October 27, 2006
More Affinity Fraud
A common means of committing a fraud is to target small groups with whom the perpetrator shares a common characteristic that engenders a degree of trust. Many frauds prey on ethnic groups, as demonstrated by an SEC civil injunctive action filed against Hyun Soo Jang and Kangsan Kim for targeting Korean investors in the Los Angeles area. According to the SEC Litigation Release (here), Jang and Kim operated through two now-defunct securities firms, Unus Capital Management, Inc. and PeopleN Investment Corp., to defraud forty investors of approximately $4.5 million. According to the SEC:
The complaint alleges that Jang and Kim did not use investor funds to purchase securities as promised. Instead, according to the complaint, Jang, age 39, formerly of Los Angeles, Calif., and Kim, age 34, of Anaheim, Calif., misappropriated the funds entrusted to them, including about $2.5 million taken by Jang, and $500,000 taken by Kim and Unus. The complaint also alleges that Jang used an additional $500,000 to repay existing investors with money that had been deposited by new investors.
The Commission's complaint alleges that, between January 2003 and August 2005, Unus attracted investors through broadcasting morning stock market reports hosted by Jang and Kim that were aired on Korean-language radio stations. As alleged in the complaint, after being contacted by interested investors, Jang and Kim falsely portrayed Unus and PeopleN as established and regulated entities. The complaint alleges that Jang and Kim misrepresented PeopleN as a broker that was registered and a member of various securities industry organizations, such as the New York Stock Exchange, the Securities Investor Protection Corporation and The Nasdaq Stock Market, Inc. In addition, the complaint alleges that Jang and Kim continued to hold out Unus as a registered investment adviser even after the firm had withdrawn its registration with the California Department of Corporations.
Interestingly, the Commission also issued its Litigation Release in Korean (here). (ph)
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