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Tag: offering fraud

  • U.S. Marshals Service Allegedly Seizes Gun From Accused USFIA Pyramid-Schemer

    From a filing by the receiver in the Steve Chen/USFIA case.
    From a filing by the receiver in the Steve Chen/USFIA case.

    “Initially, Defendant Steve Chen aka Li Chen (“Chen”) was not present at the Company Offices. Shortly after the Receiver arrived and the U.S. Marshals secured the Company Offices, Chen arrived. He was wearing a security guard uniform and carried a loaded gun, which was not concealed. The U.S. Marshals seized the weapon and also found $46,150 in cash in Chen’s car. The funds are being held by the Receiver.” — Thomas Seaman, receiver in the USFIA pyramid-scheme case filed by the SEC, Nov. 13, 2015

    UPDATED 1:24 P.M. ET NOV. 21 U.S.A. Back in September, the SEC civilly charged Steve Chen, USFIA Inc. and other entities with operating a “worldwide pyramid scheme” from Arcadia in Greater Los Angeles. Chen since has invoked his Fifth Amendment right not to incriminate himself, hinting at an underlying criminal probe.

    The amber-themed USFIA scheme pushed a purported cryptocurrency known as “gemcoins” and was alleged to have gathered on the order of $32 million. Thomas Seaman was appointed receiver.

    Seaman now alleges in court filings that he entered with the U.S. Marshals Service the two-story office USFIA was using at 135 E. Live Oak [Ave.] in Arcadia to take “control and possession of the premises.” The Arcadia Police Department also assisted.

    Chen was not initially present at the office when the takeover began, but up to 50 other individuals were, including 32 Chen employees, according to a Nov. 1 report by Seaman. The alleged scammer showed up “shortly” thereafter.

    In this setting involving dozens of employees and office subtenants, federal agents, police officers, the receiver and presumably receivership staff, two very strange things happened.

    Chen, according to the receiver, arrived “wearing a security guard uniform and carried a loaded gun, which was not concealed.”

    And, according to Seaman, “The U.S. Marshals seized the weapon and also found $46,150 in cash in Chen’s car. The funds are being held by the Receiver.”

    Ponzi and pyramid narratives often are strange to the point of being unnerving. With USFIA so far, we have the alleged presence of a purported financial titan hauling around a large wad of cash during an active investigation and, yes, allegedly appearing at headquarters with a “loaded gun” with dozens of people in the area.

    Why Chen allegedly was wearing the uniform of a security guard was not explained in the report, but Seaman did note he also discovered “a weapons safe with ammunition, and owner’s manuals for two rifles (but not the [rifles] themselves)” in the company offices.

    BehindMLM.com reported in September that some USFIA investors were worried about threats involving firearms.

    Like Krista L. Freitag, the receiver in the WCM777 Ponzi- and pyramid scheme also operating from Greater Los Angeles and also targeting Asian population groups and other peoples who may lack command of English, Seaman suddenly finds himself in the real-estate business.

    From the receiver’s report (italics added/formatting not precise/light editing performed):

    2. Hills Garden Hotel

    In the days following his appointment, the Receiver also took possession of the Hills Garden Hotel located on Ostrem Boulevard in Rancho Cucamonga. The 112 unit hotel was formerly a Days Inn, but had recently lost its flag with Days Inn. The Receiver is in financial control of the hotel and manages the hotel with the assistance of the on-site employees, many of whom had been employed by the hotel for many years prior to its purchase by the Receivership Entities on August 1, 2015. The Receiver confirmed that adequate insurance for the hotel is in place. It appears the hotel was going to be used by Defendants to conduct fundraising activities.

    3. Other Real Properties

    The Receiver also took possession of the following real properties:

    A 36-unit apartment building located in Alhambra . . . A mansion located in Bradbury that was not used as a residence and appears to have been used for fundraising and investor relations. The home is apparently called the “Clubhouse.” . . .  A single family home and a condominium, both located in Arcadia. Finally, the Receiver has also identified several other single family homes purchased with funds from the Receivership Entities and vested in other individuals or entities. The Receiver is further investigating and evaluating potential claims to recover these assets.

