BULLETIN: SEC Calls U.S. Fine Investment Arts Inc. (USFIA) A ‘Worldwide Pyramid Scheme’ Tied To ‘Gemcoins’

BULLETIN: (7th update 3:26 p.m. EDT U.S.A.) An SEC complaint against USFIA Inc. first reported on Tuesday by the Sierra Madre Tattler and BehindMLM.com now has become public, with the SEC calling the venture a “worldwide pyramid scheme” that gathered on the order of $32 million while claiming it was backed by amber mines and duping MLM participants into believing they’d score big through a purported cryptocurrency known as Gemcoins.

Among the deceptions, according to the SEC, was that “the United States government has purchased 70% of the Gemcoins in circulation.”

The SEC complaint follows by less than two months a complaint by the FTC that called Vemma, another MLM program, a pyramid scheme.

“We allege that the defendants’ false claims of riches that investors would realize from USFIA’s amber mining activity never materialized,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “In reality, as alleged in the complaint, the defendants were operating a fraudulent pyramid scheme that left many investors with nothing.”

Here’s how the SEC described the action, which has led to asset freezes ordered by U.S. District Judge R. Gary Klausner of the Central District of California (italics added):

This is an action brought to halt an ongoing securities offering fraud perpetrated by defendant Steve Chen, and various purported business entities that he operates and controls including defendants US Fine Investment Arts, Inc. (“USFIA”), Alliance Financial Group, Inc. (“AFG”), Amauction, Inc., Aborell Mgmt I, LLC, Aborell Advisors I, LLC, Aborell REIT II, LLC, Ahome Real Estate, LLC, Alliance NGN, Inc., Apollo REIT I, Inc. Apollo REIT II, LLC, Amkey, Inc., US China Consultation Association (“USCCA”), and Quail Ranch Golf Course, LLC. All of these entities are co-located in an office building owned by one of Chen’s business entities, Apollo REIT II, LLC, located in Arcadia, California.

“In the face of growing investor unrest, and negative publicity in the press, Chen was interviewed by the Arcadia Police Department on September 15, 2015, regarding his operation of USFIA,” the SEC alleged. “Immediately after that interview, Chen attempted to wire $7.5 million out of USFIA’s bank account at Bank of America to a bank in the Peoples Republic of China. The wire was broken down into two parts, and $3.5 million was sent abroad, while the remainder is still held by the bank.”

New release: SEC halts $32M scheme that promised riches from amber mining: https://t.co/FeeHkwrk4C

— SEC_News (@SEC_News) October 1, 2015

What about the amber? Some investors received some, and discovered it was “practically worthless,” the SEC alleged.

USFIA sold unregistered securities in tiers and tied them to a recruitment scheme, the agency charged.

“USFIA also represented that it had an extensive bonus and award system to encourage investors to recruit additional investors,” the SEC charged. “As set forth in its written investor ‘Compensation Program,’ investors could choose from five different ‘packages’ ranging in amounts of$1,000, $2,000, $5,000,$10,000 and $30,000. Depending on the type of package purchased by a downstream investor, the recommending investor would receive a 10% ‘Recommendation Award,’ and an additional ‘binary”‘reward based on sales of an investor’s downline investors. Investors would also receive a ‘Recurring Bonus’ generated by different ‘generations’ of downstream investors, ranging from 5% to 20%.”

As was the alleged circumstance with Vemma, USFIA allegedly used showy automobiles to lure prospects. At USFIA, prospects also allegedly were lured with the prospect of owning a dream home on a golf course.

Though USFIA initially claimed investors would score through an IPO, the IPO never materialized. Investors then were told they’d receive gemcoins, “some type of digital currency,” the SEC alleged. The gemcoins purportedly were backed by amber holdings in the Dominican Republic and Argentina.

Chen and USFIA issued “outlandish statements” to dupe the masses, the SEC charged.

Read the SEC complaint.

See the Tattler’s coverage (Tuesday into Wednesday). See BehindMLM’s coverage.