SEC Halts Pyramid Scheme Targeting Asian-American Community

The SEC announced charges and asset freezes against the operators and promoters of a worldwide pyramid scheme that falsely promises exponential, risk-free returns to investors in a venture that purportedly sells Internet-based children's educational courses. The SEC alleges that five entities based in Hong Kong, Canada and the British Virgin Islands, which collectively operate under business names "CKB" and "CKB168," are at the center of the scheme.

According to the SEC's complaint, which was unsealed late yesterday in the U.S. District Court for the Eastern District of New York, the scheme's promotional efforts seek to exploit close connections among members of the Asian-American community. The scheme has ensnared at least 400 investors in New York, California and other areas with large Asian-American communities. Promoters have raised more than $20 million from U.S. investors and millions of dollars more from investors in Canada, Taiwan, Hong Kong and other countries in Asia.

The complaint alleges that the investments in CKB constitute securities, and that the securities offerings were not registered with the SEC as is required under the federal securities laws. The SEC's complaint charges the CKB entities, three executives, and eight promoters with violations of the anti-fraud and securities registrations provisions of the federal securities laws. Nine of the individuals are charged with violating the broker-dealer registration provisions.

The SEC also issued an investor alert (linked below) warning investors about the dangers of potential investment scams involving pyramid schemes disguised as multi-level marketing programs.

See: SEC Press Release.See also: SEC Complaint; SEC Investor Alert (English language version); SEC Investor Alert (Chinese language version).