You are on page 1of 16
1 Hai iow Cina Compo United States District Cor forthe ‘Western District of New York ‘United States of America ) ve ; Case No. 17-MI- 5 3Q Craig Jerabeck, Jason Guck and Jeb Tyler ; Defendants CRIMINAL COMPLAINT 1, the complainant in this ‘case, state that-the following is true to the best of my knowledge:and belief, : Between on of about 2009 through May-2015 in the county of Ontario in the Western Disttict of Now York, the defendant violated 18 U.S.C. §§ 1343 81349, an offense described as follows: the defendants did knowingly devise a scheite and atifce to deftaud and to obtain money by means of false and fraudulent pretenses, representations and promises, and for the purpose of executing such scheme ‘and artifice, did transmit and cause to’be transmitted by means of wire communications in interstate commerce, writings, signs, and signals all in violation of Tile 18, United States Code, Section 13435 and the defendants did conspire and agree to violate’ Title 18, United States Code, Section 1343 by ‘knowingly and willfully engaging in scheme to defraud and fo obtain money by means of false and fraudulent ‘pretenses, and representations and that in furtherance of such scheme did use or cause to be used electronic ‘communications, all in violation of Title 18, United States Code, Section. 1349. "This criminal complaint is based on these facts: X Coftinued on the attached sheet. Please see attached affidavit ct ignaare ‘Swom to before mie and signed in my presence. Date: _ 32s City. atid State; Rochester, New York __. AFFIDAVIT IN SUPPORT OF A CRIMINAL COMPLAINT STATE OF NEW YORK ) COUNTY OF MONROE ) ssi CITY OF ROCHESTER ) I, Kristin M. Gibson, having been first duly sworn, do hereby depose and:state as follows: 1, Lama Special Agent of the Federal Buteau of Investigation (FBI) and have been so employed for over one’year. I have been trained to investigate, and participate in the investigation of, a wide range of federal criminal violations, including securities fraud, wire fraud, health cate fraud and violent crimes. I'am empowered by law to conduct investigations of, and make arrests for, offenses against the United States. 2, This affidavit is submitted in support of a criminal complaint charging Craig Jerabeck GERABECK), Jason Guck (GUCK) and Jeb Tyler (TYLER) (hereinafter known collectively as “the defendants”) with wire fraud, in violation: of Title 18, United States Code, Section 1343 and conspiracy, in violation of Title 18, United States Code, Section 1349. 3. The factual information supplied in this affidavit is based upon my own knowledge gained during the course of the investigation in this case, my experience and background as an FBESpecial Agent, information provided by other law enforcement agents involved in the investigation, information recorded on documents obtained during the investigation, information provided by individuals who interacted with the defendants and interviews with the victims of the fraud discussed herein. Because this affidavit is being submitted for the purpose of obtaining a criminal complaint, Ihave not set forth each and every fact known to Page-1 me telating to this investigation. Rather, I havé sét forth only those facts that I believe are necessary to establish probable cause to believe TYLER, JERABECK, and GUCK did knowingly violate Title 18, United States Code, Sections 1343 and 1349. Background on SLINX 4, SLINX Enterprise (SLINX) is a multilevel direct marketing telecommunications company which sells a variety of products. and monthly ‘services through contracted representatives, From at least 2001 to 2015, JERABECK was the Co-Founder, President and Chief Executive Officer of SLINX; and from at least 2001 to present GUCK and TYLER ‘were Co-Founders and Vice Presidents of SLINX. GUCK also served as Secretary of SLINX. 5. Multi-level marketing is a strategy that some direct sales companies use to encourage their existing independent contracted representatives to recruit new independent contracted representatives by paying them a percentage of their recruit's sales; the recruits are known as an independent contractor's “downline.” In order for independent contractors to make any money, not only are they expected to sell the company's products through direct selling ot word of mouth marketing; they are expected to recruit others to join the company. In-the instance of SLINX, mote’ than half of their revenue is attributable to sign up fees of the independent contractors. 6. In June 2006, SLINX entered into a purchase agreement and. a stockholder’s agreement with investment companies Trillium Lakefront Partners TI, L.P., Trillium Lakefront Partners I, NY LP. and Shalam Investment Co, LLC (hereinafter known Page-2 - collectively as “the investots”),, The investors purchased 2,968,366 shares of Series A Preferred Stock from SLINX for an aggregate purchase price of $3.5 million. The investors were the only holders of Series A preferred stocks. The $3.5 million investment by the investors included SLINX, along with all US subsidiaries and foreign subsidiaries of SLINX. ‘In July 2007, the investors purchased 1,188,789 shates of the Series A-1 Preferred Stock for approximately $2 million. The holders of the Series A-1 Preferred Stock were entitled to receive cumulative dividends at 8% of the original issue price. 