A Bay Area oil and gas company and its CEO were charged by the U.S. Securities and Exchange Commission on Tuesday with running a $68 million Ponzi-like scheme targeting the Chinese-American community.
According to the SEC, Bingqing Yang, the CEO of Luca International Group, misled investors about the company’s profits despite knowing that the firm “was earning no profits and sinking under a mountain of debt.”
The complaint, filed in federal court in San Francisco, alleges that Yang falsely projected “outsize” annual investment returns ranging from 20 to 30 percent and “commingled investor funds to prevent the scheme from collapsing.”
According to the SEC, Yang and her company conducted seminars for investor’s at Luca International’s office and hotel conference rooms in California and “zeroed in” on Chinese-American investors seeking permanent resident through the EB-5 program.
Yang allegedly raised about $8 million from EB-5 investors who were told the funds would be used to finance jobs and development costs for right oil and gas projects through a loan to another Luca entity that Ynag claimed was full secured.
The SEC said the Luca entity the EB-5 investors funded was “hopelessly in debt” had no realistic possibility of ever repaying the loan despite Yang’s “rosy representations”
The CEO also allegedly diverted $2.04 million in investor funds through her brother’s company in Hong Kong that was supposed to be used to purchase an oil rich but was actually used to buy a 5,600-square-foot home in Fremont, California.
Yang is also alleged to have used investor funds to purchase pool and gardening services, personal taxes and a Hawaiian vacation for her family.
“As alleged in our complaint, Yang falsely claimed that Luca International was a profitable oil and gas drilling operation when it was really a Ponzi-like scheme preying on Chinese-Americans and EB-5 investors who lost millions of dollars while Yang lined her pockets,” director of the SEC’s San Francisco Regional Office Jina L. Choi said.
Luca International’s former vice president of business development Lei “Lily” Lei, who allegedly sold securities to investors and helped Yang move investor funds, and Yong “Michael” Chen, who allegedly raised investor funds for Yang through his company Entholpy EMC, were also charged in the SEC’s complaint.
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.
The SEC added that Hiroshi Fujigami and his company Wisteria Global agreed to settle charges that they acted as brokers to illegally sell securities of two Luca entities.
As part of the settlement, Fujigami and Wisteria must disgorge allegedly ill-gotten gains of more than $1.1 million.
Fujigami also agreed to be barred from the securities industry and from participating in any penny stock offering.
