Cybercrime , Fraud Management & Cybercrime , Fraud Risk Management

Steve Bannon, 3 Others, Indicted for Online Fraud

Prosecutors Allege Former Trump Campaign Manager, Others Fleeced Online Donors
Steve Bannon, 3 Others, Indicted for Online Fraud
Former Trump Campaign Manager Steve Bannon (Photo: Gage Skidmore via Wikipedia/CC)

Steve Bannon, the former White House strategist and 2016 campaign manager for President Donald Trump, and three others have been indicted on federal wire fraud and money laundering charges for allegedly fleecing online donors who contributed money to a campaign to build a wall along the U.S. southern border, the Justice Department announced Thursday.

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The money was solicited by Bannon and the others to fund a nonprofit charity called "We Build the Wall," which collected over $25 million from online donors to help the U.S. government build a physical wall along the U.S. southern border, federal prosecutors say. But the four suspects allegedly diverted the funds through other charities and shell companies and then used some of the money for personal expenses, prosecutors say.

Bannon, 66, along with Brian Kolfage, 38, who founded the organization; Andrew Badolato, 56; and Timothy Shea, 49; are charged with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. Each of these charges carries a maximum sentence of 20 years in federal prison.

Bannon was arrested Thursday morning by investigators with the U.S. Postal Inspection Service. Thursday afternoon, Bannon pleaded not guilty at an initial court appearance, according to The Hill. A federal magistrate judge agreed to release him on a $5 million bond with certain travel restrictions.

Prosecutors allege the four defendants continued to raise online donations in 2018 and 2019 from hundreds of thousands of people, knowing that none of the money would be transferred to the federal government or used for the private construction of a border wall.

"While repeatedly assuring donors that Brian Kolfage, the founder and public face of We Build the Wall, would not be paid a cent, the defendants secretly schemed to pass hundreds of thousands of dollars to Kolfage, which he used to fund his lavish lifestyle," says Audrey Strauss, the acting U.S. attorney for the southern district of New York.

Alleged Scheme

The alleged online scheme started in December 2018, when Kolfage created a fundraising organization called "We the People Build the Wall" through an unnamed crowdfunding website, according to the federal indictment unsealed Thursday.

The site promised that 100% of all donations would be transferred to the federal government for the purpose of building the border wall, according to the indictment. The site raised $17 million within a few days.

Not long after, federal prosecutors say, the crowdfunding site that hosted the organization grew suspicious of its intent, suspended its webpage and demanded to see paperwork from Kolfage about the legal status of the nonprofit and how the money would be later transferred to the U.S. government, according to the indictment.

Bannon and Badolato, who is described in the indictment as a venture capitalist, became involved with We the People Build the Wall and switched its name to We Build the Wall. Prosecutors allege that Bannon and Badolato created an unnamed nonprofit organization and transferred $20 million in funds to it, while assuring donors that the money would go toward constructing a border wall.

Bannon and Kolfage issued public statements about not taking salaries and using the money as part of a regulated charitable organization, according to federal prosecutors.

"In particular, to induce donors to donate to the campaign, Kolfage repeatedly and falsely assured the public that he would 'not take a penny in salary or compensation' and that '100% of the funds raised . . . will be used in the execution of our mission and purpose' because, as Bannon publicly stated, 'we're a volunteer organization,'" according to the U.S. Attorney's Office.

Prosecutors allege that Kolfage took $350,000 from the donations for his personal use, while a Bannon nonprofit received $1 million from the We Build the Wall organization. He then allegedly used some of that money for his personal expenses, according to the indictment.

Shea allegedly created a shell corporation and funneled to it some of the money online donors gave to the We Build the Wall organization, according to the indictment. Much of the alleged fraud was done using fake invoices and sham "vendor" agreements, according to prosecutors.

In text messages between the two, Kolfage told Badolato to keep his pay arrangement "confidential," and that any transfer of money be kept on a "need to know" basis, according to the indictment.


About the Author

Scott Ferguson

Scott Ferguson

Managing Editor, News Desk

Ferguson is the managing editor for the news desk at Information Security Media Group. He's been covering the IT industry for more than 13 years. Before joining ISMG, Ferguson was editor-in-chief at eWEEK and director of audience development for InformationWeek. He's also written and edited for Light Reading, Security Now, Enterprise Cloud News, TU-Automotive, Dice Insights and DevOps.com.




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