Internet Ad Firm Called a Pyramid Scheme

     SAN FRANCISCO (CN) – California-based eAdGear and its Hong Kong affiliate are running a $130 million pyramid scheme in Internet ads, the SEC claims in court.
     The SEC sued Pleasanton-based eAdGear and eAdGear Holdings Limited on Wednesday in Federal Court.
     eAdGear claims to use search engine optimization to boost clients’ rankings on the Internet. It claims to have more than 66,000 accounts, and that it shares 70 percent of its revenue with its investors, the SEC says.
     But actually, more than 99 percent of its money comes from the investors themselves, most of whom are Chinese, according to the SEC.
     “eAdGear simply uses new investor money to make payments to … existing members in classic Ponzi scheme fashion,” the complaint states.
     Also sued are CEO Charles S. Wang, his wife Quian Cathy Zhang, and CFO Francis Y. Yuen. Yuen’s wife, the company’s accounting manager Laurata Chan, is named as a relief defendant.
     The SEC says the four individual defendants used investor’s money to buy property in California and New Jersey, and sent $1.3 million to their personal bank accounts.
     The company, which has been running in China since 2010 and in California since 2011, is on the verge of collapse, but continues to operate, the SEC says.
     Wang has said in testimony that eAdGear owes investors about $5 million, but the SEC says the actual amount is “far higher.”
     The SEC seeks freezing of assets, an injunction and penalties for securities violations.

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