DOJ Motion For No Jail AJ Discala Jan 7 2022

Case 1:14-cr-00399-ENV Document 813 Filed 01/07/22 Page 1 of 25 PageID #: 8665
DG:SCJ
F. # 2013R01203
UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK
– – – – – – – – – – – – – – – – – –X
UNITED STATES OF AMERICA
- against - Docket No. 14-CR-399 (S-1)(ENV)
ABRAXIS J. DISCALA,
Defendant.
– – – – – – – – – – – – – – – – – –X
THE GOVERNMENT’S OPPOSITION TO DISCALA’S

MOTION FOR RELEASE PENDING APPEAL
BREON PEACE
UNITED STATES ATTORNEY
Eastern District of New York
271 Cadman Plaza East
Brooklyn, New York 11201
Shannon C. Jones
Patrick T. Hein
Assistant U.S. Attorneys
(Of Counsel)
PRELIMINARY STATEMENT ........................................................................................... 2
BACKGROUND ..................................................................................................................... 2
I. The Offense Conduct .......................................................................................................... 2
A. Overview ....................................................................................................................... 2
B. The CodeSmart Scheme ................................................................................................ 3
C. The Cubed Scheme........................................................................................................ 5
II. Discala’s Pretrial Suppression Motions .............................................................................. 7
A. The Discala Telephone Wiretap .................................................................................... 7
B. The OmniView Search Warrant .................................................................................... 8
C. Discala’s Suppression Motion, the Court’s Order and Opinion ................................... 9
III. The Trial............................................................................................................................ 12
IV. The Sentencing .................................................................................................................. 15
ARGUMENT DISCALA IS NOT ENTITLED TO BAIL PENDING APPEAL .......... 16
I. Legal Standard .................................................................................................................. 16
II. Discala is Not Entitled to Bail Pending Appeal ................................................................ 17
A. Risk of Flight ......................................................................................................... 18
B. Discala Also Does Not Raise a Substantial Question ........................................... 20
CONCLUSION ..................................................................................................................... 24
PRELIMINARY STATEMENT
The government respectfully submits this memorandum of law in opposition to
the defendant Abraxas J. Discala’s motion for bail pending appeal filed on December 23, 2021
(“Discala Mot.”; Dkt. No. 810). The Court sentenced Discala to a total of 138 months’
imprisonment on December 8, 2021, after he was convicted, following a five-week trial in April
and May 2018, of conspiracy to commit securities fraud, conspiracy to commit mail and wire
fraud, two counts of securities fraud, and four counts of wire fraud. Discala was ordered to self-
surrender to the Bureau of Prisons on February 8, 2022. Discala argues that he is entitled to bail
pending appeal because he poses no risk of flight, his prospective appeal raises close questions
regarding whether the Court erred in failing to grant Discala’s motion to suppress certain
evidence, and reversal of the Court’s suppression order would likely lead to a new trial on all
counts. As shown below, Discala cannot satisfy the requirements of 18 U.S.C. § 3143(b)(1)(B),
and his motion should be denied.
BACKGROUND
I. THE OFFENSE CONDUCT 1
A. Overview
Discala was the Chief Executive Officer of OmniView Capital Advisors LLC
(“OmniView”), a company that Discala founded and controlled. (PSR ¶ 10; Trial Tr. at 977-79,
984 (Goepel)). Between 2012 and 2014, Discala led a scheme to manipulate the price and
trading volume of multiple microcap or “penny” stocks, including the stock of CodeSmart
Holding, Inc. (“CodeSmart”), which traded under ticker symbol ITEN, The Staffing Group, Ltd.
1
The description of the Offense Conduct is drawn from the Presentence Investigation
Report dated June 23, 2020 (“PSR”), trial transcript (“Trial Tr.”), and the government’s trial
exhibits (“GX.”).
2
(“Staffing Group”), which traded under ticker symbol TSGL, StarStream Entertainment Inc.
(“StarStream”), which traded under ticker symbol SSET, and Cubed, Inc. (“Cubed”), which
traded under ticker symbol CRPT, (collectively the “Manipulated Public Companies”). (PSR
¶¶ 12-32). Discala purported to raise capital for start-up private companies and to take them
public through reverse mergers with public shell companies in exchange for obtaining control of
a large portion of the free trading or unrestricted stock. Discala and his co-conspirators then
artificially inflated that stock price [and trading volume] through manipulative trading and
promotional campaigns, generating large profits for themselves at the expense of unwitting
investors. Id.
To execute his scheme, Discala cultivated close relationships with corrupt
brokers, such as co-defendants Matthew Bell, Craig Josephberg, Jaime Sloan 2 and Darren
Goodrich, who engaged in manipulative and fraudulent trading at Discala’s direction. In
particular, Bell, Josephberg and Sloan bought the fraudulently inflated stock in their customers’
and clients’ brokerage accounts. Discala also befriended wealthy individuals, such as Marc
Wexler and Victor Azrak, who were willing to help fund his schemes and engage in
manipulative trading at his direction. Finally, Discala solicited numerous individuals to buy the
inflated stock of the Manipulated Public Companies, and also had investors send money directly
to him via OmniView to invest in his schemes.
B. The CodeSmart Scheme
Discala and others, including attorney Darren Ofsink who acted as counsel to both
CodeSmart and Discala, arranged a reverse merger between CodeSmart and a public shell
2
Sloan was charged in a separate information. 14-CR-509 (ENV).
3
company, which occurred on or about May 3, 2013. Discala and his co-conspirators, including
Josephberg, Wexler, Ofsink, Bell, and Michael Morris, as well as others selected by Discala,
obtained all the unrestricted CodeSmart stock at pennies per share. 3 (PSR ¶ 13; Trial Tr. at
1157-67 (Goepel); GX 177-22)). After gaining control of CodeSmart’s unrestricted shares, the
co-conspirators engaged in two separate pump and dump schemes. (Id. ¶¶ 14-17). In both
schemes, CodeSmart’s Chief Executive Officer, Ira Shapiro, issued numerous press releases,
some of them containing false information, to generate interest in CodeSmart stock. (Id. ¶ 15;