7. As.a condition of the purchase agreement, the investors, SLINX and the defendants entered into a stockholder’s agreement which defined certain conditions, rights, and obligations. Among other conditions, the defendants’ compensation was limited, and any bonus payments required approval by the Board of Directors, On September 26, 2012 a revised compensation plan for the defendants was presented to the board and agreed upon. ‘The new compensation plan was as follows: JERABECK's salary was incteased from $230,500 to $350,000 . GUCK and TYLER'S salaries were increased from $185,000 to $285,000 ¢. Maximum bonus amounts was increased from $100,000 to $150,000, however, any bonus remained contingent on attaining performance and other financial ‘goals, and required additional board approval prior to dispersal. sp 8, In January 2014, SLINX repurchased the Series A Preferred Stocks and the Series A- 1 Preferred Stocks, From that point forward the investors became creditors to SLINX, The purchase price was approximately $21 million of which approximately ‘$11 million was paid in cash and the remaining $10 million became subordinated promissory notes, While the investors were no longer on the SLINX board as voting members, there remained specific Page3. * management compensation clauses within the note agreement between the investors and the defendants which prevented the defendants from altering their compensation without investor approval. 9. Shortly after SLINX repurchased the stocks, the company began to have significant financial issues. Based on this purported financial downturn, the defendants requested that the investors teduce their buyout purchase price from the original amount owed. The investors eventually agiéed, and in 2015, they teducéd SLINX’s buyout purchase price by approximately $4-million to help SLINX with their financial crisis. This decision was based ‘on financial. records and statements about cash reserves supplied by SLINX and the defendants. ‘The Scheme to defraud 10, The defendants engaged in multiple schemes to defraud the investors by diverting company money away from SLINX and hiding it in accounts controlled by and for the benefits of the defendants. 11. Beginning in approximately 2009 and continuing until at least May 15, 2015, without the knowledge, permission, or authorization of the investors, the defendants created and inserted fraudulent contracted representatives into the SLINX direct sales team in order to gmake additional income in excess Of theit compensation plan, For the purpose of executing the scheme and artifice, the defendants set up fraudulent SLINX independent contractor accounts under multiple company names which were actually controlled by the defendants Page: 4 * individually or together. These shell companies were utilized inorder to conceal the real owner's information ftom employees and the investors. 12. The scheme generated multiple financial wire transactions and additional. financial electronic transfers between SLINX and bank accounts or debit cards owned individually and collectively by the defendants. The defendants caused millions of dollars to be diverted from SLINX into the deferidants’ personal bank accounts or onto debit cards personally owned by the defendants without the knowledge or approval of the investors. 13. Had the defendants not engaged in this’scheme, and had the millions of dollars not ‘been diverted to the defendants, the money would have gone to the SLINX main account and increased the cash flow of the company. The scheme caused false financial reports to be routinely generated and disclosed to the investors by the defendants both individually and collectively via wire transmissions like email, text message, during board meetings, and via conference calls. 14, The investors telied on the false financial representations provided by SLINX to make ‘major financial decisions over multiple years. As.a result ofthe defendants’ collective decision to engage in this scheme and divert money from SLINX without the knowledge or approval of the investors, the investors were materially impacted based on information they believed to be accurate which resulted in a financial loss of at least $4 million, Page-S * The fraudulent independent contractor accounts: 15. One fraudulent independent cofitractor account created in furtherance of the scheme to defraud had multiple names throughout the years, however, it was primarily known as IAT, which according to the defendants stood for “It's About Time.” IAT received bonuses | fiom:a wide range of SLINX product sales, monthly residual payments for services, and | payments for new representatives sighing onto SLINX. Another way company money was diverted into the [AT account was when a high earning contracted representative left SLINX, the defendants would insert LA’ as a-replacement for that contracted. representative and teceive the previous representative's bonuses and residuals. According to the SLINX | contracted representative agreentent that money should have gone into the company's main account and should have gone directly to SLINX instead of only the defendants, 16. Beginning in approximately 2009 through at least May 15, 2015, JAT’s account received approximately $7.6 million which was wired from SLINX into accounts controlled by the defendants to include; a. $1.1 million was wired into a Citizens Bank account with the authorized signer listed on the account as defendant JERABECK. b. The remaining $6.5 million was wired into another account in the name of ‘Telecom Broker Network (TBN). Pet Department of State business records, a company bearing the name Telecom Broker Network has defendant JERABECK listed as the sole officer. 