In October of last year, the SEC filed suit against Gemcoin and its parent companies Alliance Finance Group (AFG) and its domestic subsidiary, United States Fine Investment Arts (USFIA). At the time, the SEC’s complaint accused Steve Chen, Founder of Gemcoin, of running a $32 million dollar Ponzi scheme.
Gemcoin’s promotional material claimed that the digital currency was backed by billions of dollars in amber mine assets located in South America, but as the Thomas A. Seaman – the receiver appointed to oversee the recovery of assets in the case – found out, those claims were false.
According to a recent Pasadena Star-News article, a report filed by Mr Seaman in February of 2016, concluded that USFIA was purposefully set up to defraud investors, and that the entire operation was a scam from the start.
The report states:
“At this point, there is no indication there was any legitimate Gemcoin or other viable business operated by the Receivership Entities. Aside from some income generated by the hotel and rental properties, the Receivership Entities had no significant source of income other than money raised from investors.”
Prior to SEC’s filing, federal authorities had already raided Gemcoin’s offices in Arcadia, a city in LA County, and most of Chen’s bank accounts were frozen. So far, Mr Seaman has managed to recover $21.9 million of investor money, and several other offshore entities are currently being examined.
Long Z. Liu, an attorney representing victims of the fraud, said that Mr Seaman’s report confirms what everyone already suspected, “Before it was just speculation, but now we have concrete evidence to show where the money went and how it was transferred,” said Liu.
The scheme even ensnared Arcadia Councilman John Wuo, who endorsed Gemcoin and enticed several Chinese-Americans into the scam. Wuo was forced to resign after allegations started to surface from disgruntled investors about his involvement in the scheme.
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