Criminal complaint affidavit - United States v. Marnell PPP fraud case (2020-07-15)

Issuer: U.S. District Court for the Central District of California
Document type: Criminal Complaint
Date: 2020-07-15
Case: United States v. Andrew Marnell magistrate
Case number: 2:20-mj-03313

Summary

A criminal complaint with supporting affidavit in United States v. Andrew Marnell, Case No. 2:20-mj-03313, in the U.S. District Court for the Central District of California, filed July 15, 2020 as Document 1. The complaint charges bank fraud under 18 U.S.C. § 1344(2) on or about May 11, 2020, and was attested by telephone before U.S. Magistrate Judge Steve Kim. A senior special agent of FHFA-OIG states that the investigation revealed Marnell sought more than $10 million in PPP loans from lenders including TransPecos, Fundbox, ReadyCap, Customers Bank and Kabbage, through entities such as Quicksilver, Shale Creek and Slatestone. The affidavit describes three TransPecos loan applications, including $1,341,700 for Slatestone, and alleges use of proceeds for a Schwab futures account and gambling at the Bellagio. It also describes an EIDL loan approved for $150,000. The document is 30 pages.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 1 of 30 Page ID #:46

AO 91 (Rev. 1 I~1 1) Criminal ('omplaint (Rev. by USAO on 3/12/20) ❑Original ❑Duplicate Original

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Case No. 2.20-mj-033 13
ANDREW MARNELL,

Defendants)

CRIMINAL COMPLAINT BY TELEPHONE
OR OTHER RELIABLE ELECTRONIC MEANS

I,the complainant in this case, state that the following is true to the best of my knowledge and belief.

On or about the dates)of May 11, 2020, in the county of Los Angeles in the Central District of California, the

defendants) violated:

Code Section Offense Description

18 U.S.C. § 1344(2) Bank Fraud

This criminal complaint is based on these facts:

Please see attached affidavit.

D Continued on the attached sheet.

Attested to by the applicant in accordance with the
requirements of Fed. R. Crim. P. 4.1 by telephone
Complainant's signature

James Shields, Special Agent, FHFA-OIG
Printed name and title
Attested to by the applicant in accordance with the requirements ofFed. R. Crim. P. 4.1 by telephone. ,SSE °~st.~Cr
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ti

Date: July 15, 2020 ~ n ~~~~
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Judge 's signature ,
F ~ rti
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City and state: Los Angeles, California Hon. Steve Kim, U.S. Magistrate Judge
Printed name and title
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 2 of 30 Page ID #:47

I, James Shields, being duly sworn, declare and state as

follows:

I. INTRODUCTION

1. I am a Senior Special Agent ("SSA") with the Federal

Housing Finance Agency - Office of Inspector General ("FHFA-OIG")

and have been so employed since January 2013. From approximately

November 2009 to January 2013, I was a duly authorized and sworn

Special Agent of the Department of Housing and Urban Development

- Office of Inspector General (~~HUD-OIG") In April 2010, I

completed the Criminal Investigator Training Program for federal

agents at the Federal Law Enforcement Training Center. Prior to

my employment with HUD-OIG, I was employed as a sworn officer with

the United States Department of Homeland Security, Department of

Customs and Border Protection (~~DHS-CBP") for two years. From

1997 to 2007, I was on active duty with the United States Navy.

In 2006, I graduated with honors from the University of La Verne

with a bachelor's degree in Organizational Management. In 2015,

I graduated from the University of Southern California with a

Master of Business for Veterans. I currently hold Certified Fraud

Examiner and Accredited Mortgage Professional certifications.

2. In my position as a SSA with FHFA-OIG, and in my prior

positions with HUD-OIG and DHS-CBP, I have conducted numerous

investigations of bank fraud, loan fraud, mortgage fraud, identity

1
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theft, and other fraud schemes, executed numerous search warrants,

and participated in the arrest of numerous suspects.

II. PURPOSE OF AFFIDAVIT

3. This affidavit is made in support of a criminal

complaint against, and arrest warrant for, ANDREW MARNELL

("MARNELL") for a violation of 18 U.S.C. ~ 1344(2) (obtaining

money or property from bank under false pretenses} ,

4. The facts set forth in this affidavit are based upon

my personal observations, my training and experience, and

information obtained from various law enforcement personnel and

witnesses. This investigation involves a joint investigation of

the Federal Bureau of Investigation ("FBI"), the Federal Deposit

Insurance Corporation Office of Inspector General (~~FDIC-OIG"),

Internal Revenue Service Criminal Investigation (~~IRS-CI"), the

Treasury Inspector General for Tax Administration (~~TIGTA"), the

Small Business Administration Office of Inspector General ("SBA-

OIG"), and FHFA-OIG (collectively, the "federal law enforcement

agencies"), and information in this affidavit is based on

evidence obtained in the course of the investigation conducted

by all the involved federal law enforcement agencies. This

affidavit is intended to show merely that there is sufficient

probable cause for the requested complaint and arrest warrant

and does not purport to set forth all of my knowledge of or

investigation into this matter. Unless specifically indicated

otherwise, all conversations and statements described in this

affidavit are related in substance and in part only.

