Criminal Complaint — United States v. Diamond Blue Smith (S.D. Fla., Dkt. 3)

Summary

Criminal complaint with affidavit, entered on the docket 10/01/2020 in the Southern District of Florida, United States of America v. Diamond Blue Smith, Case No. 20-MJ-03723-EGT. It charges wire fraud, bank fraud, and conspiracy or attempt to commit wire fraud and bank fraud, for May 13 to August 24, 2020. The affidavit of Warren E. Rogers, Jr., Special Agent, IRS-CI, states that Smith obtained two fraudulent PPP loans for Throwbackjerseys.com, LLC and Blue Star Records, LLC, with a cooperating person submitting the applications in exchange for a kickback. It states that conspirators planned or prepared at least 90 fraudulent applications, and that at least approximately 42 loans were funded for a total of approximately $17.4 million.

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“Criminal Complaint — United States v. Diamond Blue Smith (S.D. Fla., Dkt. 3).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-1-20-mj-03723-dkt-3-s-d-fla-fbfb9a1878/, SHA-256 d79d93281dfdb609a1496b9ccfcbab262f01487eb243525386aa559fca46a802.

Full text

Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 1 of 22

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

Case No. __2_0-_M~J~-0_3_7_23_-_E_G_T_ _

UNITED STATES OF AMERICA

DIAMOND BLUE SMITH,

Defendant.
- - - - - - - - - - - - - - -I

CRIMINAL COVER SHEET

1. Did this matter originate from a matter pending in the Central Region of the United States
Attorney's Office prior to August 9, 2013 (Mag. Judge Alicia Valle)? Yes ✓ No

2. Did this matter originate from a matter pending in the Northern Region of the United States
Attorney's Office prior to August 8, 2014 (Mag. Judge Shaniek Maynard)? _ Yes ✓ No

3. Did this matter originate from a matter pending in the Central Region of the United States
Attorney's Office prior to October 3, 2019 (Mag. Judge Jared Strauss)? Yes ✓ No

Respectfully submitted,

ARIANA FAJARDO ORSHAN
UNITED STATES ATTORNEY
,1,;,,,,,,_{;.Ck,,,,..,,,g
BY: v1 o
AIMEE C. JIMENEZ
ASSISTANT UNITED STATES ATTORNEY
District Court No. A5500795
99 N.E. 4th Street
Miami, Florida 33132
Tel: 305-961-9028
Fax: 305-530-7976
Email: aimee.j imenez@usdoj.gov
Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 2 of 22

:\0 QJ {Rev. 0S/09) Criminal Complaint

UNITED STATES DISTRICT COURT
for the
Southern District of Florida

United States of America )
V. )
Diamond Blue Smith, )
Case No. 20-MJ-03723-EGT
)
)
)
/J,:f,mda111(s)

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 date(s) of ___ May 13_-August 24, 2020 in the counties of ___fylJ§J.'!11:Pade 9nd.J3roward in the
South~J:D... ____ District of , the defendant(s) violated:

Code Section Offense Descriptio11

18 U.S.C. Sec. 1343 and 2 Wire Fraud
18 U.S.C. Sec. 1344 and 2 Bank Fraud
18 U.S.C. Sec. 1349 Conspiracy/Attempt to Commit Wire Fraud and Bank Fraud

This criminal c.9mplaint is based on these facts:

SEE ATTACHED AFFIDAVIT.

,;J Continued on the attached sheet.

L ID #6335
Warren E. Rogers, Jr., Special Agent, IRS-Cl
l'ri111ed name and Litle

Attested to by the Applicant in accordance with the requirements of Fed.R.Ct~·ii_..~

Date,_ ~/L;:).f,Ji(tJ
City and state: Miami, Florida
-------~-----------~-······--··--- _Jr:UJ. Torres, U.S. M§gistrate Jud_9L_________
Printed name a11d title
Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 3 of 22

AFFIDAVIT

I, Warren E. Rogers, Jr., being first duly sworn, hereby depose and state as follows:

INTRODUCTION AND AGENT BACKGROUND

1. I make this Affidavit in support of a criminal complaint charging DIAMOND

BLUE SMITH ("SMITH" or "Defendant"), with wire fraud, bank fraud, attempt and conspiracy

to commit wire fraud and bank fraud, in violation of 18 U.S.C. §§ 1343, 1344, 1349, and 2, from

on or about May 13, 2020, to at least on or about August 24, 2020, in the Southern District of

Florida, and elsewhere (the "Target Offenses").

2. Defendant has participated in a scheme to obtain by fraud millions of dollars in

forgivable loans through the Paycheck Protection Program ("PPP") and other govemment

programs, conspiring with a person now cooperating with the investigation ("CHS 2") and others.

