Pyramid Scheme and Other Investment Frauds – South Florida Pyramid Scheme and Investment Fraud and Mismanagement FINRA Arbitration and Litigation Attorney
Securities and Exchange Commission v. Steve Chen, et al., Civil Action No. CV 15-07425 (C.D. Cal., filed September 22, 2015)
Securities and Exchange Commission v. Steve Chen, et al.
Recently, the Securities and Exchange Commission filed, under seal, fraud charges and, on September 28, obtained asset freezes against the operator of a worldwide pyramid scheme that falsely promised investors would profit from a venture purportedly backed by the company’s massive amber holdings.
The SEC alleges that defendants Steve Chen, USFIA Inc. and Chen’s other entities have raised more than $32 million from investors in and outside the U.S. since at least April 2013. The SEC’s complaint alleges that Chen and his companies misled investors about a lucrative initial public offering for USFIA that never happened and about claims to own or control amber deposits worth billions of dollars.
The Hon. R. Gary Klausner of the U.S. District Court for the Central District of California on September 28 granted the SEC’s request for an asset freeze and the appointment of Thomas Seaman as the temporary receiver over USFIA and the other entities. In addition to the temporary relief, the SEC is seeking preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties in its complaint, which alleges that the defendants violated the registration and antifraud provisions of the federal securities laws and SEC antifraud rules.
According to the SEC’s complaint, Chen falsely promoted USFIA as a legitimate multi-level marketing company that owns several large and valuable amber mines in Argentina and the Dominican Republic. Investors were told that they could profit by investing in amounts ranging from $1,000 to $30,000, and earn larger returns based on the number of investors they brought into the program. The SEC further alleges that beginning in September 2014, the defendants claimed to have converted existing investors’ holdings into “Gemcoins,” which they said was a virtual currency secured by the company’s amber holdings. In reality, the SEC complaint alleges that Gemcoins are worthless.
The SEC’s complaint charges the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.
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