SEC Institutes Asset Freeze Against Group of California Companies in a Real Estate Investment Scheme
On November 1, 2013, the Securities Exchange Commission (“SEC”) announced fraud charges and an emergency asset freeze against a group of companies based in Pasadena, CA which are the center of an ongoing real estate investment scheme. In particular, the SEC alleges that Yin Nan (“Michael”) Wang and Wendy Ko have raised more than $150 million from approximately 2,000 investors by selling promissory notes issued through Velocity Investment Group (“Velocity”). Velocity manages a series of investment funds entitled the Bio Profit Series, which purports to be primarily in the business of making real estate-related loans in California, but, in reality, it is alleged that the operation is a Ponzi scheme.
Further, Wang allegedly falsified financial records and used another company to create the illusion of legitimate economic activity. Moreover, according to the SEC, Wang and Velocity Investment Group have been raising money since at least 2005. Wang is the sole owner of Velocity Investment Group, and the Bio Profits Series fund accounts are controlled by Wang and Ko, who transferred some investor funds to make quarterly interest payments to other investors.
The SEC also alleges that Wang directed one of the Bio Profit Series funds to provide its outside accountant with inaccurate financial information that materially overstated its mortgage loans receivable and mortgage income figures. In addition, the SEC alleges that Wang and Ko used transactions between the Bio Profit Series funds and another company charged in the complaint (Rockwell Realty Management) with the apparent purpose of concealing the fraud.
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