U.S. securities regulators charged a Toronto-based fund manager, who describes himself as the Chinese Warren Buffett and his hedge fund with operating a multimillion dollar investment fraud, the Securities and Exchange Commission said on Monday.
The SEC, which obtained an asset freeze to halt the alleged fraud, charged Weizhen Tang and his Canadian-based hedge fund with operating a Ponzi scheme, where funds from new investors were used to pay purported profits to other investors.
Since as early as 2004, Tang has raised as much as $75 million from more than 200 investors for his hedge fund called the Oversea Chinese Fund Limited Partnership, the SEC said.
Tang told investors in February 2009 that, in an effort to conceal substantial trading losses and attract new investors to his hedge fund, he posted false profits on investors' account statements and used funds from new investors to pay out at least $8 million in fake profits to others, the SEC said.
Attempts to reach Tang at Weizhen Tang Corp were unsuccessful. In a public letter to partners posted on Weizhen Tang's website, Tang said: I did not steal everyone's funds.
For my investment partners, February 27 of 2009 was a most shocking, heart-breaking and grieving day, Tang wrote in the letter. It was also a day of tremendous pain to myself, one that I had feared so much but eventually it arrived. Because of the sin that I had committed, I have hurt you badly. I'd like to extend my deepest apologies.
According to the SEC's complaint, Tang targeted members of the Chinese American community and solicited U.S. investors to directly and indirectly invest in the hedge fund.
Since at least November 2007, the SEC alleges, Tang raised capital for his hedge fund from U.S. investors by offering and selling limited partnership interests in WinWin Capital Limited Partnership, a Texas based venture that he controls. WinWin Partners' sole business is investing partnership capital in the Oversea Chinese Fund, the complaint said.
The SEC alleges Tang sent e-mails to investors to persuade them to trust him with even more of their money and allow him to continue trading on their behalf. Within the last two weeks, Tang has informed investors he is actively raising an additional $1 million to recoup investor losses and creating new business entities, bank accounts and brokerage accounts to circumvent action by the SEC and Canadian regulator the Ontario Securities Commission.
Edwin Tomko, a lawyer representing WinWin-related entities said his clients are cooperating with the SEC and the court-appointed receiver.
(Reporting by Rachelle Younglai; Editing by Andre Grenon