17. From the TBN account some of the $6.5 million was further divided as follows: a, $14,536 was wired toa JP Morgan Chase Bank, N.A. account in the name of TBN. This account lists defendant JERABECK as the only signer. b. $144,772 was wired to a Canandaigua National Bank account in the name of TBN. This account lists defendants TYLER and JERABECK as authorized signers. Page-6 © mp pe $2,118, 194 was transfered to an account in the name of Mirage Development. Per Department of State business records, a company bearing the name Mirage ‘Development list defendant JERABECK as the sole officer. |. $2,118,194 was transferred to an account in the name of defendant TYLER. . $2,118,194 was transferred to an account in the name of defendant GUCK. $11,658,51 was placed onto Debit cards. 18. Another representative account was referred to as SLINX Inc. Il- GOFY, an actonym for the phrase ; (GOFY). However, it was made clear among the defendants that if anyone was to question what GOFY stood for the defendants would say it ‘was an acronym for “Go For You.” GOFY received payments through SLINX Business Elite sales and Text Alertz products. 19, Beginning in approximately May 15, 2011 thtough May 15, 2015 GOFY received $2.7 million from SLINX to an account in’ the name of JAGOFYGUCK. Among other disbursements, the $2.7 million was divided as follows. Bess . $654,413 was transferred to an account in the name of defendant TYLER ): $648,721 was transferred to an account in the name of defendant GUCK . $663,482 was transferred to an account in the name of Mirage Development. |. $50,997 to an account in the name of GOFY at Canandaigua National Bank. ‘That GOFY account listed defendants TYLER and JERABECK as authorized signers. 20. Based on financial information, the defendants diverted and used for their own personal benefit approximately $11 million which would have directly gone to SLINX without the introduction of the owner's representative accounts into the SLINX sales force. Page:7 ” Other overt acts in furtheratice of the conspiracy 21. In addition to the aforementioned representative accounts 5LINX also wired money directly into an account bearing the names Jason Guck, Jéb Tyler and Mirage Development, Inc. Once the money was in the: defendants’ individual accounts the defendants then transferred the money onto debit cards or into a variety of bank accounts all who list the defendants individualy as authorized pes. 22. For the purpose of executing the scheme’and artifice, in October 2011, defendant JERABECK established a bank account in the name of Mirage Development Incorporated (MIRAGE) at JP Morgan Chase Bank, N.A. in Rochester, New York; in the Western District of New York. Funds were thereafter periodically transferred into MIRAGE’s JP Morgan ‘Chase Bank, N.A. account, One such transfer occurred on or about August 21, 2012 when, ‘$38,843 was wired into MIRAGE’s account. JERABECK jis the only authorized signer on this account. ‘The funds were subsequently disbursed for JERABECK’s personal benefit, including helping to furid improvements to a second home. ‘23. For the purpose of executing his scheme and artifice, in August 2010, defendant GUCK established a bank account in the name of YaYa Holdings Corp (YAYA) at ‘Canandaigua National Bank, in Canandaigua, New York, in the Western District of New York. Funds were thereafter periodically transferred into YAYA’s Canandaigua National Bank account, One such transfer occurred on or about April 21, 2014 when $62,279 was electronically deposited into YAYA's account, Defendant GUCK is the only authorized. signer on this account, The funds were subsequently disbursed for GUCK’s personal benefit, Page-8 ” including a $10,000 transfer to his TD Ameritrade brokerage account, a $10,000 payment to American Express and an $8,700 cash withdrawal, among othet things. 24, For the purpose of executing his scheme and artifice, in July 2010, defendant TYLER. established a bank account in the name:of JT Global Consulting, Inc. JT GLOBAL) at Canandaigua National Bank, in Canandaigua, New York, in the Western District of New York, Funds were thereafter periodically transferred into’ JT GLOBAL's Canandaigua National Bank account. One such transfer occurred on or about April 21, 2014, when $39,128 was electronically deposited into JT GLOBAL’s account. Defendant TYLER is the only authorized signer on this account. The funds were subsequently disbursed for TYLER’s personal benefit, including helping to fund a $50,000 check dated April 21,2014 to himself. 