The Securities and Exchange Commission charged Luca International Group and its CEO with running a $68 million Ponzi-like scheme and affinity fraud that targeted the Chinese-American community in California and investors in Asia, including some solicited as part of the EB-5 Immigrant Investor Program.
The SEC 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. Yang falsely projected outsized investment returns ranging from 20 to 30 percent annually. She allegedly commingled investor funds to prevent the scheme from collapsing, and used money from new investors to make sham profit payments to earlier investors.
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.
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The EB-5 program, which promises a path to a permanent green card for those who can invest in this country and create jobs, has been involved in a number of SEC enforcement actions, most recently involving unregistered broker charges. In a case filed this week, however, it was one facet of an affinity fraud. SEC v. Luca International Group LLC, Civil Action No. 3:15-CV-03101 (N.D. Cal. Filed July 6, 2015).
The Securities and Exchange Commission (the “Commission” or “SEC”) has become increasingly active in enforcing alleged violations of U.S. securities laws arising under the EB-5 Immigrant Investor visa program. EB-5 transactions — which are designed to result in the issuance of the much-coveted U.S. “green card” to foreign investors (and certain of their immediate family members) who place at least $500,000 of capital at risk in a U.S. business which creates 10 or more jobs — typically involve the issuance of securities.
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