SEC SAYS TWO DEFENDANTS ADMIT TO TARGETING ASIAN-AMERICAN COMMUNITY IN CKB PYRAMID SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23306 / July 17, 2015

Securities and Exchange Commission v. CKB168 Holdings Ltd., et al., Civil Action No. 13-5584 (E.D.N.Y., filed October 9, 2013)

In the Matter of Chih Hsuan "Kiki" Lin; Administrative Proceeding File No. 3-16694

Two Defendants Admit Liability in CKB Pyramid Scheme Targeting Asian-American Community

The Securities and Exchange Commission (the "SEC") today announced that the United States District Court for the Eastern District of New York entered settled judgments against defendants Rayla Melchor Santos and Chih Hsuan "Kiki" Lin. In 2013, the SEC charged 16 defendants, including Santos and Lin, with perpetrating a worldwide pyramid scheme.

In settling the SEC's charges against her, Santos admitted that CKB was a pyramid scheme and that she was one of its three primary founders. Santos also admitted that she travelled to the United States and worked with other CKB founders and promoters to convince investors to join CKB by falsely telling them that CKB was a legitimate multi-level marketing company that sold online education courses for children when, in fact, Santos knew that CKB sold its products only to investors and had no significant retail sales.

In settling the SEC's charges against her, Kiki Lin admitted that CKB was an unlawful scheme and that she worked with CKB's founders and others to promote CKB to investors across the United States. Kiki Lin also admitted that she made false and misleading statements to investors and potential investors in order to induce them to join CKB. For instance, Kiki Lin admitted that she falsely told CKB investors and potential investors that they would receive profit reward points ("Prpts") with a value in U.S. dollars that would increase exponentially over time when, in fact, she knew that Prpts could not be converted to actual money.

Defendants Santos and Kiki Lin consented to the entry of Judgments, which: (i) permanently enjoin each of them from violating the unregistered offering provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act"), and the anti-fraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5(a) and (c) thereunder. Kiki Lin also consented to the entry of the Judgment against her which permanently enjoins her from violating the antifraud provisions of the Section 17(a)(2) of the Securities Act and Rule 10b-5(b) under the Exchange Act and the unregistered broker-dealer provisions of Section 15(a) of the Exchange Act. Santos and Kiki Lin also agreed to conduct-based injunctions that prohibit each of them from participating in an illegal pyramid scheme disguised as a multi-level marketing program. Santos and Kiki Lin have agreed to pay disgorgement of ill-gotten gains, prejudgment interest, and civil penalties in amounts to be determined at a later date by the court upon motion of the Commission. Kiki Lin has also agreed that her wholly-controlled Relief Defendant, USA Trade Group, Inc. will pay disgorgement of ill-gotten gains and prejudgment interest in amounts to be determined at a later date by the court upon motion of the Commission.

As part of the settlement, Kiki Lin also agreed to the issuance of a Commission Order Instituting Administrative Proceedings Pursuant to Section 15(b)(6) of the Exchange Act Making Findings, and Imposition Remedial Sanctions ("Order"), which was issued today. This Order permanently bars Kiki Lin from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or national recognized statistical rating organization, and from participating in any offering of a penny stock.

The Commission's litigation in this matter continues against the remaining Defendants Hung Wai ("Howard") Shern, Rui Ling ("Florence") Leung, Daliang ("David") Guo, Yao Lin, Wen Chen Hwang (aka "Wen Chen Lee" and "Wendy Lee"), Joan Congyi Ma (aka "JC Ma"), Toni Tong Chen, Cheongwha ("Heywood") Chang, Heidi Mao Liu (aka "Heidi Mao"), CKB168 Holdings Ltd., WIN168 Biz Solutions Ltd., CKB168 Ltd., CKB168 Biz Solution, Inc., and Cyber Kids Best Education Ltd.

Opening Remarks at the Compliance Outreach Program for Broker-Dealers

Opening Remarks at the Compliance Outreach Program for Broker-Dealers

SEC CHAIR WHITE LEADS EVENT SUPPORTING MILITARY CONSUMER PROTECTION DAY 2015

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

07/15/2015 05:00 PM EDT

Securities and Exchange Commission Chair Mary Jo White led a multi-agency event today to support Military Consumer Protection Day 2015, highlighting how service members can best protect themselves and their finances from fraud and identity theft.

Chair White was joined at the Joint Base McGuire-Dix-Lakehurst event by officials from the U.S. Postal Inspection Service, the Department of Justice’s Service Members and Veterans Initiative, the U.S. Attorneys' Housing and Civil Enforcement Section of the Fair Housing Program, the FBI’s Securities Fraud Program and the U.S. Secret Service.

“Taking control of your finances starts with access to information about financial products and services and the people who sell them,” said SEC Chair Mary Jo White. “We want to ensure the men and women of our armed forces who protect us are themselves protected in the financial marketplace.”

White took questions from the base commander, Col. Frederick Thaden, as well as other senior base leadership, before an audience of several hundred at JBMDL’s Timmerman Center in New Jersey, consisting of service members and their families.

“We find that most people, service members included, want more information on how to better manage their finances and check out financial professionals, so they can make the best decisions for their families and for their future.” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.

