Complaint for Violations of Title 18, United States Code — No. 2:20-mj-00269 (Dkt. 1, W.D. Wash.)

Summary

Criminal complaint filed May 21, 2020 as Document 1 in United States v. Baoke Zhang, Case No. 2:20-mj-00269-MAT (MJ20-269), in the U.S. District Court for the Western District of Washington before Magistrate Judge Mary Alice Theiler, sworn by Treasury Inspector General for Tax Administration Special Agent Cole Ashcraft. The complaint charges Zhang with wire fraud under 18 U.S.C. §§ 1343 and 2 and bank fraud under 18 U.S.C. §§ 1344(2) and 2 between April 2020 and May 2020 at Issaquah, Washington. It alleges that Zhang submitted three Paycheck Protection Program loan applications to two lenders seeking more than $1.5 million—including two applications to Financial Institution 1 seeking approximately $925,000—in the name of sham entities claiming operations since February 2020 and monthly payrolls of $240,000 for at least 25 employees.

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“Complaint for Violations of Title 18, United States Code — No. 2:20-mj-00269 (Dkt. 1, W.D. Wash.).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/complaint-for-violations-of-title-18-united-states-code-no-2-20-mj-002-c28efad179/, SHA-256 207b5b6a81cc5ff5ab29e78e9e735e7c404678dce530338e54e9715e7b1e75f6.

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Case 2:20-mj-00269-MAT Document 1 Filed 05/21/20 Page 1 of 17

1 Magistrate Judge Mary Alice Theiler
2

3
4
5
6
UNITED STATES DISTRICT COURT FOR THE
7 WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
8
9
UNITED STATES OF AMERICA, CASE NO. MJ20-269
10
Plaintiff
11 COMPLAINT for VIOLATIONS OF
12
Title 18, United States Code, Sections 2,
V.
13 1343, 1344(2)
BAOKE ZHANG,
14
Defendant.
15
16
BEFORE, Mary Alice Theiler, United States Magistrate Judge, U.S. Courthouse,
17
Tacoma, Washington.
18
The undersigned complainant being duly sworn states:
19
COUNT ONE
20 (Wire Fraud)
21 From in or about April 2020 through in or about May 2020, at Issaquah, in the
22 Western District of Washington and elsewhere, BAOKE ZHANG knowingly devised and
23 intended to devise a scheme and artifice to defraud the United States, and to obtain money
24 and property by means of materially false and fraudulent pretenses, representations and
25 promises, and attempted to do so.
26 //
27 //
28
COMPLAIN T/United States v. Baoke Zhang - I U ITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
(206) 553-7970
Case 2:20-mj-00269-MAT Document 1 Filed 05/21/20 Page 2 of 17

1 A. Manner and Means
2 1. It was part of the scheme to defraud that BAOKE ZHANG submitted three
3 different loan applications to two different lenders seeking more than $ 1.5 million in funds
4 under the Paycheck Protection Program.
5 2. BAOKE ZHANG submitted the loan applications in the name of sham
6 entities and included in those loan applications multiple materially false statements and
7 documents, including, but not limited to:
8 a. A loan application that claimed that the ZHANG entity had been in
9 business since at least February 2020;
b. A loan application that claimed that the business was assigned an
11 Employer Identification Number in 2017; and
12 c. A loan application that claimed that the business had an average
13 monthly payroll of $240,000 and at least 25 employees.
14 B. Execution
15 On or about April 19, 2020, at Issaquah, in the Western District of Washington, and
16 elsewhere, BAOKE ZHANG, for the purpose of executing the scheme described above
17 cause to be transmitted by means of wire communication in interstate commerce from a
18 place within the State of Washington to a place outside of the State of Washington, writing,
19 signals, and sounds, to wit: a Paycheck Protection Program loan application in the name of
20 Baoke Zhang.
21 All in violation of Title 18, United States Code, Section 1343 and 2.
22 COUNT TWO
23 (Bank Fraud)
From in or about April 2020 through in or about May 2020, in the Western District
24
of Washington and elsewhere, BAOKE ZHANG knowingly executed, and attempted to
25
execute, a scheme to obtain monies owned and under the care, custody, and control of
26
Financial Institution 1, a federal insured financial institution as defined by Title 18, United
27
28
COMPLAIN T/United States v. Baoke Zhang - 2 U ITED STATES ATTORNEY
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Case No. SEATTLE, W ASHINGTO, 98101
(206) 553-7970
Case 2:20-mj-00269-MAT Document 1 Filed 05/21/20 Page 3 of 17

