Ridgewood NJ, With cryptocurrencies continuing to attract headlines, Attorney General Christopher S. Porrino and the Bureau of Securities, which is within the Division of Consumer Affairs, today reminded New Jersey investors to be cautious about investments involving cryptocurrencies.
“Cryptocurrencies may be the new rage when it comes to investments, but there are significant risks associated with transactions involving these predominantly unregulated currencies,” said Attorney General Porrino. “Investors should fully understand the types of currency and transactions being pitched to them before agreeing to invest.”
Cryptocurrencies are a medium of exchange that are created and stored electronically in the blockchain, a distributed public database that keeps a permanent record of digital transactions. Current common cryptocurrencies include Bitcoin, Ethereum and Litecoin. Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation.
A survey of state and provincial securities regulators by the North American Securities Administrators Association (NASAA), of which the Bureau of Securities is a member, shows 94 percent believe there is a “high risk of fraud” involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.
“Because of the high risk of fraud and some projections of huge returns, investors must be on alert and not be tempted to invest in cryptocurrency-related investments without first vigorously vetting any transaction,” said Sharon M. Joyce, Acting Director of the Division of Consumer Affairs. “Understanding what is being sold is the best armor an investor has against fraud.”
Last month, NASAA identified Initial Coin Offerings (ICOs) and cryptocurrency-related investment products as emerging investor threats for 2018. Unlike an Initial Public Offering (IPO) when a company sells stocks in order to raise capital, an ICO sells “tokens” in order to fund a project, usually related to the blockchain. The token likely has no value at the time of purchase. Some tokens constitute, or may be exchangeable for, a new cryptocurrency to be launched by the project, while others entitle investors to a discount, or early rights to a product or service proposed to be offered by the project.
“Transactions involving cryptocurrency are often complicated and confusing with an unproven track record. They are not designed for investors with a low tolerance for risk or volatility,” said Christopher W. Gerold, Chief of the Bureau of Securities. “The best advice we can give is for investors to be completely aware of the risks before investing and act accordingly.”
NASAA offers a short animated video to help investors understand the risks associated with ICOs and cryptocurrencies. NASAA and its members first alerted investors of the risks associated with cryptocurrencies in 2014.
Common Cryptocurrency Concerns
The following are some common concerns investors should consider before investing in any offering containing cryptocurrency:
Cryptocurrency is subject to minimal regulatory oversight, susceptible to cybersecurity breaches or hacks, and there may be no recourse should the cryptocurrency disappear.
Cryptocurrency accounts are not insured by the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits up to $250,000.
The high volatility of cryptocurrency investments makes them unsuitable for most investors, especially those investing for long-term goals or retirement.
Investors in cryptocurrency are highly reliant upon unregulated companies, including some that may lack appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.
Investors will have to rely upon the strength of their own computer security systems, as well as security systems provided by third parties, to protect purchased cryptocurrencies from theft.
Common Red Flags of Fraud
The Bureau of Securities also reminds investors to keep watch for these common red flags of investment fraud:
“Guaranteed” high investment returns. There is no such thing as guaranteed investment returns, and there is no guarantee that the cryptocurrency will increase in value. Be wary of anyone who promises a high rate of return with little or no risk.
Unsolicited offers. An unsolicited sales pitch may be part of a fraudulent investment scheme. Cryptocurrency investment opportunities are promoted aggressively through social media. Be very wary of an unsolicited communication—meaning you didn’t ask for it and don’t know the sender—about an investment opportunity.
Sounds too good to be true. If the project sounds too good to be true, it probably is. Watch out for exaggerated claims about the project’s future success.
Pressure to buy immediately. Take time to research an investment opportunity before handing over your money. Watch out for pressure to act fast or “get in on the ground floor” of a new tech trend.
Unlicensed sellers. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms. The Bureau of Securities can help investors research the background of those selling or advising the purchase of an investment.
Trenton NJ, Attorney General Christopher S. Porrino today announced arrests of 79 child predators and child pornography offenders in “Operation Safety Net,” a nine-month, multi-agency child protection initiative led by the New Jersey Regional Internet Crimes Against Children (ICAC) Task Force. Partnering agencies targeted sex offenders who exploited the internet and social media, making arrests in every New Jersey county and deploying, for the first time, a new van equipped as a mobile cyber forensics lab, as well as a new canine trained to sniff out electronic devices, to assist in execution of search warrants.
