BREAKING NEWS: Two-Time Convicted Felon With $3 Million Judgment Against Him Emerged From Prison And Targeted Ponzi Scheme At Chinese-Americans In Oklahoma City, CFTC Says

ponzinewsA man imprisoned between 1996 and 2001 after being convicted in Texas of two financial felonies emerged from the penitentiary and targeted Greater Oklahoma City’s ethnic Chinese in a Ponzi scheme, the U.S. Commodity Futures Trading Commission (CFTC) said.

Kenneth W. Lee also had a $3 million civil judgment placed against him in the 1990s in a fraud case, CFTC said.

Despite the felony convictions and the huge judgment against him, Lee and business partner Simon Yang hatched a new scheme in 2003. Yang pitched the scheme to members of his church in Edmond, Okla., CFTC said.

Information shown prospects to get them to join the scheme claimed Lee was an exceptional trader. But when investigators reverse-engineered literature about Lee’s alleged prowess, they discovered that Lee was in prison during a time in which Lee and Yang claimed Lee was “achieving great returns,” CFTC said.

CFTC’s announcment of the filing in Oklamoma City came only hours after it had joined with the SEC yesterday in announcing a Ponzi complaint against radio talk-show host Pat Kiley and his colleague Trevor G. Cook in Minnesota.

The Oklahoma Ponzi scheme operated at least in part from South Carolina and Texas. Two companies named co-defendants along with Lee and Yang claimed to be registered corporations in Panama, CFTC said.

Charged with Lee and Yang were Prestige Ventures Corp.  and Federated Management Group Inc. (FMG). The Oklahoma Securities Commission joined in the prosecution.

Regulators said the 13-year-old judgment for $3 million against Lee in Texas also included a company named Federated.

Lee was convicted of felonies in both 1995 and 1996, CFTC said.

Yang, the agency said, also used the aliases Simon Chen and Xiao Yang.

“[T]he defendants fraudulently operated a commodity futures pool that had at least $8.7 million in assets and 140 participants,” CFTC said.

Lies, Losses, Yacht Fees

Lee and Yang lied to participants, never telling them about Lee’s felony convictions or the judgment. At the same time, CFTC said, they issued bogus account statements that “consistently showed monthly profits generated by Lee’s purportedly successful trading of commodity futures, foreign currency (forex) and other instruments.

“However, Lee sustained net losses of approximately $4.3 million trading primarily commodity futures and forex,” CFTC said. “Lee, Prestige and FMG also allegedly misused pool participant funds to pay off other pool participants and for personal use, such as paying for cars and yacht fees and funneling money to family members.”

Yang was charged with submitting a false declaration to CFTC in response to a subpoena requiring the production of documents and information relating to Yang, Lee, FMG and others.

“In his declaration, Yang falsely claimed that he solicited only through email based on information on the FMG website, that the persons he solicited did not open accounts and that he no longer solicited for FMG,” CFTC said.

Both Yang and Lee also failed to tell prospective pool participants that Yang and Lee were under investigation by federal authorities.

In 2003, just two years after Lee’s release from prison, Yang and Lee reported to prospects that Prestige had $1 billion in assets under management and FMG had up to $379 million, CFTC said.

They also falsely told participants that Lee “never suffered losses,” that FMG’s marketers or solicitors were members of the National Futures Association and that the accounts of participants were insured by FMG’s credit union.

U.S. District Judge David L. Russell froze the defendants’ assets and appointed a receiver.

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