An Orinda man was sentenced to 40 months in federal prison on Friday after he was convicted of fraud and money laundering in connection with a debit card scam, the U.S. Attorney’s Office said.
Alan Safahi, 62, was convicted on June 30, 2022, of one count of bank fraud, four counts of wire fraud and one count of money laundering. According to a court order, he developed an elaborate fraud scheme with prepaid debit cards that allowed him to purchase an Orinda home and finance a lavish lifestyle.
Safahi would collect money from clients of his company, CardEx, and use the money to purchase the debit cards. He would then use a “funding on demand” scheme to defraud the banks that supported the cards and would divert the money to his own accounts. For example, a client of the company would purchase a $100 debit card and spend $10 of the card’s balance. Safahi would then report the remaining balance to the bank as being $10 instead of $100, allowing him to access the remaining $90 for his own use, the U.S. Attorney’s Office said. He obscured the scheme from his clients by accurately reporting the remaining balances to them while misleading the banks involved.
The scheme fell apart on Sept. 25, 2014, when he directed an employee to report the accurate balances of the cards to the bank. According to evidence, Safahi previously reported a balance of $93,734 on the cards — however, the actual total, which was reported to the bank that day, was $2,774,953. Safahi had nearly $2.7 million in unfunded liability, the U.S. Attorney’s Office said.
He had been using the money from the fraud scheme to pay off old debts, fund his lifestyle and purchase a home in Orinda. Two days before reporting the accurate balance of the cards to the bank, he issued himself an $80,000 cashier’s check that he used to help pay for the home, which provided the basis for him to be convicted of money laundering, the U.S. Attorney’s Office said.
In addition to 40 months in prison, Safahi was also ordered to pay a $100,000 fine and to have three years of supervision after his release. He was ordered to surrender to begin his prison sentence on May 4.
In a sentencing memo, the government said Safahi tricked both his bank and his clients, as his clients trusted their customers’ money to him and believed that it was safe and secure.
A hearing to determine how much Safahi must pay in restitution is scheduled for March 31.
Source: www.mercurynews.com