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Law360 (October 6, 2020, 10:59 PM EDT ) Federal authorities announced criminal charges Tuesday against a star of the VH1 series "Love & Hip Hop: Miami" and a Pennsylvania towing company owner for allegedly participating in a fraud ring that sought to obtain more than $24 million in forgivable COVID-19 relief loans through the Paycheck Protection Program.
Diamond Blue Smith, 36, a member of the hip-hop group Pretty Ricky who uses the stage name Baby Blue Whoaaaa, and Tonye C. Johnson, 28, of Flourtown, Pennsylvania, were charged with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud in complaints unsealed Tuesday in the Southern District of Florida, according to the U.S. Department of Justice.
Smith was arrested and appeared Monday before U.S. Magistrate Judge Regina D. Cannon of the Northern District of Georgia, while Johnson was arrested Thursday and appeared Friday before U.S. Magistrate Judge Henry S. Perkin of the Eastern District of Pennsylvania, the DOJ said.
Smith, who lives in Miramar, Florida, allegedly used falsified documents to obtain PPP loans of $426,717 for his company Throwbackjersey.com LLC and $708,065 for his other company, Blue Star Records LLC.
Authorities said they seized a Ferrari they claim Smith bought for $96,000 along with other luxury items using PPP loan proceeds. They also allege he withdrew $271,805 in loan proceeds and sought PPP loans on behalf of others in exchange for kickbacks.
Johnson allegedly obtained a PPP loan of $389,627 for his company, Synergy Towing & Transportation LLC, using falsified documents. Prosecutors said he paid a portion of that loan to co-conspirators.
Prosecutors said the charges against Smith and Johnson stem from a scheme allegedly started by Philip J. Augustin, 51, of Coral Springs, Florida, who has been accused of obtaining a fraudulent PPP loan of about $85,000 in May for his talent management company, Clear Vision Music Group, and then recruiting numerous co-conspirators and filing dozens of bogus applications for millions of dollars in PPP loans.
All told, prosecutors said the group sought loans totaling more than $24 million, using fake bank statements and other falsified documents to support applications filed with banks across the nation. Lenders went on to approve nearly four dozen of those applications and pay out at least $17.4 million, according to federal officials.
Augustin and 10 other defendants have previously been charged. They include NFL player Josh Bellamy, 31, who was arrested last month in Florida. He has been accused of obtaining more than $1.2 million for his Miami-based company Drip Entertainment LLC and also seeking additional fraudulent PPP loans on behalf of others.
In dollar terms, the purported scheme is among the largest alleged to date by federal prosecutors investigating fraud in connection with the loan program, which was launched in April as part of the federal government's efforts to limit the economic damage caused by the coronavirus pandemic.
Congress authorized $349 billion in forgivable PPP loans for small businesses as part of the Coronavirus Aid, Relief and Economic Security Act passed on March 29 and later authorized an additional $300 billion in PPP funding.
The program allows small businesses to take out federally guaranteed loans of up to $10 million each for use on payroll and overhead expenses, but its relatively lax borrower eligibility requirements and offer of full loan forgiveness have made the program an attractive target for fraud.
Smith and Johnson could not be reached for comment Tuesday.
The government is represented by Philip Trout of the U.S. Department of Justice's Fraud Section, and Aimee Jimenez and David Snider of the U.S. Attorney's Office for the Southern District of Florida.
Counsel information for Smith and Johnson was not immediately available.
Johnson's cases are USA v. Smith, case number 1:20-mj-03723, and USA v. Johnson, case number 0:20-mj-6450, in the U.S. District Court for the Southern District of Florida.
--Additional reporting by Jon Hill. Editing by Aaron Pelc.
Update: This story has been updated to include additional case information.
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