Ex-owner of NY commercial check cashing companies sentenced For $9.5M fraud

Long Island resident John Drago, age 58, of Central Islip, was sentenced to four years behind bars Friday, Oct. 21, in federal court in Central Islip.

It followed his September 2021 guilty plea to fraud charges, in which he admitted to illegally structuring financial transactions and evading payroll taxes at several of his Long Island businesses.

Federal prosecutors said between January 2010 and October 2013, Drago told employees to cash multiple checks in a single day for certain customers without filing the required Currency Transaction Report (CTR), which financial institutions must file for all transactions exceeding $10,000.

He also had employees inform certain customers who presented individual checks in amounts exceeding $10,000 to return with multiple smaller checks to avoid the reporting requirements, prosecutors said.

Altogether, the scheme resulted in more than $9.5 million in check cashing transactions that were concealed from the IRS, according to investigators.

Drago also admitted that between April 2012 and July 2013, he paid workers overtime wages and commissions in cash, failing to inform the IRS.

Gross wages paid to employees were falsely underreported to the IRS in order to avoid paying the full amount of Federal Insurance Contribution Act taxes that his companies owed, prosecutors argued.

"Drago operated his check cashing business as a haven for tax cheats like himself, concealing over $9.5 million from the federal government," US Attorney Breon Peace said.

"Today's sentence demonstrates that significant consequences follow business owners who place greed above public good."

In addition to his prison term, Drago was ordered to forfeit $253,000 and pay restitution of approximately $593,000.

As part of his plea, he also agreed to surrender his check cashing licenses, his federal money services business registrations, and is barred from applying for such licenses in the future.