FBI agents found Troy Stratos in his closet when they broke down the front door of his Marina Del Rey penthouse four years ago.
The Sacramento Country Day School graduate, who had paid the monthly rent of $14,000 on the 3,800-square-foot condo a year in advance, later testified that he was home with the flu. He wasn’t expecting company, much less federal agents.
By then, Stratos, 49, had come a long way from his modest Sacramento origins. He had managed millions of dollars for comedian Eddie Murphy’s ex-wife and was orchestrating what was supposed to be a massive buy of Facebook stock. He boasted of high-level connections that he claimed could attract President Barack Obama to a party he planned, and dropped the names of A-list actors who lived near a Venice Beach house he used as an office.
The FBI was not impressed.
“They said it was wire fraud,” Stratos would later recall. “I did not know exactly what that was.”
Today, the man who described himself in court testimony as a “creative guy” and a dreamer faces not only charges of wire fraud, but also money laundering, mail fraud and obstruction of justice. Two separate trials of Stratos will play out this year in the 15th-floor courtroom of U.S District Judge Troy Nunley. Jurors will hear testimony about the inner workings of Facebook, claims that Stratos boasted of deals with Saudi royals and Mexican billionaire Carlos Slim, and descriptions of the extravagant lifestyle Stratos led until his arrest on Dec. 20, 2011.
His prosecution is expected to generate testimony from and about some of Silicon Valley’s most prominent executives and celebrities, ranging from Murphy to legendary jazz singer Nancy Wilson, who is Stratos’ stepmother. The trial has the normally staid courthouse at Fifth and I streets buzzing with anticipation. Lawyers and a judge recently mused about whether Nicole Murphy, the comedian’s ex-wife, would call a press conference with TMZ.
Strip away the glitz, prosecutors say, and Stratos is nothing but a liar who ripped off millions of dollars from friends and business associates, spending it almost as fast as he got his hands on it.
His lawyers counter that the facts aren’t that simple, that the accusations stem from complex financial dealings involving tens of millions of dollars. The true story, they say, is a glimpse into “a whole different world” from most people’s experience.
“This case is not as black or white or as simple as the government would have you believe,” federal Public Defender Heather Williams told jurors on May 5 as the curtain rose on the first of Stratos’ trials. She noted that much of the evidence will come from an admitted embezzler looking to spare himself years in prison by testifying against his former business associate.
Stratos’ first trial involves charges that he took more than $11 million he was supposed to invest in Facebook shares and spent it on himself. A second trial, set to begin in October, features allegations that he swindled more than $8 million out of Eddie Murphy’s ex-wife after she entrusted him to invest the funds from her divorce settlement.
‘I look really bad’
In the years before he was charged, court documents state, Stratos claimed he was a movie director and producer, and that he had made a fortune investing in AOL and oil. He also had become the focus of online websites labeling him an international con artist.
“(W)hen you Google me, boy, I look really bad,” Stratos admitted in a February 2012 court hearing, where he unsuccessfully sought to bail out of the Sacramento County Jail pending trial.
Stratos, who was known as Troy Stafford until he was 21 and still uses the name from time to time, was raised by his grandparents in Fair Oaks. He said he changed his last name to honor their Greek heritage. Court documents say those are two of several names he has used to keep his financial deals afloat and shield him from the avalanche of negative online postings.
His legal problems in the United States appear to date to 2005, when he allegedly came up with a plan to get his hands on more than $8 million from Nicole Murphy, whom Stratos has described in testimony as “my first girlfriend,” and swore they have been close since their teens.
“I introduced her to Eddie Murphy,” Stratos testified. “She called me when she divorced him.”
Stratos claimed he and Nicole Murphy “commingled” their funds, and “we were planning to have a child together.”
Nicole Murphy declined comment for this story.
A federal grand jury concluded that, whatever their relationship, he conned her into giving him the money by promising he would invest it for her in Dubai, “where the proceeds would earn a high rate of return,” according to a December 2011 indictment.
