A married couple formerly of Hacienda Heights face sentencing Monday for their roles in a 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, and his spouse, Toni Chen, 49, each pleaded guilty in 2016 to a single count of wire fraud, a felony punishable by over a dozen years in federal prison, according to the U.S. Attorney’s Office.
The couple were among five defendants charged in a 14-count indictment with making 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.
In fact, federal prosecutors wrote, “the only way for investors to earn any meaningful returns was for them to actively recruit new investors.”
Prosecutors said that 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.
Members of the Chinese-American communities in Los Angeles, San Francisco and New York City were targeted, according to the 2015 indictment, filed in Los Angeles federal court.
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 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 states.
Federal prosecutors alleged the defendants collected about $30 million from CKB investors, kept about $6.5 million, and transferred the rest to others involved in the scheme.
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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