LOS ANGELES (CN) - WCM777, a California-based Ponzi scam, has taken $65 million from suckers in a "cloud media" pyramid scheme and skimmed $28 million from it, the SEC claims in court.
The SEC sued World Capital Markets, WCM777 and affiliates and its principal, Ming Xu aka Phil Ming Xu, of Temple City, in Federal Court. Xu put a lot of his money into golf courses and diamonds, and sent some of it to Hong Kong, the SEC claims. He targets Asian-Americans, Latinos and foreign investors, the SEC says in its 28-page lawsuit.
"Beginning around March 2013 and continuing to the present, operating under the offering name 'WCM777,' defendants have collected over $65 million from investors in the United States and abroad. Of that amount, over $28 million was deposited into bank accounts in the United States between March and October 2013. After October 2013, defendants deposited investor funds into a bank account in Hong Kong."
The defendants push "packages" or "membership units" in WCM777, which they claim is "a profitable multi-level marketing venture that sells packages of 'cloud media' or cloud services," the SEC says in the complaint.
They promise 100 percent returns in 100 days, and claim that the "points" their suckers get will be convertible into equity in initial public offerings in high tech companies that the defendants "are purportedly incubating," the SEC claims. Xu and his minions claim to have a "secondary market" in "points" and "estimate that $890 million of the points have traded on this market," according to the lawsuit.
It continues: "In fact, defendants do not realize any appreciable revenue other than from the sale of 'packages' of cloud services to investors. WCM777 is not profitable, and is a pyramid scheme. Defendants use some of the investor funds to make Ponzi payments of returns to investors. The bulk of the investor funds have been used to pay cash for real property purchased in the United States, purchased in many cases with funds transferred through Defendant World Capital Market Inc. ('WCM'), and held in the names of Relief Defendants Manna Holding Group LLC and Kingdom Capital Market LLC, which are affiliated with Defendant Xu. The properties include two golf courses, a warehouse, vacant land, and several single family homes. Defendants have also used investor funds to play the stock market and to make investments, through intermediary companies, in an oil and gas offering of relief defendant Aeon Operating, Inc. Defendants have also sent investor funds to relief defendant PMX Jewels, Limited, which is a rough diamond jewel merchant in Hong Kong, and to relief defendant Manna Source International, Inc., which is affiliated with Defendant Xu.
"Defendant Ming Xu is involved in all aspects of the fraud: He is chief executive officer of defendant WCM, and chairman of defendants WCM, WCM777 Inc. and WCM777 Ltd. Defendant Xu is also a signatory on the bank accounts of relief defendants Kingdom Capital Market LLC and WCM Resources, Inc., and was a signatory on the bank accounts of Manna Source International Inc. Defendant Xu's spouse is the managing member of Relief Defendant Manna Holding Group LLC."
The SEC seeks a restraining order and injunction, disgorgement and penalties.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.