Eduardo Hernandez, of Lindenhurst, Christopher Flagg and Daquan Lloyd, both of Copiague, plead guilty in $2M financial fraud scheme, federal prosecutors say

Three Long Island men were among four co-conspirators who admitted to stealing more than $2 million from a Silicon Valley financial services company in what federal officials described as a "sprawling multiyear complex financial fraud scheme," according to the United States Attorney’s Office for the Eastern District of New York.

Eduardo Hernandez, 33, of Lindenhurst; Christopher Flagg, 28, of Copiague; and Daquan Lloyd, 29, of Copiague have each pleaded guilty before U.S. District Judge Gary Brown to money laundering conspiracy for running a four-year scheme to create phony brokerage accounts to access short-term cash advances through an options trading scheme, federal officials said. A fourth defendant, Corey Ortiz, 29, of Greensboro, North Carolina also pleaded guilty in the scheme.

"Each defendant was convicted of their roles in a sprawling and complex nationwide scheme organized from Long Island to steal millions of dollars that were intended for legitimate investors and launder the proceeds of their crime," United States Attorney for the Eastern District Breon Peace said in a statement.

Prosecutors alleged that between December 2018 and January 2023, the defendants opened hundreds of straw accounts enabling them to receive millions of dollars in small cash advances known as "instant deposits" from a Menlo Park, California financial services firm. Those types of advances are intended to allow legitimate companies to receive cash before a wire transfer clears, the U.S. Attorney’s Office said.

The co-defendants then used the advances to repeatedly buy "thinly traded and highly speculative stock options" at above-market rates, while matching their bids with offers to sell the "overpriced stock options" using separate accounts they also controlled, according to the indictment.

Additionally, the instant deposits were set up with bank accounts that had little or no balance, prosecutors said.

The defendants, who allegedly recruited dozens of individuals to assist in the scheme, then laundered the funds through electronic banking apps, according to the indictment.

The four men face up to 20 years in prison and a $2 million in restitution at sentencing later this year.

Attorneys for the four defendants could not be immediately reached for comment.