Montrose Man Pleads Guilty to Adult Webcam Business Scam that Conned Victim Investors Out of Nearly $1.2 Million

LOS ANGELES - A Montrose man pleaded guilty today to defrauding investors out of more than $1 million by making false promises that they would receive an ownership interest in several adult entertainment webcam websites and then using their money on personal expenses, including luxury items.

Patrick Khalafian, 54, pleaded guilty to one count of wire fraud.

According to his plea agreement, from November 2009 to October 2016, Khalafian solicited investments for businesses - including 168 Entertainment LLC, Empire Entertainment Group Inc., and EEG LLC - that purportedly developed and operated adult entertainment websites.

Khalafian falsely represented to victims that their investments would be used for business operations, including developing software and the platform for the proposed websites, paying for computer servers, hiring employees, and purchasing advertising. He also falsely promised that the victims would be repaid for their investments by a specific date, that they would receive ownership interests in the companies, and would receive a share of the companies' profits.

Rather than investing the victim's money, Khalafian instead used their funds to pay off his debts, including to prior victims, and to fund his own lifestyle, including to pay for gambling expenses and luxury shopping sprees.

To lull the victims into believing that their funds were being used as he had promised, Khalafian lied to his victims about the status of the adult entertainment websites purportedly being developed by the companies in which they had invested. Khalafian eventually stopped responding to victims and disconnected and changed his phone number and email address to evade their inquiries.

For example, in July 2015, Khalafian met with one victim at Mastro's Steakhouse in Beverly Hills and falsely represented at the meeting that a $1 million investment from the victim would be used to pay for business expenses such as computer servers, employees, and advertising for the adult webcam business. Later that month, the victim - relying on Khalafian's false promises - wired $1 million to a Khalafian-controlled bank account.

On the same day he received the funds, Khalafian transferred $200,000 of the victim's money to an account to pay his rent, for luxury cars, and other personal expenses. The day after he received these funds, Khalafian used $66,000 of the victim's money to purchase a new Ford F-150 truck. He also used more than $100,000 of the victim's money at casinos, to pay back another investor, to pay his rent, and on luxury shopping sprees at retailers such as Tiffany, Barney's, Fendi, Saks Fifth Avenue, and Louis Vuitton. Khalafian never paid the victim back any of his investment, and he stopped responding to the victim's messages in October 2016.

Khalafian also admitted to conning two other victims in 2015 and 2016 out of $80,000 and $90,000, respectively, using their money on personal expenses and not his adult webcam business. Khalafian paid back neither victim any of their money.

In total, Khalafian's fraud caused a total loss of at least $1.17 million.

United States District Judge André Birotte Jr. scheduled a February 21, 2025 sentencing hearing, at which time Khalafian will face a statutory maximum sentence of 20 years in federal prison.

The FBI investigated this matter.

Assistant United States Attorney Roger A. Hsieh of the Major Frauds Section is prosecuting this case.

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