CEO sentenced to 6 years for COVID relief fraud, ICO fraud and more

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The Justice Department announced Wednesday that a former fintech CEO was sentenced to six years in prison after pleading guilty to charges related to COVID-19 pandemic loan fraud and crypto investment fraud.

Justin Cheng was convicted of “several attempts at fraud,” according to the DOJ’s publication. Among the alleged crimes, Cheng raised $ 400,000 for a loan startup that used blockchain technology called Alchemy Coin. Prosecutors said Cheng misled investors regarding the feasibility of the project and the legality of an associated initial coin offering.

As a DOJ release note:

“In addition to the COVID-19 pandemic loan fraud described above, CHENG has committed securities fraud from at least 2017 through at least 2019 by soliciting and receiving approximately $ 400,000 for investments in Alchemy Coin Technology Limited and affiliates (” Alchemy Coin ” ), which is controlled by CHENG. These investments were driven by materially false and misleading statements and omissions regarding Alchemy Coin’s access to capital, the use of investor proceeds, the product readiness of its supposedly blockchain-based peer-to-peer lending platform, and the registration of its tokens as part of an initial coin Offerings. “

Cheng also applied for millions of dollars in Paycheck Protection Program loans from a pandemic relief program funded by the U.S. government.

“Based on CHENG’s fraudulent PPP loan applications, a total of more than $ 3.7 million in PPP loans have been approved for the Cheng companies and approximately $ 2.8 million in PPP loan proceeds deposited into bank accounts exclusively controlled by CHENG, “said the DOJ. “Instead of using the PPP loan proceeds for payroll, mortgage interest, rent and / or utility services for the alleged Cheng businesses, as required by the PPP, CHENG has sent over $ 1 million overseas, about $ 360,000 withdrawn in cash and / or cashier’s checks. and spent at least approximately $ 279,000 in PPP loan proceeds on personal expenses. “

In addition, prosecutors said that Cheng “committed remittance fraud by fraudulently charging various start-up companies with due diligence through materially false and misleading statements about the purpose and eligibility of the fees as well as his as part of an advance payment system Interest and ability to invest in start-up companies between 2018 and 2019.

Cheng pleaded guilty to the charges in April. In addition to his prison sentence, he has been sentenced to three years supervised release and will be forced to leave the United States upon release from prison.