Trial Tr. at 718-19 (Yarosh), 855 (Oremland), 1195-96 (Goepel); GX 172-42, 177-12, 195-6).
The first CodeSmart pump and dump scheme occurred between approximately
May 13, 2013 and August 21, 2013. (PSR ¶¶ 14-17). During this first period, the co-
conspirators manipulated CodeSmart’s stock price by raising it from $1.77 per share to a high of
$6.94 per share, before causing it to drop to $2.19 per share. (Id.). Much of the early trading of
CodeSmart in May and June 2013 was coordinated trading involving Discala and Wexler, who
sold their free trading stock, and Bell and Josephberg, who purchased large amounts of
CodeSmart stock at increasing prices for their clients. (Id.; Trial Tr. at 2028, 2039-40 (Wexler)).
For example, between May 13, 2013 and August 7, 2013, the co-conspirators sold approximately
859,226 shares of CodeSmart in brokerage accounts they controlled while Josephberg and Bell
purchased 813,577 shares of CodeSmart in their customers’ and clients’ brokerage accounts.
(PSR ¶ 19).
3
A number of these individuals paid Discala in order to obtain their unrestricted
CodeSmart shares. For example, on or about May 3, 2013, Morris paid OmniView $50,000 so
that he could buy unrestricted CodeSmart stock for $719.
4
The second CodeSmart pump and dump scheme occurred between approximately
August 21, 2013 and September 20, 2013. (PSR ¶ 14, 17). During this second period, the co-
conspirators manipulated CodeSmart’s stock price by raising it from $2.19 per share to a high of
$4.60 per share, before causing it to drop to $2.13 per share. (Id.). By approximately December
30, 2013, after both active pump and dump schemes were complete, CodeSmart stock was
trading at $0.66 per share, and on or about July 9, 2014, CodeSmart stock closed at $0.01 per
share. (Id.).
Discala, Josephberg, Morris, Wexler, Bell and Ofsink made significant profits
from selling their CodeSmart stock, totaling approximately $6.5 million. Discala earned
approximately $2.4 million, Wexler earned approximately $2.2 million,4 Josephberg earned
approximately $700,00, Bell earned approximately $560,000, Morris and his son earned in
excess of $400,000, and Ofsink earned approximately $290,000. 5 (PSR ¶20; 6 Trial Tr. at 925-
951 (Ferrante); GX 195-1-195-5).
C. The Cubed Scheme
Following the CodeSmart scheme, Discala moved on to another scheme to
manipulate the stock of Cubed. (PSR ¶¶ 23-30). In that scheme, all of the free-trading stock of
Cubed was controlled by Cane, an attorney that Discala brought into the scheme. (Id.; Trial Tr.
4
Wexler also made $289,721.52 from selling his StarStream stock. (GX 195-3).
5
There were at least a dozen additional entities and individuals who also received free-
trading CodeSmart shares in May 2013 at the same time as these defendants, including Discala’s
father, all in amounts in excess of the amounts received by Morris. (Trial Tr. at 1157-67
(Goepel); GX 177-22). While everyone except Discala and Wexler were subject to Lock Up,
Leak Out agreements (Trial Tr. at 1171-72 (Goepel), 2046 (Wexler)), Bell testified that he and
others sold their stock in violation of those agreements. (Trial Tr. at 92, 202 (Bell)).
6
The PSR contains a typographical error regarding Wexler’s CodeSmart’s profit.
(Compare PSR ¶20 with GX 195-3). Also, the PSR gain calculations are net realized profits
(GX 195-1-195-5).
5
at 2084-90 (Wexler)). Cane, who had a prior relationship with Discala, controlled Northwest
Resources, Inc. (“Northwest”), a shell public company set up by Cane’s law firm. (Id.; Trial Tr.
at 1516-1521 (Smith)). In March 2014, Cane was hired by Crackpot, Inc., a private company
that Discala had agreed to take public in exchange for control of its free trading stock.
Northwest changed its name to Cubed and acquired Crackpot’s assets. (PSR ¶¶ 23-24). With
the exception of a single shareholder, all of Northwest’s shareholders who held unrestricted stock
had new unrestricted Cubed stock certificates issued in their name, and Cane’s law firm took
physical control of all those unrestricted stock certificates from the transfer agent. (Trial Tr. at
620-626 (Mokros)). One Northwest shareholder had all his unrestricted shares transferred to
David Ben-Bassett, a close friend of Cane’s. (Trial Tr. at 1707-98, 1739-55 (Ben-Bassett)).
After Ben-Bassett was issued an unrestricted Cubed stock certificate, Cane deposited that
certificate into a Ben-Basset’s trading account that Cane controlled. (Id.). Almost all the free-
trading Cubed stock that was sold, purchased, and resold on the stock market between March 28,
2014 and July 17, 2014, originated from the Ben-Bassett account. 7 (See Trial Tr. at 869-876,
880-884, 888, 1142-43 (Oremland), GX 196-21). Cane remained in control of the Ben-Basset
account and kept custody of the unrestricted Cubed stock certificates which, according to
Discala, Cane was holding in “escrow” and would sell into the market in a way that would
enable the co-conspirators to control Cubed’s stock price.
7
The Cubed stock certificate for Marche Godfrey was transferred to an entity known as
Oxbridge Technology Partners and deposited into an account with J.P. Morgan Chase, but only
500 shares were transferred out of this account. (Trial Tr. at 888 (Oremland), 1902-1903
(Albanese)). Godfrey testified that he was paid $40 to sign the paperwork to become a
Northwest shareholder, he did not pay for the stock, never received a stock certificate and was
unaware that he ever owned Cubed stock. (Trial Tr. at 2529-38 (Godfrey)).
6
On March 28, 2014, 200 shares of Cubed were sold at $5.00 per share. (PSR ¶
25). Based on the $5.00 share price and its outstanding common stock, Cubed had a market
capitalization of approximately $150 million. (Id.). On April 22, 2014, after 15 days without
trading activity, Cubed’s stock began trading in earnest at a price of $5.25; the stock closed that
day at $5.20. (Id.). On or about and between April 22, 2014 and April 30, 2014, Discala and his
co-conspirators were responsible for manipulating the vast majority of the trading activity in
Cubed through, inter alia, wash trades and matched trades. (Id.). Goodrich, Josephberg and
Sloan, as well as others, entered buy orders for Cubed stock at specific prices at Discala’s
direction to make it look like there was more demand for the stock than actually existed.
Between April 22, 2014, and June 23, 2014, Discala and the other conspirators engaged in
manipulative trading to walk the price of the Cubed stock up to its peak price of $6.75 per share.
(Id.). At $6.75 per share, Cubed’s market capitalization was approximately $200 million. (PSR
¶ 29). Over the next month, the co-conspirators continued to fraudulently manipulate Cubed’s
stock. On July 9, 2014, Cubed’s stock price closed at $6.60 per share and was still in the
controlled pump phase of the fraudulent manipulation scheme when trading was halted by the
U.S. Securities and Exchange Commission (“SEC”) after Discala was arrested. (Id.).
II. DISCALA’S PRETRIAL SUPPRESSION MOTIONS
A. The Discala Telephone Wiretap