Defendant obtained two fraudulent PPP loans for his own companies, Throwbackjerseys.com,

LLC ("Throwbackjerseys.com"), and Blue Star Records, LLC ("Blue Star Records"), with CHS 2

providing falsified documents and submitting the applications on Defendant's behalf in exchange

for a kickback from the loan proceeds. Defendant also conspired to submit additional fraudulent

PPP loan applications for other companies by recrniting other confederate loan applicants in order

to receive kickbacks from those confederates. To inflate the size of these PPP loans, and the

con-esponding kickbacks, the conspirators relied on a variety of false statements, including by

submitting falsified bank statements and payroll tax forms. For example, the conspirators used

nearly identical versions of the same fabricated bank statements, recycled in the PPP applications

for multiple companies with minor changes.

3. TI1e conspirators in the scheme planned or prepared at least 90 fraudulent

applications, most of which were submitted. Based on the evidence investigators have reviewed
Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 4 of 22

to date, CHS 2, Defendant, and their co-conspirators applied for PPP loans that are together worth

more than $24 million dollars, with at least approximately 42 of those loans approved and funded

for a total of approximately $17.4 million. Certain of those loan recipients then wired a kickback

of va1ying amounts, often approximately 25% of the fraudulent loan proceeds, to an account

controlled by CHS 2.

4. I am a Special Agent with the United States Department of The Treasury, Intemal

Revenue Service, Criminal Investigation ("IRS-CI") and have been employed in this capacity since

July 2002. I am presently assigned to the Miami Field Office. My duties as a Special Agent

include the investigation of possible criminal violations of the Intemal Revenue Code (Title 26 of

the United States Code), the Bank Secrecy Act (Title 31 of the United States Code), and the Money

Laundering Statutes (Title 18 of the United States Code). I graduated from the Criminal

Investigator Training Program at the Federal Law Enforcement Training Center in October 2002

and the Special Agent Investigative Techniques program at the National Criminal Investigation

Training Academy in Februaty 2003. In these two programs, I studied a variety of law

enforcement tactics and criminal investigator techniques relating to tax and financial crimes. Since

becoming an IRS-CI Special Agent, I have personally investigated and assisted in investigations

relating to the Intemal Revenue Laws and financial crimes. Recently, I have been assigned to

work with the U.S. Depaitment of Justice and other law enforcement pa1tners, including the

Federal Bureau of Investigation and the Small Business Administration Office of Inspector

General, to investigate possible fraud associated with the stimulus and economic assistance

programs created by the federal govemment in response to the COVID-19 pandemic.

5. TI1e facts in this Affidavit come from my personal observations, my training and

experience, and information obtained from other members oflaw enforcement and from witnesses.

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This Affidavit is intended to show merely that there is sufficient probable cause and does not set

forth all of my knowledge about this matter. 1

PROBABLE CAUSE

The Paycheck Protection Program

6. T11e Coronavirns 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 by 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 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 mies 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.

The conduct and charges described in this Affidavit are part of a larger investigation that
is being conducted in this District and elsewhere. As a result, not all numbered sources and
anonymous individuals and entities are described in every filing. I have included in this Affidavit
only those individuals and entities I have deemed necessary to explain the particular facts set forth
here.

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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 the 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 ce1iain 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.

The Scheme to Obtain Fraudulent PPP Loans

10. On or about May 13, 2020, Phillip J. Augustin ("Augustin") and CHS 2 worked

together to submit a fraudulent PPP loan application on behalf of a company owned by Augustin.

Augustin submitted a PPP loan of $84,515 to a federally insured bank (hereinafter "Bank 3"),

through a third-patty company processor (hereinafter "Bank Processor 1"), 2 The application

included bank.statements that are clear forgeries, and CHS 2 has admitted that the application was

based on documents that he falsified for Augustin. 3

2
All banks referenced in this Affidavit are insured by the Federal Deposit Insurance
Corporation.
3
On June 25, 2020, investigators arrested CHS 2 and another person now cooperating with
the investigation ("CHS 3") and executed search wa1rnnts at their residences. Following his arrest,
CHS 2 chose to cooperate with the investigation in the hope of obtaining favorable consideration
in connection with his pending charges. CHS 2 was interviewed on that day, and has continued to
cooperate with the investigation after obtaining counsel. Most of his statements related herein
have been con-oborated by records obtained from third parties or recovered from his electronic
devices.