1 States Code, Section 20, by means of false and fraudulent pretenses, representations, and
2 promises.
3 A. Manner and Means
4 1. It was part of the scheme to defraud that BAO.KE ZHANG submitted two
5 different loan applications to Financial Institution l seeking approximately $925,000 in
6 funds under the Paycheck Protection Program.
7 2. BAOKE ZHANG submitted the loan applications in the name of sham
8 entities and included in those loan applications multiple materially false statements and
9 documents, including but not limited to:
10 a. A loan application that claimed that the ZHANG entity had been in
11 business since at least February 2020;
12 b. A loan application that claimed that the business was assigned an
13 Employer Identification Number in 20 18; and
14 c. A loan application that claimed that the business had an average
15 monthly payroll of $ 130,000 and at least 20 employees;
16 B. Execution
17 On or about April 23, 2020, at Issaquah, in the Western District of Washington and
18 elsewhere, BAO.KE ZHANG submitted a loan application in the name of Cloud
19 Optimization, LLC, to Financial Institution 1, and that loan application contained
20 materially false statements.
21 All in violation of Title 18, United States Code, Section 1344 and 2.
22 And the complainant states that this Complaint is based on the following
23 information:
24 I, COLE ASHCRAFT, being first duly sworn on oath, depose and say:
25 1. I am a Special Agent with the Treasury Inspector General for Tax
26 Administration (TIGTA) and have been since December 2019. Prior to that, I was a Special
27 Agent with the U.S. Postal Service Office of Inspector General since 2013 and was
28 assigned to their Computer Crimes Unit for the majority of that time. I have received
COMPLAIN T/United States v. Baoke Zhang - 3 UNITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, W ASHINGTO, 98101
(206) 553-7970
Case 2:20-mj-00269-MAT Document 1 Filed 05/21/20 Page 4 of 17

1 formal training m both computer science and the investigation of computer crimes,
2 including network intrusions and computer forensics. I have investigated or assisted in the
3 investigation of numerous cases involving fraudulent activity in connection with
4 computers. I am currently assigned to TIGTA's Cybercrime Investigations Division and
5 the FBI Washington, D.C. Field Office Cyber Task Force. I investigate violations of federal
6 laws regarding the programs and operations of the Internal Revenue Service (IRS) and
7 Federal tax administration. I have been a sworn law enforcement officer during all times
8 herein.
9 2. The information contained in this Complaint is the result of my own
10 investigation as well as information provided to me by others, including other investigators
11 and law enforcement officers. In each instance when I recite information from such others,
12 I have gained that information either by talking directly to such investigators and law
13 enforcement officers or reviewing written reports of their investigation, or both. This
14 Complaint accurately summarizes some of the evidence I discovered during my