In furtherance of the investigation into the stock manipulation schemes, the
government applied for and obtained a Title III wiretap order on May 1, 2014. This wiretap was
for a cellular telephone used by Discala (the “Discala Telephone”) and was authorized by order
of the Honorable P. Kevin Castel of the Southern District of New York on May 1, 2014
(“Wiretap Order”), based upon an affidavit submitted by one of the case agents, Federal Bureau
of Investigation (“FBI”) Special Agent Michael Braconi, on the same date (“Wiretap Affidavit”).
7
The Wiretap Affidavit sought, and the Wiretap Order authorized, the interception of wire and
electronic communications – including telephone call and text message content – sent to or
received by the Discala Telephone. (Id.; Wiretap Order at 3). In addition, on May 30, 2014, the
government applied for an order extending the wiretap an additional 30 days, and the Honorable
Alvin K. Hellerstein of the Southern District of New York granted the application. FBI agents
began monitoring the wiretap of the Discala Telephone on May 2, 2014, and terminated the
wiretap on June 29, 2014. During this period, the government intercepted a number of
incriminating calls between Discala and his co-conspirators that were primarily about the Cubed
scheme, which was ongoing at that time.
B. The OmniView Search Warrant
On or about July 15, 2014, the Honorable Holly B. Fitzsimmons, United States
Magistrate Judge for the District of Connecticut, signed a warrant authorizing the search of
OmniView’s office located in Norwalk, Connecticut (the “OmniView Premises”). Judge
Fitzsimmons signed the warrant (the “OmniView Warrant’) after reviewing an affidavit from
Special Agent Braconi dated July 15, 2014 (the “OmniView Affidavit” or “OmniView Aff.”).
As described on the face of the OmniView Warrant, federal agents were authorized to seize from
the OmniView Premises “evidence, fruits and instrumentalities of violations of Title 18, United
States Code, Sections 371, 1341, 1343 and 1349, and Title 15, United States Code, Sections
78j(b) and 78ff, as set forth in Attachment B.” Attached to and incorporated by reference into
the OmniView Warrant were: Attachment A, a description of the OmniView Premises; and
Attachment B, a description of the property to be seized, which included computers and other
electronic storage media. A copy of the Indictment in this case, which had been returned by a
grand jury on July 14, 2014, was also provided to Magistrate Judge Fitzsimmons.
8
On July 17, 2014, the same day that law enforcement agents executed the arrest
warrants for Discala, Shapiro, Wexler, Bell, Josephberg, Cane and Azrak, the search of the
OmniView Premises was conducted. The agents seized approximately six boxes of hard-copy
documents and over a dozen electronic items, including servers and computers. Of the seized
electronic items, approximately nine of those items were later imaged off-site by the FBI’s
Computer Analysis Response Team (“CART”), including desktop computers and two servers.
Due to the large amount of data that was contained on the electronic items that CART imaged,
the government conferred with defense counsel regarding an agreed upon list of search terms
which were then used to cull responsive documents. After these searches were completed, the
documents were produced in discovery in an electronic load file. The parties also entered into
Stipulations regarding potential privilege issues regarding this data.
In addition to the material seized from OmniView’s office, on July 17, 2014,
agents also received consent from Discala’s wife to search Discala’s home, and the FBI also
seized approximately 95 binders of documents.
C. Discala’s Suppression Motion, the Court’s Order and Opinion
On September 15, 2017, Discala moved to suppress both the fruits of the Wiretap
Order and the Omniview Warrant (“Discala Suppression Motion,” Dkt. No. 353). Discala
challenged the Wiretap Order on a number of grounds, including an allegation that the Wiretap
Affidavit was “replete with false and misleading assertions that Special Agent Braconi knew or
recklessly failed to know were false when he made them.” (Discala Suppression Mot. at 9).
Among other things, Discala claimed that Agent Braconi mislead the district court by stating that
Discala “sold a large amount of [CodeSmart] shares at times the price peaked,” when, in fact,
Discala sold stock at increasing prices as the stock was pumped and then purchased additional
9
stock as the stock price was falling. Id. at 10. Discala also contested Agent Braconi’s discussion
of reverse mergers and the SEC Investor Bulletin on Reverse Mergers. (Id. at 13).
Discala also challenged the OmniView Warrant on a number of grounds,
including that the warrant was overbroad, lacked particularity, and, again, Discala attacked the
OmniView Affidavit as being “replete with material omissions and out-and-out falsifications[.]”
(Id. at 33).
On November 17, 2017, the government filed its response to the Discala
Suppression Motion, as well as a response to various other pretrial motions. (Dkt. No. 380). The
government argued that Discala’s claims that Special Agent Braconi made any intentional or
reckless misstatements and omissions in either the Wiretap Affidavit or the OmniView Affidavit
were without merit. The government also argued that the OmniView Warrant was sufficiently
particularized and not overbroad, in light of the probable cause supporting the search.
After the parties filed their main briefs, the Court heard oral argument on the
motions on December 8, 2017, supplementary letter briefs were filed by both parties, 8 another
oral argument was held on January 10, 2018, and additional letters were filed. 9 A late motion to
suppress the materials seized from Discala’s home pursuant to the consent search was also filed
by Discala. 10 On February 2, 2018, the Court entered an order denying Discala’s suppression
8
See Dkt. Nos. 404 (Dec. 15, 2017 Discala First Suppression Letter), 420 (Dec. 22, 2017
First Gov’t Suppression Letter), 425 (Dec. 29, 2017 Discala Second Suppression Letter) 429
(Jan. 3, 2018 Second Gov’t Suppression Letter), 444 (Jan. 8, 2018 Discala Third Suppression
Letter).
9
See Dkt. Nos. 455 (Jan. 12, 2018 Discala Fourth Suppression Letter), 473 (Jan. 23,
2018 Third Gov’t Suppression Letter), 481 (Jan. 25, 2018 Discala Fifth Suppression Letter), 487
(Jan. 31, 2018 Fourth Gov’t Suppression Letter), and 488 (Feb. 2, 2018 Discala Sixth
Suppression Letter).
10
See Dkt. Nos. 458 (Discala Second Motion to Suppress), 471 (Government Motion in
Opposition to Second Suppression Motion), and 480 (Discala Reply).
10
motions without a Franks hearing (Dkt. No. 490), and filed a written opinion on March 6, 2018
(“March 6, 2018 Opinion,” Dkt. No. 516). In its written opinion, the Court concluded that, with
respect to Discala’s allegations regarding the trading information discussed in the Wiretap
Affidavit,
DiScala has not sufficiently alleged that Special Agent Braconi

