Federal authorities arrested 14 individuals Wednesday in a sweeping crackdown on COVID-19 relief fraud, alleging the defendants orchestrated schemes to fraudulently obtain more than $25 million in taxpayer-funded pandemic relief and federally-guaranteed small business loans. The arrests, spanning multiple locations across the San Fernando Valley and Glendale, represent one of the latest efforts by federal prosecutors to combat widespread abuse of emergency pandemic programs.
The Alleged Mastermind and Key Players
At the center of the investigation is Vahe Margaryan, also known as "William McGrayan," a 42-year-old Tujunga resident who allegedly orchestrated an elaborate scheme spanning from 2018 to January 2025. According to the U.S. Attorney's Office for the Central District of California, Margaryan directed owners of sham corporations to open bank accounts, make false statements, and fabricate documents including phony resumes and financial statements to support fraudulent loan applications.
The investigation also snared Mery Babayan, a 32-year-old Van Nuys woman known as "Mery Diamondz," who allegedly worked with co-conspirators to defraud a bank by faking the sale of a sham business to obtain nearly $3 million in federally guaranteed loans, NBC Los Angeles reports. Sarkis Gareginovich Sarkisyan, 37, also known as "Samuel Shaw," of Glendale, allegedly submitted false applications and bogus documents to secure more than $700,000 in Paycheck Protection Program funds for a fake business.
International Connections and Money Laundering
The case reveals sophisticated international money laundering operations, with Axsel Markaryan, 47, of Pacoima, allegedly obtaining more than $5 million in fraudulent SBA loans and subsequently laundering at least $100,000 to a co-conspirator in Armenia. The scheme's reach extends beyond U.S. borders, as two federal criminal complaints named 18 defendants total, with four believed to be in Armenia and remain at large, per Silicon Valley News.
Law enforcement seized significant evidence during the arrests, including approximately $20,000 in cash, two money-counting machines, paper cash bands in denominations of $2,000 and $10,000, multiple cell phones, multiple laptops, two loaded semi-automatic 9mm handguns, and boxes of ammunition.
Pattern of Pandemic Fraud in the Region
This latest bust continues a troubling trend of COVID-19 relief fraud centered in the San Fernando Valley area. Previous high-profile cases include the Ayvazyan family fraud ring reported by ABC7, which successfully obtained more than $18 million through fraudulent PPP and EIDL applications. Those defendants used the stolen funds to purchase luxury homes in Tarzana, Glendale, and Palm Desert, along with gold coins, diamonds, jewelry, and other high-end items.
The San Fernando Valley has emerged as a hotspot for organized COVID-19 relief fraud, with federal authorities previously arresting multiple fraud rings operating in the area. These schemes often involve sophisticated identity theft operations and connections to organized criminal networks, including documented ties to various criminal enterprises that have historically operated in the region.
California's Massive Fraud Problem
California has been particularly hard hit by pandemic relief fraud. Per NPR, State officials conservatively estimate that fraudsters stole $20 billion from California's unemployment insurance program alone, representing about 11% of the $177 billion in jobless benefits paid out during the pandemic. As of February 2024, California authorities reported 2,075 total investigations, 731 arrests, and 432 convictions related to unemployment fraud, with nearly $6 billion in fraudulent unemployment funds seized or recovered.
The state's Employment Development Department became a particular target for fraudsters, with criminals using stolen Social Security numbers to file claims under fictitious names, including applications submitted under the names of sitting U.S. senators and even "Mr. Poopy Pants," according to NPR
Federal Response and Enforcement Efforts
The arrests are part of a broader federal crackdown on pandemic relief fraud. The COVID-19 Fraud Enforcement Task Force reported in 2024 that it has charged more than 3,500 defendants and seized or forfeited over $1.4 billion in stolen COVID-19 relief funds. The task force operates five specialized strike forces across the country, including one jointly located in California's Eastern and Central Districts.
IRS Criminal Investigation Special Agent in Charge Tyler Hatcher emphasized that the arrested individuals allegedly "obtained in excess of $25 million through the SBA Paycheck Protection Program, Economic Injury Disaster Loan programs, and other federal funding programs" that were established to assist legitimate businesses in need.
Legal Implications and Potential Sentences
The defendants face serious federal charges including conspiracy to defraud the government, wire fraud, bank fraud, money laundering conspiracy, and structuring financial transactions to evade reporting requirements. The Mercury News reports that if convicted, each defendant could face a maximum sentence of decades in federal prison. The charges reflect the federal government's commitment to pursuing maximum penalties for those who exploited emergency relief programs intended to help struggling Americans during the pandemic.
Recent sentencing in similar cases demonstrates the severe consequences for COVID-19 relief fraud. Previous San Fernando Valley defendants have received sentences ranging from 12 months to 17 years in federal prison, with judges specifically noting the callous exploitation of pandemic relief programs.
Ongoing Investigation
Federal authorities indicate this investigation remains active, with multiple agencies including the FBI, IRS Criminal Investigation, and the Small Business Administration Office of Inspector General continuing to pursue leads. United States Attorney Bill Essayli stated the enforcement action "is intended to send a message to all criminals who take advantage of government programs designed to help those who need them most."
The case underscores the federal government's continued commitment to investigating pandemic-related fraud even as the COVID-19 public health emergency has ended. With billions in relief funds distributed during the pandemic's peak, authorities expect fraud investigations and prosecutions to continue for years to come.
