
Gilbert had legitimate concerns for his safety and that of his family were he to cooperate against Ignatova and her organization.
Gilbert informed the Government in the early months of his cooperation that Ignatova knew disturbing details from his phone conversations with other people that took place in both his home and his aircraft.
Ignatova additionally referenced information she could only have obtained by hacking the emails of Gilbert and his employees.
For example, Ignatova questioned Gilbert about a jewelry purchase after his assistant had paid the invoice on his behalf via her business email address.
Ignatova had previously boasted to Gilbert that she had the capability to monitor the communications of others.
Although this information was immediately provided to both the agents and the prosecutors, it did not appear to Gilbert that the matter was investigated any further.
Gilbert was understandably distraught, fully recognizing by that point in time that Ruja Ignatova was a dangerous woman with limitless resources, willing to go to extreme and bizzare lengths to obtain private details about him and his family.
Perhaps the Government originally chalked Gilbert’s fears of Ruja hiring people to befriend his wife and bug his apartment up to paranoia, but by the time of the Mark Scott trial in November 2019, it presented facts legitimizing those fears to the jury.
Ignatov confirmed during his testimony in that trial that Ruja had in fact hired someone to befriend Gilbert’s wife and surveil him and his family.
Beyond the context of OneCoin, [lengthy redactions].
Armenta’s attorneys have asked the court to count his time in MCC as time served. Meaning if the sentencing request is granted, Armenta walks free.
This is primarily based on the conditions at MCC during Armenta’s detention.
As with other defendants who experienced the deplorable MCC conditions, any sentence imposed here should reflect the incrementally punitive nature of that period of incarceration.
Armenta’s attorneys also downplay his involvement in OneCoin;
Mr. Armenta’s conduct was admittedly serious. However, the Court should take into account that Mr. Armenta was not an employee or executive of OneCoin.
He did not develop, design, solicit investments into, or otherwise make any representations to the victims of the underlying OneCoin fraud scheme.
In light of that and the results and circumstances of Mr. Armenta’s immediate and sustained cooperation with law enforcement, the significant period of incarceration already served under deplorable conditions, the lengthy period of home confinement since his release, and the fact that his incarceration directly caused his contracting COVID-19 and another medical condition Mr. Armenta respectfully requests that the Court sentence him to time served.
As I understand it the DOJ have requested Armenta be sentenced to life in prison.
Armenta and Konstantin Ignatov are scheduled to be sentenced on February 16th.