The SEC has been very busy lately with a number of investigations and enforcement actions going public over the last few weeks. One major case announced on October 1st involves fraud charges and asset freezes against the operator of a global pyramid scheme that falsely promised investors would profit handsomely from the company’s valuable amber mines.
Steve Chen and 13 California-based entities, including USFIA Inc., are allegedly involved in the fraud, according to a complaint filed in federal court in Los Angeles. The amber mine fraud complaint claims that USFIA and other businesses controlled by Chen have raised over $32 million from investors in the U.S. and abroad since 2013. The SEC’s alleges that Chen and his firms intentionally misled investors about an initial public offering for USFIA that never occurred, and regarding claims to control amber mines with deposits valued at billions of dollars.
This year has been a record-breaking year for initial public offerings with companies going public via SPAC mergers, direct listings and standard IPOS. At Techlive this week, Jack Cassel of Nasdaq and A.J. Murphy of Standard Industries joined Willem Marx of The Wall Street Journal and Barron's Group to talk about companies and trends in Read More
More on Steve Chen amber mine fraud
According to the SEC’s complaint, Chen falsely promoted USFIA as a legitimate multi-level marketing company that owns several large and valuable amber mines in Latin America. Investors were promised they would profit by investing in amounts ranging from $1,000 to $30,000, and be paid bigger returns based on the number of investors they brought in. The SEC complaint also alleges that in September 2014, Chen and partners began converting existing investors’ holdings into “Gemcoins,” a virtual currency they claimed was secured by the company’s amber holdings. Unfortunately, the truth is that there are no amber mines and the Gemcoins are worthless.
Related to this, the Los Angeles Times is reporting that federal law enforcement raided the offices of Gemcoin, a digital currency company based in Arcadia, CA, on Thursday. Gemcoin is at the heart of the $32 million amber mine scam Steve Chen allegedly pulled on Chinese and U.S. investors.
The SEC’s investigation team on the case included Peter Del Greco supervised by Marc Blau of the Los Angeles office. The litigation against USFIA, Chen and others will be led by the SEC’s Donald Searles.
Statement from SEC director
“We allege that the defendants’ false claims of riches that investors would realize from USFIA’s amber mining activity never materialized,” noted Michele Wein Layne, the director of the SEC’s Los Angeles Regional Office. “In reality, as alleged in the complaint, the defendants were operating a fraudulent pyramid scheme that left many investors with nothing.”