    Meanwhile, the receiver says he has found two new large Mercedes vans, five diamonds located in Chen’s desk, a “bag of 1,160 Chinese New Year cards each containing a $5 bill” and “several designer (Chanel, Louis Vuitton, etc.) women’s bags, some of which appear to have authentic receipts. There is also an inventory of ornamental jewelry, none of which is characterized as either precious or semi-precious in nature.”

    And what about gemcoins and claims of fabulous mineral wealth?

    “Although the Receiver’s investigation is ongoing, at this point there is no indication of any legitimate Gemcoin or other viable business,” Seaman advised U.S. District Judge R. Gary Klausner. “There is also no indication the Receivership Entities had any significant sources of income other than monies raised from investors. Rather, based on documents located at the company headquarters and gathered from other sources, it does not appear that the assets described in online and written marketing materials actually exist. Instead of mines located around the world, millions of dollars in precious gems, and houses and cars available to be awarded to investors, the Receiver has found only costume jewelry and bins filled with rings of nominal value.”

    Like alleged Ponzi-schemer Ming Xu at WCM777, Chen appears to have been involved in one way or another with dozens of business entities foreign and domestic.

    Seaman has identified these to date, with his investigation ongoing:

    • Aborell Realty Advisors LLC
    • Aborell Realty Corporation
    • AFG Holding Company
    • Ahome Real Estate USA LLC
    • Alhambra Gardens LLC
    • Ally Investors LLC
    • Ameritra Inc.
    • Amkey Global
    • Ammine Inc.
    • Apollo Investors LP
    • Chenne Corporation
    • China-US Consultation Association
    • First Investment Holding Company
    • Great Wall Mountain LLC
    • Hills Garden Hotel Inc.
    • Hills Garden Hotel LLC
    • International Gemstone Mining Association
    • L’BE Group
    • LH Investment LLC
    • One World Currency Fund
    • Quail Ranch Golf Club LLC
    • Steamfont Capital Investment Group LLC
    • Steamfont Investment Group LLC
    • The New World Currency Fund
    • To Quang Duan
    • US Fovictor Jewel Investment LLC
    • US-China Consultation Association Liaison/Consulting Services
    • Weimar International Group Inc.

    In California these days, Ponzi- and pyramid-schemers running offering frauds in which cash is siphoned and used to prop up a network of interrelated businesses may be targeting you if you have money or the dream of having money. And you may be particular target if you’re of Asian or Hispanic descent and if English is not your first language, making such schemes a form of affinity fraud.

    The schemes may use shell companies and create a thicket of entities through which money may be laundered.

    NOTE: Our thanks to the ASD Updates Blog.

  • BULLETIN: SEC Says Utah Scammers Funneled Money To 2 Ponzi Schemes; Christopher A. Seeley, Justin G. Dickson Accused Of Conducting Offering Fraud That Raised Millions

    BULLETIN: The SEC has gone to federal court to accuse two Utah men of conducting a $7.9 million offering fraud in which money that flowed from investors was used to prop up two Ponzi schemes.

    Named defendants were Christopher A. Seeley, 36, of Herriman,  and Justin G. Dickson, 35,  of Salt Lake City. The offering fraud was conducted through Draper, Utah-based entities collectively known as “Alden View”: AVF Inc. and AV Funding LLC. The firms were described as unregistered “hard money” lending businesses that issued promissory notes that promised a high rate of return backed by real estate and quality due diligence on its borrowers, the SEC charged.

    Both of the Alden View entities now are defunct, and investors are out at least $6.3 million, according to the SEC.

    “In reality” the SEC charged, “Alden View funneled the majority of its investors’ funds into two Ponzi schemes that were run by its most significant borrowers.”

    The hard-money scheme lasted between 2006 and 2009, affecting at least 50 investors from “multiple states” who believed they were funding a sophisticated real-estate business, the SEC charged.

    The SEC identified one of the Alden View borrowers as Louis Dean Parrish, who also had a bankruptcy on his record.

    A man by the same name was identified by the state of Hawaii last year as a possible Ponzi schemer. Records in Utah show a 48-year-old man by the name name was booked by the Salt Lake County Sheriff’s Office on Aug. 31 on charges of racketeering, securities fraud, communications fraud and customer abuse.

    Louis Dean Parrish listed an address in Sandy, Utah, when booked, according to sheriff’s office records.

