The feds arrested Patrick Khalafian, 51, on a federal grand jury indictment charging him with defrauding investors out of more than $1 million via an adult entertainment website scam, the Justice Department announced today. The single-count indictment charged him with wire fraud. Khalafian pleaded not guilty to the charge. The indictment alleges that, from November 2009 to October 2016, Khalafian solicited investments for businesses – including 168 Entertainment LLC, Empire Entertainment Group Inc., and EEG LLC – that purportedly developed and operated adult entertainment websites. Khalafian allegedly represented that victims' investments would be used for business operations, including developing software and the platform for the proposed websites, paying for servers, hiring employees and purchasing advertising. He also promised that victims' investments would be repaid by a certain date, according to the indictment.Instead, Khalafian allegedly used the victim investors' funds on gambling, luxury shopping sprees, and to pay back other investors. Khalafian allegedly lied to his victims about the status of the adult entertainment websites and eventually stopped responding to victims, disconnected his phone number and changed his email address.  In July 2015, Khalafian received $1 million of ill-gotten gains wired from a victim's bank account in Canada to a bank account he controlled in Woodland Hills, according to the indictment. Prosecutors believe this amount comprises approximately half of the money Khalafian raised via this scheme.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.