Washington, D.C. — The Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Eastern District of Wisconsin against Kay Yang of Mequon, Wisconsin, and her companies, AK Equity Group LLC and Xapphire LLC. The complaint charges Yang, AK Equity, and Xapphire with fraud and misappropriation related to an off-exchange foreign currency (forex) trading scheme in which they solicited funds totaling at least $15.7 million from at least 67 investors. Yang’s husband, Chao Yang, is named as a relief defendant for receiving investor funds to which he was not entitled.
Case Background
According to the complaint, from approximately April 2017 through March 2020, the defendants solicited and pooled millions of dollars of investors’ funds in bank and trading accounts for the purported purpose of trading forex.
The complaint alleges, among other things, the defendants falsely represented to existing and potential pool participants that they successfully managed hundreds of millions of dollars in a variety of investment vehicles; consistently achieved positive monthly returns; would allocate 100% of pool participants’ funds to forex trading; and would adhere to a trading strategy that included low leverage ratios and moderate trading frequencies. These were false claims and the defendants routinely suffered trading losses using high leverage and high frequency trading strategies. The defendants also failed to disclose they misappropriated significant amounts of pool participants’ funds to pay for Kay Yang’s personal expenses. For example, Yang spent over $700,000 at casinos and on gambling-related purchases, more than $439,000 on travel and luxury hotels, and at least $248,000 on cars and car-related expenses. Furthermore, Yang made net transfers of approximately $200,000 to bank accounts in her name, at least $1.4 million to bank accounts in her husband’s name and more than $1 million to joint bank accounts she shared with her husband.
In continuing its litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act, as charged.
Related Civil Actions
In a separate, parallel matter, the Securities and Exchange Commission (SEC) today filed a civil complaint against Yang in connection with this scheme.
On July 13, 2020, the State of Wisconsin Department of Financial Institutions, Division of Securities (WDFI), issued a Final Order by Consent to Cease and Desist, Revoking Exemptions, and Imposing Disgorgement, Restitution, and Civil Penalties on Yang in connection with her operation of AK Equity and Xapphire.
The CFTC thanks the National Futures Association, the SEC, and the WDFI for their assistance in this matter.
Division of Enforcement staff members responsible for this case are Lauren Bennett, Kyong Koh, Luke Marsh, and Paul G. Hayeck.
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CFTC’s Forex Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories and Articles that provide the warning signs of fraud, including the Foreign Currency (Forex) Trading Fraud Advisory, which alerts customers to forex fraud and lists simple ways to spot forex scams.
The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.
Source: CFTC