25, Witness A, was employed at SLINX as patt of the Information Technology Department during times relevant to the conspiracy. Witness A was directed by defendant ‘TYLER to program an overtide to the normal compensation program which allowed LAT to bbe compensated every single time a certain product or service was sold. Witness A, again at the ditection of TYLER, also created a programming code that would allow IAT to receive recruiting bonus payments called CAB payments and money from former independent contractors’ ‘residual payments. Witness A confirmed that without the created computer overrides, the money would have been disbursed properly to the SLINX main account. 26. Witness A recalled that money was only ever deposited into the IAT account; there vere no other transactions to show IAT was selling products or recruiting other independent Page-9 * contractors for SLINX. On separate occasions defendant GUCK: also made’ specific programming requests for GOFY and IAT. Witness A never questioned IAT or GOFY accounts until he/she noticed in 2010 that IAT was one of SLINX top paid representatives earning over $1 million, 27. Witness B, was employed by SLINX and held significant responsibilities in the SLINX financial department. He/She recalled many times the defendants would take payments from SLINX in different forms that were inappropriate and spent them on non-business related expenses. Witness B was made aware of the real owners of the IAT account after attempting to identify who to mail the 1099 to, When defendant TYLER found out Witness B was ‘making phone calls to independent contractors listed on IAT's “downline” regarding IAT, TYLER was very angry and informed Witness B that this is what-all multilevel matketing owners do, 28, Witness B was told by the defendants that they did not want anyone to know about the accounts so the accounts were restricted by the information technology department. ‘Witness B was also involved in a conversation wherein the defendants discussed that they ‘had to be careful the investors did not find out about IAT and GOFY. Witness B was aware ‘Witness A was told to create overrides to the compensation program so that [AT and GOFY ‘would receive commissions without selling the necessary products or signing up additional inidependent contractors. Page: 10 ‘29. Witness B was aware the money should have gone to SLINX mainaccount and stated the covert diversion of this money created inaccurate financial statements, According to ‘Witness B, these financial statements would have misled investors who telied on them to determine cash flow and revenue of the company. As a result of the defendant's fraudulent actions, Witness B provided monthly financial statements to the investors which included the inaccurate financial figures. 30. The investors were very involved in the company fitiances and business decisions however the defendants never disclosed their positions as independent contractors to the investors and never corrected the misrepresented financial statements. Furthermore, Witness B-was a part of SLINX board meetings with both the defendants and the investors and. recalled. multiple discussions surrounding these financial statements without any mention of the diverted money, or any mention that the defendants were earning additional money outside of theix compensation agreement as covert SLINX independent contractors. 31. Witness C,, who was employed by SLINX as partof the finance department, had access 10 all the SLINX representative accounts, but was restricted fiom the defendants IAT and GOFY accounts, Witness C knew the accounts IAT and GOFY existed but was only allowed to see the Representative Identification Number (RIN) and what amounts each account was being paid. Witness C recalled one of the restricted accounts held RIN number 245245, which ‘was the RIN number for the IAT Account previously discussed. The accounts would not show the defendants names, addresses, or other personal information as all the other representative accounts did. Witness C was informed not to worry about the restricted Page- 11 * accounts during company audits, and was informed by a superior that another employee would audit them, Witness C was afiaid to question anything regarding these restricted accounts because he/she recalled people who questioned the accounts would lose their jobs shortly after the fact, ‘The Investors 32, Investor A worked for Shalam Investment Co. LLC, as the financial advisor for the SLINX investment and was.a part of the investment since the original evaluation of SLINX in 2006. Investor A held observation rights to the SLINX board meetings and received routine correspondence via email and telephonically with the defendants and other investors regarding financial decisions and business based decisions for SLINX. Investor A confirmed as part of the investment contracts between the inivestors and SLINX that the defendants were placed on compensation agreements, which stipulated that the defendants’ salaries, bonuses and any additional compensation must be approved by the SLINX board. 