15 investigation; it does not, however, contain every detail known to me about the
16 investigation.
17 FACTS ESTABLISHING PROBABLE CAUSE
18 The Paycheck Protection Program
19 3. The Coronavirus Aid, Relief, and Economic Security ("CARES") Act is a
20 federal law enacted in or around March 2020 and designed to provide emergency financial
21 assistance to the millions of Americans who are suffering the economic effects caused by
22 the COVID-19 pandemic. One source of relief provided by the CARES Act was the
23 authorization of up to $349 billion in forgivable loans to small businesses for job retention
24 and certain other expenses, through a program referred to as the Paycheck Protection
25 Program ("PPP"). In or around April 2020, Congress authorized over $300 billion in
26 additional PPP funding.
27 4. In order to obtain a PPP loan, a qualifying business must submit a PPP loan
28 application, which is signed by an authorized representative of the business. The PPP loan
COMPLAIN T/United States v. Baoke Zhang - 4 UNITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, W ASHINGTO, 98101
(206) 553-7970
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1 application requires the business (through its authorized representative) to acknowledge
2 the program rules and make certain affirmative certifications in order to be eligible to
3 obtain the PPP loan. In the PPP loan application, the small business (through its authorized
4 representative) must state, among other things, its: (a) average monthly payroll expenses;
5 and (b) number of employees. These figures are used to calculate the amount of money
6 the small business is eligible to receive under the PPP. In addition, businesses applying
7 for a PPP loan must provide documentation showing their payroll expenses.
8 5. A PPP loan application must be processed by a participating financial
9 institution (the lender). If a PPP loan application is approved, the participating financial
IO institution funds the PPP loan using its own monies, which are I 00% guaranteed by Small
11 Business Administration (SBA). Data from the application, including information about
12 the borrower, the total amount of the loan, and the listed number of employees, is
13 transmitted by the lender to the SBA in the course of processing the loan.
14 6. PPP loan proceeds must be used by the business on certain permissible
15 expenses-payroll costs, interest on mortgages, rent, and utilities. The PPP allows the
16 interest and principal on the PPP loan to be entirely forgiven if the business spends the loan
17 proceeds on these expense items within a designated period of time (usually eight weeks
18 of receiving the proceeds) and uses at least 75% of the PPP loan proceeds on payroll
19 expenses.
20 BAOKE ZHANG and Related Entities
21 7. BAOKE ZHANG is a legal permanent resident of the United States and
22 holds a valid Chinese passport. According to information obtained in the investigation,
23 ZHANG resides in Issaquah, Washington. Ilased on a publicly available Linkedln profile
24 believed to belong to ZHANG, ZHANG is a software engineer.
25 8. According to records obtained from the IRS, an Employer Identification
26 Number ("EIN") was applied for and assigned to a sole proprietorship in ZHANG's name,
27 Baoke Zhang dba Baoke Zhang, ("the Zhang sole proprietorship"), on or about April 3,
28 2020. According to internet service provider records, the IP address from which the EIN
COMPLAINT/United States v. Baoke Zhang - 5 UNITED STATES ATTORNEY
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Case No. SEATTLE, WASHINGTO, 98101
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1 was obtained ("the Zhang IP address") is subscribed to ZHANG at ZHANG's Issaquah,
2 Washington address. According to IRS records, it is the same IP address that has been
3 used to access ZHANG's personal tax information on IRS websites since 2017.
4 a. According to records from the Washington State Department of
5 Revenue ("DOR"), a business license was applied for in the name of the Zhang sole
6 proprietorship on or about April 8, 2020. The license was issued on or about April 17,
7 2020. The application lists ZHANG as the owner of the business, ZHANG's residence as
8 the business address, and Phone Number 1 as the business phone number. It also reports
9 $0 to $12,000 in estimated annual income in Washington State, reports no employees in
10 the city where the business is located, and claims to have been in operation in Washington
11 State since in or about November 2017. According to information obtained from the
12 Washington State Economic Security Department ("ESD"), the state agency with which
13 businesses register for the purpose of employer-paid state unemployment tax and paid
14 leave benefits, the agency has no record of the Zhang sole proprietorship.
15 9. According to records obtained from the IRS, an EIN was applied for and
16 assigned to an entity named Cloud Optimization LLC c ~cloud Optimization") on or about
17 April 21 , 2020. According to IRS and internet service provider records, the Zhang IP
18 address was used to obtain the EIN. According to records and information obtained from
19 the Washington State Secretary of State ("SOS"), ESD, and DOR, the agencies have no
20 record of Cloud Optimization.
21 PPP Loan Applications Submitted for the Zhang Sole Proprietorship
22 and Cloud Optimization
23 10. The government has obtained copies of three applications for PPP loans
24 totaling more than $ 1.5 million that each bear a signature in ZHANG's name and were
25 submitted to two SBA-approved lenders, Lender 1 and Lender 2, in or about April 2020.
26 The applications were submitted to the lenders from the Zhang IP address.
27 11. One application was submitted on behalf of the Zhang sole proprietorship
28 to Lender 1, a publicly traded real estate investment trust with its primary offices in New
COMPLAIN T/United States v. Baoke Zhang - 6 UNITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
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1 York, Texas, and New Jersey, that participates in the SBA's PPP loan program as an SBA
2 Preferred Lender. A Preferred Lender is a lender that's been pre-approved by the SBA to
3 accept applications for, underwrite, and disburse SBA loans with little to no SBA
4 involvement. These lenders have demonstrated their proficiency in SBA guaranteed loan
5 programs and processes.
6 12. Two additional applications were submitted to Lender 2, which forwarded
7 the applications to Financial Institution I , an FDIC-insured, state-charted industrial bank
8 headquartered in Salt Lake City, Utah, that is an approved SBA lender, for funding. One
9 application was submitted in the name of the Zhang sole proprietorship and one was
IO submitted in the name of Cloud Optimization. According to information obtained from a
11 Lender 2 representative, Lender 2 collects all PPP loan application documents and reviews
12 them. Once the application package is complete, the applicant digitally signs the package
13 and it is forwarded to Financial Institution 1, the actual lender. The servers that initially
14 accept the loan documentation from the applicant are located in Oregon.
15 13. The applications sought loans in the following amounts for the following
16 entities:
17 Approximate Date
Entity Name Lender Loan Amount
of Application
18
Baoke Zhang dba
Lender 1 $600,000 April 10, 2020
19 Baoke Zhang
20 Baoke Zhang dba Lender 2/Financial
$600,000 April 19, 2020
Baoke Zhang Institution 1
21 Lender 2/Financial
Cloud Optimization $325,000 April 23, 2020
22 Institution 1

