LOS ANGELES (CN) – Norman Hsu defrauded investors of $60 million in a Ponzi scheme, the SEC claims in Federal Court. Hsu, a politically connected campaign donor who favored Democrats, is in jail awaiting trial on federal criminal charges.
“Hsu and his company used investor funds to make significant political contributions to prominent politicians,” SEC Enforcement Director Linda Chatman Thomsen said in a press release. “He allegedly then used the veneer of respectability created by his political connections to persuade his investors that the investments he offered were legitimate. This deception convinced investors to continue to invest with Hsu, even as he and his company allegedly siphoned away investor funds to pay for his own extravagant lifestyle and to finance a Ponzi scheme.”
Hsu allegedly told investors his company, Next Components, had high-level contacts in the Chinese technology and apparel industries. His arrest, escape, and re-surrender in 2007 embarrassed law enforcement officials, when it was found that he had been sought on warrants since 1992 for a fraud conviction.
The SEC complaint claims that from January 2003 through September 2007, Hsu told investors that Next Components would pool their funds to finance bridge loans that would generate investor returns of 14 to 24 percent every 70 to 130 days. But it was a classic Ponzi scam, with new money used to pay off old investors, while Hsu drained it to live the high life, and make political donations that burnished his reputation, the SEC claims.