Those arrested in Operation Safety Net included 10 “hands-on” offenders, including child predators in California and Indiana who allegedly tried to have children transported interstate from New Jersey by adult traffickers so they could have sex with the children; four men in New Jersey who allegedly sought to lure children for sex; a camp counselor who allegedly sexually assaulted a girl, 14, under his supervision; a youth minister who allegedly sent lewd photos of himself to a young girl; and a man, 24, who allegedly used a phone app to record underage girls performing sex acts on themselves. Those arrested also included numerous defendants, ranging in age from 14 to 75, who allegedly amassed and/or distributed large collections of child pornography, including a Trenton police officer, a swimming coach, a piano teacher, an IT professional from Morris County who allegedly had over 138,000 files of suspected child pornography (possibly over one million), a mechanic from Mercer County who allegedly had over 10,000 files of child porn, and three brothers in Cumberland County who allegedly had nearly 5,000 files of child pornography.
The operation was conducted by the ICAC Task Force, which is led by the New Jersey State Police and includes the New Jersey Division of Criminal Justice (DCJ), U.S. Homeland Security Investigations (HSI), all 21 County Prosecutors’ Offices, and many other state, county and local law enforcement agencies. Attorney General Porrino made the announcement at the Hamilton Tech Center with DCJ Director Elie Honig, Acting State Police Superintendent Colonel Patrick Callahan, Supervisory Special Agent Craig Vanderhoff of HSI Human Trafficking/Child Exploitation Group, Mercer County Prosecutor Angelo Onofri, Atlantic County Prosecutor Damon Tyner and representatives of other participating agencies. The Division of Criminal Justice exhibited its new cyber forensics van, and the State Police showcased its new electronics detection dog, Mega, both of which contributed greatly to the success of Operation Safety Net.
“The men we arrested lurked in the shadows of the internet and social media, looking for opportunities to sexually assault young children or to view such unspeakable assaults by sharing child pornography,” said Attorney General Porrino. “We set up a wide safety net in this operation to snare these alleged predators and to protect children, which remains our highest priority. With our new mobile forensics lab and electronics-sniffing dog, we’re even better equipped to uncover the evidence that will keep these offenders behind bars, where they cannot threaten or further exploit vulnerable victims.”
“I want to thank all of the many agencies and individuals who participated in this massive, unprecedented and highly collaborative effort to protect our children and communities in New Jersey and elsewhere,” Porrino added.
“We charged 10 men with hands-on predatory conduct against children, including attempted interstate trafficking of children for sex, sexual assault, luring, sending obscene images to a child, or manufacturing child pornography,” said Attorney General Porrino. “These cases highlight the fact that viewing child pornography is part of a continuum of deviant behavior that often leads to or drives other sex crimes.”
“The charges against Castillo reveal a dangerous child predator who went to great lengths in the belief that he was flying two very young girls to California so he could sexually assault them,” said Attorney General Porrino. “Had we not arrested him with our federal and California partners, the allegations indicate he would have continued to seek victims, including children as young as toddlers.”
“We’ve made these proactive child protection investigations a top priority by adding more staff for them at the state level and considerable new resources, including the mobile forensics lab and electronics detection dog,” said Director Elie Honig of the Division of Criminal Justice. “There’s no question that by collaborating across all levels of law enforcement and arresting these offenders, we protected innocent children who might otherwise have been sexually abused and exploited. We’ve also ensured that all these men who victimized children – or re-victimized them by viewing child pornography – will face justice.”
“The individuals who share this horrific material will not stop unless they are apprehended and removed from the public,” said Colonel Patrick Callahan, Acting Superintendent of the New Jersey State Police. “The nine-month investigation conducted by the New Jersey Regional Internet Crimes Against Children Task Force and partnering agencies has ensured that children throughout the country will not fall victim to the actions of these depraved individuals. These arrests should put anyone looking to engage in this behavior on notice that law enforcement will be relentless in our efforts to put them behind bars.”
In addition to investigating numerous cyber tips from the National Center for Missing and Exploited Children, the ICAC Task Force in Operation Safety Net conducted proactive investigations to apprehend offenders by monitoring peer-to-peer file-sharing networks and identifying the IP addresses of individuals sharing child pornography. Detectives also conducted undercover chat investigations on social media platforms, which led to arrests of alleged hands-on offenders and defendants attempting to lure children.
