WASHINGTON, D.C. – A Connecticut man is among five former principals of an aerospace start-up who were indicted March 18 for defrauding investors of $250 million, according to U.S. Attorney Edward Martin Jr.
The indictment charges Jamil Swati, Erlend Olson, John Gallagher, Stephen Buscher, Joseph Fargnoli – former executives of Washington, D.C.-based Theia Group Inc.— with a multi-year scheme to defraud investors and lenders in a scheme to build and launch satellites at a cost of $10 billion to $15 billion. Olson is also charged with evading more than $3.9 million in personal federal income taxes. Swati is a Lakeville, Connecticut, resident.
On March 17 law enforcement arrested Olson in Albuquerque, New Mexico; and Buscher in Memphis. The following day they arrested Swati in Bridgeport, Connecticut; Gallagher in Broomall, Pennsylvania; and Fargnoli in Rochester, New York.
According to the indictment, Theia planned to launch 112 satellites starting in 2022. Theia’s principals originally planned to raise the requisite funds from various nation-states by promising perpetual data and analytics for an upfront cost of $2 billion.
However, in the six years of its existence, Theia was unsuccessful in obtaining any funding except for approximately $250 million in loans and investments that Theia’s principals induced by fraud, according to the U.S. Attorney’s office.
In 2021, Theia’s largest creditor FCS Advisors successfully moved to have the company put into receivership in a filing in U.S. District Court of the Southern District of New York. It was also at that time the company lost its FCC license to operate a satellite. In the filing, FCS quoted Theia’s counsel as saying, “There is no company today. There is no money being spent in any meaningful way … All there really is a license and a business plan.”
Olson, Gallagher, Buscher, Fargnoli, and Swati’s fraud scheme allegedly included materially false statements about revenue from non-existent government contracts, provision of multiple false financial statements, including a fake $6 billion escrow account statement, and false representations about Theia’s technical capabilities, the indictment reads.
The indictment further alleges that, between 2018 and 2020, Theia’s founder, Erlend Olson, concealed from the IRS millions of dollars in compensation he received from Theia.
In addition to not filing tax returns or paying any taxes for 2018 through 2020, Olson allegedly directed his compensation from Theia to a nominee entity called Meridian Vector Corp. (MVC). Olson then used MVC funds to pay personal expenses such as personal debts, a private jet membership, $64,500 annual rent payments for his home, a new Land Rover, and a pair of condominiums in Las Vegas. Olson also allegedly evaded payment of taxes that he owed the IRS for tax years 2009 through 2011 by directing that his pay and bonuses not be reported to the IRS.
The five defendants are each charged with one count of conspiracy to commit wire and mail fraud. Olson also is charged with five counts of wire fraud, one count of mail fraud, and four counts of tax evasion. Gallagher is also charged with five counts of wire fraud and one count of mail fraud. Buscher also is charged with three counts of wire fraud. Fargnoli is also charged with two counts of wire fraud. Swati is also charged with one count of wire fraud.
If convicted, they face up to 20 years in prison for the conspiracy count, as well as up to 20 years in prison for each wire fraud or mail fraud count. Each also face a period of supervised release, restitution, monetary penalties, and forfeiture. Olson faces up to five years in prison for each tax evasion count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FDIC Office of Inspector General and IRS Criminal Investigation are investigating the case.