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11. Following the success of that initial fraudulent PPP application, Augustin and CHS

2 began to work on obtaining more and larger PPP loans for Augustin's associates and others,

generally for several hundred thousand dollars for each loan, up to as much as approximately $1.24

million. Based on the evidence investigators have reviewed so far, CHS 2 and Augustin

collectively coordinated applications for PPP loans that are together worth more than $24 million

dollars. The evidence also shows many more PPP loans were attempted but rejected by banks or

their partners, or were planned and prepared, but not submitted before CHS 2's atTest. 111e

evidence suggests that all or nearly all of those loan applications were fraudulent, including

Defendant's loan applications.

12. Investigators have obtained many other PPP loan applications that CHS 2 has

admitted he submitted as part of this scheme, based on falsified documents, and have also obtained

draft documents used or intended to be used in those applications or others. These applications all

follow the same pattern of fraud-many with obviously counterfeit February 2020 bank

statements, and all with fabricated IRS Forms 941 (titled, "Employer's Quarterly Federal Tax

Return") with the same indicia of fraud found in Augustin's initial application-but generally with

even larger inflated payroll numbers, thus yielding much larger loans. 4 CHS 2 has explained to

investigators that the figures in the Fo1ms 941 were the product of a formula that allowed him to

start with a target loan amount, and then "back into" the payroll figures on the form. He explained

how he used figures that would produce an average monthly payroll for 2019 that, when multiplied

by 2.5, would yield the requested loan amount. In tum, the number of employees reported was

4
Some loan applications also included voided checks that appear to be falsified, such as a
purported Bank 5 check that appears to have been produced on a computer and, as the subject line
reads, "Converted to PDF," rather than a scan of an authentic check.

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chosen based on fictional payroll figures, chosen to avoid an average employee salary that might

raise suspicion.

13. CHS 2 has also explained that he tried to use bank statements showing that the

company had a large balance. Because so few companies had such a statement, and likely also

because it was easier than keeping track of their true statements, CHS 2 repeatedly submitted near

replicas of the same falsified bank statements. In particular, CHS 2 appears to have recycled one

statement each from Bank 1, Bank 6, and Bank 7. In recycling a statement, CHS 2 generally

changed only the account number and the account holder's name and address, such that each

version of the statement had identical figures and line items throughout the statement.

14. A review of records for bank accounts controlled by CHS 2 at Bank 5 confirm CHS

2's admissions that he received numerous kickbacks, often of approximately 25% of the amount

of the loans, and that he regularly wired Augustin a share of that kickback in the early stages of

the scheme. CHS 2 explained that they were doing so many loans by the end of May that he

changed course, instead wiring larger lump smns, collecting Augustin's shares of the kickbacks

for multiple loans in one wire.

15. Investigators are still receiving and analyzing records, but based on a preliminary

analysis, as of August 31, 2020, investigators had identified a total of $2,367,765.82 in transfers

to CHS 2 's accounts from entities that each obtained a sizable PPP loan and that were identified

in the PPP files seized from CHS 2's and another co-conspirator's residences, as described

below-or from individuals associated with those entities.

16. The PPP loans identified above as implicated in the foregoing kickback payments

to CHS 2 represent only a fraction of the overall scheme. In executing search warrants at the

respective residences of CHS 2 and CHS 3, federal agents found stacks of paper printed out and

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organized by entity, containing an "intake form," fabricated Forms 941, or both for each entity.

TI1e intake fonns contained fields for the information needed to fabricate the documents and fill

out other aspects of the PPP application: identifying infonnation about the owner and company,

as well as bank account infonnation for receiving the loan. A section atthe end marked "BELOW

IS OFFICE USE ONLY" included blank fields for the "Number of Employees," "Monthly Payroll

Expense," and "SBA Loan Pre-Approval Amount." Between CHS 2 's and CHS 3 's residences,

investigators seized paper files for PPP loan applications for approximately 80 different entities.

17. Data obtained from the SBA showed additional PPP loan applications from

additional entities that text message and email records show had been refen-ed to CHS 2 by

members of the conspiracy.

The Fraudulent PPP Loan to Throwbackierseys. com

18. According to Florida's Division of Corporations website ("Sunbiz"),

TI1rowbackjerseys.com was incorporated in or around April of 2018. SMITH is listed as the

company's manager and registered agent. TI1e address listed on Sunbiz for Throwbackj erseys.com

is 7958 Pines Blvd, PMB 453, Pembroke Pines, FL 33024. Investigators visited this address and

were unable to find any business named "Throwbackjerseys.com" at that location. Rather, that

address appears to be merely a mailbox at "Discount Postal & Business Center," a shipping and

mailing store. TI1e web address "Throwbackjerseys.com" does not lead to an operating website

on the internet. According to bank records, on or about June 3, 2019, SMITH opened a business

checking account in the name ofThrowbackjerseys.com and was the sole signatory on the account.

