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Home / Business / Anatomy of fraud: $ 6 million fake billionaires scam made dozens of local victims

Anatomy of fraud: $ 6 million fake billionaires scam made dozens of local victims



In January last year, Seattle federal prosecutors went to court to prevent a 27-year-old Newcastle man from being released for bail. Keenan Alexander Gracey had been arrested just before Christmas on charges of a $ 6 million stock fraud that had claimed dozens of victims in Washington and California, and prosecutors were increasingly confident that Gracey would simply return to steal as soon as he set foot bail.

Almost everything federal officials had learned about the athletic and charismatic young man suggested an almost reflexive tendency to deceive.

Gracey lied constantly and brilliantly, according to investigators. At the height of her scam, prosecutors say, Gracey routinely pretended to be a 6-foot, 9-inch Oxford-trained professional athlete and British aristocrat with palatial mansions and inside knowledge of multi-million dollar stock deals. In truth, prosecutors say, Gracey was a Canadian citizen whose father worked for Boeing. He never went to college or did an actual job while in the United States. He used a fake British accent and had lifts in his shoes.

Nevertheless, Gracey had by no means mastered complex financial concepts and strategies without formal training. He had carefully cultivated the persona of a larger-than-business savvy playboy ̵

1; complete with rented Lamborghini's and a $ 225,000-a-month estate in Beverly Hills – and used that persona to provide an ever-expanding network of victims. Often, he persuaded them to liquidate their life savings, take out high-interest, devastating loans and ropes in his own family and friends.

Perhaps most worryingly, prosecutors said, Gracey said almost no fear of consequences. On the contrary, when his first full-scale share plan was put down by US securities regulators, in May 2018, Gracey simply changed the name and name of the company, and raised another $ 2 million. He recruited new victims almost until the day he was arrested, just before Christmas, 2018.

"It's extraordinary that Gracey continued to scam investors even after being served with a federal restraining order," Assistant U.S. Attorney Seth Wilkinson said in an interview just before Gracey was sentenced Friday to 15 years in federal prison. “Generally, securities fraudsters will at least leave for a while when sued by the SEC. Gracey didn't even break down. "

Federal attorneys said fraud schemes that are sophisticated like Graceys are generally working with veteran criminals in their 40s and 50s. But Gracey was 25 when he pulled his first big scam – selling fake shares at a Bellevue startup in 2016 And it's likely that he cheated a lot earlier than that.

From a very early age, Gracey seems to have been unhappy with the actual facts of his life.

Although talented enough at football to win a place on the Canadian national team's youth program in high school and to play in England after graduation, federal authorities say Gracey will soon be joining a much more impressive resume.

He told a woman he met in 2011 that he was a professional an athlete "involved in shares" with a "trust fund", and eventually married her, according to a survey by the Securities and Exchange Commission. In 2012, according to the Federal Bureau of Investiga tion, Gracey told a family friend that he was on the Seattle Seahawks & # 39; training team. (Seahawks officials say they have no record of anyone under that name.) Gracey told acquaintances that he owned expensive cars and a home on a Newcastle golf course, but all had actually been rented to him by the father, prosecutors say.

in early 2015, according to the SEC, left Gracey's wife after discovering his fabrications. But Gracey not only maintained her false life story, but began to make money from it.

  Money confiscated from Keenan Alexander Gracey. (Federal Detention Note)
Money confiscated from Keenan Alexander Gracey. (Federal Detention Note)

Jeff Parks, an Eastside owner, says he met Gracey in 2015 at a steakhouse in Bellevue. Gracey claimed to be working with the Seahawks while awaiting approval of her NFL contract, Parks recalls. He certainly saw that part: a picture with Parks showing the rough, extremely muscular physique that would become Gracey's trademark.

But Gracey told Parks that he needed money for rent and groceries while he was training, Parks recalls. Over the next few months, he talked Parks and Parks' business partner out of $ 25,000.

  Keenan Gracey sat down for a steak dinner at a steakhouse in Bellevue where he met two of his victims.
(Courtesy Jeffrey Thomas Parks)
Keenan Gracey sat down to a steak dinner at a steakhouse in Bellevue where he met two of his victims.
(Courtesy Jeffrey Thomas Parks)

Parks remembers early on, Gracey was charming, personable and heartfelt – "just like a college boy trying to get a job". But soon, Parks said, Gracey became pushy, his stories less credible. After Gracey asked for $ 25,000 in cancer treatment for her mother, in May 2016, Parks and his business partner cut him off. Gracey, who said he was on his way back to England to play rugby, severely broke contact.

In fact, prosecutors say, Gracey had figured out what would be his basic scam – selling so-called "pre-IPO" shares in companies he had no factual affiliation with.

In 2016, prosecutors, Gracey, confessed that he was on the board of an actual Bellevue-based virtual reality education company called Fishytale, which he allegedly falsely would go public. Gracey offered to sell her victims special pre-public company shares, for $ 1 each, on the promise that they would jump to $ 60 when Fishytale went public.

Gracey's slick, knowledgeable presentation and his flashy lifestyle persuaded the victims to leave tens of thousands of thousands of dollars, prosecutors say.

