Criminal Complaint — United States v. Jae H. Choi (No. 2:20-mj-12360, D.N.J.)

Summary

A criminal complaint filed September 2, 2020 as Document 1 in United States v. Jae H. Choi, Mag. No. 20-12360, in the U.S. District Court for the District of New Jersey, attested by IRS Criminal Investigation Special Agent Vincent Flynn before Magistrate Judge James B. Clark III. Counts One through Three charge bank fraud under Title 18, United States Code, Section 1344(2) over PPP applications for Smart Learning Inc., The Homeschool Buyers Club Inc. and Educloud Inc. seeking $3,077,300.00, $2,990,957.50 and $2,903,200. Count Four charges money laundering under Section 1957 for a transfer of approximately $291,000 to a title company on or about May 4, 2020. The affidavit alleges the applications used falsified Forms 940, bank records and employee lists, and that the proceeds went to a home in Cresskill, New Jersey and to stocks including Amazon, Tesla and Apple.

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“Criminal Complaint — United States v. Jae H. Choi (No. 2:20-mj-12360, D.N.J.).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/complaint-no-2-20-mj-12360-dkt-1-d-n-j-d26a17b4a3/, SHA-256 5fa8ac8d58385a24eb8eecdd93f3f2df59b626d0fb256e3616e68e3f3a36177a.

Full text

Case 2:20-mj-12360-JBC Document 1 Filed 09/02/20 Page 1 of 10 PageID: 1

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA : Hon. James B. Clark III

V. : Mag. No. 20-12360

JAE H. CR01 : CRIMINAL COMPLAINT

I, Special Agent Vincent Flynn, being duly sworn, state that the following
is true and correct to the best of my knowledge and belief:

SEE ATTACHMENT A

I further state that I am a Special Agent with Internal Revenue Service,
Criminal Investigation, and that this complaint is based on the following facts:

SEE ATTACHMENT B

continued on the attached pages and made a part hereof.

Special Agent Vincent Flynn
Internal Revenue Service, Criminal Investigation

Special Agent Vincent Flynn attested to this Complaint by telephone pursuant
to Federal Rule of Criminal Procedure 4.1(b)(2)(A) on September 2, 2020 in New
Jersey.

HoNoRABLE JAMES B. CLARK III cZ1 /

UNITED STATES MAGISTRATE JUDGE Sig ure of Judicial Officer
Case 2:20-mj-12360-JBC Document 1 Filed 09/02/20 Page 2 of 10 PageID: 2

ATTACHMENT A

Counts One Through Three
(Bank Fraud)

From at least in or around April 2020 through in or around August 2020,
in Bergen County, in the District of New Jersey and elsewhere, defendant

JAE H. CR01

did knowingly and intentionally execute and attempt to execute a scheme and
artifice to defraud one or more financial institutions, to wit: Lender 1, Lender 2,
and Lender 3, the deposits of which are insured by the Federal Deposit Insurance
Corporation, and to obtain moneys, funds, and credits owned by and under the
control of such financial institution by means of materially false and fraudulent
pretenses, representations, and promises, each constituting a separate count of
this Complaint.

Approximate Description
Count
Date
CR01 submitted an application on behalf of Smart
April 3, 2020
1 Learning Inc. to Lender 1 for approximately $3,077,300.00
in PPP funds.
CR01 submitted an application on behalf of The
April 10, 2020
2 Homeschool Buyers Club Inc. to Lender 2 for
approximately $2,990,957.50 in PPP funds.
April 23, 2020 CR01 submitted an application on behalf of Educloud Inc.
3
to Lender 3 for approximately $2,903,200 in PPP funds.

In violation of Title 18, United States Code, Section 1344(2) and Section
2.
Case 2:20-mj-12360-JBC Document 1 Filed 09/02/20 Page 3 of 10 PageID: 3

Count Four
(Money Laundering)

On or about May 4, 2020, in Bergen County, in the District of New Jersey
and elsewhere, defendant

JAE H. CHOI

did knowingly engage and attempt to engage in a monetary transaction by,
through, and to a financial institution, affecting interstate and foreign commerce,
in criminally derived property of a greater value than $10,000, that is, the
transfer of approximately $291,000 of U.S. currency from a Smart Learning Inc.
account at Bank 3 to a Title Company, such property having been derived from
a specified unlawful activity, that is, bank fraud, in violation of Title 18, United
States Code, Section 1344.

