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Kevin Bae, 30, shared a bank account with the Morris County bar owner “into which millions of dollars were transferred” through the scheme, Attorney General Gurbir S. Grewal said Friday.
They generated the money through a variety of scams, including scaring elderly people over the phone into buying gift cards by pretending to be a grandchild who was in jail and needed bail money, Grewal said.
The owner, 63-year-old retired dentist Kevin Lipka of Livingston, was indicted by a state grand jury along with his wife, Bae and six other defendants following an investigation into Smiles II, a strip club on westbound Route 46 near Route 10 in Roxbury.
The investigation – dubbed “Operation Smiles” -- found Lipka and others buying stolen credit card information on the dark web and cloning it onto blank cards with a special machine that made them look legitimate, Grewal said.
Groups of runners used the bogus credit cards to buy pre-paid gift cards issued by Master Card, Visa and American Express at retail stores – among them, Target and Home Depot -- stretching from Brooklyn to southeast Pennsylvania, the attorney general said.
They then converted the collected gift cards to cash through bogus transactions at Smiles II, keeping 20 percent of the proceeds for themselves and dividing the rest among the runners, he said.
In some cases, they bought booze for Smiles II using stolen credit cards or illegally acquired gift cards, Grewal said.
The ring got the cards through other scams as well, he said – including offering vehicles for sale on eBay and Craigslist, convincing purchasers to pay with gift cards and never delivering.
They also pulled grandparent scams, “in which an elderly victim is contacted by someone posing as the grandchild or nephew of the victim and claiming to need bail money to be released from jail,” Grewal said. “The victim would be told to pay the bail by purchasing gift cards and providing the gift card information by phone to a ‘police officer’ involved in the arrest.”
It didn’t stop there, he said.
Lipka and certain associates, including Bae, “would fraudulently return expensive merchandise, particularly high-end power drills, to The Home Depot that had been stolen from the retail chain,” Grewal said.
They then sold $368,000 in store credit from the returns online, he said.
Lipka also used some of it to help build a luxury home in Livingston, the attorney general added.
The state Division of Criminal Justice has placed liens on the bar, on two homes owned by the Lipkas in Livingston worth a total of about $4 million, two homes owned by Kevin Lipka in Essex Fells and Belvedere, a vehicle, and several bank accounts.
“Credit card fraud of the type alleged in this case is becoming a major source of illicit revenue for organized criminal groups in the cyber age and a costly drain on the financial service and retail industries,” Grewal said.
The defendants “were prolific in purchasing stolen credit card information on the dark web, turning it into plastic, and ultimately converting the plastic into millions of dollars in cash.”
“Because they are anonymous and hard to trace, gift cards are a favorite currency of alleged con artists like Kevin Lipka and his associates,” said state Division of Criminal Justice Director Veronica Allende.
The investigation began when an out-of-state law enforcement agency “contacted the Roxbury Police Department with information that they had tracked gift cards purchased with stolen credit card information to Smiles II, where they had been processed and ‘cashed out’,” Grewal said.
Roxbury Police began investigating, then alerted the state Division of Criminal Justice Gangs & Organized Crime Bureau, he said.
Most of the defendants were arrested in July 2016, when search warrants were executed for Smiles II, Kevin Lipka’s home, his vehicle, and other locations.
Thousands of gift cards were seized, as well as documents related to the alleged schemes, Grewal said.
The 19-count indictment returned in Trenton names:
- Lipka, 63, of Livingston, who with his wife co-owned the company She-Kev Inc., which did business as Smiles II. He’s accused of leading the operation “with the help of key associates,” Grewal said;
- Shelly Lipka, 62, of Livingston, his wife;
- Bae, who’s accused of partnering with Kevin Lipka in the operation;
- Eric Olsen, 49, of Roxbury, the daytime manager of Smiles II, who’s accused of participating in the operation while handling finances for the business – “spending hours at a time processing transactions with stolen gift cards and credit cards at the bar,” Grewal said;
- Peter Vasilipous, 73, of Elizabeth, the bar’s nighttime manager who, the attorney general said, “spent hours at a time processing transactions with stolen gift and credit cards at the bar”;
- Kevin Rodriguez, 25, of Whitehall, Pa.; Jordan Turner, 25, of Jamaica, N.Y.; Chintan Patel, 34, of Edison; and Adam Ferguson, 26, of the Bronx, all of whom are accused of bringing stolen credit cards and illegally acquired gift cards to Lipka and his alleged associates and sharing in the profits.
In addition to racketeering, money laundering and conspiracy charges, all of the defendants (with the exception of Ferguson) face counts of receiving stolen property.
Kevin Lipka, Bae, Rodriguez and Turner are also charged with theft by deception.
Kevin Lipka is also charged with money laundering, while he and his wife also face charges of misconduct by a corporate official, filing bogus tax returns and failing to file tax returns.
Bae also is charged with failure to file a tax return.
Deputy Attorney General Amy Sieminski presented the indictment to the state grand jury following the investigation.
Grewal credited members of the Roxbury Police Department, including Detective Jack Sylvester and Lt. Dean Adone, as well as the state investigation team: Detective Chris Schell, Detective Patrick Sole, Lt. Brian Bruton, Detective Maria Duran, Deputy Attorney General Sieminski and former Deputy Attorney General Shontae Gray.
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