Two proactive investigations initiated by the New Jersey State Police extended beyond New Jersey’s borders – with assistance from other state and federal authorities – to apprehend defendants charged with allegedly attempting to arrange the interstate trafficking of young children for sex:
George Castillo, 36, of Inglewood, Calif., faces federal charges of transportation of a minor with intent to engage in criminal sexual activity and production of child pornography, as well as New Jersey charges including first-degree conspiracy to commit child trafficking. Castillo allegedly solicited an undercover New Jersey State Police detective – who pretended to be trafficking children – to fly a 4-year-old girl to Los Angeles so he could sexually assault her. He also allegedly solicited an undercover police detective in Washington, D.C., who posed as a father, to bring his “daughter,” 9, to Los Angeles for sex at the same time the undercover from New Jersey was expected to arrive with the other girl. He was arrested on April 4 at Los Angeles International Airport when he arrived to meet the girls and their adult escorts. The charges stem from investigations by the New Jersey State Police, New Jersey Division of Criminal Justice, U.S. Attorney’s Office for the District of Columbia, Metropolitan Police Department/FBI Child Exploitation Task Force in Washington, D.C., and, in Los Angeles, the U.S. Attorney’s Office for the Central District of California, U.S. Homeland Security Investigations, LAX Task Force, and Los Angeles Police Department. The undercover investigators identified Castillo in separate investigations targeting pedophiles using the internet and social media.
Joseph Donohew, 26, of Brownsburg, Indiana, is charged in Indiana with attempted child molestation. He allegedly offered money to an undercover New Jersey State Police detective, whom he met on an instant messaging platform, to have sex with a 9-year-old girl. The undercover represented that he had a daughter, 9, and Donohew allegedly sent him $100 as a down payment to bring the girl to Indiana for sex. Donohew was arrested on July 13 at a gas station in Indiana, where he allegedly was to meet the father and girl. He had purchased a nightgown for the girl depicting characters from a Disney movie he believed was her favorite. The New Jersey State Police worked with the FBI, Brownsburg Police Department, Indiana State Police and Hendricks County Prosecutor’s Office in Indiana.
Eight other defendants were arrested in New Jersey in Operation Safety Net on charges related to various types of alleged “hands-on” conduct, including sexual assault, luring a child, conveying obscene materials to a child, and manufacturing child pornography:
William Esker, 22, of Bayonne, N.J., was charged on Sept. 7 by the Hudson County Prosecutor’s Office with aggravated criminal sexual contact for allegedly engaging in sexual conduct with a girl, 14, over whom he had direct supervision as a camp counselor. He also is charged with providing obscene material to a child and endangering the welfare of a child.
Donald Beckwith, 34, of Browns Mills, N.J., is charged in Delaware with sexual solicitation of a minor and attempt to commit unlawful sexual contact with a minor. Beckwith, a captain in the Air Force stationed in New Jersey, met a girl, 14, through an online chat group for children and allegedly engaged her in sexual conversations, ultimately asking her to meet him in person. He allegedly met the girl twice in Delaware. The first time, he allegedly reached under her shirt and tried to touch her breast, and the second time he allegedly hugged her and repeatedly asked her to lie on a bed in the back of his vehicle and watch a movie with him. The New Jersey State Police arrested Beckwith on Aug. 16 in an investigation initiated by the Delaware State Police. Detectives allegedly found over 10 nude images of an underage girl on his phone.
Michael DeBlock, 22, of Hopatcong, N.J., a youth minister, was arrested on Oct. 10 and charged by the Sussex County Prosecutor’s Office with possession of child pornography and conveying obscene materials to a child. DeBlock allegedly exchanged sexual photos and texts with a girl, 14, including a photo of his penis.
Brandon Morris, 24, of Hammonton, N.J., was arrested on Oct. 17 and charged by the Atlantic County Prosecutor’s Office with manufacturing child pornography, endangering the welfare of a child by sexual conduct, conveying obscene materials to a child, and possession of child pornography. Morris allegedly engaged multiple underage girls in conversations on FaceTime, instructing them to perform sexual acts on themselves, which he recorded.
