A Montrose man pleaded not guilty on Monday to a charge of wire fraud for allegedly defrauding investors out of more than $1 million through an adult entertainment website scam.

Patrick Khalafian, 51, was arrested Friday on a single-count indictment charging him with wire fraud, according to the U.S. Justice Department. He appeared in U.S. District Court on Monday where he was released on $50,000 bond and given a court date of Dec. 15.


According to the indictment, from November 2009 to October 2016 Khalafian solicited investments for businesses that purportedly developed and operated adult entertainment websites.


Khalafian allegedly represented that victims’ investments would be used for business operations, including developing software and the platform for the proposed websites, paying for servers, hiring employees and purchasing advertising. He also promised that victims’ investments would be repaid by a certain date, according to the Justice Department.


Instead, Khalafian allegedly used the victim investors’ funds on luxury shopping sprees, gambling and to pay back other investors. He allegedly lied about the state of the websites and eventually stopped responding to investor calls and emails by disconnecting his phone number and changing his email address.


In July 2015, Khalafian received $1 million wired from a victim’s bank account in Canada to a bank account he controlled in Woodland Hills, according to the indictment. Prosecutors believe this amount comprises approximately half of the money Khalafian raised via this scheme.


If convicted, Khalafian faces a maximum sentence of 20 years in prison. The matter was investigated by the FBI.