Federal regulators have won a court order freezing the assets of financier Danny Pang, whom they accuse of defrauding investors of hundreds of millions of dollars.
The Securities and Exchange Commission said Monday the assets of Pang's two investment companies were also frozen. He was ordered to surrender his passports and bring back to the U.S. any assets sent overseas.
Pang, a Taiwanese immigrant, founded a $4 billion international investment firm and moved in A-list social circles in Los Angeles. The SEC has accused Pang of bilking investors by falsely portraying returns as coming from investments in timeshare real estate and life insurance policies of seniors when in fact he ran a Ponzi scheme -- using money raised from newer investors to pay earlier ones.
Pang's companies, Private Equity Management Group and Private Equity Management Group, are based in Irvine, California.
U.S. District Judge Philip Gutierrez in Los Angeles issued the asset freeze and appointed a receiver responsible for safeguarding assets held by Pang's firms.
Pang's attorney disputed the validity of the SEC move and said the agency sought the order Friday in federal court in Los Angeles without notifying his client, depriving him of a chance to respond.
"I'm troubled that the SEC sought to litigate this in secret," the attorney, David Schindler, said in a telephone interview. He said Pang is cooperating with the investigation.
In a civil lawsuit, the SEC alleged Pang and his companies have been engaged in the fraudulent offering of securities since 2003 or earlier, raising hundreds of millions of dollars from investors mostly living in Taiwan. In one case, investors were presented with a forged $108 million insurance policy to support a false claim that an investment was guaranteed, while the actual insurance policy was valued at $31 million, according to the SEC.
"We allege that Pang lured investors with false claims and even bogus documents to dupe them into believing their principal and interest were guaranteed and insured," SEC Enforcement Director Robert Khuzami said in a statement.
The SEC says its investigation is continuing. The agency is seeking unspecified civil penalties and restitution of allegedly ill-gotten profits from Pang and the firms.
The SEC also alleged Pang and his firms lured investors by falsely representing him as a former senior vice president and high-tech merger adviser from investment house Morgan Stanley with an MBA from the University of California at Irvine. In fact, Pang never worked at Morgan Stanley nor did he attend or obtain any degrees from UC Irvine, the SEC said.
A Wall Street Journal report earlier this month raised questions about Pang's resume and background, and cited a former president of Private Equity Management Group as saying Pang told him in 2007 that part of the business involved a Ponzi scheme.
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On April 17, two days after the story was published, Pang voluntarily stepped aside as chairman and chief executive officer while a special company committee investigates the allegations by his former partner.
The former PEMGroup president, Nasar Aboubakare, has a pending $50 million breach-of-contract suit against the firm in which he claims that Pang misused millions in investors' funds and double-billed them for legal and insurance costs, and lied about his academic credentials.
The SEC's complaint against Pang "seems to be predicated solely" on the accusations made by Aboubakare, Schindler said Monday. Schindler said that Pang returned voluntarily to the U.S. from a vacation in China over a week ago and has indicated his willingness to cooperate and provide information to the SEC.