Allegation notice. Allegations from the cited record; outcomes noted where adjudicated.
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EDNY · 14-cr-00399

United States v. DiScala — Cane Indicted

On 17 Jul 2014 the DOJ indicted seven defendants — including Kyleen Cane — in United States v. DiScala, No. 14-CR-399 (E.D.N.Y.), for manipulating four public companies and generating over $300 million in artificial market cap. Cane held millions of free-trading shares in attorney escrow and released them on DiScala's trading instructions — the government found she acted “not as counsel but as co-conspirator.” She was acquitted at the 2018 trial.

Listen to this brief
1

How it worked

Cane supplied the operational infrastructure — attorney escrow accounts holding millions of free-trading shares — that gave DiScala price control over companies with near-zero fundamentals. Offshore nominees (Oxbridge/Belize, North Star, Trilogy) concealed beneficial ownership, mirroring the Bermuda 3.97%-per-nominee pattern from Davi Skin. A May 2014 FBI wiretap captured Cane on price control directly.

Open the filed qui tam complaint at this section — the operative pleading (United States ex rel.), jumped to the matching allegation; the filed PDF is one click away.

2

Forensic brief

The complete forensic brief behind this summary — the full record with exhibits. Page through it below, or open it larger for the document summary and key relations.

Forensic brief — United States v. DiScala 1 / —
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3

The government's own words: “central to the scheme”

The DiScala prosecution is the one place in the enterprise record where Cane's conduct is documented not by a victim or a civil plaintiff, but by the United States Attorney for the Eastern District of New York — on the strength of a court-authorized wiretap of her own telephone.1

On 17 July 2014 the Department of Justice announced charges against seven defendants in a market-manipulation conspiracy the government valued at more than $300 million in intended loss. The press release identified Cane only as “an attorney.” In its January 2018 reply memorandum the government dropped the euphemism: Cane was “central to the scheme,” and she “could and would control the Cubed stock.”2

She was central to the scheme, and she could and would control the Cubed stock.Government’s Reply Memorandum Re Evidence / Cane Wiretaps, United States v. DiScala, No. 14-CR-399 (S-1)(ENV) (E.D.N.Y. Jan. 5, 2018)

The government's pre-trial guideline estimate for Cane was 262–327 months — more than two decades. A jury acquitted her on 7 May 2018. But acquittal resolves only the criminal standard; the wiretap recordings, seized text messages, and financial records assembled by the EDNY remain admissible in civil proceedings under the preponderance standard, where the same evidence is read against a far lower bar.3

  1. DOJ Press Release, United States v. DiScala, et al. (Jul. 17, 2014); Government Reply Memorandum Re Cane Wiretaps, No. 14-CR-399 (S-1)(ENV) (E.D.N.Y. Jan. 5, 2018).
  2. Government Detention Memorandum (Aug. 5, 2014) ($300M+ intended loss); Government Reply Memorandum Re Cane Wiretaps at 7 (Jan. 5, 2018).
  3. Government Bail Submission (May 28, 2015) (262–327 month guideline estimate); Judgment as to Kyleen Cane, No. 14-CR-399 (E.D.N.Y. Oct. 7, 2022).
4

Cane's own voice on the wiretap

On 1 May 2014 a federal judge authorized interception of Cane's cellular telephone; the order was extended by Judge Alvin K. Hellerstein on 30 May 2014, and interception ran from 2 May through 29 June 2014. The recordings captured Cane directing the price and volume of Cubed stock in real time — not advising a client, but setting targets to the nickel and ordering co-conspirators to suppress rallies.1

InterceptWhat the recording captured
Price targetsCane naming exact figures — “6.35 today, 6.30” — the precision of a professional setting a manipulated close, not an observer.
9 May 2014“keeping [the price] back down now. We need to keep it back down” — instructing co-conspirators to suppress an unwanted price increase.
Goodrich confirmationCo-conspirator Darren Goodrich: “you did a perfect job” — hearing the manipulation directed in Cane's own voice, and asking whether the coordinated press had come out.
Real-time controlRecruiting investors, coordinating press releases, and personally briefing co-conspirators on the escrow structure that controlled the stock's supply.
We need to keep it back down now. We need to keep it back down.Wiretap intercept, May 2014; Superseding Indictment ¶¶38–41, United States v. DiScala, No. 14-cr-00399-ENV (E.D.N.Y. Nov. 2, 2015)

