Factual Proffer — United States v. Varrone (S.D. Fla., Dkt. 18)

Summary

Factual Proffer in United States of America v. Varrone, Case No. 22-CR-60197-AHS, in the U.S. District Court for the Southern District of Florida, entered 12/15/2022 as Document 18. The United States and the Defendant agree that, had the case gone to trial, the United States would have proven facts including that the Defendant was Chief Executive Officer of The Credit Engineers (TCE) and of Mindset Merchants, Inc. The proffer states that from in or about January 2018 through 2022 the Defendant and coconspirators solicited victims to lease their credit to TCE for a monthly payment, and that between 2020 and 2022 they received $649,800 in fraudulent EIDL funds. It states that the Defendant and coconspirators obtained at least approximately $5,500,000 from over 40 investors.

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Case 0:22-cr-60197-AHS Document 18 Entered on FLSD Docket 12/15/2022 Page 1 of 4




                           UN TED STATESDISTRICT COURT
                           SOUTH ERN DISTRICT OF FLORIDA

                                   CASE N O.22-CR-60197-A H S

    UNITED STATES OF AM ERICA,

    v S.

    DAvlo i.vAuRoxl
           Defendant.
                                            I


                                        FA C TU A L PR O FFE R
                                                                                             '
                                                     ,

             The United States of Am erica and Defendant DAW D J. VARRONE

    CDefendanf')agree that,had thiscase gone to trial,theUnited Stateswould have
    proven, beyon d areastmabledoubt,thefollowingfacts,am ongothers,wllich '
                                                                           occurred

    in Broward County,in the Southern DistrictofFlorida and elsewhere:

             At alltimes m aterialto the charge in the Indictm ent,the Defendantwas the

    ChiefExecutive OfficerofThe CreditEngineersCTCE''),a Florida Corporation in
    Broward County,Florida.And,the Defendant was the ChiéfExecutive Oo cer of

    M indsetM erchants,Inc.,a Florida Corporation in Brow ard County,Florida.

             From in oraboutJanuary 2018 tllrough in oraboutApril2022,the Defendant

    agreed and conspired with his coconspirators to solicit Victim s- using interstate

    wires- to lease theircredittoTCE in exchange for a m ontbly paym ent.
                                    .                                                  '
                               .

             Speciscally,theDefendant,through TCE,usedtheVictims'éreditSlestoappl#
    for large,high-interest loans from third-party lenders,the proceeds of which were
    deposited into the V ictim s)bank accounts. The V ictim s then transferr'
                                                                            ed a1lor som e
Case 0:22-cr-60197-AHS Document 18 Entered on FLSD Docket 12/15/2022 Page 2 of 4




    the loan proceedstoTCE orthe DefendantatTD Bank Accountending in #2220 and

    other accountscontrolled by theDefendantand hiscoconspirators.

          The schem e included a térm repaym entstructtzre w ith a O alloon Paym ent''at

    the end of the term .The Balloon Paym ent w ould purportedly be enough for the

    Victim s to pay of any outstanding balances on the loans taken out in their nam e.

    However,in every instance,the Defendantand hisco-conspirators stopped m aking

    m onthly paym entsto the Victim sbefore the expiration ofthe term period and never
    m ade the'Ba/oon Paym ents.

          To induce the Victim s to participate in the fm udulent schem e,the D efendant

    and his coconspirators represented to the Victim s via phone,em ail,text,or social

    m edia thatTCE would investtheVictim s'm oney in a hedgefund thatwould generate

    investm ent returns that could keep up with the m onthly payments on the high-

    interest-rateloansand stillprovide excessretmm sto theVictim sforpassive incom e.

    The Defendant and his co-conspim tors touted the Defendant as a self-m ade

    billionaire and represented that TCE'S credit-leasing program had a 100% success

    rate.Thése representations were lies intended to induce the Victim s to give the

    Defendant and his co-conspirators m oney for the Defendantand llis co-conspirators'

    personaluse.In fact,theVictim s'fundsw erenotinvested in hedgefundsasprom ised

    and were m isappropriated by theDefendantand hisco-conspirators.

