United States v. Iossifov

Decision Date12 August 2022
Docket Numbers. 21-5063/5147/5404
Parties UNITED STATES of America, Plaintiff-Appellee, v. Rossen IOSSIFOV; Dimitrious Antoine Brown, Defendants-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: John Kevin West, STEPTOE & JOHNSON PLLC, Columbus, Ohio, for Appellant Iossifov. Thomas W. Kidd, Jr., KIDD & URLING LLC, Harveysburg, Ohio, for Appellant Brown. Ann O'Connell Adams, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: John Kevin West, STEPTOE & JOHNSON PLLC, Columbus, Ohio, for Appellant Iossifov. Thomas W. Kidd, Jr., KIDD & URLING LLC, Harveysburg, Ohio, for Appellant Brown. Ann O'Connell Adams, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., Charles P. Wisdom, Jr., Kathryn Anderson, UNITED STATES ATTORNEY'S OFFICE, Lexington, Kentucky, for Appellee.

Before: CLAY, GRIFFIN, and WHITE, Circuit Judges.

CLAY, Circuit Judge.

In this consolidated appeal, Defendants Rossen Iossifov and Dimitrious Brown challenge the district court's judgments after they were convicted and sentenced on Racketeer Influenced and Corrupt Organizations Act ("RICO Act") charges, see 18 U.S.C. § 1962(d), and, in Iossifov's case, an additional charge for conspiring to launder money, see 18 U.S.C. § 1956(h). For the reasons set forth in this opinion, the Court AFFIRMS Defendant Iossifov's convictions and sentence and AFFIRMS Defendant Brown's sentence.

A. Factual Background

These consolidated cases stem from a fraud scheme carried out by a Romanian organization known as the Alexandria Online Auction Fraud Network ("AOAF Network" or "the network"). The parties agree that the network used fraudulent online advertisements on websites like eBay, Craigslist, and Amazon to convince unknowing purchasers in the United States to send payments for high-value items that did not actually exist. After receiving the payments through vehicles like gift cards and prepaid debit cards, AOAF Network money launderers in the United States, including Brown, converted the payments into Bitcoin currency, which was then transferred back to Romania. Foreign Bitcoin exchange businesses including RG Coins, Iossifov's business based in Bulgaria, then transferred the Bitcoin balances to cash on behalf of the AOAF Network fraudsters. Victim purchasers never received the items for which they paid.1

The AOAF Network carried out its scheme between 2013 and 2018. The government learned about the network in late 2014 when it discovered that an American citizen living in the Eastern District of Kentucky was laundering funds on behalf of an online fraud organization. Law enforcement officials confronted the individual in June 2015, at which point the individual became a confidential source ("CS") and began to act in furtherance of the scheme under the government's supervision. The parties agree that the CS's conduct took place in the Eastern District of Kentucky.

i. Iossifov's Conduct and Involvement

Through its investigation, the government learned that Iossifov exchanged Bitcoin for fiat currency in Europe. It discovered that the AOAF Network used Iossifov's services because Iossifov did not ask network members to provide any identification or information regarding the source of the funds to be exchanged. Nor did Iossifov's business hesitate to exchange large sums of digital currency into cash payments. Benjamin Ologeanu, a co-defendant and network member, testified that he and his co-conspirators specifically favored Iossifov's exchange business because the network intended to make its transactions difficult to trace.

Iossifov's conduct violated his business’ own purported anti-money laundering ("AML") policies, which RG Coins was required to have in place in order to conduct transactions through large Bitcoin exchanges. Indeed, in communications with the large exchanges, Iossifov represented that RG Coins identified all clients with an identity card or passport; required them to sign an AML declaration; inquired about the source of the funds to be traded; refused to engage in cash transfers for transactions over 10,000 leva (Bulgarian currency); and otherwise had policies in place to prevent, detect, and report suspicious transactions.

Various witnesses who were familiar with, or involved in, the fraud scheme testified that Iossifov did not, in fact, follow any of these policies. In total, six AOAF Network co-defendants testified that they transacted with Iossifov and never came across any AML procedures. Defendant Popescu, a director of the organization, testified that he conducted AOAF business using an alias, and that he was able to trade funds through Iossifov's exchange business without ever providing his real name or any form of identification. Defendant Ologeanu stated that he had the same experience, and he added that he often sent intermediaries to retrieve the cash. According to Ologeanu, none of the intermediaries were ever asked for identification.

