DoJ charges datacenter CEO with fraud for resilience fibs • The Register
It’s one thing to stretch the truth in your marketing material, but allegedly lying about your datacenter’s qualities to lure the Securities and Exchange Commission as a customer is a whole other matter.
Deepak Jain, identified as the CEO of a Maryland IT services firm that goes unnamed in a grand jury indictment [PDF] made public on Wednesday, has been charged with six counts of major fraud and one count of making false statements after allegedly telling the Commission (SEC) that his firm’s datacenter in Beltsville, MD, had secured the “Tier 4” certification required for a to qualify for an SEC colocation contract.
Such certifications are offerd by The Uptime Institute, which defines Tier 4 facilities as offering expected uptime of 99.995 percent thanks to the presence of various resilience measures. Jain’s unnamed firm allegedly provided fraudulent certification documents to the SEC in 2011 during contract negotiations, leading to it landing the deal.
But the certifier – an entity called Uptime Council – didn’t exist at all. The DoJ alleges it was created by Jain to falsely certify his business as a Tier 4 datacenter operator, and that the fib helped him and several unnamed co-conspirators to cash in.
“Jain allegedly sought to enrich himself and his company at the expense of the reliability, availability, and security of the SEC’s electronic data,” head of the DoJ’s criminal division Nicole M Argentieri said of the case. “Yesterday’s charges make clear that the Criminal Division will not tolerate fraud schemes that threaten the security of the government’s electronic data.”
It’s not clear how the DoJ concluded that Jain had invented his tier 4 certification and certifier, but the SEC did reportedly have suspicions.
“The SEC experienced several issues with [Jain’s company’s] datacenter, including issues with security, cooling, and power – all of which were subjects of the standard referenced in the fraudulent Uptime Council certification letters,” the DoJ revealed in a press release about the indictment.
Court documents indicate the SEC asked to inspect the datacenter itself, but an employee at the firm allegedly “prevented the SEC from viewing important infrastructure that would have shown the Beltsville Data Center did not meet the Tier IV requirements” prior to the signing of the contract, which was signed in 2012.
Left unexplained is how the SEC fell for the scheme, especially if it had not been allowed to inspect the facility in question.
After the deal ended in 2018, the SEC “declined to exercise its option to stay in the Beltsville Data Center,” having spent $10.7 million over the life of the six-year contract for use of the allegedly inappropriate space.
Jain, 49, faces up to ten years in prison for each charge of major fraud, and a maximum penalty of five years for the false statement charges.
The datacenter provider at the center of the case is not named in the indictment, but a profile on Pitchbook identified Deepak Jain as the founder and CEO of AiNET, based in Beltsville, Maryland. Of course, alleged wrongdoing on the part of the CEO in no way implies that the company as a whole has been involved in any malpractice.
Jain’s LinkedIn page also indicates he founded AiNET, which describes itself as operating a Tier-4-certified datacenter in multiple places on its website, and which showed he was the CEO until shortly after The Register began making inquiries.
We called and messaged AiNET multiple times in a bid to verify whether it was their CEO who was indicted. We were told “he’s not here” and “don’t call back.” Whoever picked up another call we placed simply hung up. ®