23 14. Each application identified ZHANG as the "Primary Contact" and 100
24 percent owner of the entity listed on the relevant application. Each application also
25 identified ZHANG by his social security number and the residential address described
26 above. A copy of a Washington State driver's license in ZHANG's name and with his
27 identifying information, including the residential address described above, also was
28 submitted with each application.
COMPLAINT/United States v. Baoke Zhang - 7 U ITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
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1 15. Financial records, public records, and phone records obtained during the
2 investigation show that each of the applications submitted under ZHANG's name included
3 multiple materially false statements about the eligibility of each of the entities for PPP
4 loans. Specifically, while each application and records provided in support of it purported
5 to claim and show that the entities had been in business as of February 15, 2020, and had
6 paid employees- requirements for eligibility-each entity was created in or about April
7 2020 and had no identifiable employment expenses.
8 Fraudulent PPP Loan Application Submitted to Lender 1
9 for the Zhang Sole Proprietorship
10 16. According to records provided by Lender 1, ZHANG digitally signed an
11 application package in support of a $600,000 PPP loan for the Zhang sole proprietorship
12 and submitted it to Lender 1 from his subscribed IP address on or about April 10, 2020.
13 17. Lender 1 provided the government the SBA Form 2483 submitted with the
14 package and bearing the signature of ZHANG. To support the loan amount, the application
15 represented that the sole proprietorship had an average monthly payroll of $240,000 and
16 25 employees. ZHANG also certified that the sole proprietorship Hwas in operation on
17 February 15, 2020 and has employees for whom it paid salaries and payroll taxes or paid
18 independent contractors." As described further herein, evidence obtained in the
19 investigation demonstrates that this certification was false.
20 18. Lender 1 has provided several documents it received in support of the
21 application, including purported IRS records and a purported payroll detail report from an
22 online payroll system. A review of those documents and records and information obtained
23 from the IRS and ESD demonstrate that the documents provided to Lender 1 were falsified
24 and included materially false statements about the sole proprietorship's operations.
25 a. An IRS Notice CP 575, which notifies applicants of the assignment of
26 an EIN, was submitted with the application package. The CP 575 submitted to Lender 1
27 stated that the EIN for the Zhang sole proprietorship was assigned on April 3, 2017. As
28 described above, that EIN was actually assigned by the Modernized Internet EIN
COMPLAIN T/United States v. Baoke Zhang - 8 UNITED STATES ATTORNEY
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Case No. SEATTLE, WASHINGTO, 98101
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1 application (MODIEIN}-an application on the IRS website that allows businesses to
2 apply for EINs online---on April 3, 2020, not 2017. The IRS includes a timestamp in the
3 file names of MODIEIN-generated Notice CP 575s. The file name of the electronic copy
4 of the Notice CP 575 provided to Lender 1 included this timestamp. The timestamp reflects
5 the notice was issued on April 3, 2020, not in 2017 as represented. The submitted Notice
6 CP 575 file also lacked certain technical data encoded in MODIEIN-generated Notice CP
7 575s, indicating it was not a genuine notice or had been modified after being downloaded
8 from MODIEIN.
9 b. An IRS Form 941 , an Employer's Quarterly Federal Tax Return, was
10 submitted with the application package purpo11ing to rep011 wages and federal payroll tax
11 information for the sole proprietorship for the fourth quarter of 2019. According to the
12 form, the Zhang sole proprietorship had 25 employees in the fourth quarter and paid wages,
13 tips, and total compensation totaling $717,560.38. Based on a search of available IRS
14 records related to the EIN associated with the Zhang sole proprietorship, no such IRS Form
15 941 has been submitted to the IRS.
16 C. A Form 1040 with attachments, signed with a signature in ZHANG's
17 name and dated March 3, 2020, was submitted with the application package purporting to
18 be ZHANG's personal income tax return for 2019. Included in the attachments was a
19 Schedule C, which reports profits and losses of a sole proprietorship. The Schedule C
20 purported to report approximately $138,700 in profit in 2019 for the Zhang sole
21 proprietorship. Based on a search of available IRS records related to ZHANG and the EIN
22 associated with the Zhang sole proprietorship, no such Schedule C has been submitted to
23 the IRS.
24 d. A document purporting to be a record from an online payroll system
25 was submitted with the application package listing payroll detail records for 25 employees
26 for calendar year 2019. According to the document submitted, the Zhang sole
27 proprietorship incurred more than approximately $2.8 million in payroll in 20 19.
28 According to the document, expenses for many employees included payments for "WA
COMPLAIN T/United States v. Baoke Zhang - 9 UNITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
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1 SUI" and "WA PFML ER." Based on publicly available information, "WA SUI" is
2 believed to refer to Washington State unemployment tax payments and "WA PFML ER"
3 is believed to refer to Washington State paid family medical leave benefits. As described
4 above, ESD, the Washington State agency that maintains records of such payments, has no
5 record of the Zhang sole proprietorship.
6 19. In addition to the records provided in support of the loan application,
7 Lender 1 has provided email correspondence with Email Address 1, the email address listed
8 on the application it received. The individual using the account identified himself in
9 correspondence as "Baoke" and used the account to make additional false statements to
IO Lender I in support of the application.
11 a. On or about May 4, 2020, a representative of Lender 1 ' s loan
12 underwriter emailed Email Address 1 and stated, in part:
13 Good morning, Baoke, ... There's a discrepancy in some information
we hope you could clear up for us: The SBA records show your EIN
14
ending 1741 was established 4/3/2020[.] However, the 2019 Tax
15 information provided (returns, 941 's) shows the same EIN ending
1741 already in use last year. Would you be able to explain the
16 discrepancy between these two dates? When was this EIN actually
17 established? Please provide your SS4 from the IRS showing the date
the EIN was established. Please reply by 5PM EST today, or we will
18
have to decline your file.
19
20 b. Later the same day, a response sent from Email Address 1 and signed
21 by "Baoke" stated in part:
22 Good morning. Thank you so much for reaching out. I am sorry to
forget keeping [Lender 1] update. There are some change in situation
23
with my business in last a few days, and don't need this loan. I would
24 like to withdraw and cancel my ppp loan application. Could you help
cancel my loan application with SBA? So the loan can be available
25
to other small business who urgently need it. Regarding the SBA EIN
26 number, I don 't know why SBA record incorrectly show the date. My
business and EIN date back to 2017. Please see attached SS4. Again
27
thank you and [Lender 1] for assistance during the process. I have
28 declined the loan doc. Thank you and have a nice day.
COM PLAINT!United States v. Baoke Zhang - l 0 UNITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, W ASHINGTO, 98101
(206) 553-7970
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1 An IRS Notice CP 575 was attached to the email which purported to show that the EIN for
2 the Zhang sole proprietorship was issued on April 3, 2017. As described above, this
3 document was falsified.
4 20. Based on the discrepancy in the records and the response it received in the
5 email correspondence with Email Address 1, Lender 1 never approved the PPP loan to the
6 Zhang sole proprietorship.
7 Fraudulent PPP Loan Application Submitted to Lender 2 and Financial Institution 1
8 for the Zhang Sole Proprietorship
