A husband and wife formerly from Hacienda Heights were sentenced Monday to federal prison terms for their roles in an international 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.
Cheong Wha “Heywood” Chang, 50, was sentenced to a year and a day behind bars. His wife, Toni Chen, 49, was sentenced to a year and eight months in prison.
Chen was ordered by U.S. District Judge Dale Fischer to surrender to U.S. marshals to begin her sentence on Sept. 17, while her spouse was allowed to surrender in May 2021, so that parental care for the couple’s children would be uninterrupted.
“This was a wide-reaching and complex investment fraud scheme” that targeted Chinese-Americans in Los Angeles, San Francisco and New York, Assistant U.S. Attorney Ashwin Janakiram said outside court.
The couple — who each pleaded guilty in 2016 to a single count of wire fraud — were among five defendants charged in a 14-count indictment with making false promises about the online 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.
In fact, Janakiram wrote, “the only way for investors to earn any meaningful returns was for them to actively recruit new investors.”
Prosecutors said the defendants promoted the pyramid scheme through YouTube videos and postings on the Internet, as well as through meetings with prospective investors and live presentations about the purported investment opportunity.
From the spring of 2011 until 2014, the defendants were involved in a series of Hong Kong-based companies collectively known as CKB, according to the 2015 indictment filed in Los Angeles federal court.
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 states.
The defendants collected about $30 million from CKB investors, kept about $6.5 million, and transferred the rest to others involved in the scheme, according to federal prosecutors.
Fischer granted a defense request to allow Chang to have his electronic monitoring bracelet removed from his ankle while he awaits his 2021 self-surrender date.
“The last time I did this, the defendant fled,” the judge said, adding that she didn’t expect the same results from Chang.
Wen Chen “Wendy” Lee, 57, formerly of Rowland Heights was sentenced last month to 21 months behind bars and ordered to pay a $10,000 fine for participating in the scheme.
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