A 17-year-old student from Bergen County, whose name is not being released due to his juvenile status, was arrested on Aug. 17 and charged by the Bergen County Prosecutor’s Office with manufacturing, distributing and possessing child pornography, as well as invasion of privacy. The juvenile allegedly had over 1,000 files of suspected child pornography on his electronic devices, including video recordings he allegedly made by hiding his smartphone in a private bathroom in order to record underage boys who were nude, showering or urinating.
Craig Kirschner, 39, of Marlboro, N.J., was arrested on Aug. 21 and charged by the Hudson County Prosecutor’s Office with luring a child, attempted sexual assault of a minor, and conveying obscene material to a minor. Kirschner allegedly solicited an undercover detective, whom he believed to be a 15-year-old male, to meet for oral sex. The detective was monitoring a mobile app when he encountered Kirschner. After the undercover detective identified himself as a 15-year-old boy, Kirschner allegedly sent him photos of an erect penis, asked him to meet for oral sex, and stated “I can be generous for your trouble.”
Isaac Toney, 40, of Trenton, N.J., was arrested on July 17 by the New Jersey State Police and charged with luring a child. He allegedly used a mobile app to solicit an undercover detective, whom he believed was a 14-year-old male, for oral sex. He was arrested at Veterans Park in Hamilton, Mercer County, where he allegedly was to meet the “boy” for a sexual encounter.
Robert Elmi, 63, of Gillette, N.J., was arrested by the New Jersey State Police on Nov. 9 on a charge of luring a child. Elmi had placed an ad on Craigslist soliciting a relationship with a younger female. An undercover State Police detective responded, posing as a young girl and indicating to Elmi that she was 13. Elmi allegedly communicated with the “13-year-old” for several weeks by text and email, ultimately arranging to meet her at a diner. He allegedly told the “girl” he would take her back to his apartment, where they would drink, watch TV, kiss and perform oral sex on each other. Elmi was arrested by the State Police at the diner.
Forty-one defendants are charged with second-degree distribution of child pornography, which carries a sentence of five to 10 years in prison, and 66 defendants are charged with third-degree possession of child pornography, which carries a sentence of three to five years in prison. Out of the 41 charged with distribution, six are charged with distributing 25 items or more, and therefore are subject, if convicted, to a mandatory minimum sentence of five years in prison under the strict child pornography law signed by Governor Christie in August 2013. Out of the 66 defendants charged with possession, 25 are charged with possession of 100 or more items and are subject to a presumption of imprisonment under that law, even if they have no prior criminal record. More of the defendants may face those enhanced charges and penalties once full forensic examinations of their computers and electronic devices are completed.
On July 21, 2017, Governor Christie signed a new law which will take effect Feb. 1, 2018 and will further enhance penalties for possession and distribution of child pornography. The new law expanded the definition of child pornography to include child erotica. In addition, the new law makes it a first-degree crime to distribute 1,000 or more items depicting the sexual exploitation of a child, with a mandatory parole ineligibility period of one-third to one-half of the sentence imposed. The new law also makes it a first degree crime to possess 100,000 or more items of child pornography, and a second-degree crime to possess anywhere between 1,000 and 99,999. Under the new law, videos depicting the sexual exploitation of a child will count more heavily than still images, each counting for 10 images.
Eleven defendants arrested in Operation Safety Net would qualify as second-degree “super-possessors” under the new law to go into effect in 2018. Because it was not in effect when they were arrested, they cannot be charged under the tough new law, but these 11 arrests illustrate how offenders routinely amass huge collections of child pornography, which soon will make them subject to the enhanced penalties:
William Camargo, 48, of Millington, N.J., an IT professional , allegedly had more than 138,000 files of suspected child pornography, and possibly more than one million files (determination awaiting full forensic examinations of computer equipment);
Callen Kapschock, 55, of Hamilton, Mercer County, N.J., a mechanic, allegedly had more than 10,000 files of suspected child pornography;
Md F. Uddin, 43, of Elizabeth, N.J., an engineer, allegedly had more than 5,000 files of suspected child pornography;
Kody Knotts, 22, of Millville, N.J., along with his two brothers immediately below, allegedly had a combined total of nearly 5,000 files of suspected child pornography;
Alexander Knotts, 27, of Millville, N.J.;
Kyle Knotts, 23, of Millville, N.J.;
Laurence Duque, 42, of Dayton, N.J., allegedly had over 4,000 files of suspected child pornography;
Gregory Piszczek, 35, of Woodbridge, N.J., an IT professional, allegedly had over 4,000 files of suspected child pornography;
Kevin Groeger, 63, of Cranford, N.J., a postal worker, allegedly had over 2,000 files of suspected child pornography;
Pasquale “Charles” Albano, 75, of Point Pleasant, N.J., allegedly had over 1,000 files of suspected child pornography; and
Juvenile Male, 17, referenced above, allegedly had over 1,000 files of suspected child pornography.