2
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 4 of 30 Page ID #:49

III. STATEMENT OF PROBABLE CAUSE

A. Summary of Probable Cause

5. In or around June 2020, financial institutions

informed law enforcement about a possible fraud associated with

loan applications submitted in the names of borrowers

Quicksilver LLC ("Quicksilver"), Shale Creek LLC ("Shale

Creek"), Slatestone LLC (~~Slatestone"), Stratrock Ventures LLC

("Stratrock"), and other companies traced to MARNELL

(collectively, the "MARNELL-controlled entities"). According to

information obtained in the course of the resulting

investigation, MARNELL and potentially other co-conspirators

submitted fake documents and other false information to obtain

loans guaranteed by the Small Business Administration ("SBA")

through the Paycheck Protection Program, which is a program

created by the Coronavirus Aid, Relief, and Economic Security

Act. The investigation has revealed that MARNELL (and possibly

others) sought to obtain more than $10 million (and that MARNELL

and possibly others obtained more than $8 million) in PPP loans

from various lenders, including TransPecos Banks SSB

(~~TransPecos"), Fundbox Inc. (~~Fundbox"), ReadyCap Lending LLC

("ReadyCap"), Customers Bancorp Inc. ("Customers Bank"), and

Kabbage Inc. ("Kabbage"), and that MARNELL (and possibly others)

used the PPP loan proceeds to gamble at the Bellagio Hotel &

Casino and other gambling establishments and to fund a futures

trading account at Charles Schwab & Co, Inc. ("Schwab"). The

investigation has also revealed that MARNELL is fraudulently

obtaining, possibly with co-conspirators, other loans from the

3
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 5 of 30 Page ID #:50

SBA under the Economic Injury Disaster Loan Program, and using

the proceeds at casinos and for other unapproved purposes.

B. Paycheck Protection Program

6. The Coronavirus Aid, Relief, and Economic Security

("CARES") Act is a federal law enacted in or around March 2020

and designed to provide emergency financial assistance to the

millions of Americans who are suffering the economic effects

caused by the COVID-19 pandemic. One source of relief provided

b y the CARES Act was the authorization of up to $349 billion in

forgivable loans to small businesses for job retention and

certain other expenses, through a program referred to as the

Paycheck Protection Program (~~PPP"). In or around April 2020,

Congress authorized over $300 billion in additional PPP funding.

7. In order to obtain a PPP loan, a qualifying business

must submit a PPP loan application, which is signed by an

authorized representative of the business. The PPP loan

application requires the business (through its authorized

representative) to acknowledge the program rules and make

certain affirmative certifications in order to be eligible to

obtain the PPP loan. In the PPP loan application, the small

business (through its authorized representative) must state,

among other things, its: (a) average monthly payroll expenses;

and (b) number of employees. These figures are used to

calculate the amount of money the small business is eligible to

receive under the PPP. In addition, businesses applying for a

PPP loan must provide documentation showing their payroll

expenses.
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 6 of 30 Page ID #:51

8. A PPP loan application must be processed by a

participating lender. If a PPP loan application is approved,

the participating lender funds the PPP loan using its own

monies, which are 100% guaranteed by Small Business

Administration (SBA). Data from the application, including

information about the borrower, the total amount of the loan,

and the listed number of employees, is transmitted by the lender

to the SBA in the course of processing the loan.

9. PPP loan proceeds must be used by the business on

certain permissible expenses—payroll costs, interest on

mortgages, rent, and utilities. The PPP allows the interest and

principal on the PPP loan to be entirely forgiven if the

business spends the loan proceeds on these expense items within

a designated period of time after receiving the proceeds and

uses a certain amount of the PPP loan proceeds on payroll

expenses.

C. TransPecos Loans

10. On July 9, 2020, I participated in an interview of

Jack A. Starks, Jr., who is the Senior Vice President of

Compliance/Legal/IT for TransPecos. I have also reviewed

information and supporting documentation that TransPecos

provided to law enforcement investigators. Based on these

sources, I know the following:

a. In or about May 2020, TransPecos issued three PPP

loans totaling more than $3.5 million to MARNELL-controlled

businesses, namely, Shale Creek, Quicksilver, and Slatestone.

Although the loan applications listed "Tyler Lerman," "Andrew
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 7 of 30 Page ID #:52

Merrill," and "Andrew Maxwell," as the principals of these

entities, as discussed below, information obtained in the course

of the investigation indicates MARNELL and potentially other co-

conspirators were the ones submitting the applications and

receiving the funds.

b. Between April 5 and April 16, 2020, TransPecos

received an application and supporting documentation for a PPP

loan in the amount of $439,000 for borrower Shale Creek, which

was represented to be a Montana-headquartered firm, owned and

controlled by "Tyler Lerman." It was represented that Shale

Creek had 26 employees and average monthly payroll expenses of

$175,600.1 It was further represented that "the Applicant has

not and will not receive another loan under the Paycheck

Protection Program," and that the applicant did not own any

other business or have common management with any other

business. Based on information and documents submitted in

support of the loan application, TransPecos approved and funded

1 I and other federal law enforcement agents have reviewed
bank records and other financial records associated with MARNELL
to attempt to determine whether Shale Creek, and any of the
other MARNELL-controlled entities identified in this affidavit,
are functional companies that employ the individuals identified
in payroll records submitted in support of the loan
applications. Although the investigation is ongoing, I have
seen no evidence thus far that Shale Creek is a functioning
company (other than being registered with the Wyoming Secretary
of State), nor any evidence that it has any employees, any
payroll expenses, or conducts any business whatsoever. Along
similar lines, I have seen no evidence thus far that any of the
MARNELL-controlled entities are functioning companies (other
than being registered with various Secretaries of State), nor
any evidence that they employ anyone, have any payroll expenses,
or conduct any business whatsoever. They appear to be shell
companies that exist solely for the purpose of carrying out this
and other fraud schemes.
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 8 of 30 Page ID #:53

the requested loan, and transferred the loan proceeds via ACH to

account ending x2842 at United Missouri Bancshares (UMB)