It was these recordings — Cane's voice, not a witness's recollection — that the government would later call the difference between this case and every prior one. When Cane was caught in conduct she could not deny because her own voice was on tape, the EDNY assembled an overwhelming record of her participation.2

  1. Wiretap Authorization Order (May 1, 2014), extended by Hon. Alvin K. Hellerstein (May 30, 2014); interception May 2–June 29, 2014. Superseding Indictment ¶¶38–41, No. 14-cr-00399-ENV (E.D.N.Y. Nov. 2, 2015).
  2. Government's Reply Memorandum Re Evidence / Cane Wiretaps, No. 14-CR-399 (S-1)(ENV) (E.D.N.Y. Jan. 5, 2018).
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It wasn't her first time: the CACL matched trades

The government's most damaging evidence was not the Cubed wiretap — it was what Cane's seized text messages showed she had already been doing before Cubed. The EDNY established that Cane had been directing manipulative trades in CACL stock through the same offshore accounts and the same broker network she would later use for Cubed.1

The trades ran through a triad of offshore vehicles — Oxbridge Technology Partners (Belize), North Star, and Trilogy — with roughly $2.6 million in wire transfers moving through them. A co-conspirator described the arrangement on the wire: a broker who could “buy or sell anything out of OX and Northstar.”2

The government invoked Rule 404(b): Cane's CACL trading was admissible to prove “intent, knowledge, absence of mistake, and plan” on the Cubed counts. That theory cuts in every direction. If CACL manipulation is probative of Cubed manipulation, then the Davi Skin offshore nominees, the SDI takeover, the Thomas & Wong escrow diversion, and the MOD Systems voting-trust fraud are equally probative — each the same methodology, run through the same kind of offshore concealment.

Cane's own concession sealed it: she admitted she had “given trading instructions” to brokers in both CACL and Cubed. That admission forecloses any defense that her conduct was isolated or accidental — it was a practiced routine.3

  1. Government's Reply Memorandum Re Evidence / Cane Wiretaps at 12–14, No. 14-CR-399 (S-1)(ENV) (E.D.N.Y. Jan. 5, 2018).
  2. Superseding Indictment ¶42, No. 14-cr-00399-ENV (E.D.N.Y. Nov. 2, 2015) (267,000 Cubed shares transferred to Oxbridge (Belize); CACL trading through Oxbridge, North Star, Trilogy).
  3. Cane's Pre-Trial Memorandum (Jan. 3, 2018) (concession re trading instructions); Government Reply Memorandum (Jan. 5, 2018).
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Seven million shares against a 267,000-share float

The mechanism of control was the attorney trust account. Through her escrow, Cane held more than 7,000,000 shares of Cubed stock — against a freely tradable public float of only 267,000 shares. Whoever controls a supply that dwarfs the float controls the price; the escrow was not custody, it was a chokepoint.1

FlowAmount / quantity
Cubed shares held in Cane's attorney escrow> 7,000,000
Freely tradable public float of Cubed267,000
Wire transfers channeled through Cane's accounts~$2,600,000
Payment received by Cane from DiScala$500,000
Cubed shares transferred to Oxbridge (Belize)267,000

This is the Thomas & Wong escrow fraud (Brief 05) and the Davi Skin offshore nominee structure (Brief 07) run in a single case: a lawyer's trust account — the one instrument the public is told it can trust — weaponized to hide beneficial ownership and meter a manipulated stock's supply.2

  1. Superseding Indictment ¶¶38–41, No. 14-cr-00399-ENV (E.D.N.Y. Nov. 2, 2015) (escrow holding 7,000,000+ Cubed shares used to control price and volume).
  2. Government Reply Memorandum Re Cane Wiretaps at 12–14 (Jan. 5, 2018) ($2.6M flows; $500,000 from DiScala; 267,000 shares to Oxbridge).
7

Four shells, near-zero fundamentals

The conspiracy targeted four micro-cap companies, each a reverse-merger shell with almost nothing inside it. The valuations the manipulation produced bore no relation to the businesses underneath them.1