33, Investor A recalled the defendants asking for a bonus approximately twice throughout the 2006.2014 investment. During that process, multiple emails ensued discussing the bonus distribution and compensation plans between the defendants and the investors. In September 2012, a revision of the Co-Founder Compensation plan was completed by the board, Defendant JERABECK was the point person for this revision, which discussed bonuses and salaries. At the time of the revision the defendants stated they had not taken. anything out of the business besides payroll and approved bonuses. The defendants failed to disclose that they Page- 12 * were’ acting as SLINX itidependent contractors and earning additional imoney from: the company which they covertly'secreted. 34. Investor A stated cash flow in the company was routinely factored into the investors ‘business decisions involving SLINX. In an email from Investor A, dated February 15, 2010, to Investor B and Investor C, Investor A. specifically discussed excess cash flow and the potential business opportunities that could exist if SLINX could have “a little more’ cash.” “The excess cash flow in 2012 was the basis for a dividend payout to both the defendants and the investors. 35. Throughout their approximate ten-year business relationship, the defendants failed to disclose at any point, that they were independent contractors of SLINX and that they were covertly receiving millions of dollars in additional compensation without the investors knowledge or permission. The defendants and Investor A specifically discussed bonuses and compensation plans, Despite the hundteds of contacts between the defendants and Investor A, the defendants continuously failed to disclose’ their additional compensation and theit additional roles as independent contractors. 36, Based on the misstated. financial documents provided to the investors, the investors agreed to accept a buyout of their Series A preferred stock and Series A-1 pteferred stock. Tnvestor A’ stated that had the investors been aware of the “excess commissions” the defendants received, they would have insisted that most, if not all of the buyout be paid in cash versus partial cash and the remainder in loan notes. Investor A stated the upfront cash. Page: 13 ‘payout was ‘based. on multiples of SLINX available cash. Since the available cash was significantly understated this resulted in a lower upfront cash amount during the buyout and larger loan notes. 37. After the buyout SLINX began to struggle financially and at times the company ran out of cash mid-month. The liquidity ctisis prompted Investor B to provide an additional loan to SLINX whiich was to be paid off'in approximately a little more than a year. At some point in 2015 based ‘on representations made by the defendants and the fraudulent financial documents being provided, the investors agreed to a $4 million reduction of the. original ‘buyout purchase price in order to help SLINX with their financial burden. The investors were only paid $730,126, instead of'a much larger amount owed, towards principal and interest on the notes from September 2015 through April 2016, In addition to the $4 million loss, the balance of the notes had to be written off and additional SLINX stock was issued to the investors in lieu of cash for the notes when the company took on an additional owner in April of 2016. 38.The combination of financial misrepresentations and decreased cash reserves throughout the years’ diminished the value of their investment and impacted. the buyout purchase price, Had the money not been misdirected to the defendants, there would have been sufficient cash reserves to pay the buyout and keep the company financially sound, Investor A stated that had the investors known then what they know now the investors would have never agreed to the buyout in January of 2014 as it was structured. The fraudulent Page 14 financial statements caused the investors to make business decisions that caused material harm and financial loss to the investors. CONCLUSION Based on the forgoing, I respectfully submit that there is probable cause to believe JASON GUCK, JEB TYLER, and CRAIG JERABECK did knowingly violate Title 18, ‘United States Code, Section 1343, that is, the defendants devised a scheme and artifice to defraud and to obtain money by means of false and fraudulent pretenses, representations and promises, and for the purpose of executing such scheme and artifice, the defendants did transmit and cause to be transmitted by means of wire communications in interstate commerce, writings, signs, and signals. Further, there is also probable cause to believe JASON GUCK, JEB TYLER, and CRAIG JERABECK did conspire and agree to violate Title 18, United States Code, Section 1343 by knowingly and. willfully engaging in a scheme to defraud and to obtain money. by ‘means of false and fraudulent pretenses, and representations and that in furtherance of such scheme, JASON GUCK, JEB TYLER, and CRAIG JERABECK did use or cause to be used electronic communications, all in violation of Title 18, United States Code, Section 1349. Page: 15.