made deliberately false statements or acted with reckless disregard
for the truth in his averments regarding DiScala’s trading. He has
not shown that Special Agent Braconi “entertained serious doubts”
as to references regarding trading data he had sworn to in his
affidavits. At best, he has alleged that Special Agent Braconi made
a reasonable mistake of fact as to what DiScala’s own trading
records showed.
(March 6, 2018 Opinion at 22). With respect to Discala’s complaints about Special Agent
Braconi’s discussion of reverse mergers, the Court stated,
Certainly, and unfortunate to say, while it is uncontrovertibly true

that reverse mergers have been used to perpetrate frauds, what
makes [Discala’s] objection really mystifying is that Special Agent
Braconi also twice stated in his affidavit that reverse mergers are not
per se unlawful. See Dkt. No. 352-2 at 22, ¶s 30-31. The affidavit
also gave reasons why Special Agent Braconi had concluded that
the CodeSmart reverse merger was of the unlawful variety. Dkt. No.
380 at 43. Here, then, DiScala has not made a sufficient preliminary
showing that these statements were either intentional falsehoods or
made with reckless disregard for the truth.
(Id. at 23-24). Ultimately, the Court held,
Consideration of the entire record, as required by DiScala’s fusillade

of objections to the wiretap order easily leads to the conclusion that
the wiretap application set forth a mother load of evidence
supporting a finding of probable cause, and no reason to believe that
Special Agent Braconi made, or recklessly risked making, material
misrepresentations or omissions to the Title III Court. Any
misstatements that Special Agent Braconi made were immaterial …
and the majority of the alleged misrepresentations were, ultimately,
too insignificant to suggest that Special Agent Braconi lied or had a
reckless disregard for the truth. … Indeed, assuming that DiScala
had won all of those fact battles and that some or all of the
statements he challenged were stripped out of the affidavit, a still
considerable mountain of evidence would confront him, likely
11
sufficient to find probable cause in the teeth of a handful of