Financial Corporation ("UMB Bank"). Investigators are still

attempting to trace these funds.

c. Between April 13 and May 6, 2020, TransPecos

received an application and supporting documentation for a PPP

loan in the amount of $1,341,700 for borrower Slatestone, which

was represented to be a Wyoming-headquartered firm, owned and

controlled by "Andrew Merrill." It was represented that

Slatestone had 75 employees and average monthly payroll expenses

of $536,680. It was further represented that "the Applicant has

not and will not receive another loan under the Paycheck

Protection Program," and that the applicant did not own any

other business or have common management with any other

business. It was also represented that loan proceeds would be

used for payroll and other business expenses. Based on

information and documents submitted in support of the loan

application, TransPecos approved the requested loan, and on or

about May 11, 2020, TransPecos funded the loan, transferring the

proceeds via ACH to account ending x2627 at JPMorgan Chase Bank

("JPMC Bank"), which investigators have traced to a Schwab

account in MARNELL's name; records from Schwab indicate MARNELL

used these PPP loan proceeds to fund a futures trading account

at Schwab (which lost more than $500,000 in May 2020 alone) and

to fund a $150,000 wire transfer to the Bellagio Hotel & Casino,

7
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 9 of 30 Page ID #:54

for gambling and entertainment expenses, as will be discussed in

more detail below.z

d. Between April 23 and May 11, 2020, TransPecos

received an application and supporting documentation for a PPP

loan in the amount of $1,818,000 for borrower Quicksilver, which

was represented to be a Montana-headquartered firm, owned and

controlled by "Andrew Maxwell." It was also represented that

Quicksilver had 139 employees and an average monthly payroll of

$727,200. It was further represented that "the Applicant has

not and will not receive another loan under the Paycheck

Protection Program," and that the applicant did not own any

other business or have common management with any other

business. It was also represented that loan proceeds would be

used for payroll and other business expenses. Based on

information and documents submitted in support of the loan

application, TransPecos approved and funded the requested loan,

and transferred the loan proceeds via ACH to account ending

x6279 at Live Oak Banking Company ("Live Oak"), a business

account held Quicksilver's name and on which MARNELL is the sole

signer. According to TransPecos, they were able to recover the

funds associated with this loan from Live Oak. I have spoken to

a representative of the Federal Reserve Bank of Atlanta, who

confirmed that the ACH transfer of the loan proceeds for the

2 As discussed in more detail below, TransPecos was able to
recover all of its funds from Schwab, but it appears the monies
used to return funds to TransPecos represented PPP loan proceeds
from other lenders (laundered through a brokerage and futures
trading account at Schwab), as no other transfers or other
monies went into any of the relevant Schwab accounts.
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 10 of 30 Page ID #:55

Quicksilver loan from TransPecos to Live Oak involved an

interstate wire tranfer.

e. Among the documents and information submitted in

support of the PPP loans sought from TransPecos were payroll

data and forms, including Form 940 tax forms supposedly

submitted to the Internal Revenue Service ("IRS") on behalf of

borrowers Shale Creek, Quicksilver, and Slatestone. As

indicated in further detail below, however, information obtained

from the Treasury Inspector General for TIGTA indicates these

Form 940 tax forms were never submitted to the IRS.

f. According to login records from TransPecos, the

same IP addresses were used to access accounts associated with

all three TransPecos loans, and one of these IP addresses was

45.49.21.139, which is an IP address traced to Charter

Communications Inc. ("Charter Communications"). Information

from Charter Communications indicates that, at all relevant

times, the IP address was associated with an account held in the

name of MARNELL's husband, S.R., and was associated with the

SUBJECT PREMISES,

a search warrant is being also sought for the

SUBJECT PREMISES. As discussed in more detail below, the

SUBJECT PREMISES is the address listed on both MARNELL's and

S.R.'s California drivers' licenses and is an address associated

with other accounts in MARNELL's name and in accounts maintained

in aliases "Andrew Maxwell" and `Andrew Merrill" including

accounts associated with other PPP loans.

