Joint ICE HSI, IRS investigation results in prison sentence for multi-million dollar securities and tax fraud scheme

SAN DIEGO – A local businessman was sentenced to 12 months in prison following a joint investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the Internal Revenue Service (IRS).

On March 17, David John Nava, 63, of La Jolla was sentenced in federal court for his role in multiple felonies related to the operation of his financial firm, Surf Financial Group, LLC, including conspiring to defraud shareholders of publicly traded companies, transmitting millions of dollars through an unlicensed money transmitting business, and falsifying multiple years of federal tax returns. He was also ordered to pay $3,716,888.27 in restitution.

Nava pleaded guilty on Oct. 7, 2020, to one count of conspiracy to commit securities fraud, one count of operating an unlicensed money transmitting business, and one count of tax fraud. Pursuant to his plea agreement, Nava agreed to forfeit more than $3.1 million for his crimes.

According to the plea agreement and sentencing papers, Nava managed Surf Financial Group, LLC despite federal securities regulators permanently banning and censuring him in 1994 from participating in the industry. Nava admitted that he and other co-conspirators, including a licensed attorney, converted the debt of various publicly traded companies under materially false and fraudulent pretenses into unrestricted stock and then sold the stock for profit. Nava further admitted that he and his co-conspirators carried out their fraudulent scheme by entering into agreements where Nava sold shares of various entities’ stock on public exchanges after fraudulently claiming an exemption from the U.S. Securities and Exchange Commission’s (SEC) registration requirements for selling securities in the public marketplace.

To conceal his involvement in the securities fraud scheme, Nava admitted using various nominees to ensure that, as Nava described it, he was a “ghost” in the transactions. Brokerage firms relied on the purported truth and accuracy of the attorney opinion letters in evaluating whether to clear the sale of shares of the restricted stocks on public markets. After the stocks were cleared for sale as a result of the false attorney opinion letters, Nava and his co-conspirators sold millions of shares of these stocks to the investing public.

Nava further admitted that, from approximately 2017 to 2018, he operated an unlicensed money transmitting business as a means to transmit financial proceeds from foreign locations, including Hong Kong and the Bahamas, as a way to disguise the source, origin and control of the proceeds.

As stated in his plea agreement, in 2017 Nava entered into a business partnership with at least one person who resided in Mexico and delivered dairy products for a living. To conceal Nava’s control over the money transmitting business, Nava directed the Mexican resident to open a bank account at a financial institution in San Diego, and to transmit millions of dollars in funds as directed by Nava. Nava failed to register his money transmitting business with the U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, as required under federal law.

“This defendant stepped outside the boundaries of legal business practices and used his business acumen and connections for a criminal purpose,” said U.S. Attorney Randy Grossman. “He concocted a complex, international scheme to deceive shareholders, launder proceeds of the fraud through Mexico, and hide profits from the IRS. The sentence imposed by the court sends a message that serious crimes result in serious consequences.” Grossman thanked the prosecution team and HSI and IRS agents for their excellent work on this case.

“Today’s sentencing holds David Nava accountable for his crimes against the American tax system he cheated and the innocent Americans he victimized,” said IRS Criminal Investigation Special Agent in Charge Ryan L. Korner. “Schemes like this cannot and will not go unnoticed. IRS Criminal Investigation is committed to working with our partners to investigate fraudulent schemes and trace the proceeds. We will hold fraudsters accountable and they will face the consequences, including serving time in federal prison.”

HSI is a directorate of ICE and the principal investigative arm of the U.S. Department of Homeland Security (DHS), responsible for investigating transnational crime and threats, specifically those criminal organizations that exploit the global infrastructure through which international trade, travel, and finance move. HSI’s workforce of over 10,400 employees consists of more than 7,100 special agents assigned to 220 cities throughout the United States, and 80 overseas locations in 53 countries. HSI’s international presence represents DHS’s largest investigative law enforcement presence abroad and one of the largest international footprints in U.S. law enforcement.

Learn more about HSI’s mission to combat financial fraud @HSISanDiego.