misrepresentations.
(Id. at 30).
The Court also denied Discala’s motion to suppress the OmniView Warrant,
rejecting any arguments regarding alleged misrepresentations and omissions in the OmniView
Affidavit that were previously raised and rejected with respect to the Wiretap Affidavit,
concluding that the OmniView Warrant was supported by probable cause, sufficiently
particularized and not over broad. (Id. at 30-41). Furthermore, even if the OmniView Warrant
was somehow flawed, the Court held that the “good faith execution on these facts, would
certainly save the search. Nothing in the warrant application was materially false or recklessly
misleading. . . Nor is there anything to suggest that Magistrate Judge Fitzsimmons abdicated her
judicial role in her consideration of that application.” (Id. at 43).
III. THE TRIAL
On April 2, 2018, almost four years after he was arrested, the trial against Discala
and co-defendant Kyleen Cane began and lasted approximately five weeks. The government
called approximately 25 witnesses to testify at trial, including law enforcement agents, summary
and expert witnesses from the FBI, the SEC and the Financial Industry Regulatory Authority
(“FINRA”) who had reviewed bank, brokerage and trading records, a representative from the
Empire Stock Transfer who testified about the transfer records for Cubed stock, a representative
from Ramapo College who testified about a false CodeSmart press release, multiple CodeSmart
and Cubed victims, several witnesses who testified pursuant to non-prosecution agreements,
including Ben-Bassett, who initially possessed all the unrestricted Cubed stock and sold it at
Cane’s direction, and five co-conspirator witnesses who had pleaded guilty to felony charges and
12
were testifying pursuant to cooperation agreements with the government. 11 The co-conspirator
witnesses, Wexler, Bell, Goepel, Azrak and Sloan, testified about their participation in the stock
manipulation schemes, and the roles of the various co-conspirators, including Discala. Goepel,
Discala’s former assistant who left Discala’s employ in January 2014, primarily had information
about the CodeSmart scheme. Among other things, Goepel testified about the initial distribution
of the unrestricted CodeSmart stock, and about the fact that Discala had paid for CodeSmart
CEO Ira Shapiro’s purchase of CodeSmart stock which had been touted in a false CodeSmart
press release. Wexler, Bell and Sloan testified about both the CodeSmart and Cubed scheme,
although Bell, who had lost his job as a stock broker in June 2013, had a more limited role in the
Cubed scheme. Trial Tr. at 99, 198 (Bell). Azrak primarily testified about the Cubed scheme,
although he became aware of the CodeSmart scheme after the fact. It was clear from each co-
conspirator witnesses’ testimony that Discala was the overall scheme’s organizer and leader, and
that each co-conspirator came to participate in the fraud through Discala. For example, Bell
testified about Discala’s role in the CodeSmart scheme:
A.J. and I would text each other on a daily basis. He would tell me how
much volume we were searching for that day, didn’t want too much
volume because it was a brand new stock trading and we didn’t want a lot
of attention. He would tell me where to put the bid and he was the
quarterback so he was coordinating with Craig [Josephberg] and myself
and a few other traders that I found out about and then we would -- he
would tell us where to purchase the stock, or I would tell him I have
$30,000 to purchase stock with today. Where do you want me to buy the
stock at? He would tell me buy it at this price. I’ll put some orders own
11
Discala speculates that it would have not been possible for the government to obtain
the cooperating witnesses’ testimony without the wiretap. (Discala Mot. at 2.) This claim is
without merit. Two of the co-conspirators, Goepel and Sloan, decided to cooperate after they
were approached by agents and they both pleaded guilty to Informations without receiving any
discovery in the case. Goepel also pleaded guilty before Discala was arrested, and she was not
captured on the wiretap. Bell, Wexler and Azrak decided to cooperate and pleaded guilty shortly
after they were arrested.
13
this side. We used to text and phone call.
(Trial Tr. at 91 (Bell)).
The government admitted into evidence more than 750 exhibits, including
Government Exhibit 132-2, which included numerous text messages between Bell and Discala
from the time period of April 2013 and July 2014 that were seized from Bell’s cell phone and
reflected the types of texts that Bell mentioned in the above testimony. The government also
admitted Government Exhibit 135-1, which contained text messages seized from Wexler’s cell
phone, Government Exhibit 134-1, which contained text messages seized from Discala’s phone,
and Government Exhibits marked with a 129 prefix, which were text messages seized from
Cane’s phone. None of this evidence is at issue.
The government admitted either the entirety of, or portions of, approximately 50
wiretap calls and a couple dozen text messages, marked with a Government Exhibit 198 or 199
prefix, that were intercepted pursuant to the Wiretap Order between May and June 2014, during
the time period that the stock of Cubed was being actively manipulated. Approximately 30
documents, primarily emails, marked with a Government Exhibit 127 prefix, were admitted from
the items seized from the OmniView Warrant. The government also admitted Government
Exhibit 128-5, a large binder of CodeSmart documents, seized from Discala’s home. A number
of documents that were provided to the government by Goepel, marked with a Government
Exhibit 177 prefix, primarily about the CodeSmart scheme, were also admitted into evidence.
Finally, numerous bank records, trading records, phone records, press releases, SEC filings, and
transfer agent records were also admitted into evidence. Discala also testified in his defense and
committed perjury on multiple occasions.
14
At the conclusion of the trial, Discala was convicted of conspiracy to commit
securities fraud (Count One), conspiracy to commit mail and wire fraud (Count Two), securities
fraud (Counts Three and Four), and wire fraud (Counts Six, Seven, Eight, and Eleven). 12 Cane,
who argued at trial that her acknowledged control of Cubed’s unrestricted stock was actually
intended to protect Cubed and the market from Discala, was acquitted of all counts.
IV. THE SENTENCING
On December 8, 2021, the Court sentenced Discala to 138 months’ imprisonment,
ordered Discala to pay $2,484,873 in forfeiture, and the amount of restitution will be determined
by the Court at a later date. 13 The Court applied an enhancement for obstruction of justice in
calculating the applicable Guidelines range, based upon his finding that Discala committed
perjury at the trial.
At the conclusion of the sentencing hearing, the Court ordered Discala to self-
surrender to the Bureau of Prisons on February 8, 2022.
12
Prior to trial, the government informed the Court by letter that it would not proceed on
Count 5, a substantive wire fraud count. (Dkt. No. 529). The Indictment was redacted and jury
verdict sheet were renumbered starting at Count 5. Discala was acquitted of two wire fraud
counts, Counts 9 and 10 (renumbered 8 and 9 in references at the trial and on the verdict sheet).
(Dkt. No. 629). Counts 8 and 9 related to intercepted calls where Discala discussed manipulating
StarStream stock.
13
The government has argued that the appropriate restitution figure is $16,346,023, (Dkt.
No. 802), although Discala has disputed portions of that figure and additional briefing on the
restitution issue is due January 18, 2022. (Dkt. No. 807).
15
ARGUMENT
DISCALA IS NOT ENTITLED TO BAIL PENDING APPEAL
I. LEGAL STANDARD
Bail pending appeal is governed by 18 U.S.C. § 3143(b)(1), which provides that a
court “shall order that a person who has been found guilty of an offense and sentenced to a term
of imprisonment” be detained pending appeal unless the court makes two independent findings.
First, the court must find “by clear and convincing evidence that the person is not likely to flee or
pose a danger to the safety of any other person or the community if released[.]” 18 U.S.C. §
3143(b)(1)(A). Second, the court must find that the appeal is not for the purpose of delay and