~']
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 11 of 30 Page ID #:56

11. On July 8, 2020, I participated in an interview of

Brad Day, the Bank Secrecy Officer at Live Oak Bank. I have

also reviewed information and documents that Live Oak Bank

provided to law enforcement investigators. Based on these

sources, and as relevant to the TransPecos loans, I know the

following:

a. On or about May 8, 2020, two business accounts

were opened in the name of Quicksilver by customer "Andrew

Marvell," using MARNELL's Social Security Number (`ASSN") ending

x4394.3

b. A copy of MARNELL's California driver's license

was submitted as the identification document associated with the

two business accounts opened at Live Oak, along with business

entity information for Quicksilver (the same LLC information was

provided to both Live Oak and TransPecos for this entity,

3 Based on information obtained from law enforcement
databases, consistent with information obtained from financial
institutions in the course of this investigation, MARNELL
appears to be using at least three different SSNs in his own
name (and other SSNs in other names). Based on these same
sources, one of the SSNs he is using in his own name, SSN ending
x4394, was issued in or about 1986, which was six years after he
was born, according to information in law enforcement databases.
According to information reported by financial institutions,
MARNELL also appears to be using at least two others SSNs in his
own name, one that was issued in or about 1988, and another
issued in or about 2003, according to law enforcement databases.
For the purpose of this affidavit, when I refer to ~~MARNELL's
SSN," I am referring to the earliest-issued SSN, ending x4394.
According to reports that I have reviewed from financial
institutions, MARNELL has claimed in the past to have been the
victim of identity theft, as an explanation for the multiple
SSNs in his name when he was attempting to obtain credit or to
try to explain fraudulent credit card charges, but in each of
the instances where he reported being the victim of identity
theft, the financial institution investigating the claim
determined that any such claim was unfounded and was being used
to try to avoid responsibility for fraudulent conduct.

10
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specifically the same address and state of incorporation,

although different Employer Identification Numbers were listed),

and another supposed business entity called xtractd LLC

("xtractd"), which is listed as the borrower on another PPP loan

application submitted to a different lender (specifically

Customers Bank), as discussed further below.

c. On or about May 12, 2020, proceeds from one of

the TransPecos loans, in the amount of $1,818,000, were credited

to one of MARNELL's Quicksilver business accounts at Live Oak

Bank. TransPecos records indicate this loan was the $1,818,000

PPP loan issued to Quicksilver, supposedly owned and operated by

"Andrew Maxwell." Fraud investigators at Live Oak flagged this

transfer (and another discussed below) as possibly fraudulent,

froze the funds, and eventually returned them to TransPecos.

12. I have reviewed information and documents that Schwab

provided to law enforcement investigators, and I have spoken to

FDIC-OIG SA Vikas Arora regarding his communications with a

Schwab representative concerning relevant accounts. I have also

reviewed reports that various casinos have submitted to law

enforcement and have spoken with an assigned agent from IRS-CI

regarding her conversations with casino representatives

regarding relevant activity. Based on these sources, I know the

following:

a. In or about March 2020, a Schwab brokerage

account, ending x2726 (the "Schwab x2726 brokerage account"),

was opened in MARNELL's name, using MARNELL's SSNs, and his home

address (the SUBJECT PREMISES). In or about June 2020, another

11
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Schwab brokerage account, ending x7759 (the `Schwab x7759

brokerage account"), was opened in MARNELL's name, using

MARNELL's SSN and his home address (the SUBJECT PREMISES). At

least one of the brokerage accounts was linked to a futures

trading account, ending x8828 (the "Schwab x8828 futures trading

account," and collectively with the Schwab x2726 brokerage

account and the Schwab x7759 brokerage account, the "Schwab

accounts"). A brokerage account was also opened in S.R.'s name,

but no activity occurred in the account, and it was closed with

a zero balance, with fraud indicators.

b. The brokerage accounts allowed for uncovered

options writing, with margin requirements. I know from training

and experience and from discussions with other agents with

training and experience in financial markets that uncovered

options trading allows a trader (here, the Schwab customer) to

sell options without holding an offsetting position in the

underlying security (also known as selling a "naked option"),

and in this type of option trading, the seller of the option

runs the risk that the buyer will exercise an in-the-money

option, and the seller may have to acquire a position quickly in

the underlying security, potentially at a significant loss.

This type of options trading carries significant risks because

of the limited upside profit potential (which is the premiums

paid on the option), and the significant downside loss potential

(which could vary depending on the volume of options traded and

volatility of the underlying security). At least one of the

brokerage accounts was also linked to a futures trading account,

12
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 14 of 30 Page ID #:59

which involves all of the same risks of naked options trading,

along with additional risks involved in trading futures.

c. On or about May 11, 2020, a deposit in the amount

of $1,341,700 was received from TransPecos into the Schwab x2726

brokerage account in MARNELL's name, and I know from TransPecos

records that these funds represented all or virtually all the

proceeds of the PPP loan issued to Slatestone, supposedly owned

and operated by ~~Andrew Merrill," rather than MARNELL, and that

the loan issued for the purpose of paying payroll and other

business expenses of Slatestone.

d. Prior to the $1,341,700 deposit, the Schwab x2726

brokerage account had a zero balance. Between May 20 and May

22, 2020, more than $1.3 million of the $1,341,700 was

transferred from the Schwab x2726 account to the Schwab x8828

futures trading account, which was then used to conduct futures

options trading, resulting in a net loss of $525,693 for the

month of May 2020.

e. After transfers back from the Schwab x8828

futures trading account to the Schwab x2726 brokerage account,

$370,484.00 was left in the Schwab x2726 brokerage account at

the end of May 2020, and (after commissions and fees were

deducted) $421,523.10 was left in the Schwab x8828 futures

trading account -- all of this combined amount, or a total of

$792,007.10, represented proceeds from the original TransPecos

$1,341,700 PPP loan to Slatestone. No other transfers or other

monies went into any of the Schwab accounts in May 2020.

