Sri Lanka Express

US issues restraining order on bank accounts tied to Edwards, others in $50m CUP fraud scheme

Accounts in NDB, HNB, HSBC, and Sampath Bank owned or controlled by  Sri Lankan businessman Rienzi Edwards are among those targeted for criminal forfeiture.

Rienzi Edwards  
Michael Jacobs & wife Ruby Handler-Jacobs with Rod Adair, New Mexico State Senator (center). 
 By Hassina Leelarathna
March 23, 2017

A United States federal judge has placed a restraining order on bank accounts, several in Sri Lanka, owned or controlled by the defendants in the Cities Upliftment Program (CUP) fraud scheme that allegedly bilked investors worldwide to the tune of  $50 million. 

U.S. District Judge Jed S. Rakoff signed the order in December acting on the application of Preet Bharara, United States Attorney for the Southern District of New York, and an affidavit presented by Special Agent Brian Carlucci, Homeland Security Investigations.  It targets specific bank accounts of Sri Lankan businessman Rienzi Edwards and his co-conspirators, Michael J. Jacobs, Ruby Handler-Jacobs, Lawrence Lester, Rachel Gendreau (all in the US) and Singaporean F.K. Ho.

The order impacts all assets in the following bank accounts in Sri Lanka:

  • National Development Bank, Acct. # 101000260558, held in the name of "L.B. Karalliyadde Associates."
  • Hatton National Bank, Acct. # 176010005299, held in the name of "L.B. Karalliyadde Associates.”
  • Sampath Bank, Acct. # 512340000049, held in the name of "Green Fields Consultancy Services Ltd."
  • Sampath Bank, Acct. # 012310001072, held in the name of "Green Fields Services Ltd."
  • Sampath Bank, Acct. # 012320000831, held in the name of "Mansion Kandy Pvt. Ltd."
  • HSBC Bank, Acct. # 005184973001, held in the name of "Punya Prianji Menike Edwards" (Punya Edwards), wife of Rienzi Edwards
An HSBC Bank account in the United Kingdom, Acct. # 01496727, under the name of "Fashion Platform Ltd" which is on Judge Rakoff's order is also tied to Edwards.   According to public records in the UK, he  registered Fashion Platform Limited with an address at 1 Moxon House, Moxon Street London, in June 2012.   Shortly after starting the company, he quit the post of director, leaving the company in charge of a 30-year old student named Deepthika Hasanji Jayakody.  She was listed as the sole managing director until the company was dissolved in August of 2016, a few months before the indictment.

The other accounts targeted in Judge Rakoff’s order:

  • MFCC, LLC, including all assets held in Bank of America, Acct. # 439006351492.  Mffc, LLC is a New Mexico Domestic Limited-Liability Company registered to Michael Jacobs.
  • Decagon Company Ltd., including all assets held in Bank of America Acct. # 000016935801. President – Lawrence Lester
  • Kingdom Trust LLC, including all to assets held in Bank of America, Acct. # 439006448017
  • Amicorp Bank and Trust, Barbados, Acct. # 1025910012020101, held in the name of "Steeplechase Middle East FZE."
  • Barclays Bank,United Kingdom, Acct.# 43198383, held in the name of "CUP Trustee UK."
  • Posh Commodities LLC, including assets held in Savanna-Thomson State Bank, Acct. # 385835.
Punya Edwards, wife of Rienzi Edwards posing next to Speaker Karu Jayasuriya after she presented Rs. 1 million to him  for a charitable foundation of which he is a patron.  One of the accounts targeted by US prosecutors is held in Punya Edwards' name. (Photo from Edwards Foundation website)
Subject to forfeiture under US law
Collectively, the "target properties" named in the restraining order are alleged to constitute funds and criminal proceeds from money laundering and other unlawful monetary transactions and are therefore subject to forfeiture under  US law ( Title 18, United States Code, Section 982, and Title 21, United States Code 853).

According to the federal indictment unsealed December 12, 2016, over the course of three years, Rienzi Edwards, Michael Jacobs (64),  Ruby Handler-Jacobs (wife of Michael Jacobs) (64), Lawrence Lester (71), Rachel Gendreau (46), and Singaporean national F.K. Ho (80)  impersonated officials of the Federal Reserve while they peddled their Cities Upliftment Program (CUP) scheme as a high-yield, risk-free “trading program,” run by the New York Fed and offered to only a select group of investors.

They claimed the investments were risk free because they were guaranteed by the United States government through purported "sovereign guarantees" issued by the cities to which half of the investment returns were to be directed.   They also lured investors by claiming that the returns would not be taxed or that foreign investors would receive green cards.  The scheme brought in an estimated $50 million, wired  to accounts in the United States, Hong Kong and Sri Lanka.

