An Arcadia-based business based at 135 E. Live Oak Avenue called USFIA Inc. (US Fine Investment Arts) has been charged with fraud by the Securities and Exchange Commission for operating a global pyramid scheme involving non-existent amber mines in Argentina and the Dominican Republic and a virtual currency called Gemcoins that raised more than $32 million from investors over the last 2 1/2 years.
Washington D.C., Oct. 1, 2015 — The Securities and Exchange Commission today announced it has filed fraud charges (SEC complaint here) and obtained asset freezes against the operator of a worldwide pyramid scheme that falsely promised investors would profit from a venture purportedly backed by the company’s massive amber holdings. California resident Steve Chen and 13 California-based entities, including USFIA Inc., are at the center of the alleged scheme, the SEC said in a complaint filed in federal court in Los Angeles. According to the SEC’s complaint, USFIA and Chen’s other entities have raised more than $32 million from investors in and outside the U.S. since at least April 2013. The SEC’s complaint alleges that Chen and his companies misled investors about a lucrative initial public offering for USFIA that never happened and about claims to own or control amber deposits worth billions of dollars.
The Hon. R. Gary Klausner of the U.S. District Court for the Central District of California on Monday granted the SEC’s request for an asset freeze and the appointment of Thomas Seaman as the temporary receiver over USFIA and the other entities. In addition to the temporary relief, the SEC is seeking preliminary and permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest, and civil penalties. The complaint, which had been filed under seal, alleges that the defendants violated the registration and antifraud provisions of the federal securities laws and SEC antifraud rules.
“We allege that the defendants’ false claims of riches that investors would realize from USFIA’s amber mining activity never materialized,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “In reality, as alleged in the complaint, the defendants were operating a fraudulent pyramid scheme that left many investors with nothing.”
According to the SEC’s complaint, Chen falsely promoted USFIA as a legitimate multi-level marketing company that owns several large and valuable amber mines in Argentina and the Dominican Republic. Investors were told that they could profit by investing in amounts ranging from $1,000 to $30,000, and earn larger returns based on the number of investors they brought into the program. The SEC further alleges that beginning in September 2014, the defendants claimed to have converted existing investors’ holdings into “Gemcoins,” which they said was a virtual currency secured by the company’s amber holdings. In reality, the SEC complaint alleges that Gemcoins are worthless.
The SEC’s investigation has been conducted by Peter Del Greco and supervised by Marc Blau of the Los Angeles office. The SEC’s litigation will be led by Donald Searles.
The SEC previously issued an investor alert, also available in Chinese, warning investors about the dangers of potential investment scams involving pyramid schemes posing as multi-level marketing programs.
Earlier this week, U.S. District Court Judge R. Gary Klausner granted the SEC’s request for an asset seizure, in which 48 bank accounts associated with Chen were frozen, and federal authorities raided USFIA’s corporate offices. On Tuesday, the U.S. Marshals Service and a court-appointed receiver, Thomas Seaman Co., served a temporary restraining order against USFIA, Chen and a dozen companies in his name, according to the Pasadena Star-News. The paper also reported that the California Department of Business Oversight on Thursday filed a Desist and Restrain Order against USFIA and its top three executives — President Steve Chen, Vice President of Investor Relations Leonard Stacy Johnson and Weiwen (Wayne) Zhao, a principal and company spokesman — in an effort to prevent any further securities fraud.
Some investors who feel they have been victimized by this business have voiced their concerns at recent City Council meetings. Some of those investors have said current City Council Member and 2014-15 Arcadia Mayor John Wuo should be held accountable as well because he has been photographed at USFIA/Gemcoins promotional events which have been used in marketing materials. But investigations by city and federal officials have not resulted in any citing of Wuo for any wrongdoing.
— By Scott Hettrick