13
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f. On or about June 1, 2020, a deposit in the amount

of $1,842,929.16 was received from Fundbox into the Schwab x2726

brokerage account, and I know from Fundbox records, as discussed

below, that these funds represented proceeds of a PPP loan

issued to Stratrock, supposedly owned and operated by "S.R.,"

and that the loan issued for the purpose of paying payroll and

other business expenses of Stratrock.

g. On or about June 5, 2020, a wire in the amount of

$150,000 was sent from the Schwab x2726 brokerage account to an

account at Bank of America N.A. ("BofA"), ending x6419, held in

the name of Bellagio LLC, 3600 S Las Vegas Blvd, Las Vegas, NV

89109 (the "Bellagio account"), which is the corporate name and

address for the Bellagio Hotel and Casino (the "Bellagio") in

Las Vegas, Nevada. The wire instruction referenced MARNELL by

name and account number in the transmission notes, indicating

the $150,000 wire was for his benefit. Reports from casinos

indicate that MARNELL engaged in gambling activity throughout

May and June 2020, and that he has been engaged in gambling

activity, including at the Bellagio, in varying degrees and

amounts since at least 2013.4 The $150,000 transfer on June 5,

2020 from the Schwab x2726 brokerage account to the Bellagio,

for MARNELL's benefit, represented PPP loan proceeds, because

all of the funds in the Schwab x2726 brokerage account at the

time of transfer (and at all other times) were traceable to the

4 According to a report from Wells Fargo N.A. ("Wells
Fargo"), where MARNELL had worked as a credit analyst, MARNELL
was fired from Wells Fargo for embezzling money from the company
(through a company credit card) related to gambling activity in
June 2018.

14
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TransPecos and Fundbox PPP loans to Slatestone and Stratbox,

respectively

h. On or about June 18, 2020, a deposit in the

amount of $1,842,929.17 was received from Fundbox into the

Schwab x7759 brokerage account in MARNELL's name, and I know

from Fundbox records, as discussed below, that these funds

represented proceeds of a PPP loan issued to Quicksilver,

supposedly owned and operated by "Andrew Maxwell." These funds

were transferred to the Schwab x2726 brokerage account, also in

MARNELL's name, and they were then transferred, along with other

remaining funds from the other PPP loans, to the Schwab x8828

futures trading account, which was then used to conduct futures

options trading, resulting in a net loss of $2,773,455.40 for

the month of June 2020.

i. On or about June 22, 2020, $1,341,700 was

transferred from the Schwab x2726 brokerage account to

TransPecos (representing the full amount of the loan proceeds

that TransPecos had transferred to Schwab for MARNELL-controlled

entities). It is not clear from account records obtained to

date which entity or person initiated the return of these funds

to TransPecos. However, account records indicate that the

transfer was funded through transfers from the Schwab x8828

futures trading account, which itself was funded solely through

transfers of PPP loan proceeds from the Schwab x2726 brokerage

accounts. At all times, other than PPP loan proceeds, no other

transfers or other monies went into any of the Schwab accounts,

15
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and trading activity in those accounts did not result in any net

gains to the accounts, but rather resulted in large net losses.

j. Although the Schwab accounts collectively had a

net negative balance at the end of June 2020, on July 8, 2020, a

wire transfer of $200,000 was sent from the Schwab x2726

brokerage account to the Bellagio account, with the same

reference to MARNELL in the wire instructions as the previous

wire discussed above. Investigators are still attempting to

identify the source of the monies used to fund this wire

transfer. Information from the Bellagio indicates that MARNELL

was gambling at the Bellagio from July 9 to July 11, 2020, and

that he lost more than $150,000 in those two days.

13. I have spoken with an assigned special agent from

TIGTA and reviewed reports that she prepared, and according to

these sources:

a. Form 940s are forms that employers file with the

IRS to report and ultimately to pay an employer's annual Federal

Unemployment Tax Act (FUTA) tax. All employers that pay payroll

are required to file these forms on an annual basis.

b. IRS has no record of the Form 940 payroll forms

submitted to TransPecos for Shale Creek, Quicksilver, or

Slatestone, nor does IRS have any record of any Form 940s or any

other payroll records being submitted for these entities or the

associated Employer Identification Numbers (~~EINs").

14. Information from the Department of Homeland Security

("DHS") indicates that fake information was submitted to

TransPecos as identification for "Andrew Maxwell," the supposed
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 18 of 30 Page ID #:63

principal of Quicksilver. A photograph of what purports to be

the inside jacket of a United States passport in the name

"Andrew Maxwell," passport number ending x9799 (with what

appears to be MARNELL's photograph) was submitted to TransPecos

as identification for "Andrew Maxwell," but DHS has no record of

this passport being issued in this name -- the passport number

is real but belongs to another person. The same fake passport

was used as identification for "Andrew Maxwell" for other PPP

loans discussed below.

15. Based on my training and experience and publicly

available information regarding TransPecos, I know that

TransPecos is a financial institution, as that term is defined

in 18 U.S.C. § 20, that is insured by the Federal Deposit

Insurance Corporation.