9 21. According to records provided by Lender 2, ZHANG digitally signed an
10 application package in suppmt of a $600,000 PPP loan for his sole proprietorship and
11 submitted it to Lender 2 from the Zhang IP address on or about April 19, 2020.
12 22. Lender 2 provided the government the SBA Form 2483 submitted with the
13 package and bearing the signature of ZHANG. To support the loan amount, the application
14 represented that the sole proprietorship had an average monthly payroll of $240,000 and
15 25 employees. ZHANG also certified that the sole proprietorship "was in operation on
16 February 15, 2020 and has employees for whom it paid salaries and payroll taxes or paid
17 independent contractors." As described further herein, evidence obtained in the
18 investigation demonstrates that this certification was false.
19 23. Lender 2 also provided the government a loan agreement signed in
20 ZHANG's name on or about April 19, 2020, between ZHANG and Financial Institution 1.
21 The loan agreement identified .Financial Institution 1 as the lender and an FDIC-insured
22 institution and included a certification by ZHANG that the information related to the
23 application was complete and correct. As described further herein, evidence obtained in
24 the investigation demonstrates that this certification was false.
25 24. Lender 2 has provided several documents it received in support of the
26 application for the Zhang sole proprietorship. Most of them are the same false documents
27 provided to Lender 1 described above, including the falsified CP 575 purporting to show
28 the entity's EIN was issued in 2017, the falsified Form 941 for the fourth quarter of 2019,
COMPLAIN T/United States v. Baoke Zhang - 11 UNITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
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1 the false Schedule C, and the payroll detail report purporting to show payments of
2 Washington State unemployment taxes and paid leave benefits in 2019 of which ESD has
3 no record.
4 25. In addition, Lender 2 has provided documents it received in support of the
5 application that were not part of the application package provided by Lender 1 in relation
6 to the first loan application for the Zhang sole proprietorship. A review of records and
7 information from the IRS, ESD, and DOR show that these too were falsified and contained
8 false statements.
9 a. Additional Forms 941, for the frrst three quarters of 2019, were
10 submitted with the application package purporting to show the entity had 25 employees for
11 which it paid wages, tips, and compensation in each quarter. Based on a search of available
12 IRS records related to the EIN associated with the Zhang sole proprietorship, no such
13 Forms 941 have been submitted to the IRS.
14 b. The loan application package included what purported to be a payroll
15 detail report from an online payroll system for 2020 showing the payment of Washington
16 State unemployment taxes and paid leave benefits for many employees. As described
17 above, according to information obtained from ESD, it has no record of the entity ever
18 having registered or made such payments.
19 C. The loan application package included a document purporting to be
20 from the Washington State Business Licensing Service stating that the Zhang sole
21 proprietorship's business license had been renewed on or about February 8, 2020. As
22 described above, records from DOR show that the Zhang sole proprietorship first applied
23 for a business license on or about April 8, 2020.
24 26. After Financial Institution 1 learned of the government's investigation, it
25 did not fund the loan.
26 II
27 II
28
COM PLAINT!United States v. Baoke Zhang - 12 U ITED STATES ATTORNEY
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Case No. SEATTLE, WASHINGTO, 98101
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1 Fraudulent PPP Loan Application Submitted to Lender 2 and Financial Institution 1
2 for Cloud Optimization
3 27. According to records provided by Lender 2, ZHANG digitally signed an
4 application package in support of a $325,000 PPP loan for Cloud Optimization and
5 submitted it to Lender 2 from the Zhang IP address on or about April 23, 2020.
6 28. Lender 2 provided the government the SBA Form 2483 submitted with the
7 package and bearing the signature of ZHANG. To support the loan amount, the application
8 represented that the sole proprietorship had an average monthly payroll of $ 130,000 and
9 20 employees. ZHANG also certified that Cloud Optimization "was in operation on
10 Febmary 15, 2020 and has employees for whom it paid salaries and payroll taxes or paid
11 independent contractors." As described further herein, evidence obtained in the
12 investigation demonstrates that this certification was false.
13 29. Lender 2 also provided the government a loan agreement signed in
14 ZHANG's name on or about April 23, 2020, between ZHANG and Financial Institution 1.
15 The loan agreement identified Financial Institution 1 as the lender and an FDIC-insured
16 institution and included a certification by ZHANG that the information related to the
17 application was complete and correct. As described further herein, evidence obtained in
18 the investigation demonstrates that this certification was false.
19 30. Lender 2 has provided several documents it received in support of the
20 application, including purported IRS records, Washington State records, and payroll detail
21 reports from an online payroll platform. A review of those documents and records and
22 information obtained from the IRS, DOR, ESD, SOS, and Bank of America demonstrate
23 that the documents provided to Lender 2 were falsified and included materially false
24 statements about Cloud Optimization's operations.
25 a. The submitted application package included an IRS Notice CP 575
26 purporting to show that the EIN for Cloud Optimization was assigned on April 21 , 20 18.
27 As described above, IRS records demonstrate that the EIN was actually assigned on April
28
COM PLAINT!United States v. Baoke Zhang - 13 U ITED STATES ATTORNEY
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1 21 , 2020, not 2018. Technical data encoded in the submitted Notice CP 575 file indicate
2 the file was created on April 21 , 2020, and modified on April 22, 2020.
3 b. The submitted application package included IRS Forms 941
4 purporting to report wages and federal payroll tax information for Cloud Optimization for
5 each quarter of calendar year 2019. According to the form, Cloud Optimization had 20
6 employees in each quarter and paid approximately $394,000 to $396,000 in quarterly
7 wages, tips, and compensation. Based on a search of available IRS records related to the
8 EIN associated with Cloud Optimization, no such IRS Forms 941 have been submitted to
9 the IRS.
C. The submitted application package included a document purporting to
11 be a copy of a publicly available record from DOR's online business information database.
12 According to the document provided, a business license was first issued to Cloud
13 Optimization on or about February 8, 2018, and the entity was assigned Unique Business
14 Identifier (UBI) number 604-601-873. Information obtained from DOR and SOS reflects
15 that no entity named Cloud Optimization has ever been registered with the state of
16 Washington and the UBI listed on the document does not exist.
17 d. The submitted application package included documents purporting to
18 be records from an online payroll platform listing payroll detail records for 20 employees
19 for calendar year 2019 and the first quarter of 2020. According to the documents
20 submitted, Cloud Optimization incurred more than approximately $ 1.5 million in payroll
2 1 in 2019 and more than approximately $397,128 in payroll in 2020. According to the
22 document, expenses for many employees included payments for "WA SUI" and " WA
23 PfML EE." Ilased on publicly available information, "WA SUI" is believed to refer to
24 Washington State unemployment tax payments and "WA PFML EE" is believed to refer
25 to Washington State paid family medical leave benefits. As described above, ESD has
26 informed the government that it has no record of Cloud Optimization registering with the
27 agency or making any such payments.
28
COMPLAINT/United States v. Baoke Zhang - 14 U ITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
(206) 553-7970
Case 2:20-mj-00269-MAT Document 1 Filed 05/21/20 Page 15 of 17

