Man embezzled $36M from California media tech firm to pay off $23M in credit card debt

A former accounting manager for a Los Angeles firm was sentenced Thursday in the Central District of California to 10-and-a-half years in federal prison for embezzling more than $36 million and using the bulk of his illicit gains to pay off tens of millions in credit card debt.

Paul McDaniel, 44, also known as Edward Martin Karuku, embezzled the funds between July 2009 and December 2016 while providing accounting services to Hypermedia Systems Inc., a media technology services firm based in downtown Los Angeles.  

McDaniel fled the United States for Costa Rica in 2017, and was extradited back in 2019 to face charges.  

He pleaded guilty in September 2019 to one federal wire fraud charge, admitting he had used $23 million to pay off astronomical credit card debt.  

‘That is all true your honor,’ McDaniel told US District Judge John A. Kronstadt at his sentencing. 

While working for Hypermedia Systems Inc. as an account manager, McDaniel was assigned to request payments to be made from a Hypermedia account to pay purported vendors. 

According to the indictment, McDaniel formed a Nevada corporation with a name similar to one of Hypermedia’s vendors and opened a bank account.

McDaniel created over 100 ‘false and fictitious’ invoices appearing to be from actual Hypermedia vendors, falsely stating the goods and services had been provided to the company.

He then used his authority as an account manager for Hypermedia to approve and direct tens of millions of dollars worth of payments to his personal bank account.

McDaniel embezzled over $36 million from Hypermedia Systems, Inc. during the course of more than 7 years, using the bulk to pay off his credit card debt

McDaniel caused more than $36 million to be fraudulently transferred by wire or check to his Nevada company’s account.

During an FBI investigation, they discovered that McDaniel had used at least $23 million to pay off credit card bills, transferred another $8 million to his personal bank accounts, and additionally spent millions of dollars on ‘miscellaneous expenses.’

In addition to his 10-and-a-half year sentence, McDaniel was ordered to pay $36 million in restitution to Hypermedia.

McDaniel previously resided in the city of Orange before fleeing to Costa Rica in early 2017. He was arrested later that year before being extradited to the United States in February 2019. 

In 2006, McDaniel filed a name change lawsuit to change his original name, Edward Martin Karuku. It was finalized in 2008, one year before he began embezzling funds from Hypermedia Systems, Inc.

United States District Court initially charged McDaniel with 10 wire fraud counts which carried a statutory maximum penalty of 20 years in federal prison. He pleaded guilty to only one count and has been in custody since his 2019 extradition.