The FEDS’ Perfect Victim: Why a Man Who Never Lost a Dime Cried Fraud to the FBI

The DOJ got its headline: “Prosecutor Nails Fraudster.”

My take is the headline should be: “Venture capitalist, who is a known predator, manipulates ambitious federal officials to destroy a company and its inventor for ulterior motives.”

This is just an opinionated piece.

SENTENCED IN ABSENTIA

Judge Dale S. Fischer, on October 21, sentenced Bernhard Fritsch, a 64-year-old German inventor and musician, to fifteen years in federal prison for wire fraud. Fritsch was not in court. He had returned to Germany two weeks earlier. Under German law, citizens cannot be extradited to the United States for non-violent financial crimes.

At the time of his sentencing, he was home in Germany, drinking his own coffee and breathing free air.  His absence rendered the sentencing largely symbolic. Fritsch will not serve any time unless he reenters the United States.

At the sentencing, Judge Fischer ordered him to surrender immediately. The order was precise, legal, and useless.

THE COMPLAINT THAT STARTED IT ALL

The federal case against Bernhard Fritsch started and ended with a single investor: Danny Guy, a hedge-fund operator who claimed he’d been deceived into investing money in Fritsch’s start-up. He was one of 77 who had invested in StarClub, a Santa Monica venture that built software to help social media influencers monetize their online brands.

A LEGITIMATE COMPANY, NOT A MIRAGE

StarClub employed about fifty people, held patents, and invested roughly $90 million in developing its platform. It had ongoing contracts, its employees were paid, and it had money in its bank account. StarClub built software, filed ownership records, and held legitimate IP.

THE VENTURE CAPITAL GAME

Venture capital is a gamble. The men who play it know that. They risk money for the thrill of the chance. And without this kind of investor in the world, many big dreams would remain only that—dreams.

The people who invest in startups are not gamblers at a casino—they’re gamblers of a different kind. They know most ventures will sink and a few will soar, and they can afford to take that ride. Venture capital is a game of long odds and big dreams, and the ones who play it understand that failure is part of the ticket. Venture capitalists are, in their way, connoisseurs of risk. They invest not out of need, but out of appetite. 

They understand that failure is the rule, not the exception, and that profit—when it comes—is rare. Their money is never desperate; it is exploratory, speculative, almost aesthetic in its detachment. To them, loss is expected.  They know most of their bets will die young. They know a few will live forever. They can afford both outcomes. Venture capital investors aren’t victims—they’re professionals. They don’t bet the mortgage; they build portfolios. For them, risk is the business model.

ENTER DANNY GUY: THE FEDS’ PERFECT VICTIM

Danny Guy is a venture capital investor. He told the FBI and AUSA Karen Escalante, over drinks and dinner, that Fritsch tricked him out of investing seven million, he may not have told them he had lost far more than $500 million of his own investors’ money that was unrelated to Fritsch. Reports indicate that total losses to investors in Guy’s hedge funds exceeded $3 billion.

GOLDMAN WARNED HIM

That was his business: risk and short sales. Danny Guy did not go into StarClub blind. It later came out that  Goldman Sachs told him StarClub was risky. They said it was early and would need more money to grow. He knew it. He invested anyway. He even got others to invest.

STARCLUB’S RISE AND REACH

At the time he went to the FBI and to AUSA Escalante, he had not lost a dime in Fritsch’s venture. The company was growing. It had just signed a contract worth up to $150 million with a global computer manufacturer and gaming distributor, and had at least $50 million in sponsorship contracts with advertising companies. Fritsch had inked an agreement with Dubai Sheik Manaa Bin Hasher Al Maktoum for developing the platform in the Middle East.  

Dubai Sheik Manaa Bin Hasher Al Maktoum and Bernhard Fritsch make deal to bring StarClub to the Middle East.StarClub also had a roster of celebrities who used the patented StarSite platform, which collectively reached billions daily on platforms such as Facebook, Twitter, Instagram, YouTube, the Chinese platform WeChat, and Telegram.

Because it was “agnostic” for users—meaning a StarSite user could earn money from all platforms —it offered its members access that more directly monetized their entire body of creative work across all media platforms.

It was a one-stop platform for creators to monetize their social media popularity during a time when the influencer economy was in its infancy.
In reality, StarClub was on the verge of becoming the world’s most powerful media and celebrity platform. At the time the FBI closed the business down, there was more than one million dollars in the bank. It was not on a deadline to pay Guy dividends. Guy knew the odds. He took the bet.

The company had promise. Maybe too much promise. As we shall see, he made it lose and caused the loss for all 77 investors, including himself. The loss was likely nothing to him.

THE RUSSIAN CONNECTION

And for all we know, he may have had a motive outside of StarClub, like he did with the sale of Uramium One – the act of a traitor to the West when he brokered the sale of 20 percent of the United States’ uranium to the Russians and wound up with his hedge fund being owned by the Russian Rosatom State Atomic Energy Corporation.

