The US Securities and Exchange Commission has obtained an asset freeze to halt a multi-million dollar Ponzi scheme and affinity fraud targeting members of the Chinese-American community
The US Securities and Exchange Commission has obtained an asset freeze to halt a multi-million dollar Ponzi scheme and affinity fraud targeting members of the Chinese-American community, primarily in the Dallas area.
The SEC has charged Weizhen Tang, who describes himself as the "Chinese Warren Buffett" according to the SEC’s complaint, as well as a Canadian-based hedge fund that he controls.
The SEC alleges that Tang raised between USD50m and USD75m for the Oversea Chinese Fund Limited Partnership from more than 200 investors, and has operated a Ponzi scheme with the hedge fund since at least 2006.
"This case represents another unfortunate example of a money manager who violated investors’ trust," says Rose Romero, director of the SEC’s Fort Worth regional office. "The SEC will act aggressively to freeze the assets of such wrongdoers to the extent possible for investors."
The SEC’s complaint, filed in federal court in Dallas, also charged Plano, Texas-based investment adviser WinWin Capital Management as a defendant, and named two other Tang entities as relief defendants: WinWin Capital Partners, and Bluejay Investment (d/b/a Vintage International Investment). In granting the SEC’s request for emergency relief for investors, US District Judge Jane Boyle on 3 April entered a temporary restraining order, froze the defendants’ assets, and appointed a receiver to marshal assets.
The SEC’s complaint alleges that Tang told investors in February 2009 that in an effort to conceal substantial trading losses and attract new investors to the Oversea Chinese Fund, he posted false profits on investors’ account statements and used funds from new investors to return principal and pay out at least USD8m in "fake" profits to other investors.
According to the SEC’s complaint, Tang raised capital for the hedge fund from US investors by offering and selling limited partnership interests in WinWin Capital Partners since November 2007. WinWin Partners had raised, as of 10 March 2009, almost USD17.3m in principal investments from approximately 75 US investors, most of which are located in the Dallas area but also in California. At least USD9.6m of the money raised from US investors remains unaccounted for.
The SEC’s complaint charges, among other things, that the defendants violated the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. In addition to emergency and interim relief that has been obtained, the SEC seeks a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest.
The SEC’s investigation is continuing.