raises a substantial question of law or fact likely to result in--(i) reversal, (ii) an order for a new
trial, (iii) a sentence that does not include a term of imprisonment, or (iv) a reduced sentence to a
term of imprisonment less than the total of the time already served plus the expected duration of
the appeal process. 18 U.S.C. § 3143(b)(1)(B).
Under this statutory framework, a “substantial question” is a “‘close’ question or
one that very well could be decided the other way.’” United States v. Randell, 761 F.2d 122, 125
(2d Cir. 1985) (quoting United States v. Giancola, 754 F.2d 898, 901 (11th Cir. 1985)). If the
court concludes that the raised question is not “close,” its inquiry ends, and it must deny the
motion for bail pending appeal. However, if the court finds that the appeal does raise a question
that is “close” enough to render it “substantial,” the court must then make a second determination
before it may decide to grant bail pending appeal. The “substantial question” must be “so
integral to the merits of the conviction . . . that a contrary appellate holding is likely to require
reversal of the conviction or a new trial.” Id. (internal quotation marks omitted). If the question
is “substantial” but nevertheless fails to meet this second requirement, the court must deny the
16
motion. Thus, according to Randall, before a district court may grant bail pending appeal, it
must find:
(1) that the defendant is not likely to flee or pose a danger to the safety of any other
person or the community if released;
(2) that the appeal is not for purpose of delay;
(3) that the appeal raises a substantial question of law or fact; and
(4) that if that substantial question is determined favorably to the defendant on
appeal, that decision is likely to result in reversal or an order for a new trial on all counts on
which imprisonment has been imposed. Id. (emphasis added). See also United States v.
Cabrera, 16 Cr 238, 2020 WL 3963887 (July 13, 2020, D. Ct.)(denying bail where defendant
failed to raise a close or “substantial” question or law or fact with respect to all counts of
conviction which resulted in imprisonment).
With respect to all of these issues, “the burden of persuasion rests on the
defendant,” Randell, 761 F.2d at 125, and there is a “presumption in favor of detention.” United
States v. Abuhamra, 389 F.3d 309, 319 (2d Cir. 2004); see also Fed. R. Crim. P. 46(c). It is the
defendant’s burden to “rebut this presumption with clear and convincing evidence.” Id. This
framework and presumption give effect to Congress’s view that “[o]nce a person has been
convicted and sentenced to jail, there is absolutely no reason for the law to favor release pending
appeal or even permit it [absent] exceptional circumstances.” United States v. Miller, 753 F.2d
19, 22 (3d Cir. 1985) (quoting H. Rep. No. 907, 91st Cong., 2d Sess. 186-87 (1970)).
II. DISCALA IS NOT ENTITLED TO BAIL PENDING APPEAL
Discala’s motion fails because he cannot establish that he does not pose risk of
flight and his appeal does not raise a “substantial question” as required by Section 3143(b)(1)(B).
17
Furthermore, even if Discala had raised a substantial question, and even if that question was
determined favorably to the defendant on appeal, it would not likely result in reversal or an order
for a new trial for all counts on which imprisonment has been imposed because there was
overwhelming evidence of Discala’s guilt, independent of any evidence gathered from either the
Wiretap Order or the OmniView Warrant.
A. Risk of Flight
Discala has failed to show, by clear and convincing evidence, that he does not pose
a risk of flight, and for that reason alone his motion should be denied.
The government does not dispute that Discala complied with the restrictions of his
release during the pre-trial and pre-sentencing period. However, now that sentencing has
occurred, the circumstances have changed. Discala now faces a 138-month sentence, providing a
very strong and concrete incentive to flee. According to the PSR, since his arrest in 2014,
Discala has been the primary caretaker of his two young children, both under the age of 8. Due
to his incarceration, Discala will miss a decade of their childhoods. Discala’s wife, a German
citizen, who has been supporting the family financially for the last several years, grew up in
Algeria, Germany, and France, and previously told the Court that, “Without [Discala] here, I
may have no choice but to move to France, where my family lives.” (Dkt. No. 768-20, at 2).
Prior to his arrest in July 2014, Discala traveled abroad regularly. For example, between 2010
and July 2014, Discala had left the United States over a dozen times, traveling primarily to
Europe, Canada and Mexico. Discala also had planned to take his family, including his then
newborn, to Europe for five weeks starting in August 2014. In addition, Discala appears to have
no financial reason to remain in the United States. Since his arrest, Discala has not engaged in
any paid work or job training other than working towards a certificate as a personal trainer. PSR
18
¶¶ 113-14. While Discala now claims to have limited assets and seems highly unlikely to pay
either the forfeiture or restitution ordered in this case, Discala, through family or other sources,
had enough means to hire four separate retained attorneys to represent him at the trial, plus, after
being represented by the Federal Defenders for a period of time after the trial, Discala hired new
counsel for sentencing and the appeal. Clearly, Discala has access to financial resources, either
directly or indirectly through family, beyond those set forth in the PSR, which could be used to
finance a flight and life in another jurisdiction. In the event Discala is able to leave the United
States, even if he goes to a country that permits extradition, the government’s ability to prevent
him from any further international travel would be limited.
The government also submits that Discala’s prior obstruction of justice by
committing perjury at his trial “demonstrates a disdain for the judicial process and an
unwillingness to comply with court order, and constitutes evidence that the defendant is a flight
risk.” United States v. Amanat, 454 F. Supp.3d 358 (S.D.N.Y. 2020)(defendants denied bail
pending appeal where they introduced fabricated evidence into evidence at trial and had not
disclosed their true financial condition); see also United States v. Fishenko, No. 12 CR 626 SJ,
2013 WL 3934174, at *3 (E.D.N.Y. July 30, 2013) (“Defendant’s alleged obstruction of justice
indicates his willingness to disregard government orders and ... makes him a significant flight
risk if not detained pending trial.”); United States v. Feldman et al., 11 Cr. 20279, 2016 WL
8505085 (Aug. 1, 2016, S.D.Fl.)(defendants perjury at trial “demonstrates a total lack of
trustworthiness,” which established that the defendants posed a flight risk).
For all the reasons discussed above, the government respectfully submits that
Discala has not met his burden to show by clear and convincing evidence that he is not a flight
risk.
19
B. Discala Also Does Not Raise a Substantial Question
Discala argues that he has raised a substantial question that, if it is determined
favorably to him on appeal, would result in the Second Circuit ordering a new trial on all counts
because: (1) the Court failed to suppress the wiretap evidence, and did so after the government
failed to comply with its Brady obligations with respect to the wiretap suppression motion; (2)
the Court failed to suppress the items seized from OmniView that were introduced at trial; and
(3) without the wrongfully seized wiretap and OmniView evidence, Discala would likely not
have been convicted of any count at trial. These arguments are without merit.
In support of his motion for bond pending appeal, Discala refers to certain
arguments that he previously raised when he moved to suppress the Wiretap Order and
OmniView Warrant. These arguments were exhaustively briefed and argued over several
months, and there were no “close” legal or factual issues raised. 14
Discala also argues that “whether the government honored it’s Brady obligations
in this matter is a substantial question on appeal,” claiming that the Court erred when the “Court
declined to order the government to provide the defense with Brady information relating to the
