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Screenshot of a breaking news alert e-mail from Q2 2017
The U.S. Commodity Futures Trading Commission (CFTC) announced that on June 1, 2017, Judge James Robart of the U.S. District Court for the Western District of Washington entered a Statutory Restraining Order (SRO) against Sung Hong a/k/a Lawrence or Laurence Hong of Bellevue, Washington (Laurence Hong), Hyun Joo Hong a/k/a Grace Hong of either Bellevue or Clyde Hill, Washington (Grace Hong), and her company Pishon Holding LLC (Pishon) of Bellevue, Washington (collectively, the Defendants). The SRO, among other things, froze the Defendants’ assets and granted the CFTC the right to immediately inspect and copy the Defendants’ business records.
The SRO arises out of the CFTC’s Complaint filed the same day, charging the Defendants with fraudulently soliciting customers and defrauding them out of more than $11 million.
On June 2, 2017, Laurence Hong and Grace Hong were arrested by the Federal Bureau of Investigation, Seattle Division, on related criminal charges. The U.S. Attorney’s office for the Western District of Washington (U.S. Attorney) is in charge of the criminal prosecution of the Hongs.
James McDonald, Director of CFTC’s Division of Enforcement, stated:
Cooperative enforcement is a bedrock principle of effective enforcement, and we are committed to that principle here at the CFTC. This case serves as an example of the benefits of cooperative enforcement actions: In addition to the charges brought by the CFTC, the Hongs will face criminal charges brought by the U.S. Attorney, and the CFTC has frozen the Hongs’ assets in order to provide as much restitution for the Hongs’ defrauded customers as possible. This cooperative enforcement effort should send a message that the CFTC and its law enforcement partners will work together to protect customers and the markets, and to bring fraudsters to justice.
The CFTC Complaint specifically alleges that the Hongs fraudulently solicited prospective and current customers at a church gathering, in a subsequent YouTube video of that gathering, and in oral solicitations with one or more customers. The CFTC Complaint alleges that at the church gathering, and as captured in the YouTube video, a Pastor made representations about the amount of money that Laurence Hong has under management and his record as a successful trader. The CFTC Complaint alleges that the Hongs provided the Pastor these misrepresentations prior to the church gathering and did not correct the misrepresentations after hearing the Pastor make the misrepresentations.
The CFTC Complaint further alleges that Defendants fraudulently solicited customers by making numerous false statements in their written solicitation materials including:
- Pishon only charges a performance fee when or if the account is profitable,
- Pishon’s fund is constituted so that 50% of the fund has a “risk free rate of return,” and
- Grace Hong “maintains her 65 (uniform investment advisor) securities licenses (sic).” According to the Complaint, these written statements were false. For example, as alleged, the Defendants paid themselves fees regardless of whether customer accounts were profitable.
The CFTC Complaint also alleges that the Defendants fraudulently omitted in their solicitations that Laurence Hong was a felon who had been sentenced to 33 months in prison for soliciting and misappropriating investment funds from, among others, members of a Bellevue, Washington, church in which Hong’s mother was a member.
In its continuing litigation, the CFTC seeks full restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.