SEC charges co-founder of IIG with fraud for involvement in a $60 million Ponzi scheme

The Securities and Exchange Commission charged co-founder and chief investment officer of International Investment Group LLC (IIG) David Hu with fraud for his involvement in a $60 million Ponzi-like scheme.

The US regulator filled a complaint in federal district court in Manhattan which alleges that from Cotber 2013, Hu arranged and managed fraudulent activities with investment advisory clients of IIG. The SEC claims that Hu grossly overvalued the assets in IIG’s flagship hedge fund and as a result, the fund payed inflated fees to IIG.

The SEC alleges that through his company IIG, Hu sold around $60 million in fake trade finance loans to other investors and used the profit to pay the redemption requests of earlier investors and other liabilities. The complaint also claims that Hu mislead IIG clients to purchase these loans by directing others at IIG to create and give to the clients fake loan documentation to justify the non-existent loans, including fake promissory notes and a forged credit agreement.

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Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office said:

As alleged, Hu’s deception caused substantial losses to a retail mutual fund, and other funds IIG advised. The SEC remains committed to holding accountable individual wrongdoers who seek to take advantage of investors for personal gain, including when they employ elaborate means to cover up their fraud.

The SEC charged Hu with fraud and seeks permanent injunctive relief, disgorgement and civil penalties. The US Attorney’s Office for the Southern District of New York today announced criminal charges against Hu in a parallel action.

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