19. On or about May 17, 2020, a PPP loan application and supporting documents on

behalf of TI1rowbackjerseys.com were electronically submitted to Bank 3 through Bank Processor

1. The supp01ting documents included, among other documents: (1) purported Forms 941 for all

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four quarters of2019 in the name of the company; (2) a company bank statement; (3) an application

fom1; and (4) a promissory note.

20. 111e purported Forms 941 for 111rowbackjerseys.com included in the application

show quarterly payroll of more than $500,000 each quarter, for 20 employees. That qua11erly

payroll figure yielded the PPP loan application's "Average Monthly Payroll" figure of $170,687,

which determined the $426,717 amount of the loan. Each was signed by hand with the name

"Diamond Smith" as the company owner, and also listed SMITH as the company's designee and

as a "Paid Preparer," though he is not a paid tax preparer. 111e Throwbackjerseys.com Fonns 941

follow the same style and pattern as the many other Fonns 941 that CHS 2 described above,

acknowledged that he helped create and submit in the course of the scheme, including in the indicia

of fraud. 5 IRS records show that 111rowbackjerseys.com did not, in fact, file any Forms 941 for

any quarter of 2019 or the first quarter of 2020, and Florida Department of Revenue records show

that Throwbackjerseys.com did not report any wages or employees for that same period.

21. 111e purported company bank statement, which was submitted in electronic fonnat,

is a clear forgery. First, Throwbackjerseys.com does not have its business account at the bank

5
As noted above, SMITH was listed as both owner and paid preparer. Dozens of other
Fo1ms 941 submitted in this scheme evidence the same en-or. CHS 2 has admitted that these
documents share that feature because he misunderstood the fonn, and he ( or someone following
his instructions) prepared all of the Fotms 941 at issue. The content of the forms also indicate
falsification. All four quarterly forms are nearly identical, and the four fonns for
Throwbackjerseys.com are identical, down to the penny, in reported figures. They also evidence
a pattern of payroll spending that is likely false: each of the quarters shows significant increases
from the first to second to third month of the quarter. For each identical fonn, the same figures
are reported for the tax liability inctmed in the first month of each quarter, the same figure for the
second month of each qua11er (increased substantially from the first month), and the san1e figure
for the third month of the quarter (increased substantially from the second month). The result is
that the company reports a pe1fectly repeating cycle of ascending payroll costs within each quruter.
CHS 2 has explained that this was due to a formula he used, allocating different percentages of the
quarterly payroll tax liability to each month of each quarter.

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from which the statement was purpo1tedly drawn. Second, according to the document's file

"properties," the statement was created using "PDFFILLER," a program used to edit electronic

PDF files, and it was "modified using iText." Third, the statement is a recycled version of the

same falsified Bank 6 statement used in other fraudulent applications submitted as part of this

scheme.

22. The PPP loan application form, labeled at the top "Payment Protection Program

Bo1rnwer Application Form," listed SMITH as the owner of Throwbackjerseys. com, claimed the

company had 21 employees, and stated that the average monthly payroll was $170,687. Based on

this figure, the an1ount of the PPP loan request was $426,717. The application fonn required the

borrower to electronically initial a number of"ce1iifications," including: (1) that the applicant was

in operation on February 15, 2020 and had employees to whom it paid salaries/payroll taxes or

paid independent contractors, as repo1ted on Fonn(s) 1099; (2) that the funds would be used to

retain workers, maintain payroll, or make mo1tgage/interest/lease/utility payments as specified by

the PPP rnle and that unauthorized use could result in charges for fraud; and (3) that the

information provided in the application, including in supporting documents, was ''true and accurate

in all material respects," and that making false statements could result in criminal charges. The

application was electronically signed using SMITH's initials "DBS," which appears similar to

SMITH's signature in Florida's Driver and Vehicle Information Database ("DAVID"). Each

certification was electronically initialed "DBS" as well.

23. The promissory note, labeled at the top "Paycheck Protection Program Loan," set

forth the amount of the loan ($426,717) and its tenns (including that the proceeds could only be

used for business purposes). The terms also specified that the borrower may apply for loan

forgiveness only in an amount equal to the sum ofce1tain specified costs: payroll costs, interest on

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mortgage obligations, rent obligations, and utility payments. The promissory note fmther specified

that not more than 25% of the amount of forgiveness can be attributable to non-payroll costs.

Additionally, the promissory note contained a "Representations and Warranties" section for the

borrower to acknowledge, among other things that '<the infonnation provided in all supporting

documents and forms to obtain this loan" were true and accurate. The promissory note was

electronically signed with SMITH's initials "DBS," which appears similar to the signature in the

loan application fonn and in DAVID.