  The Mercer Island home that Keenan Gracey leased, according to federal prosecutors. (U.S. Attorney's office)
The Mercer Island home that Keenan Gracey leased, according to federal prosecutors. (U.S. Attorney's office)

 The Beverly Hills, California, property Keenan Gracey leased, one of three he used to pose as a successful investor, according to federal prosecutors. One property reportedly rented at a price of $ 225,000 per month. (U.S. Attorney's office)
The Beverly Hills, California, property Keenan Gracey leased, one of three he used to pose as a successful investor, according to federal prosecutors. One property reportedly rented at a price of $ 225,000 per month. (U.S. Attorney's Office)

  The home in San Diego that Keenan Gracey leased, according to federal prosecutors. (U.S. Attorney's Office /)
The home in San Diego that Keenan Gracey leased, according to federal prosecutors. (U.S. Attorney's office /)

As the money rolled in, Gracey made significant upgrades both in the scam and in his life. Prosecutors say he began short-term renting of affordable properties on Mercer Island, Clyde Hill and San Diego, and eventually paid $ 225,000 a month for a Beverly Hills mansion. He rented high-end sports cars, including a Ferrari for $ 22,200 a month and a Lamborghini for $ 35,200.

He sometimes posed in front of them, usually shirtless, in photographs sent to his potential investors. He entertained his victims at lavish parties and put them up in cozy hotels, which he sometimes claimed to be part owner of.

Gracey's biography also went upscale. Prosecutors say Gracey now claimed to be the heir to a British industrialist whose relatives had founded Lloyds of London and General Dynamics, while he himself had inside knowledge of top companies and their plans for stock sales.

Gracey's next scam involved Perspecta a state service company to be established through the merger of three existing companies: DXC, Keypoint and Vencore. The companies and their merger were real, prosecutors say, but Gracey had no connection with them, nor were any shares prior to the IPO. But as with Fishytale, Gracey told the victims that their $ 1 pre-IPO share would increase 50 times when the new company went public.

As before, Gracey used a powerful mix of polish and pressure. The prosecutors say he pushed the victims "to liquidate pension and education accounts" and coached them to get high-interest loans, even down to "the exact language they should use in the loan applications."

Gracey urged the victims to Recruiting friends and family, with the promise of bonus inventory for each new investment.

He seemed completely carefree about the personal injury he caused. A victim asked Gracey if a friend who had recently been diagnosed with esophageal cancer can invest $ 25,000, according to prosecutors. "Yes, it's possible," Gracey said back. Another family turned to savings that were meant to help them take care of their disabled son.

Another Gracey victim reportedly persuaded several "employees to pay their retirement plans for this," according to the victim's account. "Several of the former colleagues were close to retirement, contributing hundreds of thousands of dollars."

In yet another case, a victim and six friends and family members gave Gracey $ 745,000 in early 2018, prosecutors say. [19659002] Gracey eventually took nearly $ 4 million through the Perspecta scam, prosecutors say.

But Gracey also had problems. His wealthy neighbors complained about his parties. His influences were often mocked. "He definitely had a weird, fake accent," said an employee of a Seattle high-end car dealership like Gracey patronizingly, in an email to The Times late last year. Others noticed that he had lifts in his shoes.

Investors also became suspicious. In the spring of 2018, several Los Angeles offices notified the SEC, which in May sued Gracey and received a restraining order preventing him from further fraudulent stock sales and freezing bank accounts.

Gracey not only ignored the suit, but immediately started another scam before the IPO.

This would involve Moderna, a company formed from two biotechnology companies, Beam Therapeutics and Editas Medicine. As before, both companies existed and intended to merge. And as before, Gracey, who now bills herself Xander Gracey, was given only a probable illusion of inside expertise and access.

"We end the series A round of funding for something called Beam Therapy … based on crispr-cas9 technology for re-splitting," Gracey sent text to one victim June 3, 2018, less than a month after the SEC's restraining order. The merger, Gracey wrote, "will easily" bring a "50x ROI" – that is, a 50-fold return.

Gracey's manipulations became more intense. When one victim sent a text asking to withdraw money from a cash advance or a 401K, Gracey replied: "I'd say go for the credit card, credit line and loan. And move on to 401 K. ”One victim told authorities he eventually sent Gracey $ 400,000, part of which was borrowed.

And because Gracey's own bank accounts were still frozen, prosecutors say, Gracey began "directing the victims to wire the funds to bank accounts in the name of a relative" – ​​later revealed to be his father, David. (The prosecutors refused to prosecute David Gracey.)

When Gracey had the money for her victims, he disappeared. In sentencing documents, prosecutors included a text string from an increasingly desperate victim who told Gracey about payments on the $ 100,000 the victim had borrowed to invest. " just called, "the victim texted." They run collections on me. "The text was sent just two weeks before Christmas. Gracey did not respond.

But Gracey's luck was empty. He has been expelled from several leased properties. He knew the SEC closed in November 2018, prosecutors say there were indications Gracey asked to obtain a foreign passport, even though he continued as a victim victim.

December 20, Gracey became a arrested outside a Los Angeles County courthouse by five FBI agents, and was eventually transported to Seattle to stand trial.

Even that did not end the scam. During his plea bargaining, prosecutors say, Gracey made a number of outrageous claims – that he had tens of millions of dollars in offshore accounts, or that he had repaid some of his victims, or that some of his victims were actually criminals who uses him to launder his money.

15. August 2019, Gracey seemed to finally meet reality. He agreed to plead guilty to a single count of wire fraud and a count of " marketing pressure money laundering," where money was fraudulently obtained to continue the underlying scam.

He also admitted the fraudulent behavior and agreed to refund all the victims – although at best prospects expect them to recover about $ 600,000 seized from the Beverly Hills property Gracey rented.

But in the end, many of Gracey's victims may think that con will never be over. As one victim told the court shortly before U.S. District Judge Ricardo Martinez dismissed his 15-year prison sentence, "if I'm honest with you, your honor, I don't think that's enough. … I don't think it's enough for him to change nature to the basic person he is. "

" I don't think he's going to grow a conscience. "

          


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