The arrest Tuesday of City Comptroller John Liu's campaign treasurer for allegedly accepting illegal donations signifies the biggest blow yet to his 2013 mayoral bid.
Jia "Jenny" Hou, 25, was nabbed in Queens by federal authorities on two fraud-related counts and one count of obstruction of justice, which each carries up to 20 years in prison.
Hou allegedly instructed a campaign volunteer to forge the handwriting of donors on contribution forms, offered to reimburse someone for their $500 campaign donation and on more than 40 occasions, had donations given through "straw donors" to avoid campaign finance limits, according to the complaint.
Hou's arrest in Queens comes after federal authorities arrested New Jersey businessman Xing Wu Pan in November on charges related to illegal fundraising on behalf of Liu's campaign.
Liu wasn't named in the allegations against Pan and denied any involvement.
He said Tuesday in a statement he was "stunned" by Hou's arrest.
"These accusations against her are uncharacteristic and unexpected. Jenny is a smart, hardworking person who I hope will be treated fairly,” Liu said in a statement.
The New York Times first reported that some people listed as donating to Liu's campaign could not be verified or said they never gave money.
"New York's campaign finance laws are not optional," Manhattan U.S. Attorney Preet Bharara said in a statement following Hou's arrest.
Hou, who has worked with Liu since 2010, was "a central figure in a coordinated scheme to break the city's campaign finance laws," Bharara added.
Hou's attorney reportedly called her a "wonderful, idealistic young woman."
Ken Sherrill, a political science professor at Hunter College, said the arrest is a "bad embarrassment" for the embattled pol.
"You would expect someone running in a citywide race to hire a seasoned professional," Sherrill said. "Not doing that is perhaps an error in judgment."
Mayoral candidate Tom Allon said it's difficult to believe a candidate wouldn't know about any improprieties involving his or her campaign account.
"The arrest of John Liu's treasurer today is yet another example of how the political system in New York is flawed and badly in need of reform," Allon said in a statement. "I believe that this is just the tip of the iceberg in terms of campaign finance violations going on in citywide races."
Meanwhile, City Councilman Domenic Recchia, chairman of the finance committee, said it's up to Liu on what he should do next.
"I think he needs to look inside his heart and decide what's best for him, his family, and for New York City," Recchia said in a statement.