March 28 (Reuters) - The U.S. Securities and Exchange Commission on Friday said it has shut down a worldwide pyramid scheme that falsely promised fast gains to tens of thousands of Asian-American, Hispanic and foreign investors from cloud computing services.
A federal judge on Thursday granted the regulator’s request for an asset freeze over entities operating as WCM and WCM777, which are based near Los Angeles and in Hong Kong and run by Ming Xu of Temple City, California.
WCM and WCM777 allegedly raised more than $65 million since March 2013 by promising people they could double their money in 100 days by investing between $399 and $1,999 in cloud services such as website hosting, data storage and software support.
According to the SEC, investors were told they could parlay “points” they got for making investments or enrolling other investors into stakes in initial public offerings of 300 high-tech companies that the WCM entities were incubating.
The SEC said the defendants were also creating a “secondary market” where about $890 million of points had been traded, and even sought to allay concerns by writing on WCM777’s website: “We are not a Ponzi game company.”
But instead, according to the SEC, Xu and the WCM entities would use some new money to pay older investors, and spent other funds on two California golf courses and other properties, and to play the stock market. Xu is also known as Phil Ming Xu.
“They were operating a pyramid scheme that preyed on investors in particular ethnic communities, leaving them with nothing left to show for their investment,” Michele Wein Layne, director of the SEC’s Los Angeles office, said in a statement.
Wellman & Warren, a Laguna Hills, California-based law firm representing the defendants, had no immediate comment.
U.S. District Judge Christina Snyder in Los Angeles imposed the asset freeze and ordered a temporary receiver over the defendants’ assets. The SEC is also seeking to recoup illegal gains and impose civil penalties.
The case is SEC v. World Capital Market Inc et al, U.S. District Court, Central District of California, No. 14-02334. (Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)