Posted on 07/17/2020 5:36:03 PM PDT by ransomnote
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of an Information charging DAVID HU, a managing partner and the chief investment officer of the New York-based investment advisory firm International Investment Group (“IIG”), with investment adviser fraud, securities fraud, and wire fraud offenses. As alleged, over a period of more than 10 years, HU perpetrated an over $100 million scheme to defraud investors in IIG’s funds, including by creating fictitious investments and overvaluing investments used to generate funds to pay off earlier investors in a Ponzi-like manner. HU was arrested today and was presented and arraigned before Magistrate Judge Robert W. Lehrburger. The case has been assigned to U.S. District Judge Alvin K. Hellerstein.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, David Hu directed a multimillion-dollar, years-long scheme to defraud investors. Putting profit ahead of his fiduciary duties, Hu allegedly mismarked millions of dollars of loan assets to cover up millions in losses. Hu also created fake entities and loans, and falsified paperwork to deceive auditors and avoid detection. Now David Hu stands charged with federal crimes and faces time in federal prison.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, for nearly a decade, David Hu misled investors about the value of their investments, including the creation and sale of fictitious fund portfolios to raise capital to prop up his schemes. His alleged actions serve as an example of the lengths some will go to in these all-too-common fraud cases. The FBI is committed to investigating those who prey upon trusting individuals for their own personal gain.”
In a separate civil action, the U.S. Securities and Exchange Commission (“SEC”) today filed civil charges against HU.
As alleged in the Information and based on statements made in Manhattan federal court in this case:[1]
Background of IIG
HU and a co-conspirator (“CC-1”) founded IIG in 1994. HU was a managing partner and the chief investment officer of IIG. IIG, an SEC-registered investment adviser, provided investment management and advisory services, including for three private funds that it operated: (1) the IIG Trade Opportunities Fund N.V. (“TOF”), (2) the IIG Global Trade Finance Fund, Ltd. (“GTFF”), and (3) the IIG Structured Trade Finance Fund, Ltd. (“STFF”). IIG also advised the Venezuela Recovery Fund (“VRF”), a fund that managed the remaining assets of a failed Venezuelan bank (VRF, together with TOF, GTFF, and STFF, the “IIG Funds”). In March 2018, IIG reported to the SEC that it had approximately $373 million in assets under management.
IIG advertised itself as specializing in global trade financing, particularly in providing trade finance loans to small and medium-sized businesses. IIG’s principal investment advisory strategy, including with respect to the IIG Funds, was investing in trade finance loans that it also originated. Trade finance loans are used by small and medium-sized companies, typically exporters and importers, to facilitate international trade. IIG’s purported expertise was in trade finance loans to borrowers located in Central or South America, and in a variety of industries, with a stated focus on “soft commodities,” such as coffee, agriculture, fishing, and other food products. IIG’s trade finance loans were purportedly secured by collateral, such as the underlying traded goods, assets held by the borrowers, or expected payments by third parties.
Investments in TOF, STFF, and GTFF were marketed by IIG to institutional investors, such as pension funds, hedge funds, and insurers. In offering memoranda and communications with investors, IIG advertised strict risk controls, such as promises to use diligence to carefully select borrowers or issuers with trusted management and marketable assets, and portfolio concentration limits based on borrower, developing country, and industry.
IIG purported to value the trade finance loans in the IIG Funds on a regular basis. IIG and, in turn, HU, received a performance fee with respect to the IIG Funds, as well as a management fee, which was calculated as a percentage of the assets under management held in the Funds.
The Scheme
From approximately 2007 to 2019, HU conspired to defraud investors in IIG-managed funds by: (i) overvaluing distressed loans held by the IIG Funds, (ii) falsifying paperwork to create a series of fake loans that were classified, fraudulently, as positively performing loans, and to otherwise hide losses, (iii) selling overvalued and fake loans to a collateralized loan obligation trust and new private funds established and advised by IIG, and (iv) using the proceeds from those fraudulent sales to generate liquidity required to pay off earlier investors in a Ponzi-like manner.
The scheme HU participated in involved, among other things:
* * *
DAVID HU, 62, of West Orange, New Jersey, is charged with one count of conspiracy to commit investment adviser fraud, securities fraud, and wire fraud, which carries a maximum sentence of five years in prison; one count of securities fraud, which carries a maximum sentence of 20 years in prison; and one count of wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Ms. Strauss praised the investigative work of the FBI and also thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Drew Skinner and Negar Tekeei are in charge of the prosecution.
The charges contained in the Information are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Information, and the description of the Information set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Hudunnit
Is this the same line of work in which Mr. Chelsea Clinton specializes?
Asking for a friend ......
Perfect!
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