Lawsuit targets donation to Rudy Giuliani defense fund

One of the largest donations to Rudy Giuliani’s legal defense fund is at the center of a new lawsuit that says the $100,000 contribution rightfully belongs to the victims of an alleged online fraud scheme.

Matthew Martorano’s donation in September represented nearly 13% of all the money Giuliani, Donald Trump’s former lawyer and New York mayor, raised in the fund.

The fund was intended to help Giuliani pay lawyers in the Georgia election interference case — where Trump is a co-defendant — and in a civil defamation case that Giuliani lost, brought by two Georgia election workers.

But the plaintiff in the new civil suit — filed after CNBC reported Martorano’s donation earlier this year — claims that $100,000 came from Martorano’s participation in an alleged online skin care product scam. They seek to “unwind” the donation to Giuliani.

There is no public evidence that Giuliani and Martorano know each other. CNBC asked a Giuliani spokesperson if that was the case.

Still, the claim adds another layer of legal wrangling to the fight over Giuliani’s remaining assets. The former mayor filed for bankruptcy protection in December after a judge ordered him to pay $146 million to election workers.

Giuliani “should return all the money” he received from Martorano, said Kevin Kneupper, the attorney who filed a fraudulent conveyance lawsuit in Fulton County against Martorano, his wife and companies named of his client, LeAnne Tan.

Giuliani spokesman Ted Goodman said in an email to CNBC: “This is an unrelated lawsuit.” He had no immediate further comment.

CNBC requested comment from attorneys for Martorano, his wife and other defendants in the Georgia lawsuit and a federal civil racketeering and fraud trial in California related to the alleged skincare cream scam. None of them responded.

In early January, a San Diego judge overseeing the federal trial certified a nationwide class action against the alleged skin care sales fraudsters, as well as Martorano, his wife Kathryn Martorano, their company called Konnektive LLC and other related entities. collectively known as the Konnektive Defendants.

In her ruling, the judge wrote that the plaintiff “has demonstrated by a preponderance of the evidence that the Konnektive defendants defrauded the banks and credit card companies.”

The lawsuit alleges that many people across the country were deceived into signing up for a purported “free trial” of skin care creams under the La Pura brand.

“The scammers’ sole objective is to fraudulently obtain the victim’s credit card or bank account information,” the suit states. “And once they have it, they start charging their victims for subscriptions that they never signed up for, never agreed to, and were never properly informed about.”

According to the complaint, Martorano’s company Konnektive sold payment software to scammers that “load-balanced” entities that sold La Pura products and began charging people despite being told it was not. was a free trial offer.

The load balancer would help sellers hide the number of chargebacks from their customers from Visa and Mastercard. A high number of chargebacks — or reversals of charges to a customer’s account — is considered by Visa and Mastercard to be a sign of potential fraud, the suit notes.

“The Konnektive software was designed specifically for the purpose of facilitating automated bank fraud,” according to the federal lawsuit. This complaint also states that the software was specifically marketed to “‘free trial’ scammers at conferences these scammers attend.”

Kneupper, who was named class-action lawyer, told CNBC that the question of whether the Konnektive defendants will be held civilly liable for fraud “is ultimately going to be put before a jury” to decide.

“But I think the evidence is compelling,” Kneupper added.

The new complaint filed by Kneupper in Fulton County Superior Court, Georgia, names the Martoranos, Konnektive LLC and two other corporate entities as defendants. Giuliani is not named as a defendant.

The new complaint states that as a result of the San Diego judge’s ruling regarding Martorano and the other Konnektive defendants, “it is very likely that…the injured consumer class will prevail on the merits and obtain a favorable verdict, which could easily exceed $30 million. »

The Georgia lawsuit says Martorano and the other Konnektive defendants “are aware of this” and as a result began “a series of asset transfers in a blatant attempt to avoid paying consumers a potential eight-figure judgment under the of the federal RICO action. who were injured by their fraud.

The lawsuit cites the fact that Martorano also “recently began making significant political donations,” among them donating $100,000 to Giuliani’s legal defense fund.

Martorano also donated $5,000 to the Trump Save America joint fundraising committee last year, an additional $3,330 to the Trump presidential campaign and $1,700 to the Trump Save political action committee America, according to Federal Election Commission records.

And in November, Martorano and his wife also transferred a house and two properties in Georgia spanning 135 acres to a limited liability company, each time for a purchase price of $0, according to court office records. evaluation, notes the prosecution. The combined assessed and assessed value of the three properties was $4.1 million.

Two of the real estate transactions took place on November 14, the same day Kathryn Martorano was arraigned for federal racketeering trial. The other transaction took place five days before the deposition, the suit says.

Kneupper questioned Matthew Martorano’s motives for donating to Giuliani, whose former client Trump is the presumptive Republican presidential nominee.

“You just ask: Why is this guy giving 13 percent of the (legal defense) fund? » said Kneupper. “People don’t do it for no reason.”

Nancy Simonick, a Michigan woman who was charged for her La Pura deal despite the “free trial” offer, echoed Kneupper’s argument regarding Giuliani’s donation of Martorano.

“Oh, yeah, if he knew it was money made through a scam, he should definitely give it back,” said Simonick, who listed himself as a member of the group suing the Martoranos and other defendants in the California lawsuit.

One of Martorano’s attorneys in the Georgia case, Holly Pierson, also represents David Shafer, the former chairman of the Georgia Republican Party, in an ongoing criminal case in Fulton County.

Shafer is co-defendant with Giuliani, Trump and a dozen others in the criminal case, which accuses them of conspiring to try to overturn Trump’s 2020 presidential election loss in the state.

The defendants have pleaded not guilty.