24. Bank Processor 1's Internet Protocol ("IP") records for the Throwbackjerseys.com

loan application show that a computer with an IP address (ending in 170) associated with CHS 2 's

residence in Broward County, Florida, logged into the TI1rowbackjerseys.com loan account as

early as May 17, 2020. The session records also reveal subsequent logins by one or more mobile

devices whose IP addresses logged into the TI1rowbackjerseys.com loan account on May 18, 2020,

and May 19, 2020. Bank records show that mobile device(s) using the same IP addresses (ending

in 61, 166, 195 and 196) also accessed the TI1rowbaclgerseys.com bank account on May 18, 2020,

and May 19, 2020. Records received from DocuSign indicate that the loan application and

promissory note were signed on May 18, 2020 at 11:58 a.m. (PST) via a mobile device using IP

address ending in 61. 6 Likewise, the records from Bank Processor 1 indicate that the borrower

6
The DocuSign records reflect that the electronic signatures adopted for both loans were
"drawn on device," which indicates that the adopted signatures were manually drawn by the signer.
The other option available would have been to select one of the predefined styles from the
DocuSign program, which would then populate the signature line with the "pre-selected style."
As mentioned above in Paragraphs 22 and 23, the DocuSign signature on the loan application and
promissory note for Throwbackjerseys.com appears to match SMITH's DAVID signature. By
contrast, as discussed in Paragraphs 31 and 32 below, the DocuSign signature on the loan
application and promissory note for Blue Star Records does not appear to match the DAVID
signature of Person 53.

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approved the loan documents via DocuSign on May 18, 2020 at 11:58 a.m. (PST) using a mobile

device with IP address ending in 61.

25. Based on the representations made in the loan application paperwork and

suppo1iing documents, the PPP loan application for Throwbackjerseys.com was approved, and on

or about May 20, 2020, Bank 3 wired approximately $426,717 in loan proceeds into the

Throwbackjerseys.com bank account.

The Fraudulent PPP Loan to Blue Star Records

26. According to Sunbiz, Blue Star Records was incorporated in or around December

of 2012, with SMITH listed as the registered agent and manager. On May 21, 2020, one day after

the PPP loan amount was wired to the Throwbackjerseys.com's account, an annual report was filed

in Sunbiz for Blue Star Records that added Person 53 as a manager. As discussed below, text

communication between SMITH-and CHS 2 revealed that SMITH was the true owner of Blue Star

Records and that Person 53 was SMITH's mother.

27. The address listed in Sunbiz for Blue Star Records is 4011 N. W. 194th Street, Miami

Gardens, FL 33056. Investigators visited this address and were unable to find any business named

"Blue Star Records" at that location. What they found instead was a single-family residence in a

residential neighborhood. According to battle records, on or about April 5, 2013, SMITH and

another individual opened a business checking account in the name of Blue Star Records. Starting

on February 25, 2019, SMITH became the sole signatory on the Blue Star Records account. The

bank records I have reviewed for Blue Star Records indicate that Person 53 was never added to

the Blue Star Records account.

28. On May 21, 2020, the day on which Person 53 was added as a manager of Blue Star

Records in Sunbiz, a PPP loan application and supporting documents on behalf of Blue Star

Records were electronically submitted to Battle 3 through Bank Processor 1. The supporting

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documents included, among other documents: (1) purported Forms 941 for all four quarters of

2019 in the name of the company; (2) a company bank statement; (3) an application fonn; and (4)

a promissory note.

29. The purported Fom1s 941 for Blue Star Records included in the application show

quarterly payroll of more than $800,000 each quarter, for 35 employees. That quarterly payroll

figure yielded the PPP loan application's "Average Monthly Payroll" figure of $283,226, which

detennined the $708,065 amount of the loan. Each Fonn 941 was signed by hand with the name

of Person 53 as the company owner. Like the TI1rowbackjerseys.com Forms 941, these Forms 941

also listed Person 53 as the company's designee and as a "Paid Preparer," though she is not a paid

tax preparer. TI1e Blue Star Records Fonns 941 follow the same style and pattern as the many

other Forms 941 that CHS 2 helped create and submit in the course of the scheme, including in the

indicia of fraud discussed in note 5 above. IRS records show that Blue Star Records did not, in

fact, file any Fonns 941 for any quarter of 2019 or the first quai1er of 2020, and Florida Depai1ment

of Revenue records show that Blue Star Records did not report any wages or employees for that

same period.

30. As was the case with TI1rowbackjerseys.com's bank statement, the purported bank

statement for Blue Star Records, which was submitted in electronic format, is a clear forgery. First,

Blue Star Records does not have its business account at the bank from which the statement was

purpo11edly drawn. Second, according to the document's file "properties," the statement was

created using "PDFFILLER," a program used to edit electronic PDF files, and it was "modified

using iText." TI1ird, the statement is a recycled version of the same falsified Bank 1 statement

used in other fraudulent applications submitted as part of this scheme.

