Stephen K. Bannon, President Trump’s former adviser and an architect of his 2016 general election campaign, was charged on Thursday with defrauding donors to a private fund-raising effort called We Build the Wall, which was intended to bolster the president’s signature initiative along the Mexican border.
Mr. Bannon, working with a wounded Air Force veteran and a Florida venture capitalist, conspired to cheat hundreds of thousands of donors by falsely promising that their money had been set aside for new sections of wall, according to a federal indictment unsealed in Manhattan.
The fund-raising effort collected more than $25 million, and prosecutors said Mr. Bannon used nearly $1 million of it for personal expenses.
Despite the populist aura he tries to project, Mr. Bannon is known to enjoy the high life, and he was arrested at 7:15 a.m. on a $35 million, 150-foot yacht belonging to one of his business associates, the fugitive Chinese billionaire Guo Wengui, law enforcement officials said.
Working with the Coast Guard, special agents from the United States attorney’s office in Manhattan and federal postal inspectors boarded the yacht off Westbrook, Conn., the officials said. Mr. Bannon, 66, was on deck, drinking coffee and reading a book, when the raid occurred.
The criminal charges, filed a week before Mr. Trump was to accept the Republican nomination for a second term, marked a stark turn of fortune for the flamboyant political strategist. Mr. Bannon first came to prominence when he was in charge of the right-wing media outlet Breitbart, where he had aligned himself with the alt-right, a loose network of groups and people who promote white identity.
As chief strategist, Mr. Bannon was one of the most powerful figures in the White House early in the Trump administration, but he stepped down in August 2017 after frequently clashing with other aides.
With the indictment, Mr. Bannon became the seventh Trump associate to have been charged with federal crimes, a list that includes Paul Manafort, Mr. Trump’s former campaign manager; Michael T. Flynn, the former national security adviser; and Michael D. Cohen, Mr. Trump’s onetime lawyer and fixer.
The 24-page indictment, unsealed in Federal District Court in Manhattan, is by far the most politically sensitive case that Audrey Strauss, the acting United States attorney in Manhattan, has handled since she assumed her job after her predecessor, Geoffrey S. Berman, was fired in June by Mr. Trump.
At a brief arraignment on Thursday, Mr. Bannon, sunburned and his hair unbrushed, pleaded not guilty to charges of wire fraud conspiracy and money laundering conspiracy, each of which carries a maximum penalty of 20 years in prison. The government agreed to release him from custody on a $5 million bond.
Walking to his car after being freed, Mr. Bannon said, “This entire fiasco is to stop people who want to build the wall.”
Shortly after the charges were announced, Mr. Trump had sought to distance himself from Mr. Bannon and the fund-raising initiative, though the president also expressed sympathy for his former adviser.
“I feel very badly,” Mr. Trump told reporters in the Oval Office. “I haven’t been dealing with him for a very long period of time.”
The president said he knew nothing about the multimillion-dollar We Build the Wall campaign but quickly contradicted himself.
“I don’t like that project,” Mr. Trump said. “I thought it was being done for showboating reasons.” He called paying for the border wall privately “inappropriate.”
One of Mr. Trump’s sons, Donald Jr., publicly promoted the We Build the Wall effort at an event in 2019, calling it “private enterprise at its finest.”
Donald Trump Jr. said in a statement on Thursday that he had no involvement with the effort beyond praising it at that one event.
A White House official said that President Trump did not know Mr. Bannon would be arrested, and that he was told by aides after it happened.
Attorney General William P. Barr was briefed on the investigation several months ago, according to a Justice Department official, and the federal prosecutor’s office in Manhattan gave him notice that the indictment would be unsealed on Thursday.
According to the authorities, Mr. Bannon hatched the plot to defraud the donors with three other men: Brian Kolfage, a 38-year-old Air Force veteran and triple amputee from Miramar Beach, Fla.; Andrew Badolato, 56, a venture capitalist from Sarasota, Fla.; and Timothy Shea, 49, of Castle Rock, Colo.
Mr. Kolfage and Mr. Badolato were arrested in Florida on Thursday, and Mr. Shea, who prosecutors said funneled money for the group through a shell company he owned, was arrested in Denver.
Mr. Kolfage, who lost both his legs and one of his arms during his service in Iraq, created We Build the Wall as a GoFundMe page in December 2018. It was an immediate success, raising nearly $17 million in its first week online, prosecutors said.