In truth, Guy was one of America’s most remarkable criminals, historic in proportion, whose legacy has yet to be realized — and, with luck, will never be. Danny Guy was instrumental in handing the Russians 20 percent of America’s uranium deposits in fields in Wyoming – and paid bribes in millions of laundered money through his foundation to their foundation, from Russia to the Clintons, for Hillary to sign off as Secretary of State.

It is poetic and magnificent from a purely sinister point of view that Danny Guy was the complaining victim in the case against the German Bernhard Fritsch.

THE SEDUCTION OF POWER: THE FEDS’ PERFECT VICTIM

Shutters On the Beach, where Danny Guy met with AUSA Esclante and Agent Austin. For months, he wooed and wowed the young AUSA Escalante and young agent Austin. He dined with them at Miramar Hotel & Bungalows and Shutters on the Beach in Santa Monica and elsewhere – dinners and drinks and secret meetings.  Guy wanted control of Starclub, or he wanted it destroyed.

There was a calculation. This was not vengeance. There was undoubtedly a motive. He made it seem as if he were angry about being deceived, but Guy is not an angry man. He is a calculating man, and as dangerous a man to be associated with as any in the entire investment world.

CALCULATED MOTIVES: THE FEDS’ PERFECT VICTIM

Look into the lawsuits against him. His aliases, his use of his henchman Derek Snowdy, who was the setup man for this, too. His schemes to entrap. He plants employees in companies that act as spies and saboteurs. His honeypots and secret lures to tempt his victims and achieve his aim.

He may have wanted StarClub, as in a hostile takeover, or he may have been on a mission to destroy it for someone—someone much bigger—since the tech Fritsch had patented threatened some pretty big operations. It threatened to take control of the brand-new creator economy and hijack it from big tech right off their platforms. 

PATTERNS OF PREDATION: THE FEDS’ PERFECT VICTIM

We don’t know what Guy’s motives are yet, but ask the investors of Salida or Harrington, his Canadian and Bermuda hedge funds, if it is likely to be what he claims.

Investors who lost all their money while he and his inner circle short-sold to wealth.

Ask him about death spirals, reverse takeovers, or his raising capital to take a stock public, misleading investors that it’s going to go big, then secretly short-selling and watching (or making) the company implode.

Read the lawsuits.

Read up on Uranium One.

Danny Guy’s success was others’ losses. There were no win-wins with him. That’s not his M.O. Look into how he and a few of his inner circle made off while the investors he lured lost. Take a lesson from him on how to gain when everyone else is losing.

He was the perverse version of the man in Kipling – he could keep his shirt when everyone else around him was losing their ass – because of him.

THE FBI STEPS IN

For the FBI and for the US Attorney to so willingly adopt Guy and let him charm and woo them might be that they are gullible or ambitious, or it might have been that from above, someone high up, gave the order – get this done – down through the buffers — till it landed on the young ones – Austin and Escalante – translated as “go get yourself some career-making headlines and take out Fritsch” and his techology using the inherent tools of destruction owned and wielded by the Department of Justice and leave the rest to us.

Oh, this can’t happen in America, you say. You mean it does happen, it happens all the time, and it just isn’t talked about.

It is a matter of record that, soon after Fritsch was indicted and Starclub’s forced closure due to the FBI raid, which seized its operating systems, while holding its CEO, Fritsch, in detention. According to sources, FBI agents advised StarClub’s employees to go home and not return since Fritsch would be gone for 20 years, and returning could potentially place them in criminal jeopardy.

THE PROMOTIONS AND PAYOFFS

Agent Austin got a promotion. His first promotion was to be the assistant supervising agent of the FBI field office in Seattleand then to Section Chief, Cyber Division in the FBI Washington DC.

Escalante went on to a niche, high-paying job in multiples of her modest pay as an AUSA, as a lawyer for Adams Duerk and Kammerstien (ADK). ADK describes her: “Karen’s breadth of experience and insight into governmental decision-making will enable our clients to effectively address regulatory concerns, mitigate the impact of government action.”

Her actions against Fritsch are a prime example of harsh and unprincipled government action against a private business and its founder – and nobody sought to mitigate it.   

In private practice, Escalante probably makes more than $500,000 by industry standards and made about $140,000 as an AUSA. But that came later. After many dinners and drinks with Guy and doing his (and possibly others’ bidding.) We will get back to it soon enough. 

PART TWO: THE AFFIDAVIT THAT BURNED IT DOWN

Fritsch is in Germany, safe and in our next, we will show how AUSA Escalante composed an affidavit and Agent Austin signed to accomplish Danny Guy’s goal (and maybe others’ goals). It is a lesson on how to weaponize the US justice system – with all its severe lack of due process and all its boasts of having it in spades.

Part Two will analyze the Austin–Escalante affidavit and the government’s use of it to justify the StarClub raid.