Securities Law Prof Blog

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

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Monday, April 6, 2009

SEC Obtains Emergency Action Against Alleged Ponzi Scheme Targeting Chinese-American Community

On April 3, 2009, the SEC filed an emergency action in the United States District Court for the Northern District of Texas to halt an on-going multi-million dollar Ponzi scheme and affinity fraud involving investments in Oversea Chinese Fund Limited Partnership, a hedge fund based in Toronto, Ontario, Canada. The Commission’s complaint alleges that Defendant Weizhen Tang, 50, of Toronto orchestrated the fraud scheme through entities he controls, including Defendants Oversea Chinese Fund Limited Partnership (“Hedge Fund”) and WinWin Capital Management, LLC, a Plano, Texas-based investment adviser (“Investment Adviser”). U.S. District Judge Jane Boyle granted a temporary restraining order, asset freeze, and other emergency relief against the Defendants, including the appointment of a receiver to take control of assets belonging to the Investment Adviser and two Relief Defendants — WinWin Capital Partners, LP, and Bluejay Investment, LLC, d/b/a Vintage International Investment, LLC.

The complaint alleges that from at least as early as 2004 to the present, Tang, acting through the Hedge Fund and other entities he controls, raised between $50 million and $75 million from more than 200 investors. According to the Commission’s complaint, Weizhen Tang (the self-described “Chinese Warren Buffet”) recently admitted to investors that the Hedge Fund operated as a Ponzi scheme since at least 2006. Specifically, the Commission alleges that Tang told investors in February 2009 that he and the Hedge Fund posted false profits on investors’ account statements for the purpose of concealing substantial trading losses, and to attract new investors to the Hedge Fund. Further, the Commission alleges that Tang admitted he used funds from new investors to return principal and pay out “fake” profits to other investors, which totaled at least $8 million in 2006, 2007, and 2008 — despite significant trading losses incurred during that time.

According to the Commission’s complaint, Tang specifically targeted members of the Chinese-American community and solicited U.S. investors to directly and indirectly invest in the Hedge Fund. The In addition to the emergency relief granted by the Court, the Commission seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties against the Defendants.

http://lawprofessors.typepad.com/securities/2009/04/on-april-3-2009-the-sec-filed-an-emergency-action-in-the-united-states-district-court-for-the-northern-district-of-texas-to.html

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