CompanyWhat the manipulation produced vs. what was inside
CodeSmart (ITEN)Pumped $1.77 → $6.94 (+292%); 859,226 shares dumped for profits of at least $4,435,000. Its 12 Jul 2013 10-K reported $6,000 in assets, $7,600 in revenue, and a $103,141 net loss — at an $86M market cap.
Cubed (CRPT)Peaked at $6.75 on 23 Jun 2014 — roughly a $200M market cap — while the company held under $1,500 in cash, zero revenue, negative stockholders' equity, and $131,824 in accrued professional fees.
StarStream (SSET)A target of the substantive wire-fraud counts; part of the four-company conspiracy charged in Count 1.
The Staffing Group (TSGL)CIK 0001561622, incorporated in Greensboro, NC; the subject of Count 10, the wire-fraud count on which Cane was specifically named.
A $200 million market capitalization sitting on $1,500 in cash and zero revenue is not a valuation error — it is the visible footprint of a controlled float.
  1. CodeSmart Holdings Form 10-K (Jul. 12, 2013); Superseding Indictment, No. 14-cr-00399-ENV (E.D.N.Y. Nov. 2, 2015); SEC Complaint, SEC v. DiScala, No. 1:14-cv-04346 (E.D.N.Y. Jul. 17, 2014).
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Crimes committed while under federal indictment

Cane was indicted on 17 July 2014 and released on a $1M secured bond with express conditions: no criminal conduct, no witness contact. Between that indictment and her 7 May 2018 acquittal she was continuously under federal supervision — and during that same window she committed or directed a series of additional predicate acts.1

  • 2014–2015 — Super PAC fraud (Brief 11): Cane provided legal services to a fraudulent political-action-committee scheme generating over $1 million in losses.
  • March 2016 — Hearn threats (Brief 12): Cane directed convicted felon William Hearn to deliver more than 40 documented interstate threats to the relator, including rape and death threats — each a violation of 18 U.S.C. §875(c).
  • 6 Sept 2016 — perjured complaint: Cane filed the Cane v. Phillips defamation complaint in Nevada claiming $4.8 million in damages to her law practice.
  • 22 June 2017 — fraudulent judgment: Cane obtained a $4,888,924.78 default judgment in Nevada through perjured service of process, while still under federal indictment.

The judicial-estoppel trap. Fifteen months before the Nevada complaint, Cane's own EDNY defense counsel told the court that “the government's published allegations have destroyed Ms. Cane's law practice, and thus she now earns nothing from it.” Cane cannot tell a federal court her practice was destroyed and worth nothing, then tell a state court the same practice lost $4.8 million in income.

Each act independently violated the pre-trial release conditions under 18 U.S.C. §3148(a) and stands as a separate RICO predicate. That the EDNY never revoked bond reflects geography, not innocence — the Nevada and Washington conduct lay outside the court's view.2

  1. Transcript of Arraignment and Bond Hearing, No. 14-CR-399 (E.D.N.Y. Jul. 29, 2014); Bond Order (Jul. 29, 2014).
  2. Cane's Motion Re Bail Conditions (May 26, 2015) and Government Bail Submission (May 28, 2015) (practice “destroyed”); Complaint and Default Judgment, Cane v. Phillips, No. A-16-743194-C (Nev. 8th Jud. Dist. Ct. 2016–2017); Seattle Police Report GO# 2016-91451 (Mar. 2016).
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Acquittal, civil admissibility, and the sentencing inversion

The jury's verdict turned on reasonable doubt; the enterprise record turns on preponderance. The government charged Cane on four counts — securities-fraud conspiracy (Count 1; 15 U.S.C. §§78j(b), 78ff; 18 U.S.C. §371), mail-and-wire-fraud conspiracy (Count 2; §§1341, 1343, 1349), substantive securities fraud as to Cubed (Count 4), and substantive wire fraud as to The Staffing Group (Count 10) — each an enumerated RICO predicate under 18 U.S.C. §1961(1). Acquittal removed the criminal penalty; it did not remove the wiretap, the texts, or the financial records.1

PartyExposure / outcome
Kyleen Cane (“central to the scheme”)262–327 month guideline estimate; acquitted at trial, 7 May 2018.
Abraxas “AJ” DiScala (organizer)138 months; $16,346,023 restitution (Dec. 8, 2021).
the relator (enterprise target)48 months — on evidence Wallace later admitted was fabricated “to extort the relator.”

