Inside the $55M Brooklyn Shadow Bank That Fooled Everyone

From the outside, Midwood Lumber looked like any neighborhood family business. But upstairs, federal prosecutors say it was something very different, a full-blown underground bank that moved more than $55 million for construction firms looking to keep payrolls off the books. 

This week, that operation caught up with its mastermind. David Motovich, 49, was convicted in federal court on 16 felony counts, from bank fraud to money laundering to aggravated identity theft. When sentenced, he faces up to 30 years in prison. And for accountants, auditors, and construction-industry professionals, this case reads like a red-flag checklist. 

How the Scheme Worked 

According to federal prosecutors and trial evidence, Motovich used his family-run Midwood business as a cover for a yearslong unlicensed check-cashing operation: 

1. Off-the-Books Payroll Pipeline 

Construction company owners brought him company checks, often in huge dollar amounts, so they could withdraw cash to pay workers under the table. He charged 4–15% fees, far higher than legal check-cashing businesses. Why? Because clients knew he wouldn’t file mandatory Suspicious Activity Reports (SARs) or Currency Transaction Reports (CTRs) for cash transactions over $10,000. 

2. Fake Vendors, Fake Paperwork 

If customers got audited, Motovich provided fraudulent invoices and documents to disguise the transactions as subcontracting or materials purchases. That’s straight from the DOJ’s trial record. 

3. Shell Companies as Human Shields 

Motovich formed multiple shell entities, instructing clients to make their checks payable to these companies. He then opened bank accounts under other people’s names, a classic attempt to hide beneficial ownership. Between 2012 and 2019, prosecutors said, he deposited $55 million into those accounts. 

4. The Lifestyle Giveaways 

Like many financial crimes, the scheme funded a lifestyle impossible to miss: 

• A Manhattan penthouse renovation featuring an indoor swimming pool 
• Porsche and Lexus luxury vehicles 
• Millions in diamonds, watches, jewelry, and designer clothing 
• Premiums on multi-million-dollar life insurance policies 
• Real estate investments 
• High-end personal and corporate credit card payments 

The DOJ described the evidence as “an infestation of crimes behind the façade of a seemingly legitimate business.” 

Three co-defendants, Marina Kuyan, Kemal Sarkinovic, and Joshua Markovics—already pleaded guilty. 

How Investigators Finally Broke the Case 

Federal investigators, including IRS Criminal Investigation and the FBI, pieced together the scheme through: 

• Banking Patterns That Made No Sense 

Massive deposits from unrelated companies flowed into accounts held under other people’s names. Large cash withdrawals followed immediately. No documentation. No legitimate business activity. 

• Missing SARs & CTRs 

Licensed money transmitters must file SARs and CTRs for transactions over $10,000. Seven years of large cash movements, and no filings, was the loudest alarm bell in the room. 

• Beneficial Ownership Clues 

Even though Motovich opened accounts using other identities, investigative analysis tied: 

• ATM access 
• Credit card linkages 
• IP address logins 
• Purchase histories

back to him. 

• Lifestyle Red Flags 

Prosecutors highlighted that Motovich’s lavish lifestyle bore no resemblance to any income he could reasonably justify. That narrative echoed past enforcement cases like the Madoff, Manafort, and Nix financial frauds. 

Why This Matters

This case is more than a headline. It’s a roadmap of what regulators are prioritizing—and a warning for professionals who operate in cash-heavy industries. 

1. Off-Books Payroll Is a Leading Fraud Risk 

Federal agencies report that construction remains one of the highest-risk industries for tax evasion schemes tied to payroll fraud, shell labor brokers, and no-paper-trail subcontractors. 

2. Missing SARs/CTRs = Instant Suspicion 

If an entity is moving high volumes of cash and never triggers a CTR, it’s almost automatically flagged by financial institutions’ internal AML systems. 

3. Shell Companies Aren’t Invisible Anymore 

With the Corporate Transparency Act and next-gen AML analytics, banks now use AI and cross-platform data to detect beneficial ownership patterns, even when accounts are opened under someone else’s name. 

4. Fraudulent Vendor Paperwork Is a Growing Audit Focus

Motovich created fake invoices to mask payroll-to-cash transactions. State tax agencies and workers’ compensation boards are now cross-matching contractor data more aggressively than ever. 

5. Lifestyle Audits Still Work

Motovich’s penthouse with an indoor pool was mentioned prominently by prosecutors. Personal spending that far exceeds claimed income remains one of the IRS’s most powerful tools. 

What’s Next 

Motovich is headed to prison, but regulators say the larger fight is just beginning. 

Here’s what’s coming: 

• More real-time bank monitoring using AI to detect illegal money transmitting 
• Stricter documentation requirements for subcontractors and labor brokers 
• Greater enforcement of workers’ compensation fraud and payroll tax evasion 
• Mandatory beneficial ownership disclosures under FinCEN’s rollout 
• Increased whistleblower rewards for identifying payroll-to-cash funneling 

For accountants, auditors, and finance pros, expect more questions from regulators—and more clients needing help staying compliant. 

Bottom Line 

A Brooklyn lumber yard doubling as a $55 million shadow bank is sensational. But the deeper message is simple: When compliance goes dark, financial crime thrives. Motovich’s case shows how easy it is for illegal payroll cash pipelines to grow, and how quickly they collapse once bank data, SAR/CTR gaps, and lifestyle clues line up. If you advise clients in construction, small business, or cash-reliant sectors, this is the moment to tighten controls, verify vendors, and prepare for tougher AML oversight. Because the next takedown won’t be as quiet, or as forgiving.