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United States v. Lebedev

United States Court of Appeals, Second Circuit

July 26, 2019

United States of America, Appellee,
Yuri Lebedev and Trevon Gross, Defendants-Appellants, Anthony R. Murgio, also known as Sealed Defendant 1, Michael J. Murgio, Jose M. Freundt, and Ricardo Hill, also known as Rico, Defendants.

          Argued: December 5, 2018

          Appeal from the United States District Court for the Southern District of New York Nos. 15-cr-769-1, 15-cr-769-2, 15-cr-769-3 ― Alison J. Nathan, Judge.

         Appeal from the November 1, 2017 and November 16, 2017 judgments of the United States District Court for the Southern District of New York (Alison J. Nathan, Judge), convicting the Defendants-Appellants, after a jury trial, of multiple counts arising out of their roles in the operation of an illegal Bitcoin exchange and a scheme to use a federal credit union for illegal purposes. They argue, among other things, that the district court made various evidentiary errors, including improperly limiting the examination of a witness called to impeach a key government witness. Defendant Lebedev further argues that insufficient evidence was presented at trial to sustain his convictions, while defendant Gross argues that the evidence presented at trial so differed from the allegations of the superseding indictment that the government impermissibly constructively amended the indictment. Defendant Gross also challenges his 60-month prison sentence and order of restitution, arguing that the court misapplied certain sentencing enhancements in calculating the Guidelines range, and abused its discretion in determining restitution. We AFFIRM.

          Tillman J. Breckenridge, Pierce Bainbridge Beck Price & Hecht LLP, Washington, DC, (Eric M. Creizman, Melissa Madrigal, Creizman PLLC, New York, NY on the brief) for Defendant-Appellant Lebedev.

          Kristen M. Santillo, Gelber & Santillo PLLC, New York, NY, for Defendant-Appellant Gross.

          Daniel S. Noble, Assistant United States Attorney, (Won S. Shin, Eun Young Choi, Sarah K. Eddy, Assistant United States Attorneys, on the brief) for Geoffrey S. Berman, United States Attorney for the Southern District of New York, New York, NY.

          Before: Cabranes, Pooler, and Droney, Circuit Judges.


         This is a consolidated appeal of two defendants convicted in a joint jury trial of offenses arising out of their roles in an illegal Bitcoin exchange and a scheme to use a federal credit union for illegal purposes.[1] Yuri Lebedev was convicted of wire fraud in violation of 18 U.S.C. § 1343, bank fraud in violation of 18 U.S.C. § 1344, conspiracy to commit wire and bank fraud in violation of 18 U.S.C. § 1349, and making corrupt payments with the intent to influence an officer of a financial institution in violation of 18 U.S.C. § 215(a)(1). Trevon Gross was convicted of receiving corrupt payments as an officer of a financial institution in violation of 18 U.S.C. § 215(a)(2). Both Lebedev and Gross were also convicted of conspiracy in violation of 18 U.S.C. § 371.

         Lebedev and Gross appeal their judgments of conviction, raising various constitutional and evidentiary challenges. Gross also appeals the district court's application of several provisions of the Sentencing Guidelines in imposing his sentence and his order of restitution.

         I. BACKGROUND

         The evidence presented by the government at trial concerned the activities of an internet-based Bitcoin exchange service located in Florida, known as ""'s customers used the exchange to purchase Bitcoins, a digital currency, with traditional currency. Although the purpose of was to allow the purchase and sale of Bitcoins, concealed that fact from the banks and credit card companies processing its transactions.[2] opened bank accounts in the name of "the Collectables Club," which falsely purported to be a private members' association dedicated to collecting and exchanging memorabilia. also processed credit card transactions listing the Collectables Club as the merchant. Neither nor the Collectables Club registered with federal regulators as a money-transmitting entity or obtained state licensure for that purpose.
 employed Lebedev to manage information technology operations. One of Lebedev's responsibilities was to set up various Internet Protocol ("IP") addresses to make it appear to banks and payment processors that's transactions were legitimate Collectables Club transactions.

         Eventually, sought control of a credit union to process its transactions.[3] In April 2014, representatives contacted Gross to discuss the possibility of taking control of the Helping Other People Excel Federal Credit Union ("HOPE FCU" or the "credit union"). Gross was then the chairman of HOPE FCU, as well as the head pastor of the nearby Hope Cathedral in Jackson, New Jersey.

         Negotiations ensued between HOPE FCU, represented by Gross, and's front company, the Collectables Club, represented primarily by Anthony Murgio. Gross promised that HOPE FCU would appoint to its board of directors six members selected by the Collectables Club, giving the Collectables Club a majority of the board seats. In return, Gross required that three donations be made to Hope Cathedral: two for $15, 000 each and a third for $120, 000. Evidence at trial demonstrated that Gross frequently used those "donations" for personal expenses.

         One of's other front companies, Currency Enthusiasts, made the first two $15, 000 donations to Hope Cathedral. HOPE FCU's executive board nominated the six Collectables Club board members, and Gross promised that the board members they were replacing would resign at the annual meeting. Lebedev was one of the six new members nominated. At the annual meeting in June 2014, the nominees were elected, although the former board members remained on the board for a few additional months to help HOPE FCU avoid scrutiny from its regulator, the National Credit Union Administration ("NCUA").

