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SDNY COURTHOUSE, Feb 23 – Hamid "Ray" Akhavan and Ruben Weigand are charged with a "scheme to deceive US banks into processing in excess of $100 million for marijuana products."

 On January 7, Akhavan and Weigand had a proceeding before U.S. District Court for the Southern District of New York Judge Jed S. Rakoff, covered by Inner City Press, below.  Their trial starts March 1 - with Eaze's James Patterson cooperating, see below.

 Now on February 23 Weigand has filed a Speedy Trial Act motion to dismiss the indictment against him, noting that "[a]s of February 9, 2021, more than 70 days of non-excludable time elapsed since Mr. Weigand's initial appearance in this District."

  SDNY Chief Judge Colleen McMahon, like her colleagues in other Districts, issued COVID orders excluding time in all criminal cases. Perhaps this motion is to set up one of one expects more issues for possible appeal. Watch this site.

  Judge Rakoff has mostly allowed the defendants' subpoena to Circle about Eaze, limiting it in some ways and by time: "Weigand hired a private investigator to initiate a marijuana purchase on the Eaze platform via Circle. See Larsen Decl., ECF No. 142. Based upon that investigator’s findings and the other limited evidence before the Court, there is reason to believe that Circle charges a customer’s debit or credit card for USD Coin in the amount of the marijuana purchase; credits Eaze for the purchase, nominally in USD Coin; converts that USD Coin back into U.S. dollars; and transfers those dollars into Eaze’s account. In essence, Circle offers Eaze USD Coin as a fig leaf separating the issuing bank from Eaze. But -- and here is defendants’ key allegation -- Circle does not hide what it is doing from the banks. When Weigand’s private investigator conducted a test buy, her credit card statement included the word “Eaze” in the description of the charge. The private investigator’s bank had in its possession information tending to show that this charge related to Eaze. Akhavan and Weigand observe that anyone who Googles Eaze -- or anyone familiar with this case -- knows that Eaze is a marijuana marketplace. Given the ease with which a bank could figure out that Eaze sells marijuana, and the alleged quantity of marijuana sales consummated by Eaze (tens of millions of dollars annually), defendants argue that a juror could infer that banks must know what Eaze and Circle are doing.

The fact that banks nevertheless process such transactions, like the private investigator’s test buy, could arguably support an inference that the banks would not have cared about the misrepresentations that the defendants allegedly made. To be sure, defendants’ argument requires several inferential steps, which a jury is free to make or to reject. All the Court must here decide is whether defendants’ subpoena seeks relevant information on this topic. The Government principally argues that the victim banks have policies prohibiting use of their credit and debit cards to make illegal purchases and that whether banks are effective at enforcing those policies is beside the point because a victim’s negligence or ineptitude is no defense to bank fraud. This is true as far as it goes, but it misunderstands defendants’ theory. They intend to argue not that banks are lackadaisical in their enforcement, but rather that banks do not care about whether their cardholders are purchasing marijuana (at least in states where that is legal). If defendants uncover evidence sufficient to support such an inference, then, at least arguably, a juror might find that the alleged misstatements did not have a natural tendency to influence or a reasonable likelihood of influencing a bank’s decision whether to process Eaze transactions.4 For these reasons, the Court finds that the subpoena seeks relevant materials." Game on.

 On February 19 at 5 pm ex-Eaze CEO James Patterson appeared by Skype before Judge Rakoff and pled guilty to bank fraud conspiracy, with a cooperation deal. Inner City Press live tweeted it here:

Judge Rakoff: It's my understanding Mr. Patterson is here to plead guilty to an information in S4-20-cr-188. True?

Lawyer: Yes, Your honor.

Judge Rakoff swears Patterson in. Patterson: I live in Los Angeles. I am 41 years old. I have a BA and Masters Degree.

 Patterson: I have seen a therapist in the past. Stress Judge Rakoff: With the trial set to being March 1, to which this plea relates, this plea cannot be delayed.  [Waiting to hear, Tell me in your own words what you did that makes you believe that you are guilty]

 Judge Rakoff: You are charged with conspiracy to commit bank fraud. Maximum punishment is up to 30 years. I've received a letter agreement you signed on Feb 15. It's your cooperation letter. [So Patterson is pleading guilty at 5 pm a week before trial, as a cooperator. 5k1 being cited. Fireworks to ensue?]

Judge Rakoff: And you've agreed to a forfeiture.

 Judge Rakoff: Tell me in your own words what you did.

 Patterson: As CEO of Eaze, I cooperated with Ray Akhavan to assist people to buy pot on their credit cards. Otherwise banks wouldn't have allowed the transactions.

 Judge Rakoff: How do you know plead?

Patterson: Guilty.

Judge Rakoff: You will be given time to show substantial assistance. Then 90 days before sentencing, Probation will prepare a report.

AUSA: We ask for sentencing to be in one year. So, Tuesday Feb 22 at 4 pm. [That's Feb 22, 2022.]

 Judge Rakoff: Bail conditions remain the same. We are adjourned. 

  Earlier in the case, it emerged that Akhavan had been presented in Magistrates Court earlier in the day on an alleged violation of supervised release, and detained on consent. It involved a gun.

   After being arrested and detained in California, Akhavan was writted to SDNY in connection with the case before Judge Rakoff. He was returned on the warrant related to the violation of pretrial release on January 7, after a December 30 arrest.  His counsel Christopher Tayback of Quinn Emanuel consented to his detention without prejudice to make a future bail application.