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31. The application form for Blue Star Records listed Person 53 as the owner of Blue

Star Records, claimed the company had 35 employees, and stated that the average monthly payroll

was $283,226. Based on this figure, the amount of the PPP loan request was $708,065. The

application fo1m required the bo1Tower to electronically initial a number of "ce1tifications," as

previously described with respect to the application of 11irowbackjerseys.com. The application

was electronically signed with a signature that does not appear to match Person 53's Florida

DAVID signature. Each ce1tification was electronically initialed with what appear to be the letters

"DB," which differ from the initials of Person 53.

32. The promissory note, labeled at the top "Paycheck Protection Program Loan," set

forth the amount of the loan ($708,065) and its tenns (including that the proceeds could only be

used for business purposes). The promissory note contained the same terms previously described

with respect to the promissory note for Throwbackjerseys.com. The promissory note was

electronically signed with the same signature reflected in the application form.

33. Bank Processor 1's IP records for the Blue Star Records loan application show that

the IP address (ending in 170) associated with CHS 2's residence logged into the Blue Star Records

loan account starting on May 21, 2020. 111e session records also reveal subsequent logins by one

or more mobile devices whose IP addresses logged into the Blue Star Records loan account on

May 21, 2020, and May 22, 2020. Bank records show that the mobile device(s) with some of the

same IP addresses (ending in 50 and 204) also accessed the Throwbackjerseys.com bank account

on May 21, 2020, and May 22, 2020, and the Blue Star Records/SMITH bank accounts on May

22, 2020.

34. Based on the representations made in the loan application paperwork and

supporting documents, the PPP loan application for Blue Star Records was approved, and on or

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Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 16 of 22

about May 26, 2020, Bank 3 wired approximately $708,065 in loan proceeds into the Blue Star

Records bank account.

CHS 2 Confirmed to Law Enforcement that the Throwbackierseys.com and Blue Star Records
PPP Loam 1:Vere Fraudulent and that SklITH Referred Others to the Scheme

35. Investigators spoke with CHS 2 about SMITH and the PPP loans to

T11rowbackjerseys.com and Blue Star Records. CHS 2 stated that he met SMITH through

Augustin. According to CHS 2, the three of them met in person and discussed a PPP loan for

SMITH and the 25% kickback payments that SMITH would pay CHS 2 and Augustin out of the

loan amount. According to CHS 2, SMITH initially requested a one million dollar PPP loan, but

CHS 2 convinced him to keep the loan below $500,000. SMITH agreed to pay CHS 2 and

Augustin a kickback, but he obtained from CHS 2 an agreement in return that CHS 2 would prepare

additional paperwork to help repair SMITH's credit.

36. CHS 2 stated that he helped SMITH apply for a PPP loan for his company,

Throwbackjerseys.com. According to CHS 2, once SMITH was approved for the first PPP loan,

SMITH provided him infon11ation about Blue Star Records, advised CHS 2 that it was SMITH's

company, and indicated the amount he wanted CHS 2 to request for a second PPP loan. According

to CHS 2, he explained to SMITH that he could only be awarded one PPP loan in his name. CHS

2 stated that SMITH told him Person 53 was his mother, and that, at SMITH's request, CHS 2

added her to Blue Star Records in Sunbiz so that SMITH could apply for a second PPP loan.

37. As to the Throwbackjerseys.com and Blue Star Records PPP loans, CHS 2

confirmed that the loan applications were fraudulent and stated that he had assisted SMITH in

preparing and submitting them. CHS 2 stated that he: (1) created for SMITH an online account

for 111rowbackjerseys.com and Blue Star Records with Bank Processor 1; (2) created and

submitted a fake bank statement for Throwbackjerseys.com and Blue Star Records; and (3)

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Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 17 of 22

created, submitted, and signed (on behalf of SMITH), the false Fo1ms 941. According to CHS 2,

he did not sign the application form or promissory note for either Throwbackjerseys.com or Blue

Star Records.

38. CHS 2 also stated that, in addition to Throwbackjerseys.com and Blue Star Records,

SMITH refe1Ted to him two additional friends/associates for the purpose of creating and submitting

additional fraudulent PPP loans. As stated above, CHS 2 and Augustin would share a 25%

kickback for these refen-als. CHS 2 said he advised SMITH that he would receive a 5% share of

the loan payout for his refen-als. According to CHS 2, he acted on the first refen-al that SMITH

submitted to him, but did nothing regarding the second one because SMITH sought to renegotiate

the kickback amount he would be owed vis-a-vis CHS 2 and Augustin's share.

