Two co-founders of Canopy Financial Inc., a bankrupt Chicago-based health savings account administrator, are accused of defrauding investors of approximately $75 million and misappropriating nearly $19 million from accounts used to finance health care expenses.
Jeremy Blackburn, Canopy’s former president and COO, was charged in December in a civil enforcement action filed by the U.S. Securities and Exchange Commission.
New charges filed Monday, March 1, by the FBI in Chicago allege that Blackburn and Anthony Banas, Canopy’s former chief technology officer, misappropriated the money from HSAs and flexible spending accounts that Canopy held and administered.
In a criminal filing Monday in Chicago, Blackburn and Banas were charged with two counts of wire fraud, the FBI said in a release.
Canopy, which was founded in 2004, had been one of the country’s fastest-growing privately held companies before it entered bankruptcy proceedings in late November. At that time, a special committee of outside directors reported information to federal law enforcement officials and continues to cooperate with the ongoing investigation, the FBI said.
Both former executives are accused of using false information about Canopy’s financial condition, including a bogus auditor’s report and falsified bank statements, to fraudulently obtain about $75 million from several private equity investors in 2009.
Approximately $39 million of the total was used to buy out other Canopy investors, including approximately $1.6 million that went to Blackburn and $975,000 that went to Banas, while an additional $29 million obtained from investors was deposited into Canopy’s operating accounts, according to the FBI.
The pair are accused of misappropriating Canopy operating funds for their own use, including: $2 million for Blackburn’s shared interest in a private jet; $1 million to a luxury automobile dealer for Blackburn; $1 million to a ticket broker for Blackburn; and $300,000 for Banas’ investment in a nightclub.
The FBI also alleges that the men used phony bank statements to conceal the diversion of approximately $19 million from HSAs and FSAs to Canopy’s operating accounts in 2009, which they then misappropriated for their own use.
The charges seek forfeiture of $94 million—$75 million in investment fraud and $19 in misappropriated funds—as well as automobiles and watches from both defendants.
Blackburn, 36, formerly of Malibu, California, was released in December on a $1 million unsecured bond. Blackburn and Banas, 32, of Chicago, will be arraigned at a later date in U.S. District Court.
Canopy, which had offices in Chicago, Plainsboro, New Jersey, and San Francisco, developed and marketed software programs for banks and health care payers to administer and process payments involving health-related savings and spending accounts.
The company’s Web site was replaced with a single page containing the addresses of its three locations and phone numbers. A call to its media relations department was not returned.
The U.S. Attorney’s Office said it will send letters to approximately 1,600 known or potential identified victims of the alleged custodial account fraud. Individuals who believe they are victims and have not received a letter by March 15 should call (866) 364-2621, which is toll-free, or e-mail email@example.com and provide their name and address.