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Suit: Sovereign Citizen Tried to Forge $100 Trillion Worth of Fake Financial Documents

The iconic figure in the sovereign citizen movement is accused of a years-long scheme to invent fictional currency printed at astronomically high values.

04.20.17 5:00 AM ET

With a disarming Southern drawl, a whiteboard, and a YouTube channel, Winston Shrout spent years explaining the secrets of the tax system: money hadn’t been real since the United States abandoned the gold standard in 1933; debt was “commercial karma”; the Fourteenth Amendment to the Constitution — which may or may not be legal, Shrout contended — included a secret provision allowing Americans to opt out of citizenship.

For years, Shrout was an icon of the sovereign citizen movement, a loosely affiliated group of Americans who claim to be emancipated from the government. Sovereign citizens may believe local sheriffs to be the highest valid form of government, or that they can evade taxes in perpetuity by misspelling their names, or that all Americans are secretly owed $630,000, which was placed in a federal bank account upon their birth. From his popular YouTube channel, an expensive series of DVDs, and a lecture circuit, Shrout espoused all manner of theory on how Americans could allegedly free themselves from the federal government on wild technicalities.

Now he’s on trial in a federal court for allegedly issuing more than $100 trillion in fake financial documents, which he allegedly peddled through his seminars. In his federal trial, which began Tuesday, Shrout pleaded not guilty to six counts of willful failure to file income tax returns, and 13 counts of fictitious obligations relating to his alleged scheme to forge and circulate imaginary currency at astronomical valuations.

For at least seven years, Shrout ran an elaborate scheme to invent fictional currencies like “International Bills of Exchange” and “Non-Negotiable Bills of Exchange” supposedly worth trillions of dollars and pass them off to his sovereign citizen disciples, a federal indictment filed in an Oregon District Court alleges.

Shrout allegedly presented the made-up documents as legitimate, sending them to financial institutions and even hosting seminars to spread the gospel of fake money.

In 2009, Mark Morini paid $936 to attend one of Shrout’s three-day seminars, and to buy one of Shrout’s DVDs (which range in price from the $65 “Accepted for Value Series - Part 1” disc, to the $120 DVD on “Commercial Consciousness: Breaking The Mind Control”).

In his lectures, Shrout preached the “straw man” theory: that U.S. law only applies to a person’s “straw man,” or their name as it is registered in federal files.

Shrout elaborated on the theory in a YouTube discussion with the Galactic Connection blog. The interview opened with an advertisement for the blog’s “implant removal processes,” a service that costs $144 for “Implant Removal Phase I,” part of a set of “Galactic Essences” specially crafted by a self-proclaimed wizard of the “Melchizedek Order, right alongside Merlin,” and her friend whom she met at a UFO conference. The Galactic Essences purportedly cleanse the body of implants that were inserted for reasons unknown, either by aliens, or as part of the “controlling matrix”.

Sovereign citizens who subscribe to the straw man theory often deliberately misspell their legal names in attempt to distance themselves from their legal obligations.

When Morini signed up for Shrout’s seminar, he also used a fake name, enrolling as Mark T. Morrison. But Morini wasn’t really a sovereign citizen. He was an undercover investigator with the Treasury's Inspector General's Office. On Tuesday, Morini took the stand to testify against Shrout.

Morini posed as an out-of-luck landscaper in 2009, when he first began exchanging emails with Shrout, who sold his seminars and DVDs from the legitimate-sounding Winston Shrout Solutions in Commerce. Morini claimed to be $25,000 in debt to the IRS, a situation with which Shrout was well acquainted. (“We’re all familiar with that word ‘debt,’” Shrout said in a 2015 lecture entitled “Removing Commercial Karma” at a conference hosted by the group Enlightened Contact with Extra Terrestrial Intelligence.)

Posing as a believer, Morini traveled to one of Shrout’s three-day seminars in Cincinnati. At the seminar, Shrout showed him how to use a fake Treasury account to pay his tax debt, Morini testified Tuesday, according to OregonLive. When Morini went to pay for the seminar, Shrout allegedly refused a check and instead insisted Morini send money to a company called “ComEd,” which on Tuesday Shrout denied having any connection to.

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But Shrout was notoriously evasive about money, prosecutors allege. And Morini’s $25,000 debt, which Shrout purportedly eliminated with a fake Treasury account, was peanuts compared to other fake transactions Shrout allegedly made. His indictment lists a series of fraudulent transactions allegedly made over several years, ranging from a meager $10 million “International Bill of Exchange” issued to a small construction company in Oregon, to two $1 trillion “International Bills of Exchange” to a bank. The bills, submitted as evidence during the Tuesday trial, were stamped with a red thumbprint, a signature used in some sovereign citizen documents.

“Shrout produced and issued more than three hundred of these fictitious financial instruments, purported to be worth in total over $100,000,000,000,000 ($100 trillion), on his own behalf and for credit to third parties,” his indictment reads.

Shrout is representing himself with the help of a public defender, who is on standby. Neither the public defender, nor Shrout’s company returned The Daily Beast’s request for comment

On Tuesday, he maintained that he was within his right to pass off the fraudulent bills when he took the stand.

“The things I did are in fact lawful, and I did them in an effort to assist commerce,” he said, adding that allegations that he had attempted to pass off over $100 trillion in fraudulent documents are “not very accurate.”