Baltia Airlines Slapped With $22 Million Judgment, Largest Shareholder Arrested

Aug 8, 2018

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

Chase Sapphire Preferred® Card

WELCOME OFFER: 80,000 Points

TPG'S BONUS VALUATION*: $1,650

CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners

*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.

Apply Now
More Things to Know
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
  • Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
  • With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
  • Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
  • Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.
Regular APR
15.99%-22.99% Variable
Annual Fee
$95
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit
Excellent/Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.