1 e. The submitted application package included a document purporting to
2 be a Bank of America statement for the period December 7, 2019, to January 8, 2020, for
3 an account ending in 5806 in the names of ZHANG and Cloud Optimization. The record
4 purported to show 20 separate payments to the 20 individuals listed on the payroll records
5 provided. Records from Bank of America show that the account ending in 5806 was
6 established in or about April 2020 in the name of "Baoke Zhang dba Baoke Zhang," with
7 ZHANG as the sole signatory. Records from the account show no payments to anyone
8 matching those on the fake account statement submitted to Lender 2.
9 31. Financial Institution 1 approved the Cloud Optimization loan application
10 on or about May 3, 2020. On or about May 5, 2020, Financial Institution 1 attempted to
11 transmit the $325,000 in approved funds to the account ending in 5806. On or about May
12 6, 2020, the money was returned before it was deposited because the account name did not
13 match that provided to Financial Institution 1. After Financial Institution 1 learned of the
14 government's investigation, it did not fund the loan.
15 Phone Records
16 32. Phone N umber 1 is listed as the business phone number for the Zhang sole
17 proprietorship and Cloud Optimization on the three loan applications and on the application
18 for a business license for the Zhang sole proprietorship. It is also listed as ZHANG's
19 contact number on the publicly available Linkedln profile believed to belong to ZHANG.
20 33. The government has obtained phone records for Phone Number 1.
21 Subscriber records show that the number was activated on or about March 22, 2019, and is
22 associated with a brand that, according to publicly available information, provides pre-paid
23 phone services using the phone service provider's network. There is no other subscriber
24 data associated with the number.
25 34. On or about May 7, 2020, after the wire to Cloud Optimization was
26 returned, the phone records for Phone Number 1 show an approximately 2.5 minute call
27 with a toll free number associated with Lender 2. Lender 2 has provided an approximately
28 2.5 minute recorded call on or about May 7, 2020, between a Lender 2 representative and
COM PLAINT!United States v. Baoke Zhang - 15 UNITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
(206) 553-7970
Case 2:20-mj-00269-MAT Document 1 Filed 05/21/20 Page 16 of 17