          On October 24,2019,the Arizona Corporation Com m ission entered an Order

    toCease and Desist,OrderforAdministrative Penalties,and ConsenttoSame (the
    RArizonaConsentOrder'').Therein,theCommission setfoz'ththeTCE businessmodel
Case 0:22-cr-60197-AHS Document 18 Entered on FLSD Docket 12/15/2022 Page 3 of 4




    and found that between June 5,2018,and Septem ber 12,2018,Arizona investors

    wired $324,:91.12 to TCE and that certain funds were misappropriated by TCE.
    Specifçally, the Arizona Consent Order states, V ittle or none of the Arizona

    lnvestors'proceedswere invested with a hedge ftzndo''

          The Aeizona Consent Order concluded that TCE and two other individuals

    violated the Arizona Securities Act,and that the Defendant directly or indirectly
                                                                   ,




    controlledTCE andwasjointlyandseverallyliabletothesameextentasTCE forany
    violations oftheArizona SecuritiesAct.The Arizona ConsentOrder also stated that

    TCE had repaid the loansobtained by theArizona Investors.H owever,withoutthe

    Com m ission's knowledge, the Defendant m ade the repayments to the Arizona
    Victim susing differentVictim sif'unds.

          The Defendant also funded the schem e and his fam ily's lifestyle by

    fm udutently applying for and obtaining pandem ic-relief funds in the form of

    Econoz
         m ic Injury DisasterLo>ns CEIDLD from the Sm allBusinessAdministration
    (RSBA'')usinginterstatewirecommunicationstoapply fortheloansandreceiveioan
    proceeds.Between A ugust 5,2020,and M arch 25,2022,the Defendant and his co-

    conspirators received $649,800 in gaudulent EIDL ftm ds 9om thè United States
    Governmentbased on false statem ents aboutthe grossrevenue,costsofgoods sold,

    and num berofem ployeesofboth M indsetM erchantsand TCE.

          For exam ple, on M arch 25, 2022, the Defendant reao rm ed the false

    representations m ade on August 5,2020,in EIDL Application N umber 3312700701

    on behalf of M indspt M erchants,to receive m ore EID L funds, and caused the U .S.
Case 0:22-cr-60197-AHS Document 18 Entered on FLSD Docket 12/15/2022 Page 4 of 4




    Treasury to make an ACH transferof$350,000toRegionsBank Accountending in
    #0944.

          In addition to using Victim fundsand SBA fundstocontinue theirschem eby

    paying other Victim s'm ontbly installm ents,the D efendant and his co-conspirators

    used the funds to pay for their m ortgage and utilities at thei.
                                                                   r hom e in W eston,

    Florida,as wellas their fam ily's velzicles,travel,entertainm ent,college expenses,

    and Other Personalexpenses.
          A s a result: of the Defendant and his co-conspirators' nlaterial

    m isrepresentationsregardinèthepro/tability oftheTCE businessm odeland theuse
    ofinvestorfunds,from in or around January 2018,tllrough in or :round April2022,

    the D efendant and llis co-conspirators, thm ugh interstate w ire com m uu cations,

    falsely andvfm udulently obtained atleastapproximately $5,500,000 9om over 40
    investors,ofwhich heretained atleastapproxim ately 2,941,943.33,in additson tbthe
    $649,800 in g audulentEIDL fundsobtained 9om the U.nited StatesGovernm e'nt.

                                         JUAN ANTOM O GONZXLEZ
                                         U FRTED STA TE S ATTORN EY

    DATE: 12/11/2022               BY:                   e
                                         TREV O R C'
                                                   .J        S
                                         ASSISTANT U'
                                                    NITED STATES ATTORNEY

    DATE:la-!;-aA                  BY:                .
                                         DAW D TA REA S
                                         COU N SEL FO        E DEFENDANT

    DATE: 1Q-1$>B2                 BY:
                                         DAW D J.V A R ON E
                                         D EFE N DA N T


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