He also said he would help her sell the Granite Bay mansion the Murphys had shared in the gated Los Lagos development, court papers state, a 12,600-square-foot home with 14 bathrooms, 10 bedroom suites and a 5,200-square-foot guest house that cost $30,000 a month in upkeep.
According to the indictment, Stratos claimed he knew Middle Eastern royals who would be interested in buying the home, and he convinced her that “home purchasers would expect to see luxury automobiles” there and would want to buy them along with the house.
He eventually moved into the house – Stratos testified that he was a caretaker – and leased luxury vehicles for his own use, the indictment alleges. He convinced Nicole Murphy that because her cash was tied up overseas, she needed to raise money by refinancing the property and a home belonging to her mother in Sacramento, the indictment says.
Prosecutors say Stratos never invested her money overseas, but used it for his own expenses.
Big names dropped
The stories he has spun in sworn testimony have been impressive: He claimed in court that he had a Super Bowl commercial in the works for McDonald’s, and planned to shoot a Coke ad in 2001 featuring Muhammad Ali.
He has dropped the names of Hollywood stars Robert Downey Jr. and the late Dennis Hopper in describing a Venice Beach neighborhood where he had a $9,000-a-month residence used as workspace. He described visiting Egypt to inspect King Tut’s remains and meeting with actor Omar Sharif at the Four Seasons Hotel in Cairo.
And he claimed to be arranging for icon Nancy Wilson to record her 75th jazz album and celebrate her birthday in 2012, with invitations to luminaries including President Obama. (Wilson, who is his stepmother, remains a Stratos supporter, offering up equity in property she owned to help him make bail, and traveling to Sacramento for one of his bail hearings).
Stratos’ current trial has so far drawn testimony from Facebook executives and from a Philadelphia-based financial manager named Timothy Burns, who sicced the FBI on Stratos.
Burns testified Wednesday that he first made contact in March 2011 with Stratos, who was using the name “Ken Dennis” – the name of Stratos’ half-brother, court documents say – and was claiming to be a representative of Carlos Slim, the Mexican billionaire.
Burns testified he had a company in Pennsylvania and was in the market on behalf of clients to buy Facebook stock before its initial public offering on May 18, 2012. He said Stratos told him that a large block of stock would be left over and for sale from a Facebook purchase Stratos was completing for Slim.
“He said key members of Facebook were running the deal, and the chief financial officer was spearheading it,” Burns recalled in court last week. “He said the company’s right of first refusal that applied to all other transactions did not apply to this deal.”
Burns said Stratos quoted him a price of $27 a share, plus a transaction fee of 25 cents a share. Stratos said that was the same deal Slim was getting, and also said he was getting 56 cents a share as his fee, Burns told the jury.
Burns said that he was ultimately persuaded to hand over $11.25 million to Stratos for the purchase of stock in the Internet giant.
Prosecutors say that, even after Stratos was arrested on the Nicole Murphy charges, he continued his “Ken Dennis” charade from jail by dictating text messages to Burns through two associates assuring Burns that the deal would close shortly.
Burns testified that he has never met Stratos face to face and that all their communications have been via telephone, text messages and emails.
No Facebook shares were ever purchased, and Stratos has testified that the money from Burns was actually a finder’s fee he was owed for putting shareholders together with a buyer.
He also testified that he was “not sure” where much of the money went, other than to pay other people he owed and “to set up businesses” and push along a prospective restaurant and club in Las Vegas, “which, by the way, I have been pursuing since Feb. 25, 2002.”
Burns ended up with legal troubles of his own, pleading guilty in Philadelphia federal court in June 2013 to embezzling millions from his clients and spending $4.2 million of it for a family house on the New Jersey shore. As part of the plea bargain, he admitted that the money he gave Stratos was bilked from others.
His sentencing has been delayed while he testifies against Stratos, and he acknowledged last week in testimony elicited by Assistant U.S. Attorney Todd Pickles that he hopes to receive a reduced sentence for cooperating in the Stratos prosecution. Burns, 35, is the government’s most critical witness in the first Stratos trial. He has been housed in the Sacramento County Jail for the past week.
Call The Bee’s Sam Stanton, (916) 321-1091.