Questions ranged from what service members should consider before investing to how to avoid becoming victims of investment fraud. Both Chair White and Ms. Schock cautioned service members about offers that sound too good to be true, high-pressure sales tactics, and fraudulent opportunities that appear on social media.  Chair White also discussed cases the SEC has brought to halt frauds that targeted service members and advised the audience on how to best protect themselves from such scams.

Service members and their families are frequent targets for financial fraud and identity theft.  Military Consumer Protection Day aims to provide men and women in uniform with the knowledge and skills to better understand their finances so they can invest wisely and avoid fraud.

SEC CHARGES 15 INDIVIDUALS AND 19 ENTITIES IN MICROCAP MANIPULATION CASE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

07/14/2015 02:30 PM EDT

The Securities and Exchange Commission today charged 15 individuals and 19 entities for their roles in alleged schemes to manipulate the trading of microcap stocks.  The 34 defendants include six firms alleged to have acted as unregistered broker-dealers catering to customers who sought to conceal their stock ownership and manipulate the market for microcap securities.

Owners and employees at the six firms, several customers, stock promoters, and two microcap issuers – Warrior Girl Corp. and Nature’s Peak, formerly Everock, Inc.  –  also are among the defendants in the case filed in federal district court in Manhattan.  The SEC charged the defendants with fraud, manipulative trading, touting, and with registration violations.  Nine of the defendants were named in a criminal indictment charging them based on their roles in the alleged stock manipulation scheme.

The SEC complaint alleges that Costa Rica-based Moneyline Brokers and its founder Harold Bailey “B.J.” Gallison II unlawfully operated as a broker-dealer for U.S.-based customers who engaged in “pump and dump” schemes to artificially inflate a stock’s price and then sell their own shares.  According to the complaint, Moneyline and certain of its employees routinely accepted transfers of microcap stocks from the U.S. customers and had stock certificates reissued in Moneyline’s name to conceal the true owners of the shares.

Carl H. Kruse Sr. and Carl H. Kruse Jr., both of Miami, allegedly conspired with Moneyline and others to manipulate trading in Warrior Girl, a former shell company that the Kruses controlled.  Warrior Girl’s purported business changed from hydroelectric power (in 2008) to extracting oil from tar sands (in 2009) to online education (in 2010), and the Kruses allegedly engaged in multiple manipulations to profit from promotions to inflate the stock’s price. As a result of the various campaigns the Kruses are alleged to have obtained illegal profits estimated to total $2.3 million.

Another alleged scheme involved trading in Everock, Inc., a Canada-based mining company that relocated to Nevada and sold sandwich spreads after reorganizing itself with Nature’s Peak in 2008.  A concerted campaign promoting the mining-turned condiment company allegedly included videos and Facebook postings and produced more than $2.5 million in profits for defendants Charles S. Moeller, of Sea Cliff, N.Y., Mark S. Dresner, of Dix Hills, N.Y. and Frank J. Zangara, of Locust Valley, N.Y.

“This case demonstrates the Commission’s resolve to relentlessly pursue the villains behind these microcap fraud schemes wherever in the world they may be hiding,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  Michael Paley, Co-Chair of the SEC Enforcement Division’s Microcap Fraud Task Force, added: “This case presents an excellent example of the capacity the Microcap Fraud Task Force has developed to pierce the layers of sham entities and nominee accounts that predators employ to harm investors and evade detection by law enforcement.”

In addition to Moneyline, the complaint alleges that two Costa Rica-based firms, Sandias Azucaradas CR, S.A. and Vanilla Sky, S.A., and three Nevada-based firms, Bastille Advisors, Inc., Club Consultants, Inc., and Jurojin, Inc., operated as unregistered broker-dealers.  Employees of the firms who were charged are: Roger G. Coleman Sr., of Las Vegas, Ann M. Hiskey, of Costa Rica, Robin M. Rushing and David K. Rushing, both of Spokane, Wash., and Michael J. Randles, of Costa Rica.

Promoters who were charged include: Dresner, Antonio J. Katz, of Red Bank, N.J., Moeller, Richard S. Roon, of Rumson, N.J., AKAT Global LLC, Digital Edge Marketing LLC, Oceanic Consulting LLC, and Spectrum Research Group Inc.

The other defendants charged are: Allan M. Migdall, of Fort Lauderdale, Florida, Robert S. Oppenheimer, of Belvedere Tiburon, Calif., Core Business One, Inc., Bermuda-based Fry Canyon Corp., L.F. Technology Group LLC, Starburst Innovations LLC, and Tachion Projects, Inc., along with B.H.I. Group, Inc. and U D F Consulting Inc., both of New York.

The SEC is seeking return of allegedly ill-gotten gains with interest from all defendants.  It also is seeking civil monetary penalties from nearly all the defendants and seeks to bar nearly all of them from the penny stock business and bar some of them from serving as public company officers or directors.

The SEC’s investigation has been conducted by Laura Yeu, Christopher Ferrante and Eric Schmidt of the Microcap Fraud Task Force along with Joshua Newville and Nicholas Pilgrim in the New York Regional Office.  The SEC’s litigation will be led by Mr. Pilgrim.  The SEC appreciates the assistance of the Department of Justice, the U.S. Attorney’s Office for the Eastern District of Virginia, and the Federal Bureau of Investigation.

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Opening Remarks at the Compliance Outreach Program for Broker-Dealers

Opening Remarks at the Compliance Outreach Program for Broker-Dealers