Baltia Airlines Slapped With $22 Million Judgment, Largest Shareholder Arrested
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Baltia, the nearly 30-year-old “startup” US airline that has never flown a single commercial flight, was slapped with a $22 million default judgment, and its largest shareholder was arrested on financial fraud charges, newly surfaced legal documents show.
The judgment 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 judgment 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
Welcome to The Points Guy!
Earn 50,000 bonus miles and 5,000 Medallion® Qualification Miles (MQMs) after you spend $2,000 in purchases on your new card in the first three months of card membership. Plus, earn up to $100 back in statement credits for eligible purchases at U.S. restaurants in the first three months of card membership.
With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.
- Earn 50,000 Bonus Miles and 5,000 Medallion® Qualification Miles (MQMs) after you spend $2,000 in purchases on your new Card in your first 3 months.
- Plus, earn up to $100 back in statement credits for eligible purchases at U.S. restaurants with your card within the first 3 months of membership.
- Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
- Earn 1X Miles on all other eligible purchases.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights.
- Fee Credit for Global Entry or TSA Pre✓®.
- Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees