Bankruptcy Bandit: MD Man Gets 90 Months for $1.8M Scam

SAN JUAN, Puerto Rico – Osakwe Ismael Osagbue, a man from Maryland, will spend the next seven years and six months behind bars after a federal judge sentenced him to 90 months in prison for a brazen scheme to steal over $1.8 million from federal bankruptcy courts. Osagbue, 38, was convicted on charges of mail and wire fraud, falsification of bankruptcy records, and aggravated identity theft. The sentencing, handed down July 14, 2025, sends a clear message: exploiting the bankruptcy system comes with a hefty price.

The scheme, meticulously unraveled by the U.S. Attorney’s Office for the District of Puerto Rico and the U.S. Secret Service, spanned from 2022 through April 2024. Osagbue didn’t bother with complex hacking or elaborate cons. Instead, he preyed on the system itself, using the Federal Judiciary’s Public Access to Court Electronic Records (PACER) to identify bankruptcy cases with unclaimed funds – money legally owed to creditors or individuals. He then crafted fraudulent applications, complete with stolen identities and forged signatures, requesting those funds be diverted to accounts he controlled.

Court documents reveal a chilling level of detail. Osagbue didn’t just submit the applications; he followed up with fraudulent emails impersonating the victims whose identities he’d stolen. Once payments hit his accounts, he’d immediately withdraw the cash from ATMs, effectively laundering the stolen funds. The scope of the fraud was staggering, impacting a total of twenty-eight United States Bankruptcy Courts across the nation. The courts included those in Puerto Rico, Alabama, Arizona, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Utah, Washington, Washington D.C., and Wisconsin.

Osagbue was originally indicted on April 3, 2024, and entered a guilty plea on February 19, 2025. While he attempted to siphon off over $1.8 million, the full extent of the funds successfully stolen remains under investigation. The U.S. Bankruptcy Court for the District of Puerto Rico first flagged the suspicious activity, triggering the federal investigation that ultimately brought Osagbue to justice. The Secret Service’s involvement underscores the growing threat of sophisticated financial crimes targeting government institutions.

“This sentencing reflects the US Attorney’s Office ongoing commitment to prosecuting sophisticated fraudsters who abuse the system,” stated W. Stephen Muldrow, United States Attorney for the District of Puerto Rico. “Thanks to the relentless efforts of our multiagency partners, we will continue to aggressively pursue accountability for perpetrators whose actions impact the integrity of the United States courts and the integrity of the United States bankruptcy system.” Assistant U.S. Trustee Monsita Lecaroz-Arribas added, “Filing fraudulent unclaimed funds requests strike at the integrity of the bankruptcy system. This sentence will go a long way in protecting it.”

The case serves as a stark reminder that even seemingly secure systems are vulnerable to exploitation. Federal authorities are urging bankruptcy courts nationwide to review their procedures and enhance security measures to prevent similar schemes in the future. Osagbue’s conviction is a victory for those tasked with safeguarding the integrity of the federal judiciary, but the fight against financial crime is far from over. Expect increased scrutiny of unclaimed funds requests and a crackdown on identity theft related to bankruptcy proceedings.