 On February 9 Judge Rakoff heard arguments on releasing Akhavan for the week or two weeks of trial, starting March 1. He said he would rule by Feb 12.  Inner City Press live tweeted below.

Now on February 12, this: "MEMORANDUM ORDER as to Hamid Akhavan. The Court hereby orders that, once all custodial holds are lifted (including any imposed by the California state authorities), Akhavan shall be released pending trial on the following conditions: 1. All conditions of pretrial release in effect prior to Akhavan's arrest in November 2020 remain in effect." The order cites not Ng Lap Seng but US v. Boustani 932 F.3d 79, in which the Second Circuit affirmed denial of bail on a "fundamental principle of fairness" sounding in equal protection. But he'll be out. With his own armed guards. Guidepost?

On February 11, this: "MEMORANDUM TO THE DOCKET CLERK as to Ruben Weigand, Hamid Akhavan. On February 19 at 5pm, Judge Rakoff will have a waiver of indictment, arraignment, and plea proceeding for a defendant, James Patterson, that the Government plans to add to this case."

From February 9: Judge Rakoff: What about his use of a gun?

Akhavan's lawyer: It was gun possession. He needs to be out to prepare for this serious fraud case.

Judge Rakoff: You're telling me, Screw you judge, we're one of the best law firms in the country but we can't prepare

Defense lawyer: I'm definitely not saying Screw you judge. But we just got a lot of discovery, in a corrupted file. I'll be in NY soon. You know the risks of COVID - what is one of his lawyers gets sick? It impacts the trial. We're asking for another chance.

 Akhavan's lawyer: We would pay for armed guards. [That's what UN briber Ng Lap Seng got, in 47th Street condo, before he was found guilty of bribing  @UN_PGA  and others.] AUSA: Detain him Judge Rakoff: Let me cut to the chase. 3142(i) is for preparation of defense.

Judge Rakoff: I'm wonder if for week of trial he could be released to this private facility.  AUSA: His defendant is in a fundamentally different position that the co-defendant. He has a long history -- Judge Rakoff: I agree with all that. But there's new docs

AUSA: MCC is allowing in person visits, and video conference. So he can prepare. Being in a rented apartment, he can try to obtain drugs through guards, or while visiting counsel. Plus, we couldn't oversee his communications. He's trying to interfere in state case Inner City Press @innercitypress · 13m Judge Rakoff: OK, last opportunity for the defense.

Defense: We'd have to get the state custodial hold released too. Judge Rakoff: What about interfering with witness in state case?

Defense: We could arrange that he doesn't have a phone.

Judge Rakoff: I'm going to think about this. The only argument on the defense side that has any weight is about preparing for trial. I granted bail for Mr. Weigand. I went out on a limb for Mr. Akhavan, but his behavior was the equivalent of "Screw you judge."

 Judge Rakoff: I'll get you a decision by Friday. OK - the trial will start on March 1 rather than March 2.

Inner City Press has been digging into the possible Wirecard link.

 On July 27, Judge Rakoff held an oral argument on motions to dismiss, and motions to suppress, with a trial scheduled for January 2021. Inner City Press live tweeted it:

Judge Rakoff expressing frustration at counsel going over old ground, says "I have another matter at noon." Lawyer: If transaction occurred by debit card, there's no damage to the bank, a sine quo non of bank fraud.

 Defense lawyer: The banks received a lot of money for these transactions. There was no harm to them. Judge Rakoff: What you're saying is that when they deceived the banks, all they cheated the banks out of was some policy the banks wanted to adhere to

AUSA: It is not clear that the bank fraud statue is a prosecutor's Stradivarius. In the recent case of Attila, harm is a not a factor. The cheating in this case is obtaining the bank's own money through pretense. The analysis can end right there

Judge Rakoff: Let me hear from co-defendant's counsel.

William Burck of Quinn Emmanuel for Akhavan: There has to be a risk of loss to the bank for bank fraud.

Judge Rakoff: I was surprised that no one referred to the civil RICO cases that have address this issue

 Judge Rakoff: There was a case in the 5th Circuit, [or the 11th], after an airline takeover, to avoid unionization, the public was told that Continental Airlines was not as safe as Eastern had been. The allegation was that the pilot deceived the public

AUSA (sounds like Dimase) - these are more like Rule 29 motions, arguments about Visa and Master Card, let the jury decide. The indictment is sufficient.

Judge Rakoff: I have read your briefs. And I have other matters today.

AUSA: Conflating loss and harm is a mistake

Judge Rakoff: Let's turn to the motions to suppress. 

Weigand's lawyer: The warrants didn't allege that the devices seized were being used for the scheme.

Judge Rakoff: I'd like to hear from the government.

AUSA Nicholas Folly: We only had to show probability... The evidence in the affidavit came from the cell phone of the cooperating witness.  

Judge Rakoff: I'll issue an omnibus ruling by the end of August; trial now set for January.

 Weigand since he has money, unlike many SDNY defendants, on April 28 already had high powered lawyers from Wilson Sonsini. On April 28 they demanded a bill of particulars. 

  Judge Rakoff pushed back, setting a tight schedule for that: May 12, May 18 and he'll rule by May 20.

  But these high powered lawyers have a grueling trial schedule for other clients, from the Central District of California and elsewhere.

So Judge Rakoff agreed to a trial in December 2020, to be finished before Christmas. Inner City Press will cover it. The case is US v. Weigand, 20-cr-188 (Rakoff). 

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