D. FundBox Loans

16. I have reviewed information and documents that FundBox

provided to law enforcement investigators, and I have also

reviewed information and documents from Schwab, and spoken with

FDIC-OIG SA Arora regarding his communications with a Schwab

representative regarding the Schwab accounts. Based on these

sources, I know the following:

a. In or about June 2020, Fundbox issued two PPP

loans totaling $3,685,858.32 to MARNELL-controlled entities,

namely, Stratrock and Quicksilver. Although the loan

applications and other information indicated that the principals

of these entities were, respectively, "S.R." and "Andrew

Maxwell," other information obtained in course of the

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investigation indicates MARNELL and potentially others were the

ones submitting the applications and receiving the funds. Among

other evidence of this, all of the Fundbox PPP loan proceeds

were transferred to MARNELL's Schwab accounts and used by

MARNELL for options trading and gambling.

b. On or about May 22, 2020, Fundbox received an

application and supporting documentation for a PPP loan in the

amount of $1,842,929.16 for borrower Stratrock, which was

represented to be a Colorado-headquartered firm, owned and

controlled by "S.R." It was also represented that Stratrock had

129 employees and average monthly payroll expenses of $734,593.

It was further represented that "the Applicant has not and will

not receive another loan under the Paycheck Protection Program,"

and that the applicant did not own any other business or have

common management with any other business. It was also

represented that loan proceeds would be used for payroll and

other business expenses. Based on information and documents

submitted in support of the loan application, Fundbox approved

the requested loan for Stratrock.

c. On or about June 15, 2020, Fundbox received an

application and supporting documentation for a PPP loan in the

amount of $1,842,929.17 for borrower Quicksilver, which was

represented to be a Montana-headquartered firm, owned and

controlled by "Andrew Maxwell," with a phone number that was the

same as the phone number listed for "Tyler Lerman" in the PPP

loan application submitted to TransPecos for borrower Shale

Creek. It was also represented to Fundbox that Quicksilver had
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 20 of 30 Page ID #:65

129 employees and had an average monthly payroll of $734,593.

It was further represented that "the Applicant has not and will

not receive another loan under the Paycheck Protection Program,"

and the applicant did not own any other business or have common

management with any other business, and that the loan would be

used to pay payroll and for other approved business expenses.

Based on the information in the application and the documents

that were submitted, Fundbox approved the requested loan for

Quicksilver.

d. As discussed above, all of the Fundbox PPP loan

proceeds were transferred to MARNELL's Schwab accounts and used

for risky and losing options trading and for gambling

activities, and as of the end of June 2020, MARNELL had lost all

of the Fundbox PPP loan proceeds, leaving the Schwab accounts

with a net negative balance.

e. Among the application documents and information

submitted to Fundbox were payroll data and forms, including the

same (fake) Form 940 that was submitted to TransPecos for

Quicksilver. The Form 940 tax forms submitted to Fundbox and to

TransPecos for borrower Quicksilver were identical, containing

the exact same information, including the same Employer

Identification Number ("EIN"), and business name and address,

with the exception that the form submitted to Fundbox was dated

two days before the form submitted to TransPecos, and the form

submitted to Fundbox had a signature on it (both forms had

signature blocks filled in with the name of "William Kalemeier"

as `Treasurer" of Quicksilver, but the only the form submitted

19
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to Fundbox had what appeared to be a signature of "William

Kalemeier" affixed to it).

f. A Form 940 was also submitted for Stratrock, but

according to information provided by TIGTA, the IRS has no

record of receiving this Form 940 or any Form 940 tax forms or

other payroll records for this entity or the associated EIN.

The financial information on the Form 940 submitted to Fundbox

for borrower Stratrock (i.e., the payroll payments and other

numbers reported on the form) was identical to the financial

information on the Form 940 submitted to Fundbox for borrower

Quicksilver. The Form 940 submitted for Stratrock, like the

Form 940 submitted for Quicksilver, was also supposedly signed

b y "William Kalemeier" as "Treasurer" of Stratrock, and it was

dated the same day as the Form 940 submitted for Quicksilver.

The only differences between the 940 forms submitted for

Stratrock and Quicksilver were the EINs, the names and addresses

of the businesses, and the state of incorporation. The forms

for these two supposed businesses were otherwise identical,

including all of the financial information.

g. Among the IP addresses used to submit documents

and information for the Stratrock loan was 45.49.21.139, which

is the same IP address used to access accounts associated with

the TransPecos loans, and the same IP address used to access

other financial accounts in MARNELL's name and in the names of

aliases "Andrew Maxwell" and "Andrew Merrill," including

accounts associated with other PPP loans discussed below, and an

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IP address that has been traced to MARNELL and the SUBJECT

PREMISES through Charter Communication records.

17. Information from DHS indicates that fake information

was submitted to Fundbox as identification for "Andrew Maxwell,"

the supposed principal of Quicksilver. A photograph of what

purports to be the inside jacket of a United States passport in

the name "Andrew Maxwell," passport number ending x9799 (with

what appears to be MARNELL's photograph) was submitted to

Fundbox as identification for "Andrew Maxwell," but DHS has no

record of this passport being issued in this name -- the

passport number is real but belongs to another person. This is

the same fake passport that was submitted to TransPecos as

identification for "Andrew Maxwell," who was listed as the

principal of borrower Quicksilver for the PPP loans obtained

from TransPecos, and it is the same fake passport that was

submitted to ReadyCap, another PPP lender discussed below. The

same email address, amaxwell@eastbaydeco.com, was listed with

both Fundbox and ReadyCap as the email address of "Andrew

Maxwell."

