Chinese targeted in US$68m Ponzi scam
US authorities charge CEO who allegedly used funds to buy luxury California home
PUBLISHED : Wednesday, 08 July, 2015, 2:44am
UPDATED : Wednesday, 08 July, 2015, 2:45am
Staff Reporter
A San Francisco oil and gas company, Luca International Group, and its CEO, Bingqing Yang, were charged on Monday by the Securities and Exchange Commission. Photo: Reuters
US authorities have shut down what they described as a US$68 million Ponzi scam that allegedly targeted Chinese Americans and wealthy would-be immigrant investors seeking green cards under the EB-5 migration programme.
A San Francisco oil and gas company, Luca International Group, and its CEO, Bingqing Yang, were charged on Monday by the Securities and Exchange Commission. The Hong Kong Securities and Futures Commission and the China Securities Regulatory Commission both helped in the investigation, the SEC said.
The SEC said 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".
The SEC said Yang spuriously told her alleged victims their investments would earn from 20 to 30 per cent annually. In addition to diverting new investors' funds to make it appear that earlier investors were earning profits, Yang is accused of siphoning off US$2.4 million in funds via her brother's company in Hong Kong. The money was supposed to have been used to buy an oil rig.
Instead, the commission alleged, Yang used the money to buy a 5,600-square-foot luxury home in Fremont, California, and supposedly spent investors' funds on household services, Yang's personal taxes and a vacation in Hawaii.
Yang is described in a Bloomberg profile as an oil-and-gas specialist who founded Luca in 2005 and who has since raised about US$500 million in funding. A profile in Chinese21 online magazine said her hometown was Daying County in Sichuan province.
A call to Luca International's headquarters went unanswered on Monday.
Also charged were Luca International's former vice-president of business development, Lily Lei Lei, and Michael Yong Chen, who allegedly helped raise investor funds via his firm Entholpy EMC. Luca International's former CFO Anthony Pollace paid a US$25,500 fine over his small role in the alleged scam.
The SEC said Luca held seminars for would be investors in California. Alleged victims were sought out via Chinese-language adverts.
Chinese EB-5 applicants were also alleged targets. EB-5 is one of the world's most popular wealth-determined migration vehicles.
