FEDERAL CRIMINAL LAWYERS

Money Laundering Charges for Misusing PPP Funds

You think money laundering means hiding drug cash through shell companies. Briefcases of unmarked bills. The Wolf of Wall Street washing millions through offshore accounts. That’s not how it works in PPP fraud cases. In PPP cases, money laundering is SPENDING. Each deposit into your bank account. Each transfer between accounts. Each purchase over $10,000. Every single transaction becomes a separate federal crime carrying up to 20 years.

Welcome to Spodek Law Group. Our goal is to explain the charge that transforms a fraud case into a decades-long sentence: money laundering under 18 USC 1956 and 18 USC 1957. The prosecutors don’t need to prove you were hiding anything. Under 1957, they only need to prove you knew the money came from crime AND you spent more than $10,000 of it. That’s it. You bought a car? Money laundering. Paid off a mortgage? Money laundering. Made three separate transfers totaling $40,000? Three money laundering counts. The act of USING the money you fraudulently obtained is itself a crime that can dwarf the original fraud sentence.

That’s the revelation that nobody explains properly. Amir Dezfooli of Nevada got $11 million in PPP fraud – but it’s the 7 money laundering counts that pushed his sentence past 15 years. Prosecutors stacked the fraud, then stacked the money laundering on top. Each transaction was a separate brick in his prison sentence. The spending pattern determined his fate more than the original lie on the application.

The $10,000 Trap: Each Transaction Is a Federal Crime

Heres the statute that turns spending into crime. 18 USC 1957 criminalizes “monetary transactions in property derived from specified unlawful activity” when the transaction exceeds $10,000. Read that again. MONETARY TRANSACTIONS. Not concealment. Not laundering in any traditional sense. Just transactions.

What counts as a monetary transaction? Deposits. Withdrawals. Transfers between accounts. Wire transfers. Purchases. Payments. Basicly any movement of money through the financial system exceeding $10,000.

If you recieved a $100,000 PPP loan fraudulently and then made 8 transactions of $12,500 each – paying off a credit card, buying a car, transfering to a personal account, paying rent for a year – thats 8 separate counts of money laundering. Each count carries up to 10 years under 1957. Eight counts times 10 years equals 80 years theoretical exposure. For spending your own fraud proceeds.

The $10,000 threshold isnt adjusted for inflation. It hasnt changed since 1986. What was a relativley high bar when the statute was written now captures almost any signficant financial transaction. Buy a used car? Probably over $10,000. Pay off a credit card balance? Probably over $10,000. Make a down payment on a house? Definately over $10,000.

The money laundering exposure from spending fraud proceeds often exceeds the exposure from the underlying fraud itself.

And heres the paradox that makes this even more perverse. The act of DEPOSITING your PPP loan into your business account is potentialy the first money laundering transaction – the exact same thing you were suposed to do with legitimate PPP funds.

1956 vs 1957: Two Statutes, Two Different Traps

OK so theres actualy two money laundering statutes, and prosecutors pick which one to charge based on your conduct. Understanding the difference is essential becuase the penalties and elements differ dramaticaly.

18 USC 1956 is the “real” money laundering statute – the one that requires intent to conceal or promote unlawful activity. This carries 20 years maximum per count. Prosecutors use this when you took active steps to hide the source of funds. Shell companies. Layering transactions. Structuring deposits to avoid reporting requirements.

18 USC 1957 is the spending statute – it just requires monetary transactions over $10,000 knowing the funds were criminaly derived. This carries 10 years maximum per count. No concealment required. No intent to hide anything. Just spending money you knew came from crime.

Heres the inversion that catches defendants off guard. You might think 1957 is the “lesser” charge becuase it only carries 10 years instead of 20. But prosecutors can stack MORE 1957 counts becuase every transaction over $10,000 is a separate violation. Three transactions at 10 years each equals 30 years exposure. The “lesser” statute produces the bigger sentence.

The knowledge requirement also differs. Under 1956, prosecutors must prove you intended to conceal or promote the unlawful activity. Under 1957, they only need to prove you knew the money was criminaly derived. You dont need to know WHAT crime produced the money. You just need to know it came from SOME crime. If you fraudulently obtained PPP funds, you already knew the source was criminal. Every subsequent transaction was with that knowledge.

This creates a wierd outcome. The person who openly spent there PPP money on obvious things – a car, a house, personal expenses – faces potentialy MORE money laundering counts then someone who tried to hide it through complex structures. The simple fraud with elaborate spending equals more exposure than elaborate fraud with simple spending.

Dezfooli’s 15 Years: What Happens When You Keep Spending

Amir Dezfooli’s case is the cautionary tale that everyone facing PPP fraud charges needs to understand. He recieved over $11 million in fraudulent PPP and EIDL loans. He was charged with 3 counts of money laundering and 4 counts of monetary transactions with criminaly derived property. He was sentenced to over 15 years in federal prison.

But heres the part that makes this case uniquley instructive. Dezfooli continued buying real estate with PPP funds AFTER being indicted. Let that sink in. He knew he was under federal indictment for fraud, and he kept spending the proceeds. Each transaction after indictment was another count. Each count was another brick in his sentence.

