Statement of Offense — United States v. Chen (Dkt. 6, D.D.C.)

Summary

A statement of offense in United States v. Zhong Chen, Case No. 24-CR-50 (CRC), in the U.S. District Court for the District of Columbia, filed February 28, 2024 as Document 6, for a wire fraud charge under 18 U.S.C. § 1343 with forfeiture. It states that between approximately May 2020 and July 2021 Chen applied for PPP and EIDL loans and that his restaurants received approximately $964,843, including approximately $322,162 for a D.C. restaurant and approximately $642,681 for a Maryland restaurant. A chart lists the deposits by date, lender and loan type, and the statement is signed by Chen and his counsel.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Record facts

Full text

Text recognized from a scanned document; may contain errors.

Case 1:24-cr-00050-CRC Document6 Filed 02/28/24 Page 1of5

                        UNITED STATES DISTRICT COURT
                        FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA                :     CASE NO. 24-CR-50 (CRC)

             v.                         :      VIOLATION:
                                        :      18 U.S.C, § 1343 (Wire Fraud)

ZHONG CHEN,                             H
                                        :      FORFEITURE: 18 U.S.C. § 981(a)(1)(C),
             Defendant.                 :      28 U.S.C. § 2461(c)

                              STATEMENT OF OFFENSE

       The United States of America, by its attorney, the United States Attorney for the District

of Columbia, respectfully submits the following Statement of Offense in the above-captioned

case.

       The parties stipulate to the following facts.

       1.     Zhong Chen resided in Maryland.

       2.     Chen was the sole owner of the Shanghai Tokyo Café restaurants. One was located

 in Washington, D.C. (“Chen’s D.C. Restaurant”), The other was located in College Park, Maryland

 (“Chen’s Maryland Restaurant”).

        3,    Chen’s D.C. Restaurant maintained a bank account at Wells Fargo Bank.

        4,    Chen’s Maryland Restaurant maintained a bank account at PNC Bank.

        5.    Chen maintained a personal bank account at Capital One Bank.

        6.    Chen maintained personal investment accounts at Robinhood and TD Ameritrade.

        7,    The Paycheck Protection Program (“PPP”) was a COVID-19 pandemic relief

 program administered by the Smal! Business Administration (“SBA”) that provided forgivable

 loans to small businesses for job retention and certain other expenses. PPP loans were fully
                                                                                           ZC

 guaranteed by the SBA.

Case 1:24-cr-00050-CRC Document6 Filed 02/28/24 Page 2 of 5

8, To obtain a PPP loan, a qualifying business had to submit a PPP loan application,
which was signed by an authorized representative of the business. The PPP loan application
required the business (through its authorized representative) to acknowledge the program rules and
make certain affirmative certifications to be eligible to obtain the PPP loan, including that the
business was in operation and either had employees for whom it paid salaries and payroll taxes or
paid independent contractors,

9, PPP loan applications were electronically submitted or caused to be submitted by

the borrower and received through SBA servers located in Virginia or Oregon. Once approved, the -

business received the PPP loan proceeds via an electronic funds transfer from the third-party lender
to a financial account under the control of the business.

10. The proceeds ofa PPP loan could be used for certain specified items, such as payroll
costs, costs related to the continuation of group health care benefits, or mortgage interest payments.
The proceeds of a PPP loan were not permitted to be used by the borrowers to fund the borrower's
ordinary day-to-day living expenses unrelated to the specified authorized expenses.

11. In response to the COVID-19 pandemic, the SBA also offered certain entities,
including small business owners, Economic Injury Disaster Loans (“EIDL”). These loans were
provided directly from the SBA and were low-interest, fixed-rate, long-term loans, EIDL loan
proceeds could be used for working capital to make regular payments for operating expenses,
including payroll, rent/mortgage, utilities, and other ordinary business expenses, and to pay
business debt,

12, Between approximately May 2020 and July 2021, Chen applied for PPP and EIDL
loans and Chen’s Restaurants received approximately $964,843 in PPP and EIDL loans. Chen’s

D.C, Restaurant received approximately $322,162. Chen’s Maryland Restaurant received

