Five people are being prosecuted in Los Angeles for an alleged pyramid scheme that generated about $30 million from Chinese-Americans who were told they were investing in a company that produced children’s educational courses.
The defendants allegedly made false promises about the company, including claims that it generated substantial revenues from the sale of courses, that investments could be quickly liquidated for significant returns, and that they planned to take the company public through an IPO, according to the U.S. Attorney’s Office.
In fact, the 14-count indictment returned late Thursday states “the only way for investors to earn any meaningful returns was for them to actively recruit new investors.”
Prosecutors said the five promoted the alleged pyramid scheme through YouTube videos and other postings on the Internet, as well as through meetings with prospective investors and live presentations about the purported investment opportunity.
The indictment, charging conspiracy and multiple counts of wire fraud, alleges that members of the Chinese-American communities in Los Angeles, San Francisco and New York City were targeted.
The five named defendants are:
— Cheong Wha “Heywood” Chang, 47, formerly of Hacienda Heights and most recently a resident of Taiwan;
— Chang’s wife, Toni Chen, 46;
— Wen Chen “Wendy” Lee, 53, of Roland Heights;
— Daliang “David” Guo, 53, of Hyde Park, New York; and
— Chih Hsuan “Kiki” Lin, 50, of Los Angeles and Las Vegas.
From the spring of 2011 until about a year ago, the defendants were involved in a series of Hong Kong-based companies collectively known as CKB, according to court papers.
Using such names as WIN168 Biz Solutions, Ltd., CKB168 Ltd. and Cyber Kids Best Education Limited, the companies purportedly generated substantial profits from the sale of web-based children’s educational courses, according to the indictment.
Investments were solicited in increments of $1,380, which gave investors “Profit Reward Points” that the defendants claimed were worth $750 in cash, would increase in value, and were analogous to per-IPO shares of CKB, the indictment alleges.
Federal prosecutors allege that the defendants collected about $30 million from CKB investors, kept about $6.5 million, and transferred the rest to others involved in the scheme.
If convicted of all charges, each defendant would face up to five years in federal prison on the conspiracy count and up to 20 years in prison for each of the 13 wire fraud charges they each face, prosecutors said.
—City News Service