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A 48-year-old Israeli man, formerly a resident of New Jersey and now living in Israel, has admitted to a massive fraud scheme involving the U.S. federal aid program for small businesses impacted by the COVID-19 pandemic.
According to the U.S. Department of Justice, Daniel Dadon fraudulently obtained over $3.2 million from the government by submitting forged documents, false reports, manipulated bank accounts and fake claims about the number of employees in his businesses.
He now faces a maximum sentence of up to 30 years in prison for bank fraud, an additional 10 years for money laundering and fines that could exceed $1 million.
The indictment, filed in a New Jersey court, states that starting in April 2020 and continuing for over two years, Dadon submitted multiple loan applications under the Paycheck Protection Program (PPP). This program, established during the COVID-19 pandemic, allowed small businesses affected by lockdowns and the economic slowdown to apply for forgivable loans, provided the funds were used for employee payrolls and other essential expenses like rent and utilities.
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According to the prosecution, Dadon submitted completely false data. For instance, in an April 2020 application for his company, Seldat Distribution, he claimed it employed approximately 400 workers. However, a review by U.S. tax authorities revealed the company had only 97 employees at that time. He also falsely declared that the company’s monthly payroll expenses were about $850,000, qualifying the business for a loan of more than $2.1 million. This amount was approved and transferred to the company’s account.
The day after receiving the funds, Dadon allegedly transferred the entire $2.1 million to the account of another business he owned, Seldat Fashion. Later, when asked to prove how the funds were used and to request forgiveness for the loan, Dadon allegedly forged additional documents, including fake bank statements showing rent payments that were never made and contracts with employees who did not exist. Some of the loan was forgiven, but the remaining balance has not been repaid.
Dadon submitted additional fraudulent PPP loan applications for other businesses he owned, including DG Distriservices and Seldat Staffing. These applications also included falsified documents, such as false employee counts, federal tax forms that were never submitted to the IRS and digitally manipulated documents to make them appear authentic. On one occasion, Dadon forged a signed letter from a New Jersey accountant to retroactively certify the company’s eligibility for loan forgiveness.
The Department of Justice also claims that some of the fraudulently obtained funds were transferred to accounts in other countries, including Vietnam and Canada, and that some assets may have been hidden or sold. Court documents include provisions allowing federal authorities to seize Dadon’s assets, including any property purchased using the stolen funds.
Dadon has pleaded guilty to charges of bank fraud and money laundering. Under U.S. law, bank fraud carries a maximum penalty of 30 years in prison and a fine of $1 million (or twice the financial harm caused to the victim), while money laundering is punishable by up to 10 years in prison and a minimum fine of $250,000. His sentencing is scheduled for August 13 at the federal court in Trenton, New Jersey.