Judge Vitaliano openly rejected the official guidelines as “unhinged economic loss figures that mindlessly accelerate the resulting sentencing range,” sentencing instead from ABA “shadow guidelines.” The architect faced two decades; the manufactured victim served four years. The inversion is itself evidence of how effectively the enterprise weaponized the legal system.2

Two further threads close the record. First, the same conduct violated the Nevada Rules of Professional Conduct — Rule 1.2(d) (assisting client crime), Rule 1.15 (safekeeping property, perverted by holding 7,000,000 shares for manipulation), and Rule 8.4(b)–(c) (criminal acts and dishonesty), with Cane Clark LLP serving as registered agent for over 219 companies and EDGAR filing agent (CIK 0001255294) across the enterprise's shells. Second, the DiScala wiretap casts retroactive light on Cane's 2010–2011 FBI interviews, where she denied knowledge of Wallace's offshore accounts and claimed only a “small amount” of Dynamic Associates stock — when SEC filings showed 48.7% beneficial ownership — each a separate 18 U.S.C. §1001 false statement.3

What distinguishes these statements to federal authorities is their sophistication. Cane did not merely deny; she fed agents a coherent, internally consistent timeline — dates, entities, ownership percentages and corporate events arranged to read as a clean record — calculated to survive an investigator’s verification. A crude lie is contradicted by the first document pulled; these were engineered so that contradicting them required reconstructing a decade of EDGAR filings, backdated forms, name changes and offshore nominee chains spread across multiple agencies and courts. The same inaccessibility the enterprise exploited with private investors — a public record that is fragmented, opaque, and effectively closed to non-specialists — was turned on the FBI itself: the more sophisticated the constructed account, the more research it takes to disprove, and the longer the false statement stands unchallenged. It is the same wager as the résumés, made to a federal agent.

When Cane could lie — to the FBI, in 2010 — she lied. When she could not, because her own voice was on the tape, the government called her “central to the scheme.”
  1. Superseding Indictment, No. 14-cr-00399-ENV (E.D.N.Y. Nov. 2, 2015) (Counts 1, 2, 4, 10 against Cane); 18 U.S.C. §1961(1).
  2. Opinion Re Shapiro Appeal, No. 14-CR-399 (E.D.N.Y. Jul. 14, 2022) (“unhinged” / “shadow guidelines”); Minute Entry, Sentencing of Abraxas J. DiScala (Dec. 8, 2021); Lundvall FBI Interview (Phillips prosecution fabricated “to extort”).
  3. Nevada Rules of Professional Conduct 1.2(d), 1.15, 8.4(b)–(c); Complaint at 4, United States ex rel. Phillips v. Cane (Nov. 1, 2010) (219 companies); FBI 302, Interview of Kyleen Cane (Nov. 8, 2010); 18 U.S.C. §1001.
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Documents

Four EDNY records: the superseding indictment that added Cane to the $300M DiScala pump-and-dump; the court's pretrial memorandum reciting the intercepted wiretaps and denying suppression; her own counsel's statement that the charges destroyed her reputation; and the appearance bond / conditions of release she signed.

Superseding indictment (Cane added) · 2 Nov 2015
Superseding indictment (Cane added) 1 / —
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United States v. DiScala, No. 14-CR-399(S-1)(ENV) (E.D.N.Y.). The Nov. 2, 2015 superseding indictment that brought Kyleen Cane into the case by name — the charging instrument for the government’s theory that she acted “not as counsel but as co-conspirator.”