Emails and Text klessages Confirm S1l1ITH's Knowing Participation in the Fraud

39. As part of its investigation, law enforcement obtained communications between

CHS 2 and SMITH, including text messages and emails. I have reviewed a number of these

communications, which discuss, among other things, SMITH's PPP loans and the loans for the

friends/associates he refen-ed to CHS 2.

40. For example, on or about May 17, 2020, Augustin sent CHS 2 a text message with

the information for Throwbackjerseys.com's PPP loan application, including the company's bank

account number, EIN tax ID number, and SMITH's cell phone number. That same day, CHS 2

sent a text message to SMITH that stated: "Hi please call me working on your sba file."

41. The next day, May 18, 2020, SMITH sent a text to CHS 2 stating, "I was able to

with infonnation obtained from Bank Processor 1 regarding the application process, after CHS 2

created SMITH's account to apply for a PPP loan on Bank Processor l's website, SMITH would

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Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 18 of 22

have received an email from Bank Processor 1, and upon accessing that email, SMITH would need

to activate the account. SMITH responded in two consecutive text messages, "I think so, but it

says there are more tasks" and "should I complete those tasks?" CHS 2 responded, "Yes I have to

add documents now p[l]ease send me the new password" and "No you can't I have the docs."

According to CHS 2, this was the step in the application process at which he would upload the

Forms 941 for the borrower. SMITH advised CHS 2 that the password was the same and then

restated the steps he had taken: "when I clicked the activate button, I was asked to log in, that was

it, then it asked me to 'see tasks' to complete which is uploading documents." CHS 2 answered

that he "would take care of that in the am."

42. Later that day, May 18, 2020, SMITH texted CHS 2 notifying him that "they sent

email and asked me to accept loan. says I was approved." That same night, SMITH sent a text to

CHS 2 with a screenshot of a message from Bank Processor 1 stating, "Thank you for accepting

your offer for the Paycheck Protection Program. We've initiated an ACH deposit into the bank

account you provided in your application .... " CHS 2 explained that the notification from Bank

Processor 1 thanking the borrnwer for accepting the offer occurs after the borrower signs the loan

application and promissory note.

43. In the same minute that SMITH sent CHS 2 the screenshot from Bank Processor 1,

SMITH sent CHS 2 a text message about Blue Star Records with its bank account number and

EIN tax ID number. Two minutes later, SMITH texted CHS 2 with Blue Star Records' address

and SMITH's name as its owner. On May 21, 2020, SMITH followed-up by sending CHS 2 a text

message asking, "what is the info you needed for bluestar." CHS 2 responded by asking, "is that

your company bluestar" and SMITH answered, "yes." CHS 2's phone reflects that SMITH called

him twice, after which SMITH sent CHS 2 another text message, saying: "name to add to Blue

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Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 19 of 22

Star Records llc (Sunbiz.org)" and included the name of Person 53, her social security number,

home address and email address. CHS 2 then requested more information: "need your moms date

of birth. I need an email that is good And I need business start date." SMITH texted CHS 2 with

Person 53's date of bi1th, her email address once again, and the start date for Blue Star Records.

44. On May 22, 2020, CHS 2 sent SMITH a text message with the following

instrnctions: "check email for your company activate use email as user a11d the password is

[redacted] all lower case." CHS 2 explained that this was the point at which SMITH needed to

open the email from Bank Processor 1 and activate the account CHS 2 created for the Blue Star

Records PPP loan application process.

45. On May 26, 2020, SMITH sent CHS 2 a text message letting him know he had sent

him "$50,000" and would "send another wire tomoITOW and day after." On May 29, 2020, SMITH

ale1ted CHS 2 via text that he had wired him a11other $50,000, arid wrote, "so that's $140,000,"

which was approximately 20% of the PPP loan amount he received for Blue Star Records. SMITH

then sent CHS 2 a text message stating, "ok now I need you to make me some money and I still

don't have a car." SMITH followed that text message with another one that included a website for

the sale of a used Lamborghini Aventador.

46. During my review of SMITH's communications with CHS 2, I found what appears

to be infotmation pertaining to PPP loan refetrnls for two other companies. On May 20, 2020,

SMITH sent a text message to CHS 2 and provided a company name, date of incorporation, EIN

tax ID number, its· address, batik account number, the name of the individual associated with the

company, email address, and phone number. Later that day, CHS 2 responded with a text asking

SMITH for the individual's social security number, date of birth, home address and for

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Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 20 of 22

confirmation of the email address SMITH had provided. SMITH responded on May 21, 2020,

with a text message that contained the information CHS 2 had requested.

