Internal Revenue Service: Scottsdale resident involved in federal fraud case

The Sandra Day O’Connor U.S. Courthouse is in Phoenix at 401 W. Washington St. (Photo by United States District Court)

A person with ties to Scottsdale is being identified as a co-conspirator to a fraudulent scheme by the United States District Court for the District of Arizona.

In an April 16 Grand Jury indictment, a Scottsdale resident identified only by the initials “J.K.” allegedly engaged in a debt conversion securities fraud scheme to convert the debt of Greenway Design Group Inc. into unrestricted stock, promote the stock and then sell the stock for an inflated profit.

Independent Newsmedia received the indictment directly from the Internal Revenue Service.

Through a series of false statements and omissions, the defendants named converted nearly 2 billion shares of Greenway Design Group’s stock for a profit of hundreds of thousands of dollars.

The Scottsdale resident, J.K., was previously a registered securities broker affiliated with Collins Capital, LLC and Par Point Capital LLC, both registered in Wyoming.

A second local person, identified only by T.G. in the indictment resided in Phoenix, and was a long-time friend of J.K.

The three defendants named in the indictment are:

  • David Mirrion Loflin of Baton Rouge, Louisiana;
  • Heriberto O. Cruz of Chino Hills, California; and
  • Benjamin Lloyd Bunker who resided in or near Las Vegas, Nevada.

Cruz was affiliated with Cruz Capital Advisors, Inc. — CCAI — with Cruz as its sole officer; and RioRoca Holdings, LLC registered in Wyoming.

Bunker was allegedly an attorney practicing as The Bunker Law Group, PLLC. Between October 2014 and May 2017, Bunker provided most of the attorney letters and other legal paperwork necessary for JK and Loflin to convert the debt of Greenway Design Group Inc. — also known as GDGI — into stock.

A third unnamed involved person, identified by the initials B.L. resided in Huntington Beach, California. He was the majority shareholder of GDGI until Oct. 14, 2014, when he sold those shares to RioRoca, understanding that RioRoca was acting as a nominee for J.K.

In October 2015, T.G., at the request of J.K. agreed to act as CEO of GDGI under the direction of J.K., the indictment states.

GDGI was incorporated in Delaware and had stock that was publicly traded in the over-the-counter market. The company was controlled by J.K. at all relevant times, the indictment states.

Loflin, Cruz and Bunker have been charged by a Grand Jury on 52 counts of conspiracy, securities fraud, wire fraud, transactional money laundering and concealment money laundering.

J.K. is named as an unindicted co-conspirator in the Grand Jury indictment.

Counts and allegations

Count 1, of conspiracy, includes during the relevant time period, October 2014 through May 2017, the defendants looked for host companies that were registered to sell microcap stock over-the-counter, were current on all required regulatory filings and had debt on their books, according to the indictment.

Microcap stocks, sometimes referred to as “penny stocks” are low-priced stocks issued by small companies and typically traded on the over-the-counter marketplace rather than a national stock exchange, the indictment states.

The company selected GDGI and the controlling interest in GDGI was owned by B.L.

On Oct. 14, 2014, J.K. purchased the controlling interest of GDGI from B.L. and he did so through defendant Cruz to conceal his ownership and control of GDGI. J.K. exercised control over any important decisions affecting the company, while B.L. remained the nominal CEO.

On Jan. 6, 2016, J.K. arranged for T.G. to assume the role of CEO, again with J.K. exercising control over any important decision affecting Greenway Design Group Inc., and specifically, J.K. arranged for Cruz and T.G. to execute a stock purchase agreement to transfer the controlling shares of stock from RioRoca to T.G.

The defendants used Greenway Design Group Inc. to create a debt purportedly owed to J.K., Loflin or others in the form of a promissory note with a debt conversion provision. This conversion provision allowed the debt to be converted into shares of stock, the indictment states.

Through J.K. and Loflin, the defendants sold the unrestricted stock for a profit, dividing the proceeds in various ways.

Among other acts, J.K. specifically engaged in:

  • Contacting GDGI’s controlling owner, B.L. and arranging for the purchase of the company;
  • Directing B.L. to substitute a false promissory note for an existing, legitimate promissory note that was issued by GDGI for a debit owned; and
  • In late 2015, after a falling out with B.L., J.K. arranged for T.G. to assume the role of nominal CEO.

On Dec. 1, 2016, Loflin prepared a debit purchase and assignment agreement, which was executed by J.K., Loflin and T.G. so J.K. could fraudulently convert the debt into stock.

In addition, GDGI stock was promoted in numerous publications, and J.K. and Loflin each sold 68 million shares of GDGI stock between May 14, 2015 and June 29, 2015.

Later that year, GDGI stock was promoted in another publication and J.K. and Loflin each subsequently sold 68 million shares of stock.

Shortly after that, the stock was promoted in five different publications and in late 2015, J.K. sold 85.2 million shares of stock.

Counts 2-17, securities fraud, includes J.K. and the defendants misstated the nature of the relationships they had with GDGI to obtain unrestricted shares of stock for public sale that were not registered with the SEC.

Counts 18-34, wire fraud, include J.K., Loflin, Cruz and Bunker knowingly and willfully devising and intending to devise a scheme or artifice to defraud and to obtain money and property from others by means of material false and fraudulent pretenses and representations, and by the concealment and omission of material facts.

Between December 2014 and May 2017, the defendants transmitted by means of wire and radio communications in interstate commerce, writings, pictures, signals and sounds to and from the District of Arizona and elsewhere.

Counts 35-40 include J.K. and the defendants engaging and attempting to engage in monetary transactions in the United States in criminally-derived property with a value exceeding $10,000 derived from specified unlawful activity.

Counts 41-52 include J.K. and the defendants conducting a financial transaction involving property that represented the proceeds of criminal activity — wire fraud — knowing that the property in fact represented proceeds of criminal activity and knowing the transaction was designed in whole or in part to conceal and disguise the nature, source, ownership and control of the proceeds of the fraud.

Northeast Valley News Editor Melissa Rosequist can be e-mailed at mrosequist@newszap.com or can be followed on Twitter at twitter.com/mrosequist_.

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