An Alamo man was arrested last week after a federal grand jury indicted him on wire fraud and money laundering charges for an alleged ticket resale scheme at Chase Center and other venues that authorities believe bilked investors out of nearly $40 million.
Derek Chu, 41, was charged with eight counts of wire fraud and three counts of money laundering following an investigation by the criminal division of the IRS along with the FBI and the San Francisco Police Department related to what federal officials called a "Ponzi scheme" in an announcement this week.
Federal prosecutors allege Chu defrauded unsuspecting investors of a total of $39 million between 2013 and 2020 for buying and reselling tickets to professional basketball games and luxury amenities at Oracle Arena in Oakland and Chase Center in San Francisco, along with Crypto.com Arena (formerly Staples Center) in Los Angeles.
"The indictment further alleges that Chu induced investors by making numerous materially false misrepresentations, including how the investor funds would be used, how investors would be repaid, and whether the investments were secured by collateral," authorities said in an announcement on Tuesday.
Chu allegedly used money from new investors accounts to pay off earlier investors, as well as using funds from the accounts of several of his companies. He is also accused of using the funds for personal gain.
"The indictment alleges that Chu misappropriated and diverted more than $7.3 million of investor funds for his own personal benefit, which included paying credit card debts; making cash withdrawals; paying for travel, luxury automobile and jewelry purchases; and paying utilities bills, among other things," authorities said.
Chu was arrested on April 26, and made his first court appearance for the federal charges that morning. His next court appearance for the current charges is set for Wednesday (May 10).
Each of the eight wire fraud counts Chu faces could result in a maximum penalty of $250,000 and 20 years of prison. The three money laundering counts could result in a maximum of $250,000 in fines and 10-year prison sentence each.
Chu is also facing legal actions related to financial misconduct at the county level, according to court records. A collections complaint from American Express National Bank is currently active at the Contra Costa County Superior Court for an unpaid account balance of $182,504.39, with a hearing set for Monday (May 8).
Last May, a Contra Costa County Superior Court Judge Harry Baskin ruled against Chu and in favor of two plaintiffs who alleged that Chu had intentionally defrauded them in a life insurance investment scheme in which he withdrew money from an investment account established for the senior couple who filed the complaint, awarding them $639,815.27 in damages and attorney's fees. Chu's father, Felix Chu, was also named in that complaint, and settled for $175,000.
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