1 a male individual identifying himself on the call as "Baoke." On the call, after the Lender
2 2 representative asked Zhang to provide a voided check or bank statement to confirm the
3 account to which the wire should be sent, the individual first stated he no longer wanted
4 the loan and then stated he would discuss it with "the team."
5 35. On or about May 12, 2020, a recorded call was made with an individual
6 identifying himself as "Baoke" who was using Phone Number 1. The individual refused
7 to answer additional identification verification questions about himself. The individual
8 confirmed that he had two loan applications outstanding with Lender 2 for the Zhang sole
9 proprietorship and Cloud Optimization for $600,000 and $325,000, respectively, and stated
IO he no longer needed the loans. The individual stated that he had confen-ed with his "legal
11 team" and they did not feel comfortable disclosing the reason the entities no longer needed
12 the loans. No evidence gathered in the investigation to date suggests that any attorneys or
13 any other individuals are involved in any operations of the Zhang sole proprietorship or
14 Cloud Optimization.
15 36. Based on a lay comparison of the voices of the individual identifying
16 himself as "Baoke" on the May 7 and May 12 calls, it appears that the same male voice
17 was speaking on both calls.
18 Surveillance ofZHANG 's Residence
19 37. On or about May 14, 2020, Federal Bureau of Investigation special agents
20 conducted surveillance of ZHANG's residence in Issaquah, Washington. The residence is
21 a single-family home and is the same address at which the Zhang lP address is registered.
22 The agents observed a male matching ZHANG's height and race and wearing glasses in
23 the driveway of the residence and eventually entering it. According to driver's license
24 records, ZHANG wears con-ective lenses. Agents attempted to call Phone Number I while
25 the male individual was in view, but the call went to voicemail. The male was not observed
26 reaching for a cell phone or attempting to answer a call. He did, however, disappear from
27 view on the west side of the residence during part of the attempted call.
28 //
COM PLAINT!United States v. Baoke Zhang - 16 U ITED STATES ATTORNEY
700 STEWART ST., SlJITE 5220
Case No. SEATTLE, WASHINGTO, 98101
(206) 553-7970
Case 2:20-mj-00269-MAT Document 1 Filed 05/21/20 Page 17 of 17

