Fintech CEO is dedicated to a number of fraud packages together with $ 7 million COVID-19 pandemic mortgage fraud and USAO-SDNY securities fraud

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  Four charged with Covid-19 fraud |  USAO-AZ

Audrey Strauss, United States Attorney for the South District of New York, announced today that SHENG-WEN CHENG, a / k / a “Justin Cheng”, a / k / a “Justin Jung”, has committed a serious fraud against the United States has pleaded guilty to states, bank fraud, securities fraud, and wire fraud in connection with several fraud programs it committed. In particular, CHENG has been running a fraudulent government guaranteed loan program of over $ 7 million to provide relief to small businesses during the novel coronavirus / COVID-19 pandemic. CHENG has also requested and received investments in Alchemy Coin Technology Limited and related companies which are controlled by CHENG through materially false and misleading statements and omissions. Finally, as part of a prepayment scheme, CHENG fraudulently received due diligence fees from various start-ups. CHENG pleaded guilty to U.S. District Judge Alison J. Nathan today and is due to be sentenced on August 3, 2021 at 3:00 p.m.

US attorney Audrey Strauss said, “He admitted that Sheng-Wen Cheng fraudulently applied for over $ 7 million in government-guaranteed loans through programs designed to help small businesses financially struggling with the COVID pandemic Suffer. Cheng lied to the SBA and several banks about ownership of his businesses, the number of employees, and the use of loan proceeds using forged and fraudulent documents. Cheng spent much of the money on personal luxuries. In addition, Cheng has committed securities fraud by lying to investors on its blockchain-based peer-to-peer lending platform and wire fraud by implementing a prepayment system. Cheng is now awaiting conviction for his multitude of crimes. “

According to the complaint, information, and other documents filed in federal court in Manhattan:

The Coronavirus Aid, Aid, and Economic Security Act (“CARES”) is a federal law passed March 29, 2020 designed to provide emergency financial aid to millions of Americans suffering the economic effects of the COVID-19 pandemic. One source of relief from the CARES Act was the approval of hundreds of billions of dollars in forgettable small business loans for job retention and certain other expenses through the SBA’s Paycheck Protection Program (“PPP”). According to the CARES Act, the amount of PPP funding a company can receive is determined by the number of employees in the company and their average wage costs. The CARES Act also expanded the separate EIDL (Economic Injury Disaster Loan) program, which provides small businesses with low-interest loans that can provide vital economic support to help overcome temporary loss of income due to COVID-19.

CHENG, a Taiwanese national who entered the United States on a student visa, is a self-proclaimed “serial entrepreneur” with a bachelor’s degree from Pennsylvania State University (“Penn State”). From at least April 2020 until at least on or about August 13, 2020, CHENG used other people’s identities to submit online applications to the SBA and at least five financial institutions for a total of over $ 7 million in government-guaranteed loans through the PPP – and the SBA’s EIDL program for several CHENG-controlled companies, namely Alchemy Finance, Inc., Alchemy Guarantee LLC, Celeri Network, Inc., Celeri Treasury LLC and Wynston York LLC (collectively the “Cheng Companies”). In connection with these loan applications, CHENG took the view, among other things, that other persons were the sole owners of the Cheng companies and that the Cheng companies together employed over 200 people and that these employees had total wages of approximately USD 1.5 million paid monthly. In fact, however, the Cheng companies appear to have had no more than 14 employees in total.

To corroborate the misrepresentation in loan applications about the number of employees and wages paid by the Cheng companies, CHENG filed fraudulent and manipulated tax records that were never filed with the IRS, as well as payrolls with the fake electronic signature from an employee of the payroll company. CHENG also submitted a salary sheet for one of its companies listing the names of more than 90 alleged employees, some of whom are current or former athletes, artists, actors or public figures. For example, the list of alleged employee names included a co-anchor with Good Morning America, a former National Football League player, and a prominent former Penn State football coach who has since passed away.

Based on the fraudulent PPP loan applications submitted by CHENG, PPP loans totaling more than US $ 3.7 million have been approved for the Cheng companies and approximately US $ 2.8 million in PPP loan proceeds in bank accounts paid in, which are controlled exclusively by CHENG. Instead of using the PPP loan proceeds for wages, salaries, mortgage interest, rent and / or ancillary costs for the alleged Cheng businesses as requested by the PPP, CHENG transferred over $ 1 million overseas, pulling around $ 360,000 cash and / or bank drafts and spent at least approximately $ 279,000 on PPP loan proceeds for personal expenses. These personal expenses included buying an 18-karat gold Rolex watch for approximately $ 40,000, rent and move-in fees for a luxury condominium used by CHENG of approximately $ 17,000 per month, and approximately $ 50,000 for furnishings of the condo, part of buying a 2020 S560X4 Mercedes and totaling approximately $ 37,000 in purchases from Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin and Yves Saint Laurent.

In addition to the COVID-19 pandemic loan fraud described above, CHENG has committed securities fraud from at least 2017 or at least 2019 by soliciting and receiving investments in Alchemy Coin Technology Limited and related companies (“Alchemy Coin”). ) controlled by CHENG. These investments were made through materially false and misleading statements and omissions regarding Alchemy Coin’s access to capital, the use of investor proceeds, the product readiness of its alleged blockchain-based peer-to-peer lending platform, and the registration of its tokens as part of a first coin offer.

Finally, from at least 2018 or at least 2019 or about 2019, CHENG has committed wire fraud by mistakenly receiving due diligence fees from various start-up companies through materially false and misleading statements about the purpose and purpose of reimbursement of fees as part of a prepayment scheme his interest and ability to invest in the start-up companies.

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CHENG, 24, of New York, New York, pleaded guilty to bank fraud that resulted in a 30-year prison term; a securities fraud count and a wire fraud count, each carrying a maximum sentence of 20 years in prison; and a count of grave fraud against the United States with a maximum sentence of 10 years in prison. The maximum possible sentences are prescribed by Congress and are given here for informational purposes only, as any conviction of the accused is determined by the judge.

Ms. Strauss commended the investigative work of the Federal Bureau of Investigation, the Office of the Inspector General of the US Small Business Administration, and the Criminal Investigation Department of the Internal Revenue Service. Ms. Strauss also thanked the United States Securities and Exchange Commission, United States Customs and Border Protection, and the New York State Department of Labor for their assistance.

Law enforcement in this case is carried out by the Office’s Complex Fraud and Cybercrime Division. United States Assistant Attorney Sagar K. Ravi is responsible for law enforcement.