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Case Number: 1:20-mj-08698-UA
Judge: Alison J. Nathan
Court: United States District Court for the Southern District of New York (New York County)
Plaintiff's Attorney: United States District Attorney’s Office
Description: New York, New York bank and securities fraud charge criminal defense lawyers represented Defendant, Sheng-Wen Cheng, a/k/a “Justin Cheng,” a/k/a “Justin Jung,” was charged with major fraud against the United States, bank fraud, securities fraud, and wire fraud in connection with multiple fraud schemes he perpetrated. Specifically, CHENG engaged in a scheme to fraudulently obtain over $7 million in Government-guaranteed loans designed to provide relief to small businesses during the novel coronavirus/COVID-19 pandemic. CHENG also solicited and obtained investments in Alchemy Coin Technology Limited and related companies controlled by CHENG through materially false and misleading statements and omissions. Finally, CHENG fraudulently obtained due diligence fees from various start-up companies as part of an advance fee scheme.
U.S. Attorney Audrey Strauss said: “As he admitted, Sheng-Wen Cheng fraudulently applied for over $7 million in government-guaranteed loans under programs designed to provide relief for small businesses financially struggling in the COVID pandemic. Cheng lied to the SBA and several banks about ownership of his companies, the number of people employed, and how any loan proceeds would be applied, using forged and fraudulent documents in the process. Cheng spent much of the money on personal luxury items. In addition, Cheng committed securities fraud by lying to investors in his blockchain-based peer-to-peer lending platform, and wire fraud by engaging in an advance fee scheme. Now Cheng awaits sentencing for his multitude of crimes.”
According to the Complaint, Information, and other documents filed in Manhattan federal court:
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the SBA’s Paycheck Protection Program (“PPP”). Pursuant to the CARES Act, the amount of PPP funds a business is eligible to receive is determined by the number of employees employed by the business and their average payroll costs. The CARES Act also expanded the separate Economic Injury Disaster Loan (“EIDL”) Program, which provided small businesses with low-interest loans that can provide vital economic support to help overcome the temporary loss of revenue they are experiencing due to COVID-19.
CHENG, a Taiwanese national who entered the United States on a student visa, is a self-proclaimed “serial entrepreneur” who earned a Bachelor’s Degree from Pennsylvania State University (“Penn State”). From at least in or about April 2020 through at least on or about August 13, 2020, CHENG used the identity of other individuals 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 SBA’s PPP and EIDL Program for several companies controlled by CHENG, namely Alchemy Finance, Inc., Alchemy Guarantor LLC d/b/a “Celer Offer,” Celeri Network, Inc., Celeri Treasury LLC, and Wynston York LLC (collectively, the “Cheng Companies”). In connection with these loan applications, CHENG represented, among other things, that other individuals were the sole owners of the Cheng Companies and that the Cheng Companies together had over 200 employees and paid a total of approximately $1.5 million in wages to those employees on a monthly basis. In fact, however, the Cheng Companies appear to have had a total of no more than 14 employees.
In order to support the false representations in the loan applications about the number of employees at and the wages paid by the Cheng Companies, CHENG submitted fraudulent and doctored tax records that were never actually filed with the IRS and payroll records containing the forged electronic signature of a payroll company employee. CHENG also submitted a payroll summary for one of his companies that listed the names of more than 90 purported employees, several of whom are current or former athletes, artists, actors, or public figures. For example, the list of purported employee names included a co-anchor on “Good Morning America,” a former National Football League player, and a prominent former Penn State football coach who is now deceased.
Based on the fraudulent PPP loan applications submitted by CHENG, a total of more than $3.7 million in PPP loans were approved for the Cheng Companies and approximately $2.8 million in PPP loan proceeds were deposited into bank accounts solely controlled by CHENG. Instead of using the PPP loan proceeds for payroll costs, mortgage interest, rent, and/or utilities for the purported Cheng Companies as required by the PPP, CHENG transferred over $1 million abroad, withdrew approximately $360,000 in cash and/or cashier’s checks, and spent at least approximately $279,000 in PPP loan proceeds on personal expenses. These personal expenses included the purchase of an 18-carat gold Rolex watch for approximately $40,000, rent and move-in fees for a $17,000 per month luxury condominium used by CHENG, approximately $50,000 of furnishings for the condominium, a portion of the purchase of a 2020 S560X4 Mercedes, and purchases totaling approximately $37,000 at Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin, and Yves Saint Laurent.
In addition to the COVID-19 pandemic loan fraud described above, from at least in or about 2017 through at least in or about 2019, CHENG committed securities fraud by soliciting and obtaining investments in Alchemy Coin Technology Limited and related companies (“Alchemy Coin”) controlled by CHENG. These investments were obtained through materially false and misleading statements and omissions regarding Alchemy Coin’s access to capital, use of investor proceeds, the product readiness of its purported blockchain-based peer-to-peer lending platform, and the registration of its tokens as part of an initial coin offering.
Finally, from at least in or about 2018 through at least in or about 2019, CHENG committed wire fraud by fraudulently obtaining due diligence fees from various start-up companies as part of an advance fee scheme through materially false and misleading statements regarding the purpose and refundability of the fees and his interest and ability to make investments in the start-up companies.
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CHENG, 24 of New York, New York, pled guilty to one count of bank fraud, which carries a maximum sentence of 30 years in prison; one count of securities fraud and one count of wire fraud, which each carry a maximum sentence of 20 years in prison; and one count of major fraud against the United States, which carries a maximum sentence of 10 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the investigative work of the Federal Bureau of Investigation, the Office of the Inspector General of the U.S. Small Business Administration, and the Internal Revenue Service Criminal Investigation. Ms. Strauss also thanked the United States Securities and Exchange Commission, U.S. Customs and Border Protection, and the New York State Department of Labor for their assistance.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
Outcome: ORDER as to Sheng-Wen Cheng: A videoconference is scheduled in this matter via the CourtCall platform for April 20, 2021 at 3:00 p.m. Defense counsel will be given an opportunity to speak with the Defendant by telephone for fifteen minutes before the proceeding begins (i.e., at 2:45 p.m.). Defense counsel will receive a call at the number provided to Chambers during case intake at that time. To optimize the quality of the video feed, the Court, the Defendant, counsel for the Defendant, and counsel for the Government will appear by video for the proceeding; all others will participate by telephone. Due to the limited capacity of the CourtCall system, only one counsel per party may participate. Co-counsel, members of the press, and the public may access the audio feed of the conference by calling 855-268-7844 and using access code 32091812# and PIN 9921299. (Signed by Judge Alison J. Nathan on 4/19/2021) (See ORDER set forth) (ap) (Entered: 04/19/2021)