    In 2010, Hawaii TV station KITV4 reported that a man by the same name was a suspect in an affinity-fraud and investment scheme targeted at Mormons in the state.

    Utah has been plagued by fraud schemes targeted at people of faith, the FBI said last year.

    Seeley and Dickson “made false, fraudulent, and material misrepresentations and omissions” to investors in their promissory notes, the SEC charged.

    Read the SEC complaint.

  • BULLETIN: SEC Alleges ‘Payday Loan’ Ponzi Scheme In Utah; Second Major Ponzi Case Brought In State In Two Days; Schemes Attracted Almost $75 Million

    BULLETIN: The SEC has gone to federal court in Utah to halt what it described as a $47 million “payday loan” Ponzi scheme and offering fraud in which investors were lured by the prospect of “extraordinary returns” while the alleged operator diverted large sums of cash to himself and other business interests.

    The payday-loan Ponzi case against John Scott Clark, Impact Cash LLC and Impact Payment Systems LLC was the second major Ponzi case brought by the SEC in Utah in a matter of days. On March 23, the SEC charged Mike Watson Capital LLC of Provo, Michael P. Watson of Mapleton and Joshua F. Escobedo of Spanish Fork in an alleged real-estate and promissory-notes Ponzi scheme that gathered more than $27.5 million from more than 120 investors.

    Clark and his companies were charged on March 25. Utah has been plagued by Ponzi schemes and other forms of fraud, many of them directed at people of faith. The FBI said last year that thousands of residents of the state had been victimized in investment-fraud schemes.

    Now, Clark’s alleged payday-loan fraud has been added to Utah’s Ponzi mix by the SEC. If the alleged Clark total is added to the total gathered in the alleged Watson/Escobedo fraud, a figure of at least $74.5 million emerges from the two schemes.

    “Investors were promised extraordinary returns while Clark was actually diverting their money to make such extraordinary personal purchases as a fully restored classic 1963 Corvette Stingray,” said Ken Israel, director of the SEC’s Salt Lake Regional Office. “Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates.”

    Clark also bought “multiple expensive cars and snowmobiles” and “stole investor funds to purchase a home theater, bronze statues and other art for himself,” the SEC charged.

    In October, the SEC’s Salt Lake office also filed charges against Imperia Invest IBC, a mysterious offshore firm alleged to have stolen millions of dollars from thousands of deaf investors. The Imperia scheme was promoted on Ponzi boards such as TalkGold and MoneyMakerGroup.

    In the Clark case, the SEC said “at least” 120 investors were affected. The scheme operated between March 2006 and September 2010.

    Investors were recruited to fund payday loans, the SEC said. One recruiter was paid more than $500,000 to help drive business to the unregistered offering, according to the complaint.

    Clark 58, of Hyde Park, “has never been registered with the Commission or any other regulatory agency in any capacity,” the SEC charged.

    Investors were offered their own companies with an LLC designation and lured by suggestions that Clark and his Impact companies could generate returns “averaging at least 80% per year,” the SEC said.

    “Clark explained to investors that Impact would create a unique LLC for each investor or investor group for the purpose of investing with Impact,” the SEC said. “The investor LLC would then enter into a Joint Operating Agreement with Impact to provide money to Impact to fund payday loans.”

    And Clark’s “early investors” — impressed by their returns — helped the Ponzi gain a head of steam, the SEC said.

    “Many of Clark’s early investors mentioned their astronomical returns to their families or
    business associates, who then invested with Clark,” the SEC said. “Clark paid one salesperson between $500,000 and $600,000 over a four or five year period to locate potential investors and attend payday loan conferences and trade shows. Clark also paid certain individuals commissions ranging from 2% to 4% for bringing in investors to Impact.”

    Neither firm that used the word “Impact” in its name was registered, the SEC said.

    Although investors believed they were funding payday loans, Clark diverted cash to “to make unauthorized investments, including a real estate investment company, a diabetes research company and an online products store,” the SEC said.

    The assets of Clark and his companies have been frozen. Read the SEC complaint against Clark.

    Read the SEC’s statement on the alleged Ponzi scheme involving Watson and Escobedo, who have settled without acknowledging wrongdoing.