The Securities and Exchange Commission (SEC) has filed an emergency action to put an end to CKB Holdings, also known as Cyber Kids Best Education Limited. The agency said the company is a pyramid scheme and has filed fraud charges against it and those connected with it. It also said the company mostly targets the Asian-American community in the U.S.

SEC whistleblower United States

SEC action filed against CKB

In all there are five entities named in the SEC’s emergency action: WIN168 Biz Solutions Ltd.; CKB168 Ltd.; CKB168 Holdings, Ltd.; CKB168 Biz Solution Inc.; and Cyber Kids Best Education Limited. The agency said all five of them are based in Hong Kong, Canada and the British Virgin Islands and collectively operate under the business names CKB or CKB168.

The SEC has also named 11 individual defendants, including three foreign nationals: Rayla Melchor Santos, Hung Wai (Howard) Shern and Rui Ling (Florence) Leung (aka Kwai Chee Leung). The agency said they control the five companies named in the complaint. It also named eight others it said are “senior promoters” in the U.S.: Daliang (David) Guo; Yao Lin; Chih Hsuan (Kiki) Lin; Wen Chen Hwang (aka Wendy Lee); Tony Tong Chen; Cheongwha (Heywood) Chang; Joan Congyi (JC) Ma; and Heidi Mao Liu (aka Heidi Mao). According to the complaint, these eight “sit atop the pyramid scheme” in the U.S.

Details on the SEC’s complaint

According to the SEC, the defendants have “harvested” at least $20 million from at least 400 investors in California, New York and other parts of the U.S. They are also accused of bringing in millions from investors in Canada, Hong Kong, Taiwan and other parts of Asia.

The agency accuses them of using “publicly available websites, promotional materials, seminars and videos posted to the internet” and other efforts “to create the appearance of a legitimate enterprise.” It also said they have “falsely portrayed” CKB as a profitable multi-level marketing company which sells web-based children’s educational courses.

What the SEC says CKB “really” sells

However, the SEC says CKB really sells “the false promise of easy wealth.” It says those who buy the company’s products must invest in the company in order to receive one of its courses. Defendants claim that those investors will receive “exponential risk-free returns.” In addition to the course, buyers receive “Profit Reward Points” which the company claims are worth $750.

The agency says investors are told they earn “passive” returns in the form of dividends paid through these points and two-for-one splits. They are also told they can buy and sell their points online through the CKB website and that they will “earn massive returns” by converting their points into shares of the company’s stock when it does an initial public offering next year on the Hong Kong Stock Exchange.

According to the SEC, in reality these points are “worthless” and can’t be traded, sold or exchanged in a meaningful way. The company also hasn’t prepared for the promised IPO and doesn’t even meet the Hong Kong Exchange’s listing requirements. In addition to the points, the defendants also attempt to turn buyers in to recruiters by promising “even greater ‘active’ returns” for recruiting “down-line” participants. The SEC charges that active recruitment is the only way investors can actually make “significant money.”

The SEC seeks to halt CKB stock

The SEC filed the emergency action to halt CKB’s activities immediately as well as to seek permanent injunctions against the named defendants and monetary penalties. The agency said the company’s collapse is inevitable and will cause “substantial investor losses.” It also said that most of the money earned has already been paid out as commissions to the 11 people named in the complaint.

The agency accuses the individuals named as being associated with CKB of violating the antifraud provisions and wants to freeze the companies’ and individuals’ assets and require them to repatriate money that has been sent abroad. It also wants to preserve the companies’ documents as evidence, order expedited discovery, and require verified accountings.