Washington, DC –The U.S. Commodity Futures Trading Commission (CFTC) announced that it obtained more than $26 million in restitution and civil monetary penalties against defendants Kenneth W. Lee of Mt. Pleasant, S.C., Simon Yang of Edmond, Okla., Prestige Ventures Corp. (Prestige) and Federated Management Group, Inc. (FMG) (collectively, defendants), and relief defendants Sheila Lee, Darren Lee and David Lee (collectively, relief defendants). The court’s order stems from a joint action filed by the CFTC and the Oklahoma Department of Securities on November 20, 2009 (see CFTC Press Release 5758-09), charging the defendants with fraudulently operating a multi-million dollar commodity futures Ponzi scheme with 140 participants.
On October 27, 2010, the U.S. District Court for the Western District of Oklahoma granted summary judgment against the defendants, finding that they fraudulently solicited at least $10.6 million from approximately 140 customers, primarily ethnic Chinese located in Oklahoma City, to trade commodity futures and leveraged forex through commodity pools. Specifically, the court found that Lee misrepresented the returns he had allegedly made, the assets under management and current returns. Defendants also failed to disclose Lee’s diversion of funds and his criminal past, the court found.
The court further found that Lee lost $4.3 million in trading and misappropriated pool participants’ funds to pay off other pool participants and for personal use, including buying houses and boats, and funneling funds to his family members named as relief defendants. The defendants issued false account statements to conceal their fraud, the order finds.
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After a trial on sanctions and penalties, the court issued an order on November 29, 2010, requiring Prestige, FMG and Lee to pay restitution of $5,857,503, plus interest. The court also assessed an $18.2 million civil monetary penalty against Prestige and FMG, jointly and severally, and a $7.2 million civil monetary penalty against Lee. The court ordered Yang to pay $133,500 in restitution and barred him from making any claim against the receivership for his investment with Prestige and FMG. The court also barred the defendants from engaging in certain commodity-related activity, including trading and registering or seeking an exemption from CFTC registration.
The court ordered relief defendants Sheila Lee to disgorge $711,845, Darren Lee to disgorge $638,938 and David Lee to disgorge $574,273. Defendant Kenneth Lee and relief defendant Darren Lee were ordered by the court to surrender their residences, which the court found were purchased with pool participants’ funds, to the Receiver.
The CFTC’s Division of Enforcement thanks the Oklahoma Department of Securities for its assistance in this matter.
The Division of Enforcement staff members responsible for this case are James H. Holl, III, Katherine Scovin Driscoll, Kara Mucha, Michelle Bougas, Heather Johnson, Gretchen L. Lowe and Phyllis J. Cela.