wiretap motion.” Discala Mot. at 18, 17. This is an inaccurate representation of the record, and
14
Discala’s Motion suggests that it is new information that one of the confidential
sources described in the Wiretap Affidavit who provided information to the FBI, described in the
Wiretap Affidavit as “CS 1,” was an attorney who Discala previously claimed he had “fired.”
(Discala Mot. at 15). However, Discala’s Suppression Motion noted that CS 1 “is known to
defendant to be Omniview’s former attorney who, at the time of the Wiretap Application, had
been fired approximately nine months prior and was separately facing criminal charges in the
District of New Jersey.” (Discala Suppression Motion at 3.). In its response, the government
had noted that, “It is the government’s understanding that any information from CS1 that Special
Agent Braconi included in his Wiretap Affidavit was not protected by the attorney-client
privilege because it did not consist of confidential legal advice or was subject to the crime-fraud
exception.” (Dkt. No. 380 at 63.) Additional arguments about CS 1 were raised by Discala in
his later filings. (Dkt. No. 404 at 10-11).
20
there is no question about whether the government honored its Brady obligations. The
government did not “refuse” to provide Brady material. Instead, Discala demanded certain
information, including notes and reports prepared by Special Agent Braconi and attempted to use
Rule 17 subpoenas to obtain metadata for the underlying bluesheet data that Special Agent
Braconi had reviewed, 15 and the Court disagreed with Discala’s characterization that this was
Brady material. Furthermore, the Court did not, as Discala asserts, recognize that the
government “had not provided certain information to Mr. Discala relating to his co-conspirators
trading data,” (Discala Mot. at 18), but only that, even if the information had not been provided
(which it had), it was not relevant to the suppression motion outcome. The Court wrote:
In the same letter, DiScala argues that he is entitled to the Form 302s
prepared by Agent Braconi and the metadata for the disc provided
on December 8, 2017. Dkt. No. 404 at 4, n.3. He argues that this is
exculpatory material under Brady v. Maryland, 373 U.S. 83, 83 S.
Ct. 1194, 10 L.Ed.2d 215 (1963). However, he concedes that the
Second Circuit has not considered the issue of whether Brady
obligations arise in the context of a pretrial suppression hearing,
although the Fifth Circuit and Ninth Circuit have held that they do.
Dkt. No. 404 at 4, n.3. The Court need not decide that question here,
however, as these are the CodeSmart trading records that Special
Agent Braconi relied on when swearing out the Wiretap Affidavit.
See, e.g., December 8, 2017 Hearing Transcript at 57, 10:17;
January 10, 2018 Hearing Transcript at 34, 5:25, 35, 1:22. The
Court notes that to the extent that Special Agent Braconi reviewed
co-conspirators’ trading data – and the government has not provided
that data to DiScala – there is no issue, as he would lack standing to
review that data. See, e.g., United States v. Balon, 384 F.3d 38, 44
(2d Cir. 2004) (collecting Second Circuit cases noting that Title III
suppression must be construed in context of Fourth Amendment
standing).
15
During the oral argument on January 10, 2018, Discala’s counsel attempted to describe
what metadata he wanted, from which sources, and for what purpose, and it appeared to be an
attempt to show that the FBI had tampered with evidence, and there was no good faith basis for
that claim. (See Jan. 10. 2010 Tr. at 28, 38-39). The government turned over all the data and
metadata in its possession that it had received. (Id. at 36).
21
(March 6, 2018 Opinion, n. 19). The trading data reviewed by Special Agent Braconi, including
the CodeSmart bluesheet data that the SEC provided to Special Agent Braconi on February 27,
2014, was provided to Discala, and that data included trading data by all parties reported by the
brokers for the requested time periods, not just Discala, so it would have included the co-
conspirators trading data. 16 Furthermore, while he did not ultimately testify at trial, Special
Agent Braconi was a potential government witness and, on January 8, 2018, the government
provided the defendants with Special Agent Braconi’s statements pursuant to 18 U.S.C. Section
3500, which included Form 302 interview reports and notes. After years of litigation and a trial,
Discala should be able to particularize what Brady information was withheld, or produced in an
untimely fashion, how it was exculpatory and how production of that information would have led
to the suppression of the wiretap, and he has failed to do so.
Furthermore, even if the two suppression rulings complained of were error, which
they were not, the error was harmless. As discussed above the government’s evidence in this
case was overwhelming even without the Wiretap Order and Search Warrant evidence. Discala
and his co-conspirators control over all the unrestricted stock of both CodeSmart and Cubed and
16
In its letter of December 22, 2017, the government wrote: “to clarify the record, in this
case, there were multiple requests for bluesheet data made by the [SEC]. On December 10,
2013, the SEC made a request for bluesheet data related to CodeSmart, and received data for the
period of June 14, 2013 through November 29, 2013. On February 27, 2014, the SEC produced
this data – the Affidavit Bluesheet Data – to Special Agent Braconi pursuant to the government’s
granted access request. Prior to submitting the Affidavit on May 1, 2014, Special Agent Braconi
reviewed this data. The SEC made additional requests for CodeSmart bluesheet data after the
Affidavit was submitted, and received CodeSmart trading data that covered a wider period, from
May 13, 2013 through May 9, 2014 (the “Post-Affidavit Bluesheet Data”). On or about January
22, 2015, as part of its Rule 16 discovery, the government produced to defense counsel the Post-
Affidavit Bluesheet Data which was a more complete set than the Affidavit Bluesheet Data.”
(Dkt. No. 420). On December 8, 2017, the government produced a copy of the Affidavit
Bluesheet Data to defense counsel. (Dkt. No. 398).
22
their manipulative trading in those stocks was amply demonstrated at trial through, among other
things, witness testimony, transfer agent records, trading records and text messages seized from
co-conspirator phones that were not subject to any suppression motion. Goepel, Discala’s
former assistant, testified about how the CodeSmart unrestricted shares were divided up among
the co-conspirators and provided testimony about a false press release. The testimony of the
transfer agent representative Patrick Mokros and witness David Ben-Bassett showed how all the
free-trading shares of Cubed were controlled by Cane. FINRA witness Deborah Oremland
testified about her analysis of the trading records, which showed coordinated trading involving
the co-conspirators. Co-conspirators Bell, Wexler, Sloan and Azrak testified at length about the
charged crimes and Discala’s role in orchestrating them. Discala also has not pointed to any
evidence seized from the search of OmniView whose admission he alleges affected the outcome
of the trial.
While the introduced wiretap calls were strong evidence of the Cubed scheme,
they were not necessary to prove the defendant’s guilt, and the wiretap evidence had little to
offer for the CodeSmart scheme, which predated the wiretap by many months. Even without the
Wiretap Order and Search Warrant evidence that Discala claims should have been suppressed,
there was overwhelming evidence to support all of the counts of conviction, but this is
particularly true of the counts that related to CodeSmart conspiracy to commit securities fraud
(Count One), conspiracy to commit mail and wire fraud (Count Two), and securities fraud for the
CodeSmart scheme (Count Three), all of which resulted in terms of imprisonment. Therefore,
Discala cannot show that, even if he raised a substantial question of law of fact on appeal that
was decided in his favor, that it is likely to result in reversal or an order for a new trial on all
counts for which imprisonment has been imposed.
23
CONCLUSION
Based on the foregoing, the government respectfully requests that the Court deny
Discala’s application for bail pending appeal.
Dated: Brooklyn, New York