The co-conspirators also testified that Iossifov never asked them about the origin of the funds. Indeed, on one occasion when Defendant Sandu asked Iossifov to give him the money without an identification, "no questions asked," an email account associated with Iossifov replied that it would be "[n]o problem." (Trial Tr. Day 4, I.R.2 1106, Page ID # 8748.) Law enforcement officials involved in the government's investigation similarly stated that they had found no evidence that Iossifov ever sought to verify the origin of the funds that he exchanged through RG Coins. Nevertheless, Iossifov testified that he followed Bulgarian law with regard to transaction identification requirements, including asking customers for their identification and for a declaration regarding the source of their money. He then stated that any testimony to the contrary was untrue.

At trial, Iossifov also stated that he did not know that his Romanian customers were engaged in fraudulent activities until he was arrested and extradited to the United States––a contention that he maintains before this Court. Over his objections, however, and in addition to Popescu and Ologeanu's testimony, Defendant Stoica specifically testified to the contrary. Stoica stated that Iossifov did indeed know that some of the Bitcoin he exchanged came from fraudulent sources. He testified that Sandu had previously mentioned that Iossifov offered to assist Sandu with securing additional fraudulent advertisements. Additionally, the government produced emails showing that Iossifov agreed to pack cash prior to the exchange, out of view of other customers, and that he agreed to place the money in "a paper bag," ahead of Sandu's arrival at the storefront, in part so that Sandu could avoid any possible encounters with other people. (Trial Tr. Day 5, I.R. 1107, Page ID # 8968–70.) When confronted with the email at trial, Iossifov said that he "personally [did] not see anything suspicious," with the request to pack cash in a paper bag, "and that's why [he] continued to work with this guy." (Id. at Page ID # 8970.) The government also confronted Iossifov with RG Coins emails in which the business agreed to support a customer with "any problems" relating to proof of the source of exchanged funds, possible police encounters, and confiscation. (Id. at Page ID # 8971.) Iossifov admitted that the emails came from his business, but he argued that they were not directly attributable to him.

The government also produced evidence that RG Coins exchanged Bitcoin for other criminal networks. Marko Leopard, a Macedonian fraudster formerly associated with an international cybercrime organization known as "Infraud," testified that he exchanged Bitcoin at RG Coins on its behalf. Leopard stated that he was introduced to Iossifov by another online fraudster named Nemanja, and that after Nemanja made the introduction, Iossifov gave Leopard a "VIP card" to use at RG Coins. According to Leopard, the card provided him with discounts for Iossifov's services. Leopard testified that he exchanged high-value sums of Bitcoin at RG Coins, and he added that all of the exchanges were for cash. Leopard emphasized that Iossifov never requested any form of identification or declaration about the source of the funds in order to carry out trades. Like Ologeanu and Sandu on behalf of the AOAF Network, Leopard sent intermediaries to retrieve the exchanged funds on various occasions.

ii. Brown's Conduct and Involvement

Brown admitted to his participation in AOAF Network transactions at the other end of the scheme. He specifically stipulated that he converted fraudulent proceeds contained in debit cards, gift cards, money orders, and bank wires into more liquid methods of payment like cash and Bitcoin between March 2015 and March 2017. Brown also acknowledged that he knew that the funds came from online fraud, and that he nevertheless joined the scheme voluntarily. He admitted that he directly laundered or attempted to launder $664,460 worth of proceeds. Finally, Brown confessed that he assisted the confidential source in procuring false identifications. He agreed that he shipped four fake driver's licenses to the confidential source's location in the Eastern District of Kentucky.

B. Procedural History
i. Iossifov's Trial, Conviction, and Sentence

In July 2018, the government charged Defendant Iossifov with one count of conspiring to engage in racketeering activity, in violation of the RICO Act, 18 U.S.C. § 1962(d), and one count of conspiring to launder money, in violation of 18 U.S.C. § 1956(h). A jury convicted Iossifov on both counts in September 2020. Iossifov moved for a Rule 29 judgment of acquittal on the basis that the evidence failed to establish that he knowingly and willfully joined the conspiracy. Several months later, Iossifov also moved for a new trial on the basis that he had received newly discovered evidence regarding the credibility of Marko Leopard, which he claimed would have changed the...

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1 books & journal articles
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