In violation of Title 18, United States Code, Section 1957 and Section 2.
Case 2:20-mj-12360-JBC Document 1 Filed 09/02/20 Page 4 of 10 PageID: 4

ATTACHMENT B

I, Vincent Flynn, am a Special Agent with the Internal Revenue Service,
Criminal Investigation. Recently, I have been assigned to work with the U.S.
Department of Justice and other law enforcement partners to investigate
possible fraud associated with the stimulus and economic assistance programs
created by the federal government in response to the COVID-19 program. I am
fully familiar with the facts set forth herein based on my own investigation, my
conversations with other law enforcement officers, and my review of reports,
documents, and evidence. Where statements of others are related herein, they
are related in substance and part. Because this complaint is being submitted
for a limited purpose, I have not set forth each and every fact that I know
concerning this investigation. Where I assert that an event took place on a
particular date, I am asserting that it took place on or about the date alleged.

Overview

1. Defendant CHOI used a variety of false statements to fraudulently
obtain nearly $9 million in federal COVID-19 emergency relief funds meant for
distressed small businesses. CR01 submitted applications on behalf of three
different business entities to three different lenders that fabricated employees,
manipulated bank records, and falsified a driver’s license. He then used the
proceeds to buy, among other things, a nearly one million-dollar residential
home in Cresskill, New Jersey (“Cresskill Residence”), pay for approximately
$30,000 in remodeling and other improvements, and to invest millions more in
the stock market through an account held in the name of his spouse.

Background

The Paycheck Protection Program

2. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is
a federal law enacted in or around March 2020 and designed to provide
emergency financial assistance to the millions of Americans who are suffering
the economic effects caused by the COVID-19 pandemic. One source of relief
provided by the CARES Act was the authorization of up to $349 billion in
forgivable loans to small businesses for job retention and certain other expenses,
through a program referred to as the Paycheck Protection Program (“PPP”). In or
around April 2020, Congress authorized over $300 billion in additional PPP
funding.

3. In order to obtain a PPP loan, a qualifying business must submit a
PPP loan application, which is signed by an authorized representative of the
business. The PPP loan application requires the business (through its authorized
representative) to acknowledge the program rules and make certain affirmative
certifications in order to be eligible to obtain the PPP loan. In the PPP loan
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application, the small business (through its authorized representative) must
state, among other things, its: (a) average monthly payroll expenses;
and (b)
number of employees. These figures are used to calculate the amount of money
the small business is eligible to receive under the PPP. In addition, busine
sses
applying for a PPP loan must provide documentation showing their
payroll
expenses.

4. A PPP loan application must be processed by a participating lender.
If a PPP loan application is approved, the participating lender funds the PPP
loan
using its own monies, which are 100% guaranteed by Small Busine
ss
Administration (“SBA”). Data from the application, including information
about
the borrower, the total amount of the loan, and the listed number of emplo
yees,
is transmitted by the lender to the SBA in the course of processing the loan.

5. PPP loan proceeds must be used by the business on certain
permissible expenses—payroll costs, interest on mortgages, rent, and utilitie
s.
The PPP allows the interest and principal on the PPP loan to be entirely forgive
n
if the business spends the loan proceeds on these expense items within
a
designated period of time after receiving the proceeds and uses a certain amoun
t
of the PPP loan proceeds on payroll expenses.

Relevant Entities and Individuals

6. At various times relevant to this complaint:

a. Defendant Jae H. Choi (“CR01”) was a resident of Cliffside Park, New
Jersey.

b. CHOI was associated with various corporate entities that were used
to apply for PPP loans, as follows:

i. Smart Learning Inc. (“Smart Learning”) is a Delaware
Corporation, which purports to provide educational services.

ii. The Homeschool Buyers Club Inc. (“Homeschool Buyers
Club”) is a California Corporation, which purports to provide
curriculums for homeschooling.

iii. Educloud Inc. (“Educloud”) is a New Jersey Corporation,
which purports to provide educational services.

c. Individual 1 was CHOI’s spouse and was a resident of Cliffside Park,
New Jersey.

d. Individual 2 was CHOI’s brother.
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e. Lender 1 is a financial institution insured by the Federal Deposit
Insurance Corporation (“FDIC”) headquartered in Saint Petersburg, Florida with
additional locations in Florida.

f. Lender 2 is a FDIC-insured financial institution headquartered in
Los Angeles, California that has locations primarily in California.

g. Lender 3 is a FDIC-insured financial institution headquartered in
Logan, Utah that has locations throughout Utah.

The Scheme to Defraud

7. From in or around April 2020 through in or around August 2020,
CR01 submitted, or caused to be submitted, fraudulent loan applications to
approved lenders, including Lender 1, Lender, 2, and Lender 3, in order to obtain
funds through the PPP.

