Virginia engineer sentenced in $15.6M investor fraud scheme

October 30, 2024

A Virginia engineer was sentenced to seven years and six months in federal prison for his role in an investment fraud scheme that bilked investors out of over $15.6 million after purporting that he had lucrative engineering inspection contracts for federal and state government infrastructure projects.

Babu Ramaraj, 47, of Aldie, Virginia, was sentenced Friday in the U.S. District Court for the Eastern District of Virginia. Three months earlier, he had pleaded guilty to one court of wire fraud and one count of conducting an unlawful monetary transaction.

Once released from prison, Ramaraj will serve three years of supervised release per count to run concurrently. Senior U.S. District Judge Claude M. Hilton also ordered Ramaraj to pay over $15.6 million in restitution.

According to his plea deal, Ramaraj agreed to forfeit all interests in any “fraud-related and money laundering-related assets” that he owns. Those include two properties in Aldie and Ashburn, Virginia, as well as four vehicles – among them three 2023 Teslas.

What happened?

Ramaraj owned DAB Inspection and Consulting Services LLC (DAB), headquartered in Sterling, Virginia, and primarily did residential deck and patio renovations and other small construction work, according to the criminal complaint filed by the U.S. Department of Justice.

However, federal prosecutors claimed that he used his small business to operate an investment scheme. He purported to existing and potential investors “that DAB had lucrative contracts with the the Federal Aviation Administration, the Virginia Department of Transportation (VDOT), and others, and was a joint venture partner on a Washington DC Water Clean Rivers Project, for tens of millions of dollars each, supposedly to perform engineering inspection work on huge infrastructure projects,” according to a release from the U.S. Attorney’s Office for the Eastern District of Virginia.

Court filings state that over a four-year period — January 2020 until his arrest in May 2024 — Ramaraj pitched individuals, including members of his Loudon County cricket league, that he needed to make large upfront bond payments to secure the work on these government contracts, but could not obtain bank financing because of the “relative youth of DAB as a company.”

He also offered investors the opportunity to lend DAB money at high interest rates, annualized at 30% or more, according to court filings.

As part of Ramaraj’s scheme, federal prosecutors claimed he supplied falsified contract award letters, invoices, financial records and other documents to induce dozens of investors in at least five states, including Virginia, Maryland, North Carolina, New Jersey and Missouri, to lend funds that he claimed would be pooled into payments for bonds associated with the purported government contracts. However, the supposed bonds were never paid.

“Using money from later investors, Ramaraj paid initial investors the promised returns to entice them to continue investing and to recruit other friends and family to invest,” the U.S. attorney’s office said in a statement. “Instead of paying for the promised bonds, Ramaraj electronically transferred investor funds to his online brokerage accounts to engage in securities trades; wired over $1 million to accounts in India; purchased several automobiles, including several Teslas; obtained real properties; incurred millions in stock market trading losses, and made other payments to fund his lifestyle. Ramaraj took in nearly $40 million and caused losses to investors of approximately $15 million.”

Court filings claim that Ramaraj was confronted by two investors and signed an acknowledgment in October 2023 that he had tampered with numerous contracts and financial records and that he “continued to make material misrepresentations concerning DAB to other investors and potential investors.”

Prosecutors alleged that Ramaraj maintained a website that overstated DAB’s projects and work history. He also provided a slide deck to investors misrepresenting the company’s current projects and claimed that he submitted millions of dollars in bonds for supposed projects for VDOT, the FAA and other entities.

According to court filings, Ramaraj was pitching investors up until his arrest on May 30. He had remained in custody as a flight risk since that time.

In June, a federal grand jury indicted Ramaraj on 22 counts of wire fraud and six counts of money laundering. However, as part of his plea agreement, the court dismissed the remaining 26 counts.

SEC files civil complaint

On Tuesday, the clerk of courts for the U.S. District Court in Alexandria, entered a default judgment against Ramaraj after he failed to plead or otherwise respond in a timely manner to a civil complaint lodged against him in July by the Securities and Exchange Commission. The complaint was filed after Ramaraj had already pleaded guilty to two counts, which included wire fraud and money-laundering, in the DOJ’s criminal case.

Earlier Tuesday, the SEC filed a motion for default judgment with the court, four days after Ramaraj was sentenced in the DOJ’s case.

The motion claims that Ramaraj failed to respond to the summons and complaint by Sept. 5, after being served on Aug. 14, while in custody at the Alexandria Adult Detention Center. The motion also alleges that Ramaraj made no attempt to hire an attorney to appear on his behalf in the civil action.

According to the SEC complaint, Ramaraj conducted an offering fraud through his company, DAB, and raised around $31 million from over 70 investors through the offer and sale of promissory notes.

“Ramaraj promised exorbitant rates of return and told prospective investors that he would use their funds to finance surety and performance bonds required to guarantee DAB’s performance of quality assurance services for government-sponsored multi-million-dollar infrastructure projects,” the SEC claims in court filings.

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