         The third donation was made by a company known as "Kapcharge." Kapcharge was a third-party payment processing company that processed electronic payments for its clients through its own accounts at financial institutions.[4] Murgio was affiliated with Kapcharge. Murgio approached Gross in June 2014 about allowing Kapcharge to process third-party transactions, known as automated clearing house transactions ("ACH transactions"), through an account at HOPE FCU. Kapcharge, which was a Canadian company, became a member of HOPE FCU, even though HOPE FCU's membership was limited to persons and organizations within the local community. HOPE FCU was substantially undercapitalized to process the high volume of transactions Kapcharge used it to process. Shortly after becoming a member, Kapcharge wired $120, 000 to Hope Cathedral.

         In addition to the "donations" used by Gross for personal expenses, Kapcharge and its co-conspirators paid Gross $12, 000 in so-called "consulting fees."

         Ultimately, Gross had a falling out with Murgio, Lebedev, and the other representatives, which resulted in Gross expelling them from the credit union and terminating their relationship. [5] Thereafter, Gross refused to communicate or transact with the agents, directed them to stop wiring funds into the credit union, locked them out of computer access to their accounts, and informed them that they were not members of the credit union and thus lacked standing to call a board meeting. However, Gross continued to allow Kapcharge to process transactions through its account after was no longer involved in the credit union. In 2015, Kapcharge wired an additional $80, 000 into credit union accounts that Gross controlled.

         HOPE FCU eventually came under regulatory scrutiny from the NCUA. During the NCUA's examination of the credit union, Gross failed to disclose a number of transactions, including the "donations" that Currency Enthusiasts and Kapcharge paid to Hope Cathedral, that HOPE FCU had opened a branch in Florida, and that Kapcharge was paying the salary of the credit union's new CEO and the legal fees of Gross and the credit union. Gross further misrepresented that Kapcharge had an office in New Jersey that qualified it for membership in the credit union, and failed to disclose agents' email accounts after the NCUA requested all of the credit union's email accounts. NCUA placed HOPE FCU into a conservatorship in October 2015.

         A superseding indictment was filed on December 22, 2016, in the United States District Court for the Southern District of New York. Following a four- week jury trial, Murgio, Lebedev, and Gross were convicted of all counts on March 17, 2017. Following the denial of post-trial motions, Lebedev was sentenced to 16 months' imprisonment, supervised release, and forfeiture. Gross was sentenced to 60 months' imprisonment and three years' supervised release. Lebedev and Gross were ordered to pay $126, 771.82 in restitution jointly and severally with their convicted codefendants.

         Lebedev and Gross appealed their judgments of conviction. Gross, but not Lebedev, also challenges his sentence on appeal.

         II. ANALYSIS

         We consider Lebedev's and Gross's claims on appeal in turn.

         A. Lebedev's Claims on Appeal

         1. Sufficiency of the Evidence

         Lebedev challenges the sufficiency of the evidence underlying his convictions for wire fraud under 18 U.S.C. § 1343, bank fraud under 18 U.S.C. § 1344, and conspiracy to commit wire and bank fraud under 18 U.S.C. § 1349.

         We review de novo a challenge to the sufficiency of the evidence underlying a criminal conviction. United States v. Corbett, 750 F.3d 245, 250 (2d Cir. 2014). We "view the evidence in the light most favorable to the government, crediting every inference that could have been drawn in the government's favor, and deferring to the jury's assessment of witness credibility and its assessment of the weight of the evidence." United States v. Coplan, 703 F.3d 46, 62 (2d Cir. 2012) (internal quotation marks omitted). "[W]e will uphold the judgments of conviction if 'any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.'" Id. (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979)).

         a. Wire Fraud

         Lebedev argues that there was insufficient evidence that he committed wire fraud because his role in's scheme-deceiving financial institutions concerning the nature of's business-did not harm or risk harming those financial institutions.

         The elements of wire fraud are "(1) a scheme to defraud, (2) money or property as the object of the scheme, and (3) use of the . . . wires to further the scheme." United States v. Binday, 804 F.3d 558, 569 (2d Cir. 2015) (internal quotation marks omitted). "Since a defining feature of most property is the right to control the asset in question, we have recognized that the property interests protected by the . . . wire fraud statute[] include the interest of a victim in controlling his or her own assets." Id. at 570 (alteration omitted) (quoting United States v. Carlo, 507 F.3d 799, 802 (2d Cir. 2007)). For this reason, a wire fraud charge under a right-to-control theory can be predicated on a showing that the defendant, through the "withholding or inaccurate reporting of information that could impact on economic decisions," deprived "some person or entity . . . of potentially valuable economic information." United States v. Finazzo, 850 F.3d 94, 108 (2d Cir. 2017) (internal quotation marks omitted).

         At trial, the government presented testimony from witnesses to establish the significance of's misrepresentations about the nature of its business, including Erika Heinrich, who worked in the fraud investigations group at Chase Bank USA ("Chase"). Heinrich testified that Chase decides whether to process pending credit card transactions based in part on information it receives about the merchant. Chase evaluates regulatory risk, including potential fines for doing business that is illegal, as well as economic risk posed by fraudulent transactions, and considers transactions with money services or money-transmitting businesses to carry a higher risk of fraud.

         The evidence at trial demonstrated that was a money service business that was both unlawful and carried a higher risk of fraudulent transactions. The evidence also showed that Lebedev's role in's scheme was to disguise's Bitcoin transactions through front entities such as the Collectables Club, so the institutions processing those transactions would be more likely to process and approve them. On this basis, a reasonable jury could conclude that Lebedev ...

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