Operation Safety Net made extensive use of two key new tools: an electronics detection canine and a mobile forensics van. Both contributed greatly to the success of the operation. As electronic devices become smaller and easier to hide, the importance of dogs trained to detect them increases. There are thumb drives available that are hidden in or disguised as cuff links, bracelets, LEGO blocks, coins and other everyday items. Throughout the operation, the canine was used at State Police and Division of Criminal Justice (DCJ) search warrant scenes. The canine was used for a preliminary walk-through and would identify devices and loose electronic storage media not in plain view. The detectives would then thoroughly search the area where that evidence was found to ensure all digital evidence was recovered.
Rapid triage of computers at search sites – also called forensic previewing – is a critical component of child pornography investigations. Such forensic previewing can result in the immediate arrest of individuals who otherwise might be left to continue direct illicit sexual contact with minors, preventing further abuse of victims. The previewing of computers at search sites has often had to occur in close proximity to the alleged perpetrator and often in potentially dangerous environments. As an example, in the last operation, two DCJ detectives were hospitalized after the suspect at the search warrant scene attempted to gain control of one detective’s handgun, resulting in a dangerous struggle. To maintain the integrity of the evidence gathering process, it is important for the forensic examiner to have the proper equipment to work with and the proper environment to work in. For these reasons, DCJ purchased a customized van, equipped with the appropriate desks and electrical and other equipment, which is used on-site for the forensic previewing of computers and computer-related equipment. This van enabled detectives in Operation Safety Net to safely examine suspected devices within the van and conduct more extensive previews at the scene, increasing the number of charges carrying enhanced penalties.
The following 58 additional men were arrested in Operation Safety Net on charges of possession and/or distribution of child pornography:
Paul Marinelli, 52, of South Brunswick, N.J., a Trenton police officer, charged with possession of child pornography.
James Cutrone, 54, of Hazlet, N.J., a youth swim coach, charged with distribution of child pornography.
Bryan San Andreas, 37, of Toms River, N.J., a piano teacher, charged with possession of child pornography.
John Parsons, 50, of Vineland, N.J., charged with possession of child pornography.
Donald Williams, 39, of Camden, N.J., charged with distribution of child pornography.
Kevin Wenng, 35, of Cliffwood Beach, N.J., charged with possession of child pornography.
Victor Kurynow, 58, of Bedminster, N.J., charged with attempted possession of child pornography and conveying obscene materials to a minor.
Paul Fuhs, 44, of Laurel Springs, N.J., charged with possession of child pornography.
Ryan Stemetzki, 26, of Maple Shade, N.J., charged with possession and distribution of child pornography.
Robert Ruff, 56, of Delran, N.J., charged with possession of child pornography.
Robert King, 63, of North Wildwood, N.J., charged with possession and distribution of child pornography.
Jason Locke, 42, of Manchester, N.J., charged with possession of child pornography.
Stephen Slawinski, 60, of Morris Plains, N.J., charged with possession and distribution of child pornography.
Herbert Ferreira, 43, of Dover, N.J., charged with possession and distribution of child pornography.
Joseph Maruca, 26, of Berkeley Township, N.J., charged with possession of child pornography.
James Gilbertson, 60, of Manchester, N.J., charged with possession of child pornography.
Christopher Todd, 49, of Lyndhurst, N.J., charged with possession and distribution of child pornography.
Alexis Gonzalez, 28, of Hackensack, N.J., charged with possession of child pornography.
Raul Rodriguez, 33, of Jersey City, N.J., charged with possession of child pornography.
Dhanendhran Govender, 32, of East Windsor, N.J., charged with possession and distribution of child pornography.
Luis Pacheco-Loja, 30, of Belleville, N.J., charged with possession and distribution of child pornography.
Robert White, 66, of Morristown, N.J., charged with possession and distribution of child pornography.