1 CONCLUSION
2 38. Based on the above facts, I respectfully submit that there is probable cause
3 to believe that BAOKE ZHANG did knowingly, having devised and intending to devise a
4 scheme and artifice to defraud, and for obtaining money and property by means of false
5 and fraudulent pretenses, representations and promises, and attempting to do so,
6 transmitted and caused to be transmitted by means of wire, radio, and television
7 communication in interstate and foreign commerce, writings, signs, signals, pictures, and
8 sounds for the purpose of executing such scheme and artifice, in violation of Title 18,
9 United States Code, Sections 1343 and 2.
10 39. Based on the above facts, I further respectfully submit that there is probable
11 cause to believe that BAOKE ZHANG knowingly executed, and attempted to execute, a
12 scheme to defraud Financial Institution I , a federally insured financial institution, and
13 obtain monies owned and under the care, custody, and control of that financial institution
14 by means of false and fraudulent pretenses, representations, and promises, in violation of

:~ Title 18, United States Code, Sections 1344 and 2~ ~

COLE ASHCRAFT, Complainant
18
Special Agent, TIGTA
19
20 The above-named agent provided a sworn statement attesting to the truth of the
21 contents of the foregoing affidavit, and based on the Complaint and Affidavit, the Court
22 hereby finds that there is probable cause to believe the Defendant committed the offenses
23 set forth in the Complaint.
24 21st
Dated this _ _ _ day of May, 2020.
25
26 ~
MARY ALICE THEILER
27
United States Magistrate Judge
28
COMPLAI T/United States v. Baoke Zhang- 17 ITED TATE ATTOR EY
700 TE WART T. , ITE 5220
Case o. EATTL E, W A HI 'GTO 9 101
(206) 553-7970

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