United States v. Safi et al. (Case No. 24-10200): Defense Strategies for the "Burner Phone" Insider Trading Indictment

Securitieswhite-collar defensemassachusetts
Written By Eric Rosen

Executive Summary: The Unsealed Indictment

If you have been named as a defendant, a co-conspirator, or a "relevant individual" in the recently unsealed Superseding Indictment United States v. Safi et al. (Criminal No. 24-10200), you are facing one of the most complex financial crime prosecutions currently pending in the District of Massachusetts. Contact Dynamis LLP attorney Eric Rosen, who has significant insider trading experience in Massachusetts and beyond, for a free consultation.

Federal prosecutors have charged eight individuals in a massive, international conspiracy involving Securities Fraud and Money Laundering . The government alleges a scheme spanning nearly a decade, involving applications like Telegram and Signal, code words, and the illicit trading of stocks such as Alexion Pharmaceuticals, Tiffany & Co., and Atos S.E.

This blog post breaks down the specific allegations, the digital evidence the government claims to possess, and the immediate steps required for a robust legal defense.

Who Is Charged in U.S. v. Samy Fadi Khouadja, et al.

The indictment targets a specific group of international traders and insiders:

Samy Fadi Khouadja: Allegedly a former investment banker previously residing in France and the UAE .

Eamma Safi (a/k/a "TT," "Yummy," "Situatie Packered," "Roman Kna"): Accused of sharing ownership in a Paris restaurant with Khouadja .

Zhi Ge (a/k/a "Josh Ge," "Josh Gez," "Jay Gat"): A resident of Singapore allegedly recruited into the scheme in 2016 .

Christophe Dong, Julien Liu, and Patrick Chou: Residents of France and Hong Kong implicated in the trading ring

Cheuk Yue Lee (a/k/a "Ryan," "m100"): Based in Hong Kong .

Dev Ananth Durai (a/k/a "Devah"): Based in Singapore .

  • Warning for Unindicted Individuals: The indictment lists twelve "Co-Conspirators" (CC-1 through CC-12) and eight "Individuals" (Individual 1 through 8) who have not yet been publicly charged . If you fit the description of a trader in Singapore, the U.S., or Europe who interacted with the defendants listed above, you may be a target of the ongoing investigation. Contact us!

The Prosecution's "Digital Evidence": Decoding the Allegation

The Department of Justice (DOJ) has built its case on the alleged interception of thousands of messages from encrypted platforms. A primary defense strategy will be challenging the admissibility and interpretation of these communications.

1. The "Socks and Shoes" Code

The government alleges the defendants used "tradecraft" to conceal their activities. The indictment cites messages where SIM cards are referred to as "socks" and mobile phones as "shoes".

  • Alleged Evidence: Prosecutors cite a message from Zhi Ge stating, "Did you get the shoes with the socks?" and "Is that shoe good for running?"

  • Defense Angle: The government must prove these terms refer to illicit equipment used for fraud, rather than innocent items. Context is subjective, and "coded language" interpretations are frequently challenged in court.

2. Codenames for Public Companies

The prosecution claims the group assigned female names to corporate acquisition targets to avoid detection algorithms.

  • Alleged Evidence: Pinnacle Foods was allegedly referred to as "Patricia" or "party," while Kindred Healthcare was referred to as "Kelly" .

    Example: A text cited in the indictment reads, "Kelly is missing for 2 weeks... we are all getting out," which the government interprets as a discussion about a delay in Kindred’s acquisition.

3. The "Meat" and "Chedder" Money Laundering Charges

The money laundering counts (Counts Five and Six) rely on the movement of funds under the guise of legitimate business. The indictment alleges the defendants referred to illicit profits as "meat" (measured in "kg") and money as "chedder".

  • Alleged Evidence: Messages discussing the logistics of "meat business" and transferring "40kg meat".

  • Defense Angle: Tracing the actual source of funds is essential. We work with forensic accountants to demonstrate that transfers often have legitimate business origins, challenging the government's assertion that all transfers were proceeds of fraud.

The Securities Involved: Did You Trade These Companies?

The indictment focuses on trades involving specific companies during specific timeframes. If you traded these securities while in contact with the defendants, your transactions are likely under scrutiny:

Legal Peril: Conspiracy and Extradition

The defendants face charges under 18 U.S.C. § 1349 (Conspiracy to Commit Securities Fraud) and 18 U.S.C. § 1956(h) (Money Laundering Conspiracy).

The "Overt Act" Danger: The government alleges specific overt acts, such as a meeting in a Paris restaurant on November 19, 2016, and cash hand-offs in Vienna, Austria. Because the indictment alleges a conspiracy, prosecutors can attempt to hold each member liable for the foreseeable acts of their partners.

International Defense Capabilities: With defendants located in France, the UAE, Singapore, and Hong Kong, this is a transnational case .

Extradition: The U.S. will seek extradition. This process can be contested based on dual criminality and treaty specifics.

Asset Forfeiture: The indictment explicitly seeks forfeiture of all property derived from the offenses. The government will move quickly to freeze international accounts

The Statutes: What the Government Must Prove

The indictment charges the defendants under three primary legal frameworks. Understanding the differences between them is critical for a successful defense.

1. Securities Fraud under Title 18 vs. Title 15

The prosecution has charged defendants under 18 U.S.C. § 1348 (Count Three) and 15 U.S.C. § 78j(b) / Rule 10b-5 (Count Four).

