ICO fraudster pleads guilty to $7 million COVID-19 relief loan scam, faces up to 80 years in prison

An ICO fraudster used more than $7 million in fraudulent COVID-19 relief funds on lavish personal expenses, including a Rolex, a luxury apartment and a new Mercedes.

A 24-year-old New York resident has admitted to obtaining more than $7 million in COVID-19 relief funds through fraudulent loan applications and misleading investors in a fraudulent initial coin offering during 2018.

Taiwanese Justin Cheng -- also known as "Justin Jung" -- submitted a series of online loan applications and falsified tax and payroll records between May and August last year, according to an April 20 announcement by the U.S. Department of Justice.

Cheng's application contained falsified IRS tax and payroll records that listed the names of 200 employees who received $1.5 million in monthly wages from his company. However, the list was made up of the names of public figures, including a "Good Morning America" ​​co-host and a deceased "former Penn State football coach."

In addition to applying for loans from at least five different banks, the scammer also applied for loans from the U.S. government's Paycheck Protection Program and Economic Injury Disaster Loan Program.

Cheng successfully obtained $7 million worth of COVID-19 relief funds for his fictitious employees, which were allegedly used for personal expenses, including a $40,000 Rolex watch, a $17,000 monthly apartment rent, and a 2020 Mercedes-Benz. U.S. Attorney Audrey Strauss said:

“Cheng lied to the Small Business Administration (SBA) and several banks about his company’s ownership, the number of employees he would employ, 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.”

The self-proclaimed “serial entrepreneur” also admitted to running a fraudulent ICO for his company between August and October 2018.

In 2018, Cheng solicited investors to participate in the ICO of his company, Alchemy Coin Technology Limited, while making false statements about the company’s financial condition and the readiness of its peer-to-peer lending platform, and failing to disclose that the ICO was an unlicensed offering. The Department of Justice stated:

“These investments were obtained through material false and misleading statements and omissions regarding: access to Alchemy Coin’s capital, use of investor proceeds, product readiness of its purported blockchain-based peer-to-peer lending platform, and registration of tokens as part of its initial coin offering.” (Cointelegraph)