The head of a Maryland data center firm is facing federal fraud charges after prosecutors say he created a sham company to secure a $10M contract with the Securities and Exchange Commission.

A federal grand jury in D.C. returned an indictment Tuesday charging Deepak Jain, founder and CEO of data center provider AiNET, with “major fraud against the United States” and making false statements to the SEC, the Department of Justice announced Wednesday.

According to the indictment, AiNET provided data center services to the SEC at its data center in Beltsville, Maryland, a contract that earned the company approximately $10.7M between 2012 and 2018. The contract required that the Beltsville data center be certified as a Tier 4 facility, the highest rating for security, reliability and uptime.

The Justice Department alleges that the data center didn't meet those standards. To secure the SEC contract, Jain allegedly created a sham organization called the Uptime Council, which purported to inspect and audit data centers. He then allegedly created documents from Uptime Council falsely certifying AiNET’s data center as Tier 4.

“As alleged in the indictment, Jain orchestrated a years-long scheme to defraud the SEC by falsely certifying that his company’s data center met the highest rating level, when the actual rating did not satisfy the SEC contract,” Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division, said in a written statement. “Jain allegedly sought to enrich himself and his company at the expense of the reliability, availability, and security of the SEC’s electronic data.”

Jain is charged with six counts of major fraud against the United States and one count of making false statements. If convicted, the Potomac, Maryland, resident faces a maximum penalty of 10 years in prison on each of the fraud charges and a five-year prison term for each count of making false statements, according to the DOJ.

In an email to Bisnow, an attorney representing Jain, McCool Law partner Steven McCool, disputed the charges outlined in the federal indictment.

“Deepak Jain and his company performed fully under the SEC contract,” McCool said in a written statement. “There is no evidence that any data was lost or compromised in any way. Mr. Jain is an innocent man who looks forward to confronting these charges at trial.”

The SEC Office of Inspector General is investigating the case. DOJ attorneys Vasanth Sridharan and Spencer Ryan are prosecuting the case.

Jain, 49, founded AiNET in 1993. According to his LinkedIn profile, he previously held positions at the National Security Agency and Verizon. He also lists himself as an executive producer at a video production firm specializing in motorsports-themed content.

Headquartered in Beltsville, Maryland, AiNET touts itself as a “premier cloud and data center provider” and developer that builds and operates colocation data centers and fiber networks. On its website and in marketing material, AiNET claims a global data center portfolio totaling 1 gigawatt of capacity across 25 separate markets, focused primarily on enterprise and government tenants.

AiNET’s Beltsville facility at the heart of the DoJ’s allegations is marketed as a “purpose build mission critical data center for US government” that meets requirements for federal agencies and sits in close proximity to the heart of Washington, D.C.  According to the firm, current and past clients include the Department of Defense, Department of Labor and Comcast.

In recent months, Jain and AiNET had touted plans for new development to grow the company’s data center portfolio and shift its focus towards artificial intelligence. Jain claimed on LinkedIn that the firm would have “2 Gigawatts ready for AI by 2027.”

As Bisnow reported previously, AiNET unveiled plans in August to increase the capacity of its downtown Baltimore data center at 300 W. Lexington St. over the next several years from 80 to 280 megawatts. The firm also indicated it intended to add 300 more employees to the facility.

AiNET executives said at the time that the company sought to capture demand from smaller tech firms and government agencies that don't want to contract their AI data center operations out to the Big Tech companies for security or privacy reasons.

UPDATE, OCT. 16, 5:10 P.M. ET: This story has been updated with a statement from Jain's attorney and additional context.