8. In connection with this fraud, CHOI submitted the following PPP loan
applications to PPP lenders:

Name of Approximate
Business Amount Lender
Approved Application Status
Applicant Date
Smart $3,077,300.00 Lender 1 April 3, 2020 Funded
Learning

Homeschool $2,990,957.50 Lender 2 April 10, 2020 Funded
Buyers Club

Educloud $2,903,200.00 Lender 3 April 23, 2020 Funded

Falsified Smart Learning Application to Lender 1

9. On or about April 3, 2020, CHOI submitted a PPP application to
Lender 1 in the name of Smart Learning seeking a PPP loan in the amount of
$3,077,300. The application was submitted in CHOI’s name and listed CR01 as
the owner of Smart Learning.

10. The PPP application submitted to Lender 1 stated that Smart
Learning’s average monthly payroll was $1,230,925 and that the company had
170 employees. As purported documentation of Smart Learning’s payroll
numbers, the PPP application included a payroll summary report listing the
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purported employees and a purported Employer’s Annual Federal
Unemployment Tax Return (IRS Form 940) for 2019.

11. The Smart Learning PPP application to Lender 1 contained materially
false and fraudulent information:

a. The purported Form 940 provided to Lender 1 was falsified. It
claimed that Smart Learning had paid employees $13,924,004.28
for 2019. Internal Revenue Service (“IRS”) records indicate no tax
filings—including no Form 940—were made for Smart Learning for
2019.

b. As part of the application, CR01 provided falsified bank account
records. CHOI provided purported January 2020 Smart Learning
checking account records from a different financial institution
(“Bank 1”) falsely indicating an ending balance of approximately
$685,000 and hundreds of thousands of dollars in payroll payments
and other transactions. Records obtained from Bank 1 show that
this account was not opened until on or about February 8, 2020 and
that the largest balance the account held during February and
March 2020 was approximately $25,000.

12. On or about April 20, 2020, CHOI emailed Lender 1 to falsely claim
that he just told 150 of his Smart Learning employees that they were losing their
jobs because the PPP loan had not yet come through, that he had “watched
grown men and women crying,” and that he sincerely hoped that the Lender 1
employee he was emailing “would never find [themselves] in this kind of
situation.”

13. Bank records show that upon receiving the full amount of PPP loan
proceeds from Lender 1 into a Smart Learning account at Bank 1 on or about
April 23, 2020, CR01 wired approximately $2,410,000 of the funds to an attorney
trust account (“Trust Account”) held in his name at another financial institution
(“Bank 2”) in two transactions on or about April 24, 2020 and May 6, 2020. Prior
to the deposit of PPP funds, the Trust Account had a balance of less than
$10,000. Choi transferred the remaining PPP loan proceeds of approximately
$640,000 from Bank 1 to another Smart Learning bank account at yet another
financial institution (“Bank 3”).

Falsified Homeschool Buyers Club Application to Lender 2

14. On or about April 10, 2020, CHOI submitted a PPP application to
Lender 2 in the name of Homeschool Buyers Club seeking a PPP loan in the
amount of $2,990,958. The application was submitted in CHOI’s name and listed
CR01 as the owner of Homeschool Buyers Club.
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15. The PPP application submitted to Lender 2 stated that Homeschool
Buyers Club’s average monthly payroll was $1,196,383 and that the company
had 150 employees. As purported documentation of Homeschool Buyers Club’s
payroll numbers, the PPP application included a payroll summary report listing
its purported employees and its purported IRS Form 940 for 2019.

16. The Home School Buyers Club PPP application to Lender 2 contained
materially false and fraudulent information:

a. The purported Form 940 provided to Lender 2 was falsified. It
claimed that Homeschool Buyers Club had paid employees
$13,924,004.28 for 2019 (identical to that claimed for Smart
Learning). The real Form 940 that Homeschool Buyers Club filed
with the IRS for 2019 states that the total payment for all employees
was approximately $610,000.

b. As part of the application, CHOI provided social security numbers
and names for 182 employees, along with other information.
According to records maintained by the United States Social
Security Administration (“SSA”), only eleven of those individuals’
names matched the social security numbers provided. And for those
eleven individuals, the wages provided to Lender 2 as part of the PPP
application were higher than those reported to the SSA by
Homeschool Buyers Club for the same period.

c. As part of the application, CHOI provided social security numbers
and names for 167 contractors, along with other information.
According to SSA records, only one of those individuals’ names
matched the social security numbers provided. Many of the social
security numbers provided by CR01 for employees in the PPP
application to Lender 2 were the same numbers provided for
contractors, but were associated with different names.

d. According to SSA records, for dozens of social security numbers
provided by CHOI to Lender 2, the true holder of the social security
number is deceased.

