The original partners of 5Linx, once one of Rochester's fastest growing companies, cheated investors out of more than $4 million, federal authorities allege according to an article in the Democrat & Chronicle.
The illegally gained money could be as much as $11 million, court papers allege.
The three partners — Craig Jerabeck, Jason Guck and Jeb Tyler — were charged today in federal court with defrauding investors between 2009 and 2015. The three were released on bond of $100,000 a piece.
5Linx was once a highly successful network marketing company, with products ranging from nutritional supplements to wireless security systems. However, there have been clear strains in recent years between past and current 5Linx management.
The Democrat and Chronicle previously reported on allegations in a lawsuit against Jerabeck, who had left the company.
Jerabeck was accused of stealing company employees when he went to a new venture. Guck and Tyler responded, claiming Jerabeck lied to would-be lenders about the financial stability of 5Linx.
Jerabeck, Tyler, and Guck engaged in a scheme to defraud investors by causing millions of dollars to be diverted from 5LINX into their own personal bank accounts or onto their debit cards without the knowledge or approval of the investors
Assistant U.S. Attorney Craig Gestring stated in a news release.
An affidavit from FBI Special Agent Kristin Gibson alleges that the three engaged in fraud by:
• Establishing shell companies to illegally divert company revenues to themselves.
• Funneling bonuses to themselves illegally.
• Directing employees to adjust computer codes so Tyler received money above that to which he was entitled.
Attorney Matthew Parrinello, who represents Tyler, said lawyers are waiting for thousands of pages of evidence from federal prosecutors. He said additional compensation may be justified under the employment contracts the three worked under.
Parrinello also questioned why federal authorities arrested the three on Thursday morning. The investigation has been ongoing for months, and the three would have willingly turned themselves in, he said.
Noting that the accused have substantial assets, U.S. Magistrate Judge Jonathan Feldman released the three on $100,000 bond apiece. They also have to surrender passports and firearms.
Get more information, facts and figures about 5Linx, click here for the 5Linx overview.