E. ReadyCap Loan

18. I have reviewed documents and information that

ReadyCap., Customers Bank, and Live Oak provided to law

enforcement, along with data from a law enforcement database

compiling information concerning PPP loans, and I have spoken to

a Live Oak representative and to another law enforcement

investigator from FHFA-OIG regarding her communications with a

Customers Bank representative regarding a ReadyCap PPP loan

21
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sought in the name of borrower East Bay Associates LLC (`East

Bay Associates"). From these sources, I know the following:

a. Shortly after the PPP program was introduced,

Customers Bank partnered with several vendors including

ReadyCap, Kabbage, and other financial institutions to offer PPP

loans to small businesses.

b. On or about April 8, 2020, ReadyCap received an

application and supporting documents for a PPP loan in the

amount of 5456,917 for borrower East Bay Associates, which was

represented to be a Florida-headquartered firm, owned and

controlled by "Andrew Maxwell." On at least one of the

application forms, it was also represented that East Bay

Associates employed 27 people and had an average monthly payroll

of $182,767.5 The IP address used to affix a virtual signature

for "Andrew Maxwell" to at least two documents was 45.49.21.139,

which is the same IP address used to access accounts associated

with the TransPecos loans, other accounts in MARNELL's name, and

has otherwise been traced to MARNELL at the SUBJECT PREMISES,

PREMISES as described in this affidavit. It was further

represented that "the Applicant has not and will not receive

another loan under the Paycheck Protection Program," and that

5 ReadyCap provided at least two versions of the PPP loan
application form submitted for East Bay Associates, one dated
April 8, 2020, and the other dated April 14, 2020. On the first
of these applications, dated April 8, 2020, it was represented
that East Bay Associates had 27 employees and an average monthly
payroll of $182,767; on the second version, dated April 14,
2020, it was represented that East Bay Associated had 26
employees and an average monthly payroll of $141,000.
Regardless, I have seen no evidence thus far that East Bay
Associates is a functional company or has any employees or has
any payroll expenses.

22
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the applicant did not own any other business or have common

management with any other business. It was also represented

that loan proceeds would be used for payroll and other business

expenses. Based on information and documents submitted in

support of the loan application, ReadyCap approved a PPP loan in

the amount of $352,500.

c. On or about May 18, 2020, an ACH transfer of

$352,500 was initiated from Customers Bank to an account at Live

Oak Bank, account ending x6912, held in Quicksilver's name, and

on which MARNELL was the sole signer, to fund the PPP loan that

ReadyCap had issued to East Bay Associates, for "Andrew

Maxwell." According to transfer instructions, the funds were

supposed to be transferred to a checking account at Live Oak

Bank, but they were frozen because of a discrepancy between the

type of account designated in wire instructions and the type of

account at Live Oak Bank, which was a savings account. In

addition, fraud investigators at Live Oak Bank identified a

discrepancy in the name of the borrower entity on the PPP loan,

which was East Bay Associates, and the name of the

accountholder, which was Quicksilver, and a difference between

the supposed principal of East Bay Associates, "Andrew Maxwell,"

and the individual signer on the account, which was MARNELL. As

a result, Live Oak Bank froze the funds and ultimately returned

them.

19. Information from DHS indicates that fake information

was submitted to ReadyCap as identification for "Andrew

Maxwell," the supposed principal of East Bay Associates. A

23
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photograph of what purports to be the inside jacket of a United

States passport in the name "Andrew Maxwell," passport number

ending x9799 (with what appears to be MARNELL's photograph) was

submitted to ReadyCap as identification for "Andrew Maxwell,"

but DHS has no record of this passport being issued in this name

-- the passport number is real but belongs to another person.

This is the same fake passport that was submitted to TransPecos

and Fundbox as identification for the "Andrew Maxwell," the name

that was listed as the principal of borrower Quicksilver for the

PPP loans obtained from TransPecos and Fundbox. The same email

address, amaxwell@eastbaydeco.com, was listed with both Fundbox

and ReadyCap as the email address of "Andrew Maxwell."

F. Customers Bank Loan

20. I have reviewed information provided by Customers Bank

to law enforcement investigators, along with data from a law

enforcement database compiling information concerning PPP loans,

and I have spoken to another law enforcement investigator from

FHFA-OIG about her conversations with a Customers Bank

representative regarding a PPP loan obtained from Customers Bank

in MARNELL's name, and from these sources, I know the following:

a. In or about April 2020, Customers Bank received a

loan application for a PPP loan in the amount of $1,352,318 for

xtractd, with the same address and phone number listed for this

entity as that listed for Slatestone in application materials

sent to TransPecos. The principal of xtractd was listed as

`Andrew Marvell," with MARNELL's SSN. It was also represented

that xtractd employed 78 people and had an average monthly

24
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payroll of $542,683.59. It was further represented that "the

Applicant has not and will not receive another loan under the

Paycheck Protection Program," and that the applicant did not own

any other business or have common management with any other

business. It was also represented that loan proceeds would be

used for payroll and other business expenses. Based on

information and documents submitted in support of the loan

application, Customers Bank approved the requested loan, and on

or about April 23, 2020, proceeds in the amount of $1,352,318

were disbursed to a Customers Bank account ending x8371.

b. Between May 4, 2020, and June 11, 2020,

approximately $1.1 million of the PPP loan proceeds for xtractd

were further transferred to other accounts, and investigators

are still tracing these funds.