To persuade potential donors to contribute to the effort, prosecutors said, Mr. Kolfage promised them that he would “not take a penny in salary or compensation” and that all of the money he raised would be used “in the execution of our mission and purpose.” According to the indictment, Mr. Bannon described We Build the Wall as a “volunteer organization.”
But all of that was false, prosecutors said. Instead, they claimed, Mr. Kolfage secretly took more than $350,000 in donations and spent it on home renovations, boat payments, a luxury S.U.V., a golf cart, jewelry and cosmetic surgery.
Mr. Bannon, working through an unnamed nonprofit organization, received more than $1 million from We Build the Wall, prosecutors said, some of which he used to pay off hundreds of thousands of dollars in personal expenses.
Court papers suggested that prosecutors were in possession of several text messages between the men, including one in which Mr. Kolfage told Mr. Badolato that the payment scheme was “confidential” and should be kept on a “need to know” basis.
Mr. Kolfage initially pitched We Build the Wall as a way to sidestep the considerable legal and political obstacles to erecting Mr. Trump’s long-sought barrier. While the group has drawn approval from some top Homeland Security and Border Patrol officials, it has also prompted a backlash over its connections to Mr. Trump’s associates and its construction methods.
The federal government has built parts of the wall well within the American side of the border on federally owned land. But the sections built with private funds — slightly less than five miles in all, according to We Build the Wall’s website — have been erected along the riverbank of the Rio Grande in New Mexico and Texas.
Environmental groups have challenged those portions, citing potential harm. When experts recently said that sections along the river could fall into the river, even Mr. Trump criticized the project.
It remained unclear precisely when the yearlong investigation into the alleged scheme began. But last year, a bank informed Mr. Bannon that federal prosecutors had subpoenaed records related to We Build the Wall, according to a person briefed on the matter.
Prosecutors said that despite the effort’s early success, there were questions almost instantly “about Mr. Kolfage’s background” and the viability of his promises to use the money he had raised to actually build Mr. Trump’s wall.
Because of these concerns, prosecutors said, GoFundMe warned Mr. Kolfage that if he did not find a “legitimate nonprofit organization” to handle the money, it would return it to the donors. Mr. Kolfage claimed that the group had determined that only $800,000 of the funds needed to be given back.
“No rules were broken,” he said in an interview last year.
As the problems with donors mounted, Mr. Kolfage said he would establish a board of advisers and incorporate the group as We Build the Wall Inc.
Mr. Kolfage enlisted Kris Kobach, the former Kansas secretary of state, to serve on the board. Mr. Kobach, a longtime Trump supporter and a prominent immigration hard-liner, was not named in the indictment.
Mr. Kolfage also brought in Mr. Bannon, who had joined Mr. Trump’s campaign as chief executive in August 2016 and later became the White House’s chief strategist.
Several times, prosecutors said, Mr. Kolfage falsely assured his donors that every dime they gave him would go to the wall.
“It’s not possible to steal the money,” he said at one point, according to the indictment. “We have an advisory committee.”
When special agents from the Manhattan federal prosecutor’s office and postal inspectors boarded Mr. Guo’s yacht, the Lady May, in Long Island Sound, they searched the vessel and seized Mr. Bannon’s cellphone, officials said.
The investigators also conducted other searches in Florida, Colorado, Nevada, Missouri and Virginia, including at the homes of all of the defendants, the officials said.
Mr. Guo, a real-estate magnate, has been in exile since 2014 after fleeing China in anticipation of corruption and rape allegations by its government.
While living abroad — sometimes at a palatial apartment overlooking Central Park in Manhattan — he forged relationships with China hard-liners like Mr. Bannon and bought a membership to Mr. Trump’s Mar-a-Lago club in Palm Beach, Fla.
Almost immediately after leaving the White House, Mr. Bannon struck up lucrative financial ties to Mr. Guo that began with a $150,000 loan, according to a memo written in May 2019 and obtained by The New York Times.
The GoFundMe page through which Mr. Bannon and his co-defendants raised money is now inactive. On Wednesday, less than 24 hours before their arrests, Mr. Kolfage made an appearance on Mr. Bannon’s podcast and explained the deactivation as an example of how tech companies censor conservative speech online.
When Mr. Bannon asked how people could continue giving money to the wall campaign, Mr. Kolfage responded by directing potential donors to his personal website, as well as another specifically for wall funding.
“How do people get access to We Build the Wall?” Mr. Bannon said.
“Don’t go to GoFundMe anymore,” Mr. Kolfage replied. “Screw them. Go straight to our website.”
Reporting was contributed by Jeremy Peters, Stephanie Saul, Michael S. Schmidt and Juliana Kim.