  • 18 U.S.C. § 1348 (The "Sarbanes-Oxley" Fraud):

    • The Burden: This is a broader statute. The government must prove you knowingly executed a "scheme to defraud" in connection with a security.

    • Why it’s Dangerous: Unlike traditional insider trading, Section 1348 does not strictly require the government to prove a "personal benefit" was exchanged between the tipper and tippee in the same rigid way courts have required for Title 15 charges. It focuses on the deceptive intent.

  • 15 U.S.C. § 78j(b) (Traditional Insider Trading):

    • The Burden: The government must prove you employed a "manipulative or deceptive device."

    • Key Defense Area: They must prove scienter (intent). It is not enough to show you traded on information; they must prove you knew the information was Material Non-Public Information (MNPI) and knew it was disclosed in breach of a fiduciary duty . See the Dynamis LLP guidance on insider trading for more information.

2. Conspiracy (18 U.S.C. § 1349 and § 371)

Counts One and Two allege conspiracy .

  • The Burden: The government does not need to prove you successfully made money on every trade. They only need to prove:

    1. An agreement existed to commit securities fraud.

    2. You knowingly and voluntarily joined that agreement.

  • The Trap: Under Section 1349, the government does not even need to prove an "overt act" was committed by you, as long as the conspiracy existed. However, under Section 371, they must show at least one overt act was taken in furtherance of the conspiracy.

3. Money Laundering (18 U.S.C. § 1956)

Counts Five and Six involve laundering the proceeds of the fraud .

  • The Burden: The government must prove you conducted a financial transaction with proceeds of unlawful activity, knowing the money was "dirty," and specifically intending to conceal the nature, source, or ownership of those funds .

  • Defense Opportunity: Simple spending is not money laundering. The government must prove the intent to hide. If you transferred money openly, even if it was illicit, it may not satisfy the "concealment" element of Section 1956. See the Dynamis guide for money laundering for more information.

Venue: Why is This Case in Boston?

A common question for international clients is: "I live in Singapore or France. I traded on the NYSE in New York. Why am I being charged in federal court in Boston?"

The U.S. Constitution guarantees a trial in the district where the crime was committed. In Safi et al., the government establishes venue in the District of Massachusetts through specific jurisdictional hooks embedded in the indictment:

1.Corporate Headquarters: Several of the companies allegedly traded, such as Alexion Pharmaceuticals and MorphoSys US Inc., were headquartered in Boston, Massachusetts.

  1. Exchange Location: The indictment explicitly notes that options trades for Medidata and Cytokinetics were executed over the "BOX Exchange," which is located in Boston, Massachusetts.

  2. Victim Location: The government argues that the harm (the fraud on the market and the companies) was felt in Massachusetts where these issuers are based.

Defense Strategy: Challenging venue is a potential pre-trial motion. If the connection to Massachusetts is too tenuous—for example, if a defendant only traded stocks with no Boston connection—we may be able to move to dismiss the charges in this district or transfer the case to a more favorable jurisdiction.

Possible Defenses: Deconstructing the Government's Case

Although the Indictment is 81-pages, based on the allegations, several defense avenues appear viable:

1. The "Mosaic Theory" Defense

The indictment relies on the idea that the information obtained was "Material Non-Public Information" (MNPI).

  • The Potential Argument: Defendants were savvy traders who pieced together public information, rumors, and market analysis (a "mosaic") to make investment decisions.

    The Evidence: The indictment mentions journalists and news reports. If the information was even partially public or based on speculation, it may not qualify as MNPI, negating the fraud charge.

2. Attacking the "Code" Interpretation

The prosecution’s case leans heavily on interpreting terms like "shoes," "socks," and "meat" as criminal tools and proceeds.

  • The Potential Argument: Text messages are notoriously ambiguous. Without a cooperating witness to testify to the meaning of a specific text, the government is asking the jury to guess.

3. Lack of Knowledge (No "Scienter")

For the "downstream" traders (those who received tips second or third-hand), the defense is often lack of knowledge.

  • The Potential Argument: Even if the information was inside info, the government must prove the defendant knew the original source breached a duty. The indictment shows complex chains of communication (e.g., Khouadja to Safi to Ge to Lee), raising the inference that other defendants are removed from the source, meaning the less likely they knew the information was illicitly obtained.

4. Jurisdiction and Extradition

For defendants currently outside the U.S., the first battle is not in Boston, but in their home country.

  • The Strategy: Coordinate with local counsel in France, Singapore, or the UAE to contest extradition. Scrutinize the "dual criminality" requirements—arguing that the specific conduct alleged may not constitute a crime in the home jurisdiction, potentially blocking the transfer of the defendant to the U.S.

Why You Need Specialized Counsel

The intersection of Title 18 Securities Fraud, International Extradition, and “traditional” insider trading requires a defense team with significant experience in cross-border cases.

In United States v. Safi, the government is banking on the volume of digital evidence to force plea deals. However, raw data is not proof of intent. Dynamis LLP specializes in dismantling these complex narratives, challenging the venue, and protecting our clients' rights across borders.

Contact us today for a privileged consultation regarding the Safi et al. indictment.

Disclaimer: This post is for informational purposes regarding the Indictment. It does not constitute legal advice. All defendants are presumed innocent until proven guilty beyond a reasonable doubt.

Eric Rosen
Next

Bunni DEX Hack: Lessons Learned