$32 Million Amber Mining Pyramid Scheme Halted by the SEC
On October 1, 2015, the Securities and Exchange Commission (“SEC”) announced it had frozen the assets and filed fraud charges against the operator of a worldwide pyramid scheme who falsely promised investors that they would profit from a venture allegedly backed by the company’s enormous amber holdings.
The SEC’s complaint stated that California resident Steve Chen and 13 California-based entities, including USFIA Inc. (“USFIA”), are at the center of the purported scheme. According to the complaint, since at least April 2013, USFIA and Chen’s other entities have raised more than $32 million from investors in and outside the United States. Allegedly, Chen and his companies misled investors about claims to own or control amber deposits worth billions of dollars in a lucrative initial public offering for USFIA that never happened.
U.S. District Court for the Central District of California, Hon. R. Gary Klausner, granted the SEC’s request for an asset freeze and appointed a temporary receiver, Thomas Seaman, over USFIA and the other entities. The SEC is also seeking preliminary and permanent injunctions, civil penalties and repayment of illicit earnings with prejudgment interest. The complaint claims that the defendants violated the SEC antifraud rules and the registration and antifraud provisions of the federal securities laws.
“We allege that the defendants’ false claims of riches that investors would realize from USFIA’s amber mining activity never materialized,” said Michele 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.”
The SEC’s complaint states that Chen falsely promoted USFIA as a legitimate multi-level marketing company owing 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. Further SEC investigations allege 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 truth, the Gemcoins are worthless.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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