Jonathan Latiff 40, of Jersey City, N.J., charged with possession and distribution of child pornography.
Anthony Gerace, 43, of Egg Harbor Township, N.J., charged with distribution of child pornography.
Antonio Baang, 26, of Galloway Township, N.J., charged with possession of child pornography.
Richard Lake, 65, of Trenton, N.J., charged with possession and distribution of child pornography.
Federico Flores, 29, of Rahway, N.J., charged with possession and distribution of child pornography.
James Agin, 69, of Westwood, N.J., charged with possession and distribution of child pornography.
Fortino Rosales-Rodriguez, 22, of Oaklyn, N.J., charged with possession of child pornography.
Justin Saavedra, 22, of Clifton, N.J., charged with distribution of child pornography.
Daniel Braz, 39, of South River, N.J., charged with possession and distribution of child pornography.
Nelson Cintron, Jr., 54, of Collingswood, N.J., charged with possession and distribution of child pornography.
Michael Brown, 28, of Pennsauken, N.J., charged with possession and distribution of child pornography.
Erik Baez, 38, of Sicklerville, N.J., charged with possession and distribution of child pornography.
Larry Gonzalez, 45, of Elizabeth, N.J., charged with possession and distribution of child pornography.
Erik Johnson, 49, charged by Union County Prosecutor’s Office with possession and distribution of child pornography.
Marco Biason, 68, of Dover, N.J., charged with possession of child pornography.
Brian Neilson, 55, of Metuchen, N.J., charged with possession of child pornography.
Thomas Smith, 54, of Woodstown, N.J., charged with possession and distribution of child pornography.
Zachary Brawer, 31, of Paramus, N.J., charged with possession and distribution of child pornography.
Brian J. Gardner, 74, of Nutley, N.J., charged with possession and distribution of child pornography.
John T. Ruffner, 37, of Lumberton, N.J., charged with possession of child pornography.
John Skubiak, 62, of Deptford, N.J., charged with possession and distribution of child pornography.
Nicholas J. Novak, 66, of Ocean Township, Monmouth County, N.J., charged with possession and distribution of child pornography.
Eric MacAfee, 41, of Seaside Heights, N.J., charged with possession of child pornography.
Jeison Padilla, 29, of Somerville, N.J., charged with possession of child pornography and conveying obscene materials to a minor.
Justin England, 31, of North Plainfield, N.J., charged with possession and distribution of child pornography.
Eric Yourish, 61, of North Plainfield, N.J., charged with possession of child pornography.
Christopher Dunham, 22, of Rockaway, N.J., charged with possession and distribution of child pornography.
Justin Piccola, 23, of Randolph, N.J., charged with possession and distribution of child pornography.
Nicolas Bencze, 36, of Maywood, N.J., charged with possession and distribution of child pornography.
Michael Yosco, 70, of Garfield, N.J., charged with possession of child pornography.
Male Juvenile, age 14, of Bergen County, N.J., charged with possession of child pornography.
Julio Garcia, 29, of Bridgeton, N.J., charged with possession and distribution of child pornography.
Joseph Lawitz, 34, of Hamilton, Mercer County, N.J., charged with possession of child pornography.
James Livas, 22, of Hopatcong, N.J., charged with possession and distribution of child pornography.
Robert Fuscarino, 27, of Hopatcong, N.J., charged with possession and distribution of child pornography.
Donovan Roots, 19, of Pilesgrove, N.J., charged with possession and distribution of child pornography.
The charges against the defendants in Operation Safety Net are merely accusations and the defendants are presumed innocent until proven guilty.
Trenton NJ,Attorney General Christopher S. Porrino announced today that New Jersey has filed an amended consumer fraud and false claims complaint against Insys Therapeutics, Inc. – maker of the powerful opioid-fentanyl drug Subsys – that adds as a defendant John N. Kapoor, billionaire founder of the company.
Insys and Kapoor are accused in the State’s complaint of endangering the public through a greed-driven, unlawful marketing campaign designed to exponentially increase sales of Subsys by making fraudulent claims and unlawfully incentivizing health care providers to prescribe Subsys to an inappropriately broad array of pain patients.
Subsys is only approved by the federal Food and Drug Administration (FDA) for treating breakthrough cancer pain in opioid-tolerant cancer patients.
