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SEC Freezes Assets in Alleged Amber Scheme

The Securities and Exchange Commission (SEC) announced that it has filed fraud charges and obtained asset freezes against the operator of a worldwide pyramid scheme. The regulatory agency noted that this entity falsely promised that investors would profit from a venture purportedly backed by the company’s massive amber holdings.

California resident Steve Chen and 13 California-based entities, including USFIA, are the focus of this alleged scheme, according to the SEC complaint filing in a Los Angeles federal court. In the complaint, USFIA and Chen’s other entities raised over $32 million from investors in and outside the United States, at the very least, beginning April 2013. The SEC’s complaint alleges that Chen and his companies misled investors about a lucrative initial public offering (IPO) for USFIA that never happened and about claims to own or control amber deposits worth billions of dollars.

According to the SEC report:

Chen falsely promoted USFIA as a legitimate multi-level marketing company that owns several large and valuable amber mines in Argentina and the Dominican Republic. Investors were told that they could profit by investing in amounts ranging from $1,000 to $30,000, and earn larger returns based on the number of investors they brought into the program. The SEC further alleges that beginning in September 2014, the defendants claimed to have converted existing investors’ holdings into “Gemcoins,” which they said was a virtual currency secured by the company’s amber holdings. In reality, the SEC complaint alleges that Gemcoins are worthless.

The U.S. District Court for the Central District of California granted the SEC’s request for an asset freeze and the appointment of Thomas Seaman as the temporary receiver over USFIA and the other entities. Also, the SEC is seeking preliminary and permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest and civil penalties. The complaint, which had been filed under seal, alleges that the defendants violated the registration and antifraud provisions of the federal securities laws and SEC antifraud rules.

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Michele Wein Layne, director of the SEC’s Los Angeles Regional Office, said:

We allege that the defendants’ false claims of riches that investors would realize from USFIA’s amber mining activity never materialized. In reality, as alleged in the complaint, the defendants were operating a fraudulent pyramid scheme that left many investors with nothing.

By Chris Lange