Court Enters Final Judgment Against eAdGear and Its Operators
The Securities and Exchange Commission (SEC) announced that on February 1, 2016, the Honorable Richard Seeborg of the United States District Court for the Northern District of California entered final judgments against defendants eAdGear Holdings Limited, eAdGear, Inc., Charles Wang, Francis Yuen, Qian Cathy Zhang, and relief defendant Laurata Chan. The final judgments order the defendants and relief defendant to pay a total of $26,539,280 in disgorgement, penalties, and prejudgment interest.
The SEC’s complaint, filed on September 24, 2014, together with a request to the court for emergency relief, charged the defendants with operating an international pyramid scheme to fraudulently raise more than $129 million from investors, in violation of the federal securities laws. The complaint alleged that defendants used money from new eAdGear investors to pay earlier investors, as well as to repay a personal loan and purchase million-dollar homes for the individual defendants. The complaint further alleged that defendants perpetuated the scheme by making it appear as if eAdGear had real, paying customers when it lacked any substantive sources of revenues other than investments, and defendants further manipulated revenue distributions to investors to appear profitable. On September 25, 2014, Judge Seeborg granted the SEC’s request for an asset freeze and issued a temporary restraining order.
The defendants and relief defendant have consented, without admitting or denying the facts in the complaint, to the entry of final judgments against them. The final judgments permanently enjoin all defendants from future 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 (“Exchange Act”) and Rule 10b-5 thereunder. The final judgments also order eAdGear Holdings Limited and eAdGear, Inc. to disgorge $21,000,000 in illicit earnings, pay prejudgment interest of $640,000, and pay a civil penalty in the amount of $1,000,000; Wang and Zhang to disgorge $2,019,000 in ill-gotten gains and pay prejudgment interest of $61,280; Zhang to pay a civil penalty in the amount of $200,000; and Yuen and Chan to disgorge $1,571,000 in illicit earnings and pay prejudgment interest of $48,000. It also permanently bars Wang, Yuen, and Zhang from acting as officers or directors of any public company, and permanently enjoins them from directly or indirectly participating in the issuance, offer, or sale of any securities of any entity controlled by, or under joint control with any person named a defendant in this case or soliciting any person or entity to purchase or sell any security.
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 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.