Page 2 of 5

ZC


Case 1:24-cr-00050-CRC Document6 Filed 02/28/24 Page 3 of 5

approximately $642,681. The deposited amounts and types of loans are detailed in the following

chart,

“May 8, 202 “MD 1$55,867 |PNC_| PPP/Cross River
May 19, 2020 DC $65,526 Wells Fargo PPP/Celtic Bank
June 18, 2020 DC $10,000 Wells Fargo EIDL/SBA
June 18, 2020 MD _—_{ $10,000 PNC EIDL/SBA
June 29, 2020 DC $149,900 Wells Fargo EIDL/SBA
June 29, 2020 MD $149,900 PNC EIDL/SBA
Jan, 29, 2021 DC $91,736 Wells Fargo PPP/Celtic Bank
Feb, 25, 2021 MD $78,214 PNC PPP/First Home Bank
July 13, 2021 DC $5,000 Wells Fargo EIDL/SBA
July 29, 2021 MD $348,700 PNC EIDL/SBA

13, When Chen applied for the loans, he signed applications and other forms stating
that he understood how the Joans were to be used. For example, on or about January 27, 2021, in
connection with the $91,736 PPP loan to Chen’s D.C, Restaurant, he certified that all loan proceeds
would only be used for business-related purposes and indicated that the “funds will be used to
yetain workers and maintain payroll; or make payments for mortgage interests, rent, utilities,

‘covered operation expenditures, covered property damage costs, covered supplier costs, and
covered worker protection expenditures as specified under the Paycheck Protection Program
Rules.” Chen further indicated that, “I understand that if the funds are knowingly used for
unauthorized purposes, the federal government may hold me legally liable, such as for charges of
fraud.”

14, Onor about February 5, 2021, approximately one week after the D.C, restaurant’s
Wells Fargo bank account received roughly $91,736 in PPP loan proceeds, Chen used

approximately $35,000 from that Wells Fargo account to purchase a cashier’s check payable to

Page 3 of 5

ZC


Case 1:24-cr-00050-CRC Document6 Filed 02/28/24 Page 4 of 5

himself, He then deposited that check into his personal Capital One bank account and transferred
$30,000 to his Robinhood account, which he used to day trade stocks.

15. At the time that he applied for the approximately $91,736 PPP loan, Chen falsely
certified that all loan proceeds would be used only for business-related purposes knowing and
intending that he would misappropriate some loan proceeds to a personal investment account to
allow him to engage in day trading. Moreover, by submitting the application, which contained his
false certification, Chen caused an interstate wire transmission.

16. Chen admits that of the approximately $964,843 his DC, and Maryland Restaurants
received in PPP and EIDL loans, Chen misappropriated $354,520 and used those funds to engage
in day trading through his Robinhood and TD Ameritrade investment accounts.

17. The proceeds from Chen’s scheme that he obtained have been dissipated by him
and cannot be located upon the exercise of due diligence, have been transferred or sold to, or

deposited with, a third party; and/or have been placed beyond the jurisdiction of the Court.

Respectfully submitted,

MATTHEW M. GRAVES
UNITED STATES ATTORNEY
D.C. Bar No, 481052

By: /)p-dii uf (Lc
Kondi J, Kleinnian
California Bar No, 241277
Assistant United States Attorney
Fraud, Public Corruption & Civil Rights Section
601 D Street, N.W. | Washington, D.C, 20530
(202) 252-6887 | kondi.kleinman2@usdoj.gov

Page 4 of 5


Case 1:24-cr-00050-CRC Document6 Filed 02/28/24 Page 5 of 5

DEFENDANT’S ACKNOWLEDGMENT

The preceding statement is a summary, made for the purpose of providing the Court with
a factual basis for my guilty plea to the charge against me. It does not include all of the facts known
to me regarding this offense. I make this statement knowingly and voluntarily and because I am,
in fact, guilty of the crime that is charged. No threats have been made to me nor am I under the
influence of anything that could impede my ability to understand this Statement of Offense fully.

I read every word of this Statement of Offense. Pursuant to Federal Rule of Criminal
Procedure 11, after consulting with my attorney, I agree and stipulate to this Statement of Offense, ZC
and declare under penalty of perjury that it is true and correct.

pa:  [[ 2Y/ A22¥ Aaa Cfer~

ZHONG CHEN
Defendant

ATTORNEY’S ACKNOWLEDGMENT

lly. { concur
accurate,

I have read this Statement of Offense and have reviewed_-if with my clien

in my client’s desire to adopt and stipulate to this Statement

om Lap

RMechard A. Finci, Esq.
Counsel for Zhong Chen

Page 5 of 5

File and source

File

6.pdf

Size

268,295 bytes

SHA-256

3e2876157b727f534d63a214ec716baaa65aafa3eeeced7feffd6b6468ab00d5

Our copy

6.pdf