Filed in Superior Court in Middlesex County, the State’s amended complaint notes that Kapoor not only founded Insys and is its principal shareholder, but also held executive management positions in the company including Executive Chairman of the Board of Directors, President and Chief Executive Officer.
Kapoor’s public claims that he was “not involved in day-to-day operations” concerning Subsys and that he was merely “an investor” in the company are contradicted by documentary evidence, the State’s amended lawsuit notes. The complaint charges that, in reality, Kapoor exercised “firm direction” and “close management” of the illegal push to have Subsys inappropriately – and dangerously – prescribed for patients with routine chronic pain.
“This individual (Kapoor) founded Insys and for all intents and purposes ran the company. We reject the suggestion that he had only a hands-off, observer’s role in the process of illegally expanding the off-label prescription market for his company’s flagship drug Subsys. And, as our amended complaint filed today makes plain, we believe that available evidence suggests otherwise,” Porrino said. “We allege that Mr. Kapoor was firmly at the controls as Insys coldly set aside any concerns about addiction and death, and forged full-steam ahead with a campaign to have more doctors prescribe Subsys to more patients, and to have doctors who were already prescribing the drug prescribe higher doses. Naming him as a direct defendant credits his alleged role in a calculated scheme to drive profits at the expense of human life, and allows us to look beyond the corporate veil and obtain a judgment against Mr. Kapoor and his personal assets.”
Among other things, the State’s amended complaint alleges that the greed of Kapoor and Insys put “hundreds” of lives in jeopardy and “led to the death of at least one New Jersey resident” – a 32-year-old Camden County woman who was prescribed Subsys for fibromyalgia. In addition, the suit notes that two New Jersey state employee health benefits plans paid a total of approximately $10.3 million to reimburse Subsys prescriptions between 2012 and the third-quarter of 2016, while the State Worker’s Compensation Program paid another $300,000.
The lawsuit includes three counts alleging violations of New Jersey’s Consumer Fraud Act and one count alleging violations of the New Jersey False Claims Act. The suit asks that Insys and Kapoor be assessed maximum civil penalties for each violation of the Consumer Fraud Act, and seeks three times the State’s actual damages for violations of the False Claims Act, per that statute. The suit also seeks to have Insys and Kapoor held responsible for costs and fees incurred by the State in bringing the case.
From the 2012 market launch of Subsys until the present, the drug has accounted for approximately 98 percent of net revenues for Insys, a Delaware corporation with headquarters in Chandler, AZ. Insys, which has raised the price of Subsys every year since its launch, sold $74.2 million worth of the drug in New Jersey between 2012 and the third-quarter of 2016.
The State’s complaint alleges that Insys’s corporate decision-makers – led by Kapoor – devised a strategy to expand what they recognized as a limited market for Subsys by aggressively pushing “off label” uses of the drug – even to podiatrists and other specialty practitioners who typically would have little call to treat cancer patients or prescribe powerful Schedule II painkillers. (Off-label use denotes use of a drug for purposes other than that for which it was approved by the FDA.)
Trenton NJ, Attorney General Christopher S. Porrino announced today that New Jersey residents who were deceived into sending payments to scammers using Western Union’s wire transfer service can now apply for compensation from a $586 million fund related to a multi-state settlement with Western Union in which New Jersey participated.
According to Porrino, New Jersey residents may be eligible to receive compensation if they were the victim of a fraud-induced money transfer using Western Union services between January 1, 2004 and January 19, 2017.
New Jerseyans who reported to Western Union, or to the New Jersey Attorney General’s Office, that they were the victim of such a scam may soon receive a claim form in the mail. The claim form will be sent from the Settlement Administrator of a related federal settlement within the next two weeks.
The form will contain instructions explaining how consumers may file their claim to receive compensation. Consumers who do not receive a claim form in the mail but believe they may have an eligible claim can visit www.westernunionremission.com or call 1-844-319-2124 for more information on how to file a claim.
Filing a claim is free, so consumers should not pay anyone to file a claim on their behalf.
No one associated with the claims process will call to ask for consumers’ bank account or credit card number. All completed claims forms must be mailed back to the Settlement Administrator by February 12, 2018.
“Unfortunately, con artists use all types of ruses and tall tales to convince people to wire them money – and they sometimes succeed. Some of these ‘send money’ scams may appeal to the target’s humanitarianism or love of family, while others may suggest the would-be victim needs to wire money in order to claim a big sweepstakes prize,” Porrino said.