  1. Cane added by name. The superseding indictment adds Cane to the $300M DiScala market-manipulation case on Counts 1, 2, 4, and 10 — eleven months before trial.
  2. The charged conduct. The counts pair securities fraud (15 U.S.C. §§78j(b), 78ff) and conspiracy (§371) with wire- and mail-fraud conspiracy (18 U.S.C. §§1341, 1343, 1349).
  3. Attorney as instrument. The government’s theory: Cane released free-trading shares from attorney escrow on DiScala’s trading instructions — the infrastructure that gave the ring price control.
  4. The shells. CodeSmart (ITEN), Cubed (CRPT), and Staffing Group (TSGL) — near-zero-fundamental companies pumped to nine-figure market caps before the July 2014 seizures.
EDNY memorandum opinion — pretrial motions · 6 Mar 2018
EDNY memorandum opinion — pretrial motions 1 / —
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United States v. DiScala, No. 14-CR-399 (ENV), Mem. Op. Dkt. 516 (E.D.N.Y. Mar. 6, 2018) (Vitaliano, D.J.). The court’s ruling on the pretrial motions — the record that recites the intercepted May 2014 wiretap calls and the government’s theory of Cane’s role, and denies her motions to sever and to suppress the wiretaps.

  1. The court sets out the wiretaps. The opinion reproduces the intercepted calls the government relied on — the escrow discussions and, on May 23, 2014, DiScala’s statement that “Kyleen’s [Cane] re-tweaking this thing to 6.35” — the Cubed (CRPT) price-targeting the government charged.
  2. Suppression and severance denied. Cane joined DiScala’s motion to suppress the Title III wiretaps and for a Franks hearing, and moved to sever her trial; the court denied both, and the intercepts were admitted at the 2018 trial.
  3. The escrow theory, recited. The memorandum situates Cane’s charged role in the 267,000 purportedly free-trading shares moved through her attorney escrow at DiScala’s direction.
  4. Allegation, not verdict. This is a pretrial ruling reciting the government’s theory; at the April–May 2018 trial Cane was acquitted on all counts.
Cane reply — reputation “destroyed” · 1 Jun 2015
Cane reply — reputation “destroyed” 1 / —
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United States v. DiScala (E.D.N.Y.). Cane’s reply in support of her motion to modify the release conditions to permit travel — her own counsel’s characterization of what the prosecution did to her standing.

  1. “Reputation … destroyed.” Cane’s counsel argue, in their own words, that “Ms. Cane’s professional reputation has been destroyed by the allegations” in the DiScala prosecution.
  2. Filed while on bond. Submitted June 1, 2015, as Cane sought to loosen the travel restrictions imposed at her July 2014 appearance (the bond, adjacent).
  3. Her own measure of the stakes. A contemporaneous statement of the reputational impact — to be read beside her later resurfacing as “Kyleen Elisabeth Castro.”
Cane appearance bond · 17 Jul 2014
Cane appearance bond 1 / —
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United States v. Cane, No. 2:14-mj-00469-CWH (D. Nev.). The constraints imposed at Cane’s initial appearance the day the DiScala charges were unsealed.

  1. Signed at first appearance. Executed 17 Jul 2014 — the same day federal agents seized $184,578 and the DOJ unsealed charges against the DiScala ring.
  2. Travel restricted. The release conditions limited Cane’s travel — later the subject of her motion to travel and the government’s opposition (see the case index below).
  3. Her own representations. The bond record fixes Cane’s sworn undertakings to the court at the outset of the prosecution.
  4. Acquitted, bail exonerated. Cane was tried in 2018 and acquitted on all counts; the bond was exonerated post-verdict (Dkt 615, 21 May 2018).
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Indictment & Court Pleadings

The federal criminal record of the DiScala / OmniView pump-and-dump (E.D.N.Y. No. 1:14-cr-00399-ENV), in which Cane was indicted, tried and acquitted — the charging instruments, the bond and travel fights, the government's pleadings on Cane's role, the court's opinions and orders, the trial transcripts, and the FBI wiretap intercepts. Preview opens each document inline; the wiretaps play with a synced transcript labelled by speaker (Cane and DiScala).

