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Texas

TX builder helped scammers steal $12M from KKR

It’s unclear whether Howard J. Nelms knew he was part of the scam

(Photo Illustration by The Real Deal with Getty)
(Photo Illustration by The Real Deal with Getty)
By
Feb 16, 2023, 7:37 PM

A homebuilder in Canyon Lake was involved in a multi-million-dollar scam of one of the world’s largest private equity firms, according to the U.S. Secret Service in San Antonio.

New York-based firm KKR & Co. lost $12.7 million through an email spoofing scam, the San Antonio Express-News reported, based on federal court documents. Howard J. Nelms, 54, received wire transfers from KKR totaling $5 million, according to the documents.

KKR hasn’t publicly shared how much money it lost, but the firm has recovered $9 million with the help of federal authorities and private banking institutions, court documents show.

Nelms hasn’t been charged, and it’s possible he didn’t know he was part of a scam. Federal authorities, which seized more than $1.5 million from Nelms’ accounts, described his role in the scheme as a “money mule,” a middleman recruited to move illegally obtained money on a con artist’s behalf.

“Most of them believe they are doing a legitimate job. They don’t know they are doing something illegal,” Dan Morales, acting special agent in charge of the Secret Service in San Antonio, told the outlet. “That’s how the crooks wash their money.”

Nelms transferred money to accounts, including $560,000 to accounts in the name of his late mother, the documents show. He also moved $142,150 to Shelton Vann, a lawyer in Florida, as well as $2.4 million to Lorium Law in Fort Lauderdale, according to the documents.

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The lawyer told federal authorities that Nelms got mixed up in a cryptocurrency scam involving “discounted” Bitcoin, the newspaper reported. He was working with two people who said they were part of the cryptocurrency deal.

“These two individuals purported to be the owners of the funds, and represented that the funds were related to real estate transactions,” an affidavit said. “They directed Nelms to purchase Bitcoin on their behalf for ‘investment purposes.’”

KKR was attempting to send money to one of its clients, Great Wall Asset Management, when a spoofed email came in that closely resembled a real email from the client. The firm sent $5.8 million to a Chase Bank account in March 2022 and an additional $6.9 million two weeks later. After a third request for a wire transfer came in, the company launched an internal review and discovered the emails were faked.

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Federal authorities have been unable to locate Nelms or Vann, the newspaper reported.

The Secret Service in San Antonio recovered $20 million in money-mule scams in 2022, Morales said. “This office is pretty close to leading the nation in seizures,” he told the outlet.

— Victoria Pruitt