47. On June 4, 2020, SMITH sent CHS 2 a text message about "another client" and

attached a hand-written note about another individual, Person 54, and the associated company

containing the same detailed information that CHS 2 had previously requested for the other loan

applications. Miami-Dade County's maITiage license bureau shows that Person 54 is maITied to

Person 53 and is SMITH's step-father. According to Sunbiz, Person 54's company was inactive

until a reinstatement was filed with Sunbiz on June 1, 2020. On June 5, 2020, SMITH followed

up with CHS 2, and sought to remind him, "so this is my second refe1Tal." Fu11her investigation,

including review of data collected from Bank Processor 1, suggests that a PPP loan application

was initiated for the first entity that SMITH refe1Ted, but the application process was not

completed.

SA1ITH's Banking Activity Confirms His Knowing Participation in the Fraud

48. I have also reviewed the bank records for Throwbackjerseys.com, Blue Star

Records, SMITH and CHS 2, which confirm SMITH's receipt of the PPP loan proceeds.

Specifically, on or about May 20, 2020, Bank 3 wired the loan amount, $426,717, into the

Throwback.jerseys.com account. As of May 1, 2020, the Throwback.jerseys.com account had a

balance of $642.57, and before the PPP loan amount aITived on May 20 th , the account balance was

down to $218.68. The bank statements also indicate that as of May 2020, the account had been

charged $910 in overdraft fees for the year. Upon receiving the PPP loan amount on May 20,

2020, SMITH wired $90,000 to CHS 2 's account, which is approximately 21 % of the loan amount.

On May 22, 2020, SMITH wired $214,000 to the Blue Star Records account and transferred

another $5,000 to his personal account. There were transfers made to several individuals after the

loan was received, but based on my training and experience, these do not resemble salary

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Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 21 of 22

payments, as they were multi-thousand dollar, rounded-number payments that were not repeated

in June. By August 3, 2020, the Throwbackjerseys.com account had a zero balance.

49. On or about May 26, 2020, Bank 3 wired the loan amount of $708,065 into the Blue

Star Records account. The account had a zero balance to start the month of May, which grew to

$13,100 before the account received $214,000 from the 111rowbackjerseys.com account on May

22, 2020. Between May 26, 2020 and May 29, 2020, SMITH made three wire payments to one of

CHS 2's accounts, totaling $140,000, and on May 26, 2020, he made a separate $10,000 payment

directly to Augustin. The payments totaling $150,000, are approximately 21 % of the loan amount.

50. Between May 26, 2020 and May 27, 2020, SMITH transferred $1,036,667.08 from

the Blue Star Records account to his personal account. SMITH's personal account had a balance

of $1,021.97 as of May 14, 2020. Between May 26, 2020 and May 29, 2020, SMITH transfeITed

$294,453.79 from his personal account back to the Blue Star Records account, resulting in a net

transfer to his personal account of $742,213. In June, SMITH had a net transfer of another

$245,040.07 to the Blue Star Records account from his personal account. By June 30, 2020, the

ending balance for the Blue star Records account was -$600.02. On July 13, 2020; the ending

balance on SMITH's personal account was zero. In all, following SMITH's receipt of the PPP

loan proceeds, his net transfers from the Throwback.jerseys.com and Blue Star Records accounts

to his personal account totaled approximately $502,173.

51. Bank records show what appear to be purchases of luxury items and personal

expenses using loan proceeds. For example, between June 22, 2020 and July 6, 2020, SMITH

spent approximately $27,176 at the Seminole Hard Rock Hotel and Casino. On June 24, 2020,

and July 2, 2020, SMITH purchased $2,290 in goods at Versace. In addition, bank records show

that SMITH withdrew approximately $271,805 between May 26, 2020 and August 3, 2020.

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Case 1:20-mj-03723-EGT Document 3 Entered on FLSD Docket 10/01/2020 Page 22 of 22

52. Records from the Blue Star Records account show that a check dated June 9, 2020,

bearing SMITH's sihrnaturc was issued from the Blue Star Records account to Person 55 in the

amount of $96,000, with a note indicating it was a "company vehicle payment." On four separate

occasions in September 2020, investigators have observed a black Ferrari parked at SMITH' s

residence. The Ferrari has a temporary tag registered to a company owned by Person 55.

CONCLUSION

53. Based on the forgoing, I respectfully submit that there is probable cause to believe

that DIAMOND BLUE SMITH committed the Target Offenses.

FURTHER YOUR AFFIANT SA YETH NAUGHT.

WatTCll E. Rogers, Jr. /
Special Agent /
1
IRS-CI ID #6335

Attested to by the applicant in accordance
with the requirement~f Fed. R. Crim. P. 4.1
by telephone on this.![Q_ Day of September, 2020

HONORA
UNITED STATES MAGISTRATE JUDGE

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