“The position of the states in this matter was that Western Union must be more vigilant going forward,” Porrino said, “but consumers can protect themselves, too, by exercising great caution in the face of overtures asking that they send money. If a person is being told a loved one is in need or in danger, we urge that he or she proceed with deliberation and make every effort to authenticate the story independently. And if a supposed ‘bargain’ or ‘contest prize’ sounds too good to be true, it probably is. We recommend that they not take the bait.”
Announced by Attorney General Porrino in January 2017, a multi-state settlement with Western Union Company resolved an investigation by the participating states focused on fraud-induced money transfers – specifically, the wiring of money by unwitting consumers to third-party con artists using Western Union’s wire transfer service.
Under the settlement, Colorado-based Western Union was required to develop and put into action a comprehensive anti-fraud program designed to help detect and prevent future incidents in which consumers who are the victims of fraud utilize Western Union to wire money to those defrauding them.
New Jersey was a member of the multi-state Executive Committee that spearheaded the Western Union investigation. Deputy Attorney General Cathleen O’Donnell, assigned to the Division of Law’s Consumer Fraud Prosecution Section, and Division of Consumer Affairs Chief Investigator Laurie Goodman, as well as Investigator/Team Leader Aziza Salikov, handled the Western Union matter on behalf of the State.
Ridgewood NJ, Attorney General Christopher S. Porrino and the Division of Consumer Affairs are urging seniors to avoid becoming the victims of phone fraud schemes and are providing a number of educational tools to help with the effort.
The Division offers brochures online to help consumers identify scams and avoid them. Its latest brochure, Fighting Phone Fraud, also gives information on the federal Do Not Call Registry and how to sign up, along with ways to block robocallers.
The message of the brochures is simple: If you think the call you are receiving is a scam, it probably is.
“Technology has made it easier for disreputable companies and criminals to prey on senior citizens with a simple phone call, often bullying or cajoling people to part with their money. These types of scams are despicable,” said Attorney General Porrino. “We want to arm seniors with information to help them avoid becoming victims and also aid regulatory agencies and law enforcement to stop illegal activity before others are hurt.”
New Jersey law also prohibits telemarketers who have not registered with the Division of Consumer Affairs from calling any New Jersey resident, regardless of whether the resident is on the national Do Not Call Registry or not. Violations of that law can lead to a $10,000 fine for a first offense and up to $20,000 for each subsequent offense.
“There are ways to punish scam autodialer calls in New Jersey, and we urge people who are being subjected to repeated calls to report these efforts to the Division of Consumer Affairs, said Steve Lee, Director of the Division. “Consumers should not engage these callers, but they should make sure to report the phone numbers.”
Those who wish to file a complaint can submit it online.
The scams outlined by the Division in its materials are varied, but all seek either personal information or money. Here are some examples:
A person posing as an agent of the Internal Revenue Service demands money for back taxes.
A person posing as a relative calls, saying he or she is in serious trouble and asks you to send money in order to help.
A person posing as a representative of your electric, gas or water service says that you owe it money and that if it’s not paid now, your service will be shut off.
A caller says he or she is getting in touch on behalf of Medicare or Medicaid and is seeking personal information because you need a new card.
The advice for all of these is the same. Do not give money. Do not give personal information. Hang up immediately.
In order to limit robocalling and scam calling, consumers first should make sure their phone numbers, both land line and cell, are on the federal Do Not Call Registry, which can be done by phone at 888-382-1222 or online at www.donotcall.gov. Unwanted sales calls also can be reported at this line.
Unfortunately, robocallers and scammers will still call. Third-party services may be able to limit these calls. Information on those services can be obtained at www.fcc.gov/consumers/guides/stop-unwanted-calls-texts-and-faxes#call-blocking-resources.
Consumers should also know that spam and autodialer text messages are illegal as well. If you are getting unsolicited offers for free merchandise or services via text, do not respond. Instead, report these messages by filing a complaint with the Federal Trade Commission (complaints.donotcall.gov) or the Federal Communications Commission (consumercomplaints.fcc.gov).
In addition, if your wireless provider is AT&T, T-Mobile, Verizon, Sprint or Bell, you can report offending texts by copying and pasting the original text and forwarding it to 7726, free of charge.
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