January 7, 2022
Respectfully submitted,
BREON PEACE
UNITED STATES ATTORNEY
Eastern District of New York
Attorney for Plaintiff
271 Cadman Plaza East
Brooklyn, New York 11201
By: /s/
Shannon C. Jones
Patrick T. Hein
Assistant United States Attorneys
(718) 254-6379
cc: Defense Counsel (by ECF)
24

DOJ Motion For No Jail AJ Discala Jan 7 2022

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Case 1:14-cr-00399-ENV Document 813 Filed 01/07/22 Page 1 of 25 PageID #: 8665

UNITED STATES DISTRICT COURT

UNITED STATES OF AMERICA

- against - Docket No. 14-CR-399 (S-1)(ENV)

THE GOVERNMENT’S OPPOSITION TO DISCALA’S

PRELIMINARY STATEMENT ........................................................................................... 2

I. The Offense Conduct .......................................................................................................... 2

B. The CodeSmart Scheme ................................................................................................ 3

C. The Cubed Scheme........................................................................................................ 5

II. Discala’s Pretrial Suppression Motions .............................................................................. 7

A. The Discala Telephone Wiretap .................................................................................... 7

B. The OmniView Search Warrant .................................................................................... 8

C. Discala’s Suppression Motion, the Court’s Order and Opinion ................................... 9

III. The Trial............................................................................................................................ 12

IV. The Sentencing .................................................................................................................. 15

ARGUMENT DISCALA IS NOT ENTITLED TO BAIL PENDING APPEAL .......... 16

I. Legal Standard .................................................................................................................. 16

II. Discala is Not Entitled to Bail Pending Appeal ................................................................ 17

A. Risk of Flight ......................................................................................................... 18

B. Discala Also Does Not Raise a Substantial Question ........................................... 20

The government respectfully submits this memorandum of law in opposition to

and his motion should be denied.

I. THE OFFENSE CONDUCT 1

To execute his scheme, Discala cultivated close relationships with corrupt

Goodrich, who engaged in manipulative and fraudulent trading at Discala’s direction. In

to him via OmniView to invest in his schemes.

B. The CodeSmart Scheme

951 (Ferrante); GX 195-1-195-5).

C. The Cubed Scheme

Following the CodeSmart scheme, Discala moved on to another scheme to

enable the co-conspirators to control Cubed’s stock price.

II. DISCALA’S PRETRIAL SUPPRESSION MOTIONS

A. The Discala Telephone Wiretap

In furtherance of the investigation into the stock manipulation schemes, the

scheme, which was ongoing at that time.

B. The OmniView Search Warrant

OmniView’s office located in Norwalk, Connecticut (the “OmniView Premises”). Judge

Stipulations regarding potential privilege issues regarding this data.

seized approximately 95 binders of documents.

C. Discala’s Suppression Motion, the Court’s Order and Opinion

Discala also challenged the OmniView Warrant on a number of grounds,

DiScala has not sufficiently alleged that Special Agent Braconi

Braconi’s discussion of reverse mergers, the Court stated,

Certainly, and unfortunate to say, while it is uncontrovertibly true

(Id. at 23-24). Ultimately, the Court held,

Consideration of the entire record, as required by DiScala’s fusillade

sufficient to find probable cause in the teeth of a handful of

judicial role in her consideration of that application.” (Id. at 43).

III. THE TRIAL

testified about Discala’s role in the CodeSmart scheme:

this side. We used to text and phone call.

(Trial Tr. at 91 (Bell)).

Cane’s phone. None of this evidence is at issue.

committed perjury on multiple occasions.

At the conclusion of the trial, Discala was convicted of conspiracy to commit

IV. THE SENTENCING

On December 8, 2021, the Court sentenced Discala to 138 months’ imprisonment,

perjury at the trial.

surrender to the Bureau of Prisons on February 8, 2022.

DISCALA IS NOT ENTITLED TO BAIL PENDING APPEAL

Bail pending appeal is governed by 18 U.S.C. § 3143(b)(1), which provides that a

the appeal process. 18 U.S.C. § 3143(b)(1)(B).

Under this statutory framework, a “substantial question” is a “‘close’ question or