Assets Frozen on $150 Mill Investment Scheme

Assets Frozen on $150 Mill Investment Scheme

SEC Freezes Assets on a $150 Million Dollar Real Estate Investment Scheme

The SEC filed fraud charges against a group of companies in California that raised over $150 million in a real estate investment scheme.  According to the SEC, Yin Nan (Michael) Wang and Wendy Ko raised money from more than 2,000 investors.  They sold promissory notes issued by Velocity Investment Group.  Velocity was the owner of Bio Fund which was supposed to make real estate loans in California.  They have been raising money through this fund since 2005.  Recent investor funds went to pay interest payments to previous investors instead.

Michele Wein Layne, director of the SEC’s Los Angeles Regional Office, “The SEC sought emergency action to prevent the further dissipation of investor assets through an expected set of upcoming Ponzi-like payments.  Wang falsified financial records and used another company to create the illusion of legitimate economic activity.”

The SEC is accusing Wang of doing the following:

  • Using investor funds to pay other investors in a Ponzi scheme like fashion.
  • Falsifying financial information.
  • Fraudulent money transfers to hide information.

Wang admitted that recent investor money went to pay prior investors their quarterly interest payments.

The SEC also claims that Wang had one of the Bio Profit Series funds (owned by Velocity) give falsified financial information to an outside accountant.  This information overstated the companies mortgage loan receivables and mortgage income. These numbers included accrued interest that Wang knew would not be paid.  According to the SEC Wang told the internal accountant that the falsified information was necessary to keep investors from fleeing.

They did more to hide the financial problems with the fund.  They created another company, Rockwell Realty Management, to facilitate fraudulent transfers to continue the cover up.

A search online shows that Velocity does not provide very much information on who they are, including the simplest of things like a company website.  They show up on manta and yellow pages but that’s basically it.  If a company is truly issuing a lot of mortgage loans they would be advertising it because they need to attract borrowers.  When looking at companies for a potential investment opportunity ask yourself if what they are saying makes sense.  Evaluate their business model and see if it is something you would understand as a consumer.  If not, they may be too good to be true.

Judge John A. Kronstadt of the U.S. District Court for Central District of California agreed to the asset freeze against Velocity, Bio Profit Series I, Bio Profit Series II, Bio Profit Series III, Bio Profit Series V, and Rockwell Realty Management.  On December 9th there will be a hearing on a motion for a preliminary injunction.

 

 

 

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