“Edwards and his co-defendants allegedly concocted and carried out an audacious scam, promising investors exponential returns on investments they claimed were overseen by the New York Federal Reserve and backed by the U.S. government.  In reality, it was all a lie,” U.S. Attorney for the Southern District of NY  Preet Bharara said in a statement, December 13. “There was no government-backed program and no plan to invest, only an alleged plan to steal the investors’ money.”  (Read full press release)

At least 12 investors were defrauded, Dawn Dearden, a spokeswoman for the Southern District of New York U.S. Attorney’s Office told SLE.
Edwards, believed to have masterminded the fraud scheme with the help of Michael Jacobs, has invested in a number of boutique hotels (called the “Edwards Collection) in Sri Lanka, including the Kandy Mansion cited in the restraining order.  A controversial figure, Edwards is accused of using high level political contacts to grab a major share of the lucrative horse racing business in Sri Lanka.   In 2015, the Financial Crimes Investigation Division (FCID) detained the businessman and his wife, Punya Priyanthi Menike for alleged money laundering but the case has mysteriously fallen off the radar. 

The website of his charity, Edwards Foundation is   crammed with photos touting Edwards’ philanthropic achievements, among them a picture of  his wife Punya Edwards posing with Speaker Karu Jayasuriya after donating Rs. 1 million to a charity of which Mr. Jayasuriya is a patron. 

How Edwards came in contact with his co-conspirators in the U.S. is not known.  The Sri Lanka-based businessman has reportedly denied the charges, claiming he does not even know the other defendants.  However, according to investigators, Edwards, Michael Jacobs, and Ho were together at a hotel in Hong Kong in November 2013 where they impersonated New York Fed officers during a meeting with a potential investor. 

Michael Jacobs, an immigrant from Britain has as colorful a history as his Sri Lankan counterpart.   In 2004 he moved to Albuquerque, New Mexico with his wife Ruby Handler Jacobs and the following year  he made his debut as a film director with Crab Orchard .   The movie which starred  Edward Asner, Judge Reinhold and Ruby Handler Jacobs won the Director’s Gold Award at the International Family Film Festival. He went on to purchase the Rio Grande Studios for $650,000 and reportedly was approved for $27 million in loans from the State Investment Council. 

Despite these promising beginnings at a time when the New Mexico movie industry itself was starting to attract Hollywood investors, Michael Jacobs and his wife were never far from financial and legal woes.   In 2011, in a federal complaint, Wells Fargo bank accused Michael Jacobs, Ruby Handler- Jacobs, Decagon Company and its president Lawrence, of fraudulently obtaining sovereign guarantees on bank letterhead which they had a Wells Fargo employee mail to several foreign banks, including banks in Dubai and Geneva.  That same year, the Jacobses filed for Chapter 11 bankruptcy for Rio Grande Studios.  In 2012 they were indicted on 57 counts , including fraud, conspiracy and securities violations involving the illegal sale of security interests in Rio Grande Studios.  The duo allegedly sold security interests in their movie studio development, but contrary to New Mexico law failed to register the securities with the state and committed fraud by not disclosing the existence of unpaid debts and pending litigation against their company and themselves.  This case was dismissed in October 2015.

     "Celebs to Sri Lanka"
The Albuquerque Journal (Dec. 15, 2016) included in its report on the CUP fraud case this photo of a whiteboard in Michael Jacobs’ office.  His to do list seemed to include taking "celebs to SL."  Were plans being hatched to take American celebrities to Sri Lanka as part of the fraud scheme?  The "$3B MTN" notation is also intriguing, raising the question if the reference was to funds to or from MTN Nigeria, the telecom giant facing accusations of large-scale money laundering.   
Extradition?

Michael Jacobs was arrested at Los Angeles International Airport in California on December 11, 2016, and was presented in federal court before a U.S. Magistrate Judge in Santa Ana, California, on December 12.  Ruby Handler-Jacobs was arrested in Albuquerque, New Mexico, on December 11, 2016, and was presented in federal court before a U.S. Magistrate Judge in Albuquerque on December 12.  Lester was arrested in Mount Vernon, Washington, on December 12, 2016, and presented the same day in federal court before a U.S. Magistrate Judge in Seattle, Washington.  Gendreau was arrested on December 12, 2016, in Savanna, Illinois, and was presented in federal court before a U.S. Magistrate Judge in Rockford, Illinois, earlier today.  Edwards  and Ho are currently at large. 

SLE asked Dearden if  the US had plans to have Edwards extradited from Sri Lanka to face charges here.  She refused to comment.  The US and Sri Lanka signed an extradition in 1999 which was put into effect in 2001.