The San Francisco bureau of the Securities and Exchange Commission has filed a complaint against the operators of two Pleasanton companies with an $80-million Ponzi scheme.
It's the second large-scale Ponzi scheme involving Pleasanton alleged by the federal agency in the past three months. In March, the SEC alleged that Pleasanton resident Kenneth Kenitzer, 66, and former Pleasanton resident Anthony Vassallo, 29, of Folsom, Calif., defrauded 150 investors of $40 million.
In the most recent complaint, the SEC said the men targeted Korean-American investors with false promises of extraordinarily high returns from foreign currency (forex) trading. The SEC alleges that Peter C. Son of Danville and Jin K. Chung of Los Altos lured approximately 500 investors in the United States, South Korea, and Taiwan into their investment scheme in which funds were not traded in the forex market as claimed, but instead used to pay cash "returns" to certain investors in Ponzi-like fashion. The agency further claims that the men "misappropriated investor money for their own personal use, including mortgage payments on Son's multi-million dollar home."
"Son and Chung portrayed themselves and their companies as highly successful in the forex industry, while in reality the tremendous forex trading profits they claimed did not exist," said Marc Fagel, director of the SEC's San Francisco Regional Office. "They placed ads in Korean-language newspapers and used sales agents to target Korean-Americans in typical affinity fraud fashion as they preyed on the trust within close-knit communities."
According to the SEC's complaint, filed in federal district court in San Francisco, Son, 37, and Chung, 46, operated their scheme through SNC Asset Management, Inc. (SNCA) and SNC Investments, Inc. (SNCI), which maintained offices in Pleasanton, and New York City.
The SEC alleges that Son and Chung faked SNCA's supposed forex trading profits, providing investors with monthly account statements showing fictitious returns. Son and Chung drained SNCA's and SNCI's bank accounts as their Ponzi scheme was collapsing and transferred investor funds to accounts they controlled overseas, the complaint said. In addition to paying Son's mortgage, investor funds were used to provide capital infusions to SNCI and pay Son's wife a salary for which she did no work, according to the complaint.
The SEC is seeking court orders prohibiting the defendants from engaging in future violations of the antifraud provisions of the federal securities laws; freezing their assets and compelling them to return overseas assets to the U.S.; and requiring them to disgorge their ill-gotten gains and pay financial penalties.
Son appeared in federal court in Oakland Tuesday on federal criminal charges. Separately on Wednesday, the Commodity Futures Trading Commission announced civil fraud charges against Son, Chung, SNCA and SNCI, according to the SEC.
This is the third piece of civil action filed by the SEC relating to Pleasanton. Last month, the agency charged Emile Jilwan, 54, and Joseph Azar, 49, both of Pleasanton, with an insider trading scheme valued at $6 million.
To view the details in the complaint, visit www.sec.gov/litigation/complaints/2009/comp21076.pdf