Baltia, the nearly 30-year-old “startup” US airline that has never flown a single commercial flight, was slapped with a $22 million default judgement, and its largest shareholder was arrested on financial fraud charges, newly surfaced legal documents show.
The judgement comes after almost three decades of complicated and sketchy financial maneuvering from Baltia. Initially, the airline’s business model was based on operating a 747-200 between New York and St. Petersburg, Russia. The startup carrier promised for years that flights would be starting soon. Then in 2016, it dumped that business plan to become a regional airline that would fly the 747 between small cities in the Northeastern US — Baltimore, Trenton, Islip and Albany (hence the name Baltia).
A few months later, in late 2016, Baltia scratched that idea, too, opting instead to ditch the 747 for a leased 767-300. In 2017, the airline yet again changed its mind — and its name to US Global Airways — and said it wanted to buy out Florida charter airline Songbird Airways, which had one 737-400, for about $6.2 million. The carrier would start charter flights to the Caribbean and then build its business to eventually handle domestic US flights and finally international flights (once it acquired some 767s).
Confused? So were investors, according to the Security and Exchanges Commission, which charged an executive with the airline in early 2016 for misleading investors. (And there were many investors — in 2014 Baltia had a market cap of $70 million.)
Still, those charges were not enough to issue a death blow to Baltia, and the grandiose promises to investors continued. Until June rolled around, when the SEC finally revoked its stock registration and ability to trade on the over-the-counter market because it had not filed a financial report in more than two years.
Fast forward to the first week of August, when news that a $22.6 million default judgement was obtained by Logistics Air Inc., in a court in Reno, Nevada. In a July 31 filing with the SEC, Baltia said the hefty fine was for “the alleged breach of a lease for four Boeing 747 jet engines, plus charges, fees and interest.”
Adding to the intrigue is the fact that the criminal division of US Attorney’s office in Long Island, along with the IRS, arrested the airline’s largest investor, 54-year-old John Drago, on eight counts of financial fraud, including the failure to“develop, implement and maintain an effective anti-money laundering program” of his six check-cashing businesses on Long Island, the Times-Herald Record reports. Drago had recently invested more than $1 million in Baltia and held 1 billion shares of stock, or about 11% of the company.
Baltia denied that Drago’s arrest was connected with the airline, according to the Times-Herald Record.
H/T: One Mile at a Time