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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, October 6, 2008

SEC Charges Next Components & Hsu with Ponzi Scheme

The SEC filed a Complaint in the United States District Court for the Central District of California against Next Components, Ltd. and its principal, Norman Hsu alleging that the defendants operated a nationwide Ponzi scheme.  Norman Hsu is in federal custody awaiting trial on federal criminal charges of investment fraud and wire fraud.  According to the SEC’s complaint, Hsu presented himself as an international businessman with high-level contacts with overseas businesses, particularly in the Chinese apparel and technology industries. From January 2003 through September 2007, Hsu allegedly told investors that Next Components would pool their funds to finance bridge loans negotiated by Hsu that would generate investor returns of 14 to 24 percent every 70 to 130 days.  Insstead, according to the SEC, Hsu and Next Components used new investor funds to pay “returns” to pre-existing investors, and misappropriated the remainder of investor funds to pay sales agent commissions, finance Hsu’s luxury living and entertainment expenses, and reimburse investors for political donations solicited by Hsu.

The complaint alleges that Next Components and Hsu violated the antifraud and registration provisions of the federal securities laws. The Commission seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties against the defendants.

http://lawprofessors.typepad.com/securities/2008/10/sec-charges-nex.html

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