According to an article in the New York Times written by Alan Rappeport who covers the Treasury Department, the IRS has started using artificial intelligence to investigate tax evasion at multi-billion partnerships as it looks for ways to better police hedge funds, private equity groups, real estate investors and large law firms. The passing of Inflation Reduction Act set aside 80 Billion taxpayer dollars to target the wealthiest Americans to tackle complex tax cases.
The Inflation Reduction Act was passed on August 12, 2022 by the House of Representatives with all Democrats voting for it and all Republicans voting against the Bill with a 220 – 207 vote.
According to the IRS News site, the Founder of a purported artificial intelligence-driven fund has been charged with defrauding clients. An IRS criminal complaint was filed in federal court in Brooklyn charging Mina Tadrus, the founder and chief executive officer of Tadrus Capital, LLC, with wire fraud in connection with a scheme to steal from clients of his purported hedge fund. Tadrus was arrested this morning in Tampa, Florida and made his initial appearance in federal court in the Middle District of Florida where he was released on a $100,000 bond.
Breon Peace, United States Attorney for the Eastern District of New York, James Smith, Thomas M. Fattorusso, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York Field Office (CI), and Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI) announced the arrest and charges.
“As alleged, the defendant preyed on the Egyptian-American Coptic Christian community through a scheme built on false promises that his purported artificial intelligence-driven hedge fund would earn them guaranteed annual returns, when in reality he never invested a dime and just used new investor money to pay the guaranteed monthly returns and line his own pockets,” stated United States Attorney Peace. “This Office will vigorously prosecute those who, like the defendant, claim to use cutting edge technology but instead are committing old-fashioned fraud against the public to enrich themselves.”
Mr. Peace expressed his appreciation to the U.S. Securities and Exchange Commission’s New York Regional Office for its assistance in this matter.
According to the complaint, between September 2020 and July 2023, Tadrus, a former registered stockbroker, operated Tadrus Capital LLC. Tadrus promised clients he had met at a Coptic Christian Church in Brooklyn and elsewhere that its artificial intelligence-driven trading strategies would earn them guaranteed annual returns of 30% or more. Tadrus did not appear to have engaged in AI-based algorithmic trading. Instead, Tadrus used the investors’ funds to pay a few employees and purchase luxury goods and expensive meals for himself and make good on the fraudulent “returns” to new investors. In total, Tadrus misappropriated at least $5 million from his victims.
The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, Tadrus faces up to 20 years in prison.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Genny Ngai and John O. Enright are in charge of the prosecution.
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