Orinda Man Gets 40 Months for $2.7M Card Fraud

SAN FRANCISCO – Alan Safahi, 62, of Orinda, California, is headed to federal prison after being sentenced to 40 months for a brazen fraud scheme involving prepaid debit cards. The scheme created a staggering $2.7 million in unfunded liabilities, and Safahi was convicted on one count of bank fraud, four counts of wire fraud, and one count of money laundering following a four-week bench trial. The sentence was handed down today by Senior United States District Judge Susan Illston.

Safahi’s operation, run through his company CardEx, was deceptively simple. He collected money from clients for prepaid debit cards, accurately reported the card balances to those clients, but then systematically lied to the bank funding the cards. He employed a “funding on demand” system where he only reported the amount spent on a card as its balance, pocketing the difference. For example, a $100 card with only $10 spent would be reported to the bank as having a $10 balance – allowing Safahi to siphon off the remaining $90.

The house of cards came crashing down on September 25, 2014, when Safahi, while shutting down CardEx, ordered an employee to finally provide the bank with accurate card balances. The real total balance on the cards was a shocking $2,774,953 – a far cry from the fraudulently reported $93,734. This revealed the nearly $2.7 million in unfunded liabilities Safahi had accumulated through his scheme.

Evidence presented at trial showed Safahi didn’t just defraud the bank; he stole directly from his clients, betraying their trust. The proceeds of the fraud weren’t squirreled away, either. Safahi used the illicit funds to purchase an Orinda home, issuing an $80,000 cashier’s check to himself just two days before reporting the true card balances – a key component of his money laundering conviction. He lived large on stolen money, paying off debts and indulging in a lavish lifestyle.

“Safahi tricked both his bank and his clients,” prosecutors argued in a sentencing memo. “His clients entrusted their customers’ money to him, having been misled to believe it was protected and secure. Through lies and his fraudulent ‘funding on demand’ scheme, Safahi also misled his bank.” Senior U.S. District Judge Illston agreed, imposing the 40-month sentence along with a $100,000 fine and three years of supervised release following his imprisonment. Safahi is ordered to surrender on May 4, 2023, to begin serving his time.

Assistant U.S. Attorneys Robert David Rees and Benjamin Kurtis Kleinman prosecuted the case, aided by Llessica Chan Fierro, Veronica Hernandez, Olivia Hawkins, Leeya Kekona, and Karina Ruiz. The investigation was conducted by the Internal Revenue Service-Criminal Investigation (IRS-CI). A hearing to determine the amount of restitution Safahi will be required to pay is scheduled for March 31.

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