California based Luca International Charged by SEC with Oil and Gas Ponzi and Affinity Fraud

Another oil and gas venture domino falls.  The Securities and Exchange Commissions (SEC) released a press release on July 6, 2015 announcing charges brought against Luca International, a California based oil and gas company, and Bingqing Yang, the company’s CEO.  The SEC charged Luca and Ms. Yang with running an alleged $68 million Ponzi scheme and affinity fraud against the Chinese-American community in California and elsewhere.

The SEC alleged that Ms. Yang knew the company was failing, but misrepresented the projected returns of the company as 20-30% annually.  Ms. Yang allegedly also commingled funds and diverted $2.4 million through a separate offshore entity to purchase a home and pay for personal expenses.

Ms. Yang allegedly relied on two tactics: affinity fraud and Chinese citizens who sought to immigrate to the United States through the EB-5 visa program, which grant green cards for making certain investments in U.S. companies.  Other Luca employees were also reported to be implicated in the fraud.  Additionally, the SEC’s press release noted that in a separate administrative action, Wisteria Global and one Hiroshi Fujigami settled charges that they acted as brokers for the Luca entities and were to disgorge ill-gotten gains of more than $1.1 million.

Affinity fraud occurs when a fraudulent product is marketed towards a specific group that are defined by a common interest, such as through religion or the community.  The Luca International investors were largely Chinese-American investors from the California area.  The investors were allegedly lured by advertisements made in Chinese language television, radio and newspapers.

We at Malecki Law have represented several groups who were drastically affected by affinity fraud.  It is essential that broker-dealers properly vet private placements in investments such as oil and gas ventures before permitted the investments to be marketed and recommended to investors.  Brokers and broker-dealers may be liable to their customers for failing to properly perform this due diligence.

If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.