Todd Spodek has represented clients who made similar mistakes – continuing to spend while under investigation. The psychology is understandable. The money is in your account. The investigation might take years. Life continues. Bills need paying. But every transaction over $10,000 after you know your under investigation is a new federal crime. And prosecutors LOVE charging transactions that occured after the defendant was clearly on notice.

The Dezfooli case also demonstrates the asset forfeiture dimension. He purchased approximately 25 properties with fraud proceeds. Every single property became subject to forfeiture. The government didnt just want him in prison – they wanted everything he bought with the money. He lost the real estate AND got 15 years.

Think about the math that produced that sentence. The base fraud charge might have resulted in 5-7 years. But the money laundering charges – specificaly the transactions with criminaly derived property – stacked additional years on top. The sentence was front-loaded with fraud, then multiplied by spending.

The Stacking Effect: How 3 Transactions Becomes 30 Years

Heres were the numbers get truly terrifying. Money laundering sentences often run CONSECUTIVE to fraud sentences, not concurrent. That means the time stacks. And each money laundering count can run consecutive to the PREVIOUS money laundering count.

Korama Torjagbo of Georgia was convicted of PPP fraud and money laundering after commingling PPP funds with other money and paying personal expenses. His theoretical maximum exposure? Up to 170 years. Thats not a typo. The stacking of fraud counts plus money laundering counts plus tax fraud counts produced a sentancing exposure measured in centuries.

The stacking happens like this:

First, the fraud sentence. Wire fraud or bank fraud, typicaly 3-7 years for signficant PPP amounts.

Second, the first money laundering count runs consecutive. Thats potentialy 10-20 more years depending on which statute.

Third, additional money laundering counts stack on the first one. Each significant transaction adds another potential decade.

Fourth, asset forfeiture strips away everything you bought. Even if you somehow got probation, your losing the house, the car, the investments – everything traceable to fraud proceeds.

Tommy Hawkins, a bank manager in New Jersey, recieved 65 months for coordinating fraudulent PPP applications. His money laundering involved fake payroll checks to conceal how proceeds were actualy spent. The concealment element triggered 1956 exposure instead of just 1957. The position of trust as a bank employee aggravated the sentence further.

According to DOJ statistics, sentences in 2024-2025 are running approximately 40% longer then identical conduct in 2021-2022. The judiciary has lost patience with pandemic fraud. That frustration translates into longer sentences across the board, and the money laundering charges give judges the legal framework to impose those longer sentences.

Heres what the practical stacking looks like for a typical PPP defendant. Say you obtained $200,000 fraudulently. You made 5 major purchases – a car, home down payment, credit card payoff, business equipment, and a wire transfer to family. Thats 5 potential 1957 counts at 10 years each. Your fraud exposure might be 3-5 years based on loss amount. But your money laundering exposure is 50 years. Even if the judge runs everything concurrent, the money laundering charges give prosecutors tremendous leverage in plea negotiations. They can offer to drop 3 counts in exchange for a guilty plea – suddenly your exposure goes from 50 years to 20 years, and you feel like your getting a deal.

The irony is that someone who got $200,000 and just let it sit in their account has FAR less exposure then someone who got $50,000 and spent it on 6 different things. The smaller fraud with more transactions equals more money laundering counts.

They’re Taking Everything: Mandatory Asset Forfeiture

Now heres the system revelation that most defendants dont understand until its to late. Asset forfeiture under 18 USC 982 is MANDATORY upon conviction. Not discretionary. The judge must order forfeiture of anything traceable to fraud proceeds.

That Lamborghini you bought with PPP money? Gone. The house you paid off? Gone. The jewelry, the watches, the investments – everything purchased with fraud proceeds gets seized. And this happens IN ADDITION to your prison sentence. You loose the assets AND do the time.

At Spodek Law Group, we explain to clients that money laundering convictions produce two seperate punishments: incarceration and forfeiture. The Dezfooli case exemplifies this – 15+ years in prison PLUS forfeiture of approximately 25 properties. The government wanted both his freedom and his assets.

The forfeiture process often begins BEFORE conviction. Money laundering charges allow prosecutors to seize assets during the investigation through civil forfeiture. Your bank accounts can be frozen. Your property can be seized. Your ability to fund a defense can be compromised – all before your proven guilty of anything.

The DOJ Fraud Section has seized more than $65 million in cash proceeds plus properties and luxury items from PPP fraud prosecutions. That number continues to grow. When prosecutors add money laundering charges, there not just seeking prison time – there building the legal framework to take everything.

Criminal forfeiture upon conviction is mandatory under 18 USC 982 – the judge has no discretion to let you keep assets purchased with fraud proceeds.

Heres the consequence cascade that destroys families. You commit PPP fraud. You deposit the funds. You buy a house for your family. You get convicted. The forfeiture order strips the house. Your family is homeless. Your in prison. The money laundering charge didnt just add years to your sentence – it took your familys home.

And the commingling issue makes forfeiture even more complicated. If you deposited $100,000 in PPP funds into an account that already had $50,000 of legitimate money, the entire account becomes potentialy tainted. The goverment can argue that every transaction from that commingled account used fraud proceeds. The burden shifts to YOU to trace which dollars were legitimate and which were fraudulent. Without meticulous records, the presumption runs against you.

