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Fintech CEO Pleads Responsible to A number of Fraud Schemes, Together with $ 7 Million in COVID-19 Mortgage Pandemic Fraud and Securities Fraud | USAO-SDNY

Audrey Strauss, United States Lawyer for the Southern District of New York, as we speak introduced that SHENG-WEN CHENG, a / ok / a “Justin Cheng”, a / ok / a “Justin Jung”, has pleaded responsible main fraud in opposition to the US. States, financial institution fraud, securities fraud and wire fraud in reference to a number of fraud schemes he has dedicated. Particularly, CHENG has engaged in a scheme to fraudulently get hold of greater than $ 7 million in government-guaranteed loans aimed toward offering reduction to small companies in the course of the novel coronavirus / COVID-19 pandemic. CHENG additionally solicited and obtained investments in Alchemy Coin Know-how Restricted and associated firms managed by CHENG by way of materially false and deceptive statements and omissions. Lastly, CHENG fraudulently obtained due diligence charges from varied start-ups beneath an advance price system. CHENG pleaded responsible as we speak earlier than U.S. District Decide Alison J. Nathan and is anticipated to be sentenced on August 3, 2021 at 3:00 p.m.

US Lawyer Audrey Strauss stated, “As he admitted, Sheng-Wen Cheng fraudulently requested greater than $ 7 million in government-guaranteed loans beneath applications designed to alleviate financially troubled small companies. the COVID pandemic. Cheng lied to the SBA and a number of other banks in regards to the possession of his companies, the variety of individuals employed, and the way the mortgage proceeds could be utilized, utilizing cast and fraudulent paperwork within the course of. Cheng spent a big portion of the cash on private luxurious gadgets. As well as, Cheng dedicated securities fraud by mendacity to buyers in its blockchain-based peer-to-peer lending platform, and wire fraud by partaking in an early price scheme. Now, Cheng is awaiting sentencing for his multitude of crimes.

In response to the criticism, data and different paperwork filed in Manhattan Federal Courtroom:

The Coronavirus Aid, Aid and Financial Safety Act (“CARES”) is a federal regulation enacted on March 29, 2020, designed to supply emergency monetary help to the tens of millions of Individuals struggling the financial results brought about. by the COVID-19 pandemic. One supply of reduction supplied by the CARES Act was the authorization of a whole bunch of billions of {dollars} in forgivable loans to small companies for job upkeep and sure different bills by way of the Paycheck Safety Program ( “PPP”) of the SBA. Underneath the CARES Act, the quantity of PPP funds a enterprise is eligible to obtain is decided by the variety of workers employed by the enterprise and their common wage prices. The CARES Act additionally expanded the separate Financial Harm Catastrophe Lending (“EIDL”) program, which has supplied small companies with low-interest loans that may present important financial assist to assist overcome the disaster. momentary lack of earnings they endure on account of COVID-19.

CHENG, a Taiwanese nationwide who entered the US on a scholar visa, is a self-proclaimed “serial entrepreneur” who graduated from Pennsylvania State College (“Penn State”). Between at the very least or round April 2020 and at the very least on or round August 13, 2020, CHENG used the identification of others to submit on-line claims to the SBA and at the very least 5 monetary establishments for a complete of greater than $ 7 million authorities assure. SBA PPP and EIDL program loans for a number of firms managed by CHENG, specifically Alchemy Finance, Inc., Alchemy Guarantor LLC d / b / a “Celer Supply”, Celeri Community, Inc., Celeri Treasury LLC and Wynston York LLC (collectively, the “Cheng Corporations”). In reference to these mortgage purposes, CHENG represented, amongst different issues, that different individuals had been the only real house owners of the Cheng firms and that the Cheng firms collectively had greater than 200 workers and paid a complete of about 1.5 million. in wage {dollars} to those workers on a month-to-month foundation. In actual fact, nevertheless, the Cheng firms don’t seem to have had greater than 14 workers in whole.

With a purpose to assist the false statements in mortgage purposes on the variety of workers and salaries paid by Cheng firms, CHENG submitted fraudulent and falsified tax information which had been by no means truly filed with the IRS and payroll information containing the cast digital signature of a payroll firm worker. CHENG additionally submitted a payroll abstract for one in every of its firms which lists the names of greater than 90 alleged workers, a lot of whom are present or former athletes, artists, actors or public figures. For instance, the listing of alleged worker names included a co-host on “Good Morning America,” a former Nationwide Soccer League participant and a former Penn State soccer coach who’s now deceased.

Primarily based on the fraudulent PPP mortgage purposes submitted by CHENG, a complete of over US $ 3.7 million of PPP loans have been authorised for Cheng firms and about US $ 2.8 million of PPP loans have been deposited on financial institution accounts managed solely by CHENG. As a substitute of utilizing the proceeds from the PPP mortgage for personnel prices, mortgage curiosity, hire, and / or utilities for the so-called Cheng firms as required by the PPP, CHENG transferred a couple of million {dollars} overseas, withdrew about $ 360,000 in money and / or cashier’s checks, and spent at the very least about $ 279,000 on PPP mortgage merchandise for private bills. These private bills included the acquisition of an 18k gold Rolex watch for about $ 40,000, hire and move-in prices for a $ 17,000 per thirty days luxurious condominium utilized by CHENG, roughly $ 50,000 of furnishings for the condominium, a part of the acquisition of a 2020 Mercedes S560X4, and purchases totaling roughly $ 37,000 at Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin and Yves Saint Laurent.

Along with the COVID-19 pandemic mortgage fraud described above, between at the very least 2017 or round 2017 and at the very least round 2019, CHENG has dedicated securities fraud by soliciting and acquiring investments in Alchemy Coin Know-how Restricted and associated firms (“Alchemy Coin”)) managed by CHENG. These investments had been obtained by way of materially false and deceptive statements and omissions relating to entry to Alchemy Coin’s capital, use of investor proceeds, preparation of proceeds from its purported peer-to-peer lending platform primarily based on the blockchain and registering its tokens as a part of an preliminary coin providing.

Lastly, from at the very least round 2018 or round 2019 till at the very least round 2019 or round 2019, CHENG has dedicated digital fraud by fraudulently acquiring due diligence charges from varied start-ups as a part of a price system. anticipated via materially false and deceptive statements relating to the aim and reimbursability of bills and its curiosity and its means to spend money on start-ups.

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CHENG, 24, from New York, New York, pleaded responsible to 1 rely of financial institution fraud, carrying a most sentence of 30 years in jail; one rely of securities fraud and one rely of wire fraud, every punishable by as much as 20 years in jail; and one rely of main fraud in opposition to the US, carrying a most sentence of 10 years in jail. The potential most sentences are prescribed by Congress and are supplied right here for informational functions solely, as any conviction of the defendant can be decided by the choose.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation, the Workplace of the Inspector Normal of the U.S. Small Enterprise Administration, and the Inside Income Service Legal Investigation. Ms. Strauss additionally thanked the US Securities and Alternate Fee, US Customs and Border Safety and the New York State Division of Labor for his or her help.

The prosecution of this case is being managed by the Workplace’s Advanced Fraud and Cybercrime Unit. Deputy United States Lawyer Sagar Okay. Ravi is in command of the prosecution.

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