Ex-Owner Stole $354K In COVID Funds From Maryland, DC Restaurants: Feds

HOWARD COUNTY, MD — Zhong Jie Chen, 47, formerly of Columbia, has pleaded guilty to misusing $354,520 of COVID-19 relief funds that he was supposed to use to operate his restaurants. Chen used the misappropriated funds to engage in day trading.

Chen, who now lives in New Jersey, pleaded guilty to wire fraud, which has a statutory maximum penalty of 20 years in prison. As part of his plea agreement, Chen must pay restitution and be liable for a forfeiture money judgment. Sentencing has been scheduled for July 2.

In court documents, Chen admitted that while he was a Maryland resident, he was the sole owner of two restaurants, one in Washington, D.C., the other in College Park. Between May 2020 and July 2021, he applied for Paycheck Protection Program and Economic Injury Disaster loans for the restaurants.

The Paycheck Protection Program was a COVID-19 pandemic relief program administered by the U.S. government’s Small Business Administration that provided forgivable loans to small businesses for job retention and certain other expenses. Once PPP loan applications were approved, businesses received loan proceeds from third-party lenders. In response to the COVID-19 pandemic, the SBA also offered EIDL loans to certain entities, including small business owners. These loans were provided directly from the SBA and were low-interest, fixed-rate, long term loans. Both PPP loans and EIDL loans could only be used for specified purposes.

Between May 2020 and July 2021, Chen’s two restaurants received PPP and EIDL loans totaling approximately $964,843. On loan applications, Chen acknowledged understanding how the loans could be used and that if he knowingly used funds for unauthorized purposes, he could be held legally liable by the federal government, and potentially charged with fraud.

Chen admitted that he falsely certified that all loan proceeds would be used for business-related purposes even though he knew and intended that he would misappropriate some loan proceeds to a personal investment account to allow him to engage in day trading. He admitted that he misappropriated $354,520 of loan proceeds and used those funds to engage in day trading.