21. Based on my training and experience and publicly

available information regarding Customers Bank, I know that

Customers Bank is a financial institution, as that term is

defined in 18 U.S.C. ~ 20, that is insured by the Federal

Deposit Insurance Corporation.

G. Kabbage Loans

22. On July 8, 2020, I participated in an interview of

Spencer Robinson, the Chief Risk Officer at Kabbage, and I have

also reviewed data from a law enforcement database compiling

information concerning PPP loans, and from these sources I know

the following:

a. Kabbage is a financial technology company that

provides small businesses with products that can help grow their

25
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business. Kabbage partners with banks to provide capital for

these business products. When the PPP loan program was

announced, Kabbage applied with the Small Business

Administration (~~SBA") to be a non-bank PPP lender.

b. In or about June 2020, Kabbage received an

application for a PPP loan in the amount of $1,301,050 for

borrower Slatestone, purportedly owned and operated by "Andrew

Merrill," and based on information and documents submitted in

support of the loan application, Kabbage approved the requested

loan, and an SBA loan number was issued for it.

c. The PPP loan did not fund because the borrower

failed pre-funding identification verifications. Also, because

of the loan amount, it would have required a full manual

underwriting, which did not happen.

d. Kabbage had received an additional PPP loan

application in the name of an Arizona-based business whose

principal was represented to be "Andrew Marnell," with MARNELL's

SSN. This loan also never funded because the borrower again

failed the pre-funding identity verification checks.

H. Information from TD Ameritrade

23. I have reviewed information and documents that TD

Ameritrade Inc. ("TD Ameritrade") provided to law enforcement

investigators. Based on these sources I know the following:

a. In or about February and March 2020, accounts

were opened in the name "Andrew Maxwell" and "Andrew Merrill" at

TD Ameritrade. Previously, in 2018, TD Ameritrade closed

26
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accounts in MARNELL's name because of fraudulent activity and

banned him as a future client.

b. Login information shows the accounts opened in

the names of "Andrew Maxwell" and "Andrew Merrill" were accessed

from the SUBJECT PREMISES using IP address 45.49.21.139, which

is the same IP address used to access accounts associated with

other PPP loan applications, other accounts in MARNELL's name

and in the names of his aliases "Andrew Maxwell" and "Andrew

Merrill," and has otherwise been traced to MARNELL at the

SUBJECT PREMISES.

c. I have listened to recordings of two calls that

TD Ameritrade representatives had with "Andrew Maxwell" and

"Andrew Merrill," and it appears the same person is using both

identities, as the voice sounds the same, and also sounds like

the same voice on recordings I have reviewed from Live Oak of a

customer identifying himself as MARNELL.

d. The TD Ameritrade accounts opened in the names of

"Andrew Maxwell" and "Andrew Merrill" were closed in or about

April 2020 because of fraud indicators.

I. Information Concerning Fraud Affecting the Economic
Injury Disaster Loan Program

24. I have spoken to an assigned special agent from SBA-

OIG SA and reviewed documents from the Bellagio including a

document that appears to be an account statement from an account

maintained at Aspiration Bank in MARNELL's name, and I have

spoken with a special agent from IRS-CI who has had further

conversations with casino investigators, and from these sources,

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I know that, on or about May 22, 2020, applications were filed

for two (2) SBA Economic Injury Disaster Loans (~~EIDL"), one on

behalf of xtractd and the other on behalf of Slatestone -- for

both loans MARNELL was represented to be the principal of the

relevant business entities. In applications for both loans, it

was represented that xtractd and Slatestone each employed 10

people. The loan for xtractd was approved for $150,000. On or

about June 11, 2020, SBA disbursed $149,900, the total loan

proceeds less fees, into MARNELL's Aspiration Bank account,

ending in x6538. A review of bank statements revealed that the

loan proceeds were used for personal expenses such as groceries

and home improvement, for cash withdrawals near MARNELL's

residence, and for gambling and entertainment expenses at the

Bellagio.
Case 2:20-mj-03313-DUTY Document 1 Filed 07/15/20 Page 30 of 30 Page ID #:75

IV. CONCLUSION

25. For all the reasons described above, there is probable

cause to believe that, on or about May 11, 2020, ANDREW MARNELL

knowingly and with intent to defraud carried out a scheme or

plan to obtain money or property from TransPecos through the use

of material false statements and promises, namely, MARNELL

obtained the proceeds of the PPP loan issued to Slatestone,

based on false and fraudulent representations regarding the

borrower and the use of proceeds, in violation of 18 U.S.C.

~ 1344(2) (bank fraud).

Attested to by the applicant in
accordance with the requirements
of Fed. R. Crim. P. 4.1 by
telephone on this 15 day of
July 2020.

STEVE KIM
UNITED STATES MAGISTRATE JUDGE

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Criminal complaint affidavit - United States v. Marnell PPP fraud case (2020-07-15)

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