SEC Charges Participants In EB-5 Offering Scheme

SEC Charges in EB-5 Offering Scheme

On July 6, 2015, the Securities and Exchange Commission (SEC) charged individuals in connection with an EB-5 offering program. According to the SEC complaint, Bingqing Yang and Luca International Group operated a $68 million Ponzi scheme and affinity fraud that targeted the Chinese-American community in California and investors in Asia.

The SEC complaint alleges that Bingqing Yang knew that Luca International Group was earning no profits and sinking under a mountain of debt, yet she made presentations to investors portraying a successful oil and gas operation with millions of barrels of oil reserves and billions of cubic feet in gas reserves. Despite this, Yang falsely projected investment returns ranging from 20 to 30 percent annually.

According to the SEC complaint, Yang commingled investor funds to prevent the ponzi scheme from collapsing and used money from new investors to make purported profit payments to earlier investors.  Yang also diverted $2.4 million of investor funds through her brother’s company in Hong Kong to purchase a 5,600-square-foot home.  According to the SEC Complaint, Yang also spent investor funds on personal expenses including a family vacation to Hawaii.

According to the SEC’s complaint, Luca International conducted seminars for investors at the company’s offices and hotel conference rooms.  Besides targeting investors in the Chinese-American community through advertisements in Chinese-language television, radio, and newspaper outlets, Yang and Luca International allegedly targeted Chinese citizens who sought permanent U.S. residence through the EB-5 offering program. Under some circumstances the EB-5 offering program allows foreign investors to obtain a green card if they comply with certain investment requirements.  According to the SEC complaint, Yang raised approximately $8 million in an EB-5 offering to finance jobs and development costs for eight oil and gas drilling projects.  Yang allegedly told the EB-5 investors that the investment was safe and fully secured. In reality, the EB-5 investors were not told the company was hopelessly in debt and had no realistic possibility of ever repaying the loan.

Others charged in the SEC’s complaint include Luca International’s former vice president of business development Lei (Lily) Lei, who allegedly sold securities to investors and helped Yang divert investor funds, and Yong (Michael) Chen, who allegedly raised investor funds for Yang through his company Entholpy EMC, which did business under the name Mastermind College Funding Group.  Luca International’s former CFO Anthony Pollace agreed to pay a $25,500 penalty to settle charges that he played a small role in the alleged fraud.

Hiroshi Fujigami and his company Wisteria Global agreed to settle charges that they acted as brokers to illegally sell securities of two Luca entities.  Fujigami and Wisteria must disgorge allegedly ill-gotten gains of more than $1.1 million and Fujigami agreed to be barred from the securities industry and from participating in any penny stock offering.

For further information, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton, FL, (561) 416-8956, or by email at [email protected].  This securities law Q & A is provided as a general or informational service to clients and friends of Hamilton & Associates Law Group, P.A. and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Going Public Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855