17. Bank records show that upon receiving the PPP loan proceeds in the
amount of $2,990,957.50 from Lender 2 into a Homeschool Buyers Club account
at Lender 2 on or about May 12, 2020, CR01 wired $2,990,000 to the Trust
Account in two separate transactions on or about May 14, 2020 and June 8,
2020.
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Falsified Educloud Application to Lender 3

18. On or about April 23, 2020, Lender 3 received a PPP application in
the name of Educloud seeking a PPP loan in the amount of $2,903,200. The
application was submitted in Individual 2’s name.

19. The PPP application submitted to Lender 3 stated that Educloud’s
average monthly payroll was $1,161,280 and that the company had 150
employees. As purported documentation of Educloud’s payroll numbers, the PPP
application included a payroll summary report listing the purported employees
and a purported IRS Form 940 for 2019.

20. The Educloud PPP application to Lender 3 contained materially false
and fraudulent information:

a. The purported Form 940 provided to Lender 3 was falsified. It
claimed that Educloud had paid employees $13,924,004.28 for that
year (identical to that claimed for Smart Learning and for the
Homeschool Buyers Club). IRS records indicate no tax filings—
including no Form 940—were made for Educloud for 2019.

b. The driver’s license provided to Lender 3 for verification of Individual
2’s identity was a falsified copy of CHOI’s New Jersey driver’s
license—both the name and date of birth had been altered from
CHOI’s to Individual 2’s.

21. Bank records show that after receiving the full amount of PPP loan
proceeds from Lender 3 into an Educloud account at Bank 1 on or about May 5,
2020, CR01 wired approximately $2,902,000 of the proceeds to the Trust
Account on or about May 6, 2020.

Use of PPP Loan Proceeds

22. Bank records show that upon receiving the PPP proceeds from Lender
1, Lender 2, and Lender 3, CR01 used the proceeds for, among other things, to
purchase the Cresskill Residence for approximately $970,000, to pay
approximately $30,000 in improvements to the Cresskill Residence, and to
deposit approximately $3 million into the personal investment account of
Individual 1 held at an electronic third party broker (“Investment Account”).

a. On or about May 4, 2020, CHOI transferred approximately $291,000
of the $640,000 Lender 1 PPP loan proceeds previously sent to the
Smart Learning account at Bank 3 to a title company located in
Cinnaminson, New Jersey (“Title Company”) to purchase the
Cresskill Residence. In addition, between on or about May 15, 2020
and on or about May 22, 2020 CR01 transferred approximately
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$950,000 from the Trust Account to an account at Bank 2 held in
the name of another company controlled by Individual 1 (“Company
Account”). To complete the purchase of the Cresskill Residence, on
or about May 22, 2020, approximately $300,000 of the Company
Account funds, and on or about May 26, 2020, approximately
$387,748.45 of the Company Account funds, were transferred in two
wire transactions to the Title Company.

b. Between on or about May 13, 2020 and on or about June 26, 2020,
CHOI used PPP loan proceeds from the Trust Account and the
Company Account to pay approximately $16,000 in architect fees.
And, on or about June 29, 2020, CR01 used approximately $2,250
from the Company Account to pay for landscaping design for the
Cresskill Residence. Finally, on or about July 14, 2020, CR01 used
approximately $12,000 from the Company Account to pay for
remodeling costs for the Cresskill Residence.

c. Between on or about May 14, 2020 and on or about June 10, 2020,
CR01 transferred approximately $2.7 million from the Trust Account
to Individual l’s account at Bank 2. Approximately $2.5 million of
these proceeds from Lender 1, Lender 2, and Lender 3 PPP loans,
were sent to the Investment Account between on or about May 15,
2020 and on or about June 10, 2020. In addition, between on or
about May 19, 2020 and on or about June 10, 2020, CR01
transferred approximately $1.3 million from the Trust Account to
Individual l’s account at Bank 3, and approximately $450,000 of
these proceeds from Lender 1, Lender 2, and Lender 3 PPP loans,
were sent to the Investment Account between on or about June 11,
2020 and on or about June 22, 2020. Approximately $2.6 million in
the Investment Account was then invested in various stocks,
including Amazon, Tesla, and Apple.

File and source

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Our copy: 1-complaint.pdf
Original: archive.org