Covid-19 scams have been some of the most common types of fraud registered in the past two years. These scams have been carried out through different strategies over the phone and online. Although many of the authors who carried out successful Covid-19 scams haven’t been caught yet, others are already paying for their acts. Some of them are even known figures in the online environment such as Alchemy Coin’s CEO, Justin Cheng. Find out how this young man managed to steal $7M worth of Covid relief funds.
Justin Cheng is a 25-year-old Taiwanese resident. The young man arrived in the United States a few years ago after he managed to get a student visa. Cheng studied at the Pennsylvania State University. Through a well-orchestrated scam, the man managed to obtain $7 million, but he will spend as many years in prison as he has already been convicted by the federal court for his actions.
Besides the successful Covid-19 scam that was almost going to make him rich, Cheng has also been convicted in relation to an investment scam carried out through his cryptocurrency company, ICO. Through this secondary illicit source of income, the businessman managed to steal more than $400,000 from investors who put their money and trust in his company – Alchemy Coin Technology Limited.
The money Cheng got as investments was gathered by making false and misleading statements. He basically lied to his investors regarding how they would be able to access Alchemy Coin’s capital and use his blockchain lending platform and its tokens.
Regarding the Covid-19 scam, Cheng did not come up with a new and original scheme to defraud the U.S. government and gain access to money that was actually due to unemployed citizens. His way of work resembled that of many other fraudsters who have submitted fake Covid-19 unemployment benefit applications online and received money after their approval.
However, unlike other cybercriminals, Cheng could pull of a successful scam at a larger scale and make much more money because he also had a company. This enabled him to receive financial aid from SBA’s Paycheck Protection Program (PPP).
The investigation carried out by the U.S. Department of Justice revealed that Cheng submitted lots of online applications in 2020, in the period ranging from April to August. As a result, he received the astonishing amount of $7 million from the PPP.
To be able to make the necessary applications, Justin lied about the number of people he employed. In theory, his company had more than 200 employees for whom Cheng paid a total amount of monthly wages of over $1.5 million. In reality, the company only had 14 employees.
Moreover, to be able to put together such a long list of employees, the businessman started inventing names of persons who proved to have no records as U.S. citizens. What took the authorities by surprise even more so was the fact that Cheng even included in his applications names of famous celebrities such as TV figures or a well-known NFL player.
The red flag that probably prompted the authorities to start an official investigation was the way in which Cheng used his money once it became available. Normally, the funds companies get as part of SBA’s PPP program should be used for business expenses. This is not what Cheng did. A major error was that he transferred $1 million abroad, which obviously drew attention.
Furthermore, he also decided to withdraw $360,000 in cash. With this money, he didn’t buy any business equipment, renovate his office, or invest in any other business-related activity. As records showed, a similar amount was spent by Cheng on personal expenses. For example, the man bought an expensive Rolex and a new car.
This year in April, the man pleaded guilty to 4 of the accusations brought against him. The final sentence for Cheng was 72 months in prison and 3 years of supervised release. Cheng was just one of the many criminals who have managed to defraud the U.S. government and take advantage of its Covid stimulus programs. A lot of money seems to have been stolen in similar scams, many of which were carried out from abroad by groups of cybercriminals residing in China, Russia, Nigeria, and other countries.
Courtesy of Mount Equity Group