USFIA civil fraud charges settled for $200 million dollars
Back in January a proposed $145.4 million dollar settlement between Steve Chen and the SEC was filed.
On March 13th Judge Klausner approved the settlement proposal and ordered Final Judgement against Chen.
As per Judge Klausner’s March 13th order, Steve Chen is “permanently restrained and enjoined” from further violating the Securities and Exchange Act.
On the money side of things Chen along with entity companies he previously owned were also held liable for a $51.2 million dollar disgorgement payment plus a $16.7 million civil fine.
$3.7 million dollars in interest in prejudgment interest was also awarded.
Chen has fourteen days from the order date (March 13th) to pay the judgement amount.
The SEC shall hold the funds, together with any interest and income
earned thereon (collectively, the “Fund”), pending further order of the Court.
It is expected the funds will be added to USFIA victim claim disbursements at a later date.
A separate consent filing was made on March 14th, stipulating consent to Final Judgement by USFIA, Alliance Financial Group, Amauction, Aborell Management, Aborell Advisors, Aborell Reit II, Ahome Real Estate, Alliance NGN, Apollo Reit I, Apollo Reit II, Amkey, US China Consultation Association and Quail Ranch Golf Course.
Collectively the defendant entities will pay $135.5 million in disgorgement plus $9.8 million in prejudgment interest.
Steve Chen’s interactions with the SEC during civil proceedings strongly suggested he was aware of or suspected criminal charges will follow at some point. As at the time of publication however, they’ve yet to materialize.
So,Chen& his companies took in $195million ( according to the latest Receiver’s report ); now he has to pay back more than $200million.
It will be interesting to see how he would be able to make up the shortfall, as the Receiver only holds about $104million in cash & real estate assest.
Could he file for bankcruptcy if he could not make it ? will the us bankcruptcy law allow him to discharge the debt?
I don’t think you can wipe government fines and penalties through bankruptcy.
As for paying it off, the amount will have been decided as per the SEC’s investigation. That might not match up with what the Receiver has recovered.
There will be some overlap but so long as Chen gives up every last dollar he stole plus interest, that’ll be the end of it.
If the SEC find out he’s been telling porky pies during settlement proceedings they can go after him again, or the Receiver can investigate and launch proceedings.
fred, where do you find that $104million figure in the Receiver’s report ?I know real estate value is only estimated, still, I could not add up the total!
At least Steve Chen here is not stupid enough to run for China and restart the scam there, unlike Phil Ming Xu…
In fact, AFAIK Stevie here NEVER went back to China even when his Amkey was in full swing and he was promising the sun and the moon and a direct sales license from the Chinese government (none of which came to pass, of course).
Phillee, that $104m is just an estimate I made, the receiver said there was about $77.4 m in real estate and when they shut down USFIA there was about $26 m in the bank accounts.
Oz, in reading the proposed order for the “defendant entities” it says the disgorgement of $145 m will be satisfied by assets seized by the receiver. But then separately Chen is ordered to pay $71.7 m including disgorgement, interest, and civil penalties.
Where is that money going to come from, if the receiver has already seized Chen’s assets?
Future earnings? Sann Rodrigues is paying back the SEC through honest work IIRC.
Something tells me Chen is not going to be earning $71m , more likely he is going to spend quite a few yrs in prison!
He has other entities he is part of which were not intermingled in USFIA and were not included in the asset freeze, such as the partnership in the security training center and private security company. I’d be willing to bet he still has a stake in 24HD as well.
Doesn’t mean he will be able to come up with the money easily, but will show he will be able to repay through other ventures.
Fred, you are right, that $26 million in cash & 77.4 million in real estate value was in deed mentioned in the Receiver’s fifth report.
And it is also my understanding that the $145 million ” will be deemed satisfied by the amounts recovered and distributed by the court-appointed receiver as set to be set forth in the receiver’s final report and accounting to the Court. ” i.e. whatever amount the Receiver will be able to recover, that would be it.
However, Chen will have to come up with that $71 million from his other resource outside the Receiver’s control. Oz, Is it correct ?
Pretty much. The full amount has to be satisfied.
Oz, what about the ‘net winners’ in this case who pocketed big commissions? Several of them were mentioned in the original SEC complaint, but it sounds like the SEC and receiver might be able to recover all investor losses from Chen and his companies, so in that case would the net winners get off the hook?
They are really sleazy. One of them in Singapore and another in France, and maybe others, are still active and luring some of the former USFIA investors into new scams.
I can’t speak for the Receiver. Whether clawback litigation is filed is up to the Receivership.
Chen had 14 days from the order date (March 13) to pay $71.7 million, how do we find out if he paid it?
I suppose if the SEC file further action?
Did he pay, OR he has not paid? Seems it is awfully silent!
And no criminal charge on the way yet?
phillee – we are wondering about this also! The receiver hasn’t updated his site for more than a month, so nothing there.
The Receiver filed the 7th report; besides sales of real estate, more discussion about the funds that were transfered to his brother & companies in Dominic Republic.
Still no clue if He paid that $71.7 million or not; anything in the Court’s docket ?
Another proposed sale of real estate report by the Receiver ! Seems almost all the real estate investment by the Defendant & Company are making money; One could only wish that if they could have put all those 200 millions into real estate investment, not “gem coin or amber”.
Back to the case, any new development ? Did he pay the full amount ?
Oz & Fred, any updates ?
Chen only obtained $200 mill via fraud. Real estate investments are long-term and don’t generate the marketing hype required by a Ponzi scheme.
No updates on my end.
No informaton on my end either, sorry.
Oz, do we know how the SEC learned about the USFIA fraud?
I read that if the SEC is tipped off by a whistleblower and takes enforcement action, the whistleblower can get a bounty of 10 to 30% of the judgment amount.
In the USFIA case that would be $20 million to $60 million, which is huge!
You have to file a whistleblower report and then make a claim when they list the judgement on their whistleblower site.
How the SEC determines who gets what I’m not privy to.
Too bad for me, I didn’t file a whistleblower report 🙁 but if someone did they might be in line for a LOT of money!
It’s taking a long time but the receiver is slowly taking back the property Steve Chen bought with investors money. The judge has just ordered Chen’s girlfriend Jennifer Zhao to vacate the luxury house he bought for her, so the receiver can put it up for sale.
When can an investor get back some money?
Kesiny you were not an investor you were a victim.
The USFIA Receiver is still marshaling assets. Not ready to receive claims yet.
Yes Oz is correct, just this week the receiver announced he is pursuing Steve Chen’s ex wife who received more than $6 million that was stolen from investors. Most of this was used to buy luxury properties.
So it is taking time, but at least in this case Chen put a lot of the stolen money into California real estate so the receiver has a good chance of recovering it.