Notorious Counterfeiters-Part 9

Itzhak Loz and the Russian-Israeli Millions

In recent years, the best US counterfeits have been made overseas and smuggled into the country or used in foreign transactions. Some, known as “supernotes,” are printed by hostile foreign governments, notably North Korea, where the operation is officially sanctioned and funded.

But excellent quality notes have also been made in places like Pakistan, the Middle East, and Colombia where counterfeiters can operate with relative impunity. Such was the case around the turn of the 21st century when an Israeli man, Itzhak Loz, and his partners started a counterfeiting ring that would last for fourteen years and dump an estimated $70 million bogus $50 and $100 US notes into circulation, many of which are still out there.

A Decade of Confusion

The Secret Service was baffled. High quality US notes started turning up in Israel, Russia, and the US in the late 1990s, but they had no idea where they were coming from. Labeled the Russian-Israeli notes, the bills were of good enough quality to fool most merchants, but alert bank employees caught many when they were deposited. By 2012 the Secret Service had amassed $50 million worth of the fakes at its Washington field office. Detailed forensic analysis showed that the bills were made using a sophisticated process that did a good, but not perfect, job of replicating the raised intaglio printing, color coding and security features of genuine notes. But they still hadn’t traced down their source.

Fresh Eyes and Persistence

Adam Gaab joined the Secret Service in 2010 after several years as a federal police officer at the Supreme Court. The 28-year-old had worked dozens of counterfeiting investigations so when he looked at a fresh batch of seized bills he knew immediately they were part of the Russian-Israeli counterfeits.

When fresh Russian-Israeli notes had come in in the past, Gaab had made dozens of phone calls to the stores where they had been passed hoping for leads, but none had been successful. This time though the owner of a loan company identified a man who had used four of the counterfeits to pay off a car loan. The company’s paperwork had the man’s New York address and listed his job as a delivery driver.

Gaab decided to go to New York and drive by the man’s home for a look. It was in an upscale neighborhood and had three luxury cars in its driveway, unusual, to say the least, for a deliveryman. That aroused Gaab’s suspicion. Having identified the man and his wife, Gaab pored through hours of security footage from other businesses that had taken in the bogus money. The cameras showed both the driver and his wife passing the bills at various locations. Gaab had the evidence he needed.

Falling Dominos

Warrant in hand, Gaab accompanied local police on a raid at the driver’s home in early 2013. Threatening both him and his wife with federal prison, he got the man to admit that he had been buying the bills at 45% of their face value from a friend and the friend’s cousin. The friend, Tarell Johnson, had no criminal record, but his cousin, Johnny Lee, had done two years in prison on a prior counterfeiting conviction.

Gaab had the truck driver, whose name has been withheld at the request of the Secret Service, arrange a buy from Johnson. Through surveillance and a series of wiretaps Gaab tracked their source to a pair of Russian brothers named Arkadiy and Eduard Bangiyev in Queens, New York who operated a distribution network for the counterfeits throughout the eastern US. Phone taps revealed communication with an Israeli national named Itzhak Loz, who made frequent trips to New York. Further investigation revealed that Loz had been arrested in Israel in the late 1990s for counterfeiting.

Jailbirds of a Feather

While in prison in Israel, Loz met a fellow counterfeiter who connected him with the Bangiyevs. Once out Loz and his jail mate went back into business, shipping millions of dollars’ worth of fake 100s to the US through Canada. By the early 2000s Loz, whose family had fled to Israel (then Palestine) from Nazi Germany, had pushed out his accomplice and partnered with the Bangiyev brothers to set up operations on Long Island where they would avoid the risk of smuggling their products into the US.

But in 2007Arkadiy was caught selling bogus bills to an undercover agent. Even though Arkadiy was paroled instead of serving jail time, Loz felt the heat and moved operations back to Israel, but not before dumping an estimated $10 million worth of funny money into US circulation.

Back in the USA

Surveillance of the gang continued as the Feds built their cases against them and others in the network. In January 2014, wiretaps revealed Loz was heading back to the US. Agents tailed him and an Israeli accomplice to the Philadelphia suburbs in New Jersey. When the men went to a warehouse in Cherry Hill, the agents came back at night for a look.

Through the windows they spotted equipment that could be used for counterfeiting. Formerly thought by the Secret Service to be just one of the ring, they now had reason to believe the Israeli was its head.

Concerned that they had found evidence in the warehouse trash that Loz was getting close to replicating the newest security features, Gaab and his colleagues debated the risks of warning merchants. On the one hand, it could cause Loz and others to flee; on the other, it might panic them into wiretapped conversations that would reveal more evidence about the criminal enterprise. They got lucky.

Loose Lips Sink the Ship

Concerned that they were about to be found out, Arkadiy called Loz and suggested they shut down. Loz, told Bangiyev not to worry; a new “machine” was arriving that would turn out much better fakes that would be impossible to trace.

A week later, agents were amazed when 55,000 pounds of new equipment arrived at the Cherry Hill location including the “machine” Loz had referred to: a state-of-the-art Heidelberg printing press.

Agents continued snooping through the operation’s trash. Loz was getting close to making nearly undetectable counterfeits. As they continued to gather evidence, agents got a call from the owner of the motel where Loz was staying. He had given notice he was checking out. A call to Customs revealed Loz was booked on a flight to Tel Aviv in three days.

Pulling the Plug

On May 28, 2014, the day before Loz was scheduled to leave the country, agents raided the Cherry Hill warehouse. Inside they discovered computer images of US currency plus etching, embossing and laminating equipment along with the Heidelberg press. Before he could flee, Loz was arrested at his motel. $2.5 million in counterfeit bills were found in Loz’s New York storage unit along with $200,000 in genuine US cash, jewelry, and diamonds.

In August 2014 federal prosecutors indicted Loz, the Bangiyev brothers, Tarell Johnson, Johnny Lee and eight others from New York to Florida on racketeering and counterfeiting charges.

Loz was ultimately sentenced to fifteen years in prison. Eduard and Arkadiy Bangiyev were sentenced to eight and nine years, respectively, and the others received lesser sentences of up to three years.

According to a US Department of Justice press release at the time, Loz was also forced to forfeit over $20 million in assets including property, cars, and bank accounts.

The arrests brought the curtain down on one of the largest counterfeiting rings in US history. Most, but not all, of the $70 million in fake money has been recovered. But every few weeks one turns up in seized bills at the Secret Service.

Interviewed in 2016 by Bloomberg Businessweek, Agent Gaab was quoted saying, “It’s going to take years for all of it to bleed out of the system.”

So be careful when you take large bills. Here’s what the Federal Reserve says to look for.