Efraim Diveroli

Diveroli returned home to Miami Beach, Florida in March 2001 at the age of fifteen. After an argument with his uncle, he told his father he wanted to open a business specializing in arms, ammunition trading, and defense contracts with the U.S. Government. He convinced his father to sell him a shell company, AEY, Inc., named after the first initials of him and his siblings, which his father had incorporated as a small printing business, but had not done anything with in years.[4] Diveroli showed a penchant for arms dealing and quickly made a name for himself within the industry.[8] His young age and apparent talent led local media outlets to label him as an "arms wunderkind."[12] Diveroli struggled with drug addiction and was also labeled as a "stoner arms dealer" by the media.[8]

During the Cold War, the world was locked in an arms race.[13] Millions of weapons were stashed throughout Eastern Europe, ready for a war with the west. When the Cold War ended, and the immediate threat of violence subsided, arms dealers started moving these vast amounts of weapons.[8] The sales that followed formed the "gray market" where non-state actors (such as militia or terrorist groups) and legitimate government sanctioned buyers could procure arms through illegal foreign government sales.[14] "The Pentagon needed access to this new aftermarket in order to arm the militias it was creating in Iraq and Afghanistan. The trouble was, it couldn't go into such a murky underworld on its own. It needed proxies to do its dirty work — companies like AEY."[8]

Diveroli started working during this period of heavy arms trading as a teenager in a one-room apartment in Miami. Equipped with nothing more than a laptop, he sought to enter the industry from the seat of his couch.[4][8] He began surfing solicitations on fbo.gov, or FedBizOpps, which is a government website where contracts are posted. He began by bidding on small contracts with the financial help of Ralph Merrill, with whom he did business during his time working for his uncle. By the age of eighteen, Diveroli had become a self-made millionaire by continuing to beat out big corporations like Northrop Grumman, Lockheed and BAE Systems. In the words of Rolling Stone, Diveroli had "an appetite for risk and all-devouring ambition."[8]

After steadily increasing the size of his contracts and developing a track record of success, Diveroli’s company AEY, Inc. was awarded a $298 million contract by the Pentagon to provide arms and munitions to the allied forces in Afghanistan.[4] In order to fulfill the US government contracts, Diveroli soon found himself dealing with dubious weapons traders, crooked diplomats, and soldiers of fortune; negotiating deals with foreign defense ministers, holding meetings at embassies, and taking calls from high-ranking Army officials.[8]

On March 27, 2008, the U.S. government suspended AEY Inc. for infringing upon the terms of its contract; in violation of a pre-existing arms embargo, the company was accused of supplying ammunition manufactured in China to the Afghan National Army and police. United States Army documents showed that the company totaled more than $200 million in contracts to supply ammunition, rifles, and other weapons in 2007. As a result of publicity surrounding the contract, the United States Army began a review of its contracting procedures.[15]

The United States House Committee on Oversight and Government Reform ruled the ammunition "unserviceable".[16] AEY had also failed to perform on numerous previous contracts, including sending potentially unsafe helmets and failure to deliver 10,000 Beretta pistols to Iraq.[17][18][19]

Diveroli's former partner, David Packouz, and Ralph Merrill, the group's former chief financier, later filed separate lawsuits against Diveroli seeking payment of millions of dollars they say they were owed in connection to the weapons contract with the U.S. government.[20]

A company Diveroli owns, Ammoworks, continued selling arms while he awaited trial for conspiracy.[21] In late August 2008, he pleaded guilty on one count of conspiracy, and was sentenced to four years in prison on January 4, 2011.[22][23] He was further sentenced for possessing a weapon while out on bond[24] and had his overall sentence reduced for assisting in the investigation of the offense. Diveroli's former partner David Packouz was sentenced to seven months' house arrest.[8]