  • 21 May 2014FBI Title III wiretap intercept — Cane line (914-255-7892) · U.S. v. DiScala open audio
  • 23 May 2014FBI Title III wiretap intercept — Cane line (914-255-7892) · U.S. v. DiScala open audio
  • 27 May 2014FBI Title III wiretap intercept — Cane line (914-255-7892) · U.S. v. DiScala open audio
  • 15 Jul 2014United States v. Cane et al., Sealed Indictment & docket — Cane charged on Counts 1, 2, 4, No. 1:14-cr-00399-ENV (E.D.N.Y.) open
  • 17 Jul 2014United States v. Cane, Appearance Bond & conditions of release (travel restrictions), No. 2:14-mj-00469-CWH (D. Nev.) open
  • 17 Jul 2014SEC v. DiScala, Wexler, Bell, Josephberg, Shapiro, Complaint, No. 1:14-cv-04346 (E.D.N.Y.) open
  • 18 Jul 2014United States v. Cane, Passport surrender receipt — Cane surrenders her U.S. passport as a bond condition open
  • 29 Jul 2014United States v. Cane, Transcript of arraignment before Magistrate Judge Reyes (E.D.N.Y.) — the government put Cane's assets at “more than $13 million” and argued flight risk open
  • 26 May 2015United States v. Cane, Motion to modify conditions of release to permit travel to Edinburgh, Scotland, Dkt 139 (Roland G. Riopelle, Sercarz & Riopelle LLP) open
  • 26 May 2015United States v. Cane, Appearance bond re travel motion (co-signed) — posted for the Edinburgh request open
  • 26 May 2015United States v. Cane, $1,000,000 Confession of Judgment bond — recording cover page (the real-property collateral the government valued below $400,000) open
  • 28 May 2015United States v. Cane, Government's opposition to Cane's motion to modify conditions of release, Dkt 140 — flight-risk argument open
  • 1 Jun 2015United States v. Cane, Cane's reply re motion to travel — her own representations to the court open
  • 24 Jun 2015United States v. Cane, Government's response opposing Cane's travel motion open
  • 2 Nov 2015United States v. Cane, Superseding Indictment, Dkt 166 (Cane added) open
  • 9 Jan 2018United States v. Cane, Government's Reply Memorandum, Dkt 450 — the prosecution on Cane's role open
  • 6 Mar 2018United States v. Cane, Memorandum Opinion on pretrial motions, Dkt 516 (Judge Vitaliano) open
  • 23 Mar 2018United States v. Cane, Government's Requests to Charge, Dkt 541 open
  • 4 Apr 2018United States v. Cane, Trial Transcript — Day 1, Dkt 635 open
  • 5 Apr 2018United States v. Cane, Trial Transcript — Day 2, Dkt 636 open
  • 21 May 2018United States v. Cane, Order Exonerating Bail re Kyleen Cane, Dkt 615 (post-acquittal) open
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Timeline

  1. Apr 2012First Independence Corp. files Form S-1 registering 3,000,000 shares.
  2. Jan 20133,000,000 shares sold to 24 shareholders at $0.0115.
  3. 3 May 2013CodeSmart Holdings (ITEN) acquires First Independence via reverse merger.
  4. May–Aug 2013First CodeSmart pump: $1.77 → $6.94 (+292%); 859,226 shares dumped; profits ≥ $4,435,000.
  5. 12 Jul 2013CodeSmart 10-K: $6,000 assets, $7,600 revenue, $103,141 net loss — at an $86M market cap.
  6. 9 May 2014FBI wiretap captures Cane: “we're keeping [the price] back down now. We need to keep it back down.”
  7. 23 Jun 2014Cubed (CRPT) peaks at $6.75 — ~$200M market cap; company holds < $1,500 cash, zero revenue.
  8. 15 Jul 2014Federal agents seize $184,578.02; 17 Jul — DOJ charges + SEC civil action.
  9. 2 Nov 2015Superseding Indictment, No. 14-cr-00399-ENV — Cane added (Counts 1, 2, 4, 10).
  10. 7 May 2018Cane acquitted on all counts at trial.
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Named parties

  • Abraxas J. “AJ” DiScala (ringleader)
  • Kyleen Cane (attorney-escrow custodian / co-conspirator; acquitted 2018)
  • Victor Azrak (convicted; $3,788,490.05 restitution)
  • Companies: CodeSmart (ITEN), Cubed (CRPT), StarStream (SSET), Staffing Group (TSGL), Regenicin
  • Offshore: Oxbridge Technology Partners (Belize), North Star, Trilogy
  • Hon. Eric N. Vitaliano, E.D.N.Y.
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Citations & pleadings