Epoch Times CFO alleged for fraud, owners planning on the run

 —— $67 million proceeds from unemployment insurance benefits laundered

New York, 4 June 2024 - According to the Associated Press, the headquarters of the New York-based media company Epoch Times was raided by police. Its CFO was arrested and charged in an indictment with participating in a years-long transnational scheme to launder illegally obtained unemployment insurance benefit funds and other proceeds, by exploiting policy loopholes.

Guan, a 61-year-old resident of Secaucus, NJ, the CFO of Epoch Times, was arrested in New York City on last Sunday. He will make an appearance in the U.S. Federal Court on Monday, on charges of conspiracy to commit money laundering and bank fraud.

According to the federal prosecutor's indictment, Guan Weidong is charged to have participated in a “sprawling, transnational scheme” with other members of the Epoch Times, to launder at least approximately $67 million of illegally obtained funds. The Money Laundering Scheme benefited a multinational media company headquartered in Manhattan, New York, and certain entities affiliated with the Media Company. GUAN managed, among other teams, the Media Company's “Make Money Online” (MMO) team, whose members used cryptocurrency to knowingly purchase tens of millions of dollars in crime proceeds, including those of fraudulently obtained unemployment insurance benefits, which had been loaded onto tens of thousands of prepaid debit cards owned by the Epoch Times. 

The Companies that Guan worked for, have set up official websites in 35 countries. Among them, the Epoch Times online edition is available in 21 languages, and its paperback edition in more than 10 languages, including Chinese, English, French, German, Korean, and Russian. Millions of its copies have been distributed simultaneously in 35 countries around the globe. In addition, its related printed publications are being distributed free of charge at many popular tourist attractions, schools, and public places in the United States, Canada, Hong Kong, Japan, Australia, and New Zealand, among other places. The operation is huge, which means it must take huge amounts of money to maintain the organization. This crisis may have well revealed the true problem the media empire is facing: an internal breakdown induced by a financial crisis.

According to court documents, the arrested CFO, Guan Weidong, who used to be an instructor at Guangxi University's Department of Accountancy, was born in 1962. He studied in Canada in 1995, obtained Canadian citizenship in 2001, and went to the U.S. to join Epoch Times after meeting Tang, becoming one of its early core members. His main responsibilities were to manage the accounts of the multinational media group, including Epoch Times, New Tang Dynasty TV and Sound of Hope. Despite Guan being the financial leader, all of these media groups were independently registered as ‘non-profit entities’ in the U.S.. According to Xiao Ming, a hostess who had just left the organization, every invoice she issued at work had to be submitted to Guan for signature and approval, demonstrating his absolute power within the entire organization.

But why was Guan Weidong arrested? To answer this question, we have to mention the unemployment insurance benefit system in the United States. The U.S. government pays unemployment benefits to adult citizens who have not found work on a weekly basis, while the specific figure is set according to the applicant’s previous income level. The upper limit is 500 U.S. dollars per week. That is to say, the U.S. government will bear an unemployed person's monthly living expenses up to 2,000 U.S. dollars. However, there are conditions for receiving the relief - applicants are required to report to a career centre every month and submit their CVs, to prove that they are actively looking for work, rather than deliberately not making any efforts on their end. Under the regulation, one single round of unemployment insurance benefit is valid for 6 months at longest, or $12,000 per person, to be provided by the U.S. government. A loophole in the policy then arises, which some fraudsters have started exploiting for their own benefits.

An even bigger loophole lies in the policy of “online”- due to the recent economic downturn, the number of applicants is massive. During the covid pandemic, the government was forced to open up online applications, i.e., there is no need to visit in person when submitting the application.  This provided “opportunities” for fraud - people use false identities to ‘steal’ money from the US government, as exactly what Guan and his team was doing.

In 2020, the US was in the midst of the covid pandemic. With many residents losing their jobs due to the pandemic and the subsequent forced break-down of supply chains, the government couldn’t afford to audit every single application of the unemployment insurance benefits. Looking into this loophole, the Guan’s team used ‘acquired’ false identities, to scam money from the government. That said, U.S. banks strictly regulate the flow of money. Guan understood the money stream must be handled with care. In order to cover up the criminal behavior, Guan began to launder the money, to make sure Epoch Times could receive the money at the end.

Guan’s team started by buying debit cards circulating in the black market at a discounted price - at a 70% discounted offer, they paid USDT crypto-currency to the seller, making it difficult for the FBI to trace the source of the transaction, which then maintained a 1:1 exchange rate with the U.S. dollar. Then Guan and his team would take the crypto-currency to the market, and perform a number of complicated transactions, including the exchange. For every transaction processed, Guan was able to make thousands of dollars in profit for the Epoch Group's account.

According to the indictment, for every money-laundering transaction operated by Guan and his MMO team, the proceeds would be paid into the Epoch Times account. Federal prosecutors even mentioned that Guan was clearly not alone in his actions, as he had created a dedicated team within his Epoch Times company dubbed ‘Make Money Online’, whose sole business was to use the company’s human resources to launder money with crypto-currencies. With this MMO team, Guan was able to deposit $56 million into the Epoch Times’ bank accounts in the year of 2020 alone.

However, this operation was exposed the following year and led to an investigation by federal authorities. Here’s how. Guan’s transfers to ‘non-profit organizations’ were subject to tax reporting under US law, requiring him to fill in a detailed 990 form. According to page 9 of the 37-page evidence file, Guan casually entered the $56 million sum as an ‘income from services.’ Later, he falsely told investigators that it was a ‘subscription fee.’ Countered by his own words, when he explained the source of the money to the bank, he said it was a ‘donation’. It seems he dared not to lie to the bank about the membership subscription - after all, in the bank's records, the large sum of money was a single large loading from one single account to the Epoch Times account. If it were ‘subscriptions’, the transfer should have been small bills of ‘a few dollars’ from millions of accounts. Guan was unable to submit the detailed paperwork to the bank, thus his claims about the ‘donation’ have attracted the attention of the highest legislative body.

In 2022, it was the congressional office that made inquiries about the unclear source of large sums of money. In response, GUAN wrote a letter falsely stating that the "charitable donations" constitute "an insignificant portion of the overall revenue."

These three contradictory testimonies by an Epoch Times executive were finally put together by the FBI. It was clear that Guan, on behalf of the Epoch Times, had lied to the highest legislative body in the United States. That is a felony.

According to the indictment, before the federal authorities raised questions, Guan's bank in the United States had already inquired him about his recent account activity, which involved high transfer values and many transactions with peer-to-peer exchanges that are "attractive for money laundering activities”, in the hope that the Epoch Times team would give an explanation and terminate such operations. But Guan ignored it. He even refused to write back to the bank.

Immediately after Guan Weidong's arrest, Epoch Times issued an open letter on its official website, claiming that it had cut off Guan, or “suspended him”. However, the FBI's investigation is less likely to only target Guan. As the chief financial officer, to set up a special money laundering team within the organization could be such a big endeavor, that its owner Tang, is unlikely to be unaware of. Moreover, many of Guan's financial operations, is utilizing the company's account to take care of Tang’s debt he owed to others. Therefore, the spearhead of the investigation would soon point to Tang.

Epoch Times was once a small, unassuming company that Tang started in his basement in Atlanta in 2000. At the beginning, claiming the venture was a ’non-profit,’ Tang required all employees who joined the media to be unpaid. In this way,  Epoch Times maintained a ‘zero-cost’ operation for at least a decade. However, as the company's reach grew and it became a larger organization operating 21 language versions across 35 countries, the maintenance of the website and instant translations required a large number of staff with specialized skills and support abilities, who of course required pay-checks. As the payroll became increasingly large, Tang found Guan Weidong and convinced him to join, who then became an important figure to Tang.

However, even with a professional finance team, Epoch Times was still in a bad financial shape.  According to BBC, by 2019, the media company had only an annual revenue of just over $14 million, hardly making its ends meet. Ironically, in the subsequent 2020, the company's revenues miraculously multiplied by several folds, and that year was supposed to be one of the most difficult times for the U.S. during the pandemic, when many other businesses were failing due to broken financial supplies. Somehow the debt-plagued Epoch Times managed to have an extra $70.59 million on its books all of a sudden.

How did Tang's money-losing business suddenly become so profitable? While his peers in the industry were confused, Guan's MMO team was getting bigger and bigger. In 2021, under Biden's administration, Epoch Times' profits reached $118 million. This even puts those traditional American media outlets to shame (the New York Times, founded in 1851, only earned $207 million in the same period).

In 2022, the Epoch Times' revenue rose again to $128 million. As a matter of fact, with several fake news scandals, three major media outlets under Tang’s management was experiencing decreased traffic. In the case of several online media outlets, even waves of un-subscriptions. Despite this, their revenues were still surging. It really was a blatant insult to the FBI's intelligence.

Ironically, even though the company's ‘revenue’ exceeded 100 million every year, a large number of the company's employees were still ‘working on a voluntary basis’ without being paid. Xiao Ming, the hostess who just quitted the media, confirmed that even though she had worked for the company for 20 years, she still did not receive any salary from Tang (only after the covid did she receive a meagre allowance of ‘$1,000 per month’). Other colleagues in her team also confirmed that they were not paid for their work by the ‘non-profit organization’.

Xiao Ming confirmed that she and the 200 employees of Epoch Times were paid less than $1 million in total, in the year before they left. After deducting Tang's own exorbitant expenses, the company's books still got $130 million outstanding, which none of the employees were aware of. Apparently, the details of the accounts were known only to the CFO Guan and the owner Tang. Based on Guan’s indictment, his operation in recent years has not translated Epoch Times' revenue surges to the benefits of its employees, and the company's additional revenue was successfully “channelized” to Tang's personal account. Tang became the direct beneficiary of the huge money laundering case under investigation by the FBI.

According to reports, Tang has kept a very questionable record of personal integrity. An internal employee of Epoch Times had tweeted how this boss was not only very stingy with his subordinates, but also enjoyed taking advantage of his female employees every now and then. The sudden dismissal of popular hostess Xiao Ming was also expected to bear an inside story. According to an internal employee, during his tenure as CEO of Epoch Times, Tang was sued several times for unpaid wages, and involved in a cross-border fraud lawsuit in 2013, tangling him all up in legal issues.

According to an information, a Hong Kong businessman had been trying to recover more than $4 million from Tang, who has cleverly leveraged the U.S. justice system to stonewall the lawsuit. As for the debts Tang owed of his own, Guan has been trying to find a way to use the corporate account to cover them. It is fair to say between Tang and the arrested Guan, it goes beyond the  simple superior-subordinate relationship. In the eyes of the FBI, this is an obvious gang. Tang is cutting himself off from Guan in the form of an official statement on Epoch Times’ website, but this is just a delay tactic. He knows very well, that FBI is kicking off an investigation for the ‘organized crime’, as the New York police are also investigating other key members of the Epoch Times. Once Guan pleaded guilty in front of the judge, the Epoch Times will likely be regarded as a fraudulent organization. As the organization's founder and CEO, Tang could not have been unaware of what would happen next.

According to local media in New York, since Guan's arrest last Sunday, Tang has disappeared from the company and the media. He is probably planning on an escape. Employees within his company have also hinted that their boss has been preparing to flee the United States for some time. Of course, it's not that easy for a suspect already on the FBI's radar to get out of the country.