Jury Convicts San Diego Man in $35 Million Dollar Securities Fraud and COVID-Relief Fraud Scheme

Press Release

SAN DIEGO - After an eight-day trial, a federal jury has convicted Denny Thakorbhai Bhakta on all 25 counts of securities fraud, bank fraud and money laundering in connection with a $35 million dollar investment fraud scheme and COVID-relief fraud scheme.

Bhakta's uncle, who was swindled out of $4.5 million, testified during the trial that he came to the U.S. as an immigrant, with only a suitcase and $8 in his pocket, and because of the defendant, he "lost everything he had worked for in 57 years in America. Everything." Bhatka's fraud scheme targeting numerous victims, including a childhood friend who lost hundreds of thousands of dollars; a friend of his family who lost $1.6 million; a high school classmate and her father who together lost more than $800,000; a cousin who lost $40,000; and an 88-year-old investor who was defrauded out of $50,000.

"This sophisticated scheme unraveled after several victims came forward and exposed the fraud," said U.S. Attorney Tara McGrath. "Many of the victims are people who represent the best of us-hard working, honest Americans who made investments based on a trusted relationship. The jury's verdict is a resounding affirmation that justice will prevail over deceit."

The evidence at trial showed Bhakta solicited investors in his companies Fusion Hotel Management LLC and Fusion Hospitality Corporation (collectively "Fusion"). Between at least 2016 and up to 2021, Bhakta falsely told investors that Fusion routinely acquired discounted blocks of hotel rooms from Hilton, which Fusion then sold to United Airlines and other companies at a higher price for a significant profit. To support these lies, Bhakta provided fabricated bank statements, fake contracts, and profit and loss statements purporting to show millions in revenue and profit. Instead of buying blocks of hotel rooms with investors' funds, however, Bhakta used the money he obtained from investors for gambling, to make Ponzi-style payments to other investors, and to pay for Bhakta's personal expenses, including a Mercedez-Benz S-Class and a Porsche 911 Turbo S.

During the trial, prosecutors introduced evidence that Bhakta was flown into Las Vegas on the Wynn private jet and in just one 7.5-hour gambling binge in 2018, Bhakta lost $1 million at the Wynn Las Vegas. Through casino records, prosecutors demonstrated how Bhakta repeatedly took investors' money straight to casinos and gambled (and lost) millions of dollars of investor money.

As prosecutors argued at trial, in 2020, Bhakta doubled down on the fraud. Through the Paycheck Protection Program ("PPP"), Bhakta applied for 18 separate PPP loans totaling $4.4 million. To fraudulently obtain the PPP loans, and unbeknownst to his victim/investors, Bhakta created fake W-2 and other IRS documents and used the names and personally identifying information of his victim-investors to claim them as employees of Fusion and other entities under Bhakta's control. Bhakta used the more than $4.4 million he received in PPP loans to keep the Ponzi scheme going and to continue gambling and losing money at casinos.

Bhakta was remanded into custody after the jury's verdict. A sentencing hearing is set for January 25, 2025, at 9:00 a.m. in Courtroom 4D.

This case is being prosecuted by Assistant U.S. Attorneys Kevin Mokhtari and Eric Olah.

The Securities and Exchange Commission has also take civil action against the defendant.

DEFENDANTS Case Number 21cr3352-JLS

Denny Thakorbhai Bhakta Age: 42 San Diego, CA

SUMMARY OF CHARGES

Securities Fraud-Title 15, U.S.C. §§ 78j(b), 78ff; Title 17, C.F.R. § 240.10b-5

Maximum penalty: Twenty years in prison and $5 million fine

Bank Fraud-Title 18, U.S.C., Section 1344(2)

Maximum penalty: Thirty years in prison and $1 million fine

Money Laundering- Title 18, U.S.C., Section 1957

Maximum penalty: Ten years in prison and fine twice the amount of the criminally derived property involved in the transaction

INVESTIGATING AGENCIES

Federal Bureau of Investigation

U.S. Securities and Exchange Commission, Los Angeles Regional Office

Contact

Updated November 1, 2024