A federal court in Oklahoma City has entered a restraining order against defendants Kenneth W. Lee, Simon Yang, Prestige Ventures and Federated Management Group freezing assets controlled by the defendants, protecting records and appointing a temporary receiver to locate and marshal assets for return to defrauded customers.
The order stems from a joint enforcement action filed by the US Commodity Futures Trading Commission and the Oklahoma Department of Securities, charging that since at least July 2003, the defendants fraudulently operated a commodity futures pool that had at least USD8.7m in assets and 140 participants.
The CFTC complaint alleges that in their solicitations the defendants targeted members of Oklahoma City’s ethnic Chinese community. Yang allegedly solicited members of his church.
The CFTC complaint charges defendants with fraudulently soliciting and issuing false statements to pool participants. These statements consistently showed monthly profits generated by Lee’s purportedly successful trading of commodity futures, foreign currency and other instruments. However, Lee sustained net losses of approximately USD4.3m trading primarily commodity futures and forex. Lee, Prestige and FMG also allegedly misused pool participant funds to pay off other pool participants and for personal use, such as paying for cars and yacht fees and funnelling money to family members.
Yang is further charged with submitting a false declaration to the CFTC in response to a CFTC subpoena requiring the production of documents and information relating to Yang, Lee, FMG and others. In his declaration, Yang falsely claimed that he solicited only through email based on information on the FMG website, that the persons he solicited did not open accounts and that he no longer solicited for FMG. Yang failed to disclose that he was soliciting on behalf of Prestige and Lee. Yang actively solicited FMG and Prestige pool participants through his church and other personal solicitations, according to the complaint.
In soliciting prospective pool participants, defendants allegedly failed to disclose, among other things, that Lee committed two felonies, served prison time and had a related USD3m civil judgment against him, and that defendants were under investigation by federal authorities.
Defendants allegedly falsely represented that: Lee’s trading was highly profitable, and he never suffered losses; FMG’s marketers or solicitors were members of the National Futures Association and registered with the CFTC; in December 2003 Prestige had USD1bn in assets under management and FMG had up to USD379m; pool participant accounts were insured by FMG’s credit union and; Yang was merely a friend of Lee and an investor.
The court has set a hearing on the court’s order to show cause why a preliminary injunction hearing should not be entered for 2 December 2009.
In its continuing litigation, the CFTC seeks restitution, disgorgement, civil monetary penalties and permanent injunctions against further violations of the federal commodities laws and against further trading.