The practical effect is that commingling – which almost everyone does becuase they deposit PPP funds into there regular business account – creates maximum forfeiture exposure. The $100,000 in fraud proceeds potentially taints $300,000 in total assets if the funds were moved around, invested, or used to generate returns.

“I Didn’t Know It Was Fraud Money” – When This Defense Works

Theres one genuine defense pathway for money laundering charges, and it turns on the knowledge element. Under 1957, prosecutors must prove you KNEW the funds were criminaly derived when you spent them. If you genuinley didnt know, you might have a defense.

But heres the myth that needs busting. The knowledge requirement dosent mean you need to know the SPECIFIC crime that produced the money. You just need to know it came from SOME criminal activity. If you fraudulently obtained PPP funds yourself, you already knew. The knowledge element is automaticaly satisfied becuase you committed the underlying fraud.

The defense works in limited scenarios:

Third-party transactions: If someone else committed the fraud and gave you money without explaining its source, you might genuinley lack knowledge. The spouse who recieved “business income” without knowing about the fraud. The family member who got a “gift.” The business partner kept in the dark.

Commingled funds ambiguity: If legitimate funds were mixed with fraud proceeds and you made transactions from the commingled account, theres potential argument about which funds were used. This dosent eliminate exposure but might reduce the number of proveable counts.

Reliance on advisors: If an accountant or attorney told you the funds were legitimate and you relied on that advice, you might lack the requisite knowledge. But this defense requires documented advice from a professional who examined the situation.

The defense DOSENT work if:

• You obtained the PPP funds through fraud (you knew the source)
• You were told the funds came from fraud (actual knowledge)
• The circumstances made criminal origin obvious (willful blindness)
• You structured transactions to avoid reporting (consciousness of guilt)

Todd Spodek and the attorneys at Spodek Law Group evaluate the knowledge element carefully for every client. For some clients, legitimate lack of knowledge completley eliminates money laundering exposure. For clients who committed the underlying fraud themselves, the knowledge defense is essentialy unavailable.

Theres also a timing dimension to the knowledge defense. If you spent PPP funds beleiving at the time that your application was legitimate – maybe you thought you qualified, maybe you misunderstood the rules – your knowledge at the time of transaction matters. Later learning that the application was problematic dosent retroactivley create knowledge for earlier transactions. The question is what you knew when you spent the money, not what you learned afterwards.

This creates a potential gap for some defendants. Transactions made before you realized there was a problem might be defensible on knowledge grounds. Transactions made AFTER you knew – especially after you recieved a subpoena or target letter – are much harder to defend. The timeline of your knowledge acquisition matters enormusly for determining which transactions are prosecutable.

What Money Laundering Charges Mean for Your Case

Everything above leads to this practical question: given money laundering exposure, what should you do if your facing PPP fraud investigation?

Step 1: Stop Spending Immediately

If your under investigation but not yet charged, STOP making transactions with potentially-tainted funds. Every transaction over $10,000 is another potential count. Every purchase creates more forfeiture exposure. The money sitting in your account is less dangerous then the money you spend.

Step 2: Map Your Transaction History

How many transactions over $10,000 did you make with PPP funds? Each one is potential exposure. Understanding your transaction count tells you your theoretical money laundering exposure before negotiations even begin.

Step 3: Assess Concealment Conduct

Did you take steps to hide the source of funds? Shell companies, structuring, layered transactions – these trigger 1956 exposure (20 years) rather then just 1957 (10 years). The distinction matters enormusly for sentencing exposure.

Step 4: Identify Forfeiture Assets

What did you buy with the proceeds? Everything traceable to fraud is subject to forfeiture. Understanding what you stand to lose – beyond prison time – shapes the full picture of consequences.

Step 5: Consider Cooperation Value Early

Information about other participants, other fraudulent applications, or systemic issues can be valuable to prosecutors. Early cooperation – before charges – creates leverage that might result in fewer money laundering counts or no money laundering charges at all.

Step 6: Get Counsel Before Investigators Arrive

The window to influence charging decisions exists during investigation, not after indictment. Once money laundering charges appear on your indictment, there locked in unless negotiated away. Early counsel involvement can shape wheather those charges ever appear.

Step 7: Understand the Extended Timeline

The statute of limitations was extended to 10 years for pandemic fraud. Your 2020 PPP loan can be charged until 2030. The fact that nothing has happened in four years dosent mean your safe. The investigation might be building. The money laundering analysis might be ongoing.

Call Spodek Law Group at 212-300-5196 for a consultation. The call is free. The mistake of not understanding your money laundering exposure – or making additional transactions that become additional counts – is measured in years of your life.

Money laundering charges for PPP fraud arnt about washing money through shell companies. There about SPENDING money you shouldnt have had. Each transaction over $10,000 is a federal crime. Each count stacks on the previous count. The sentence can dwarf the underlying fraud. And mandatory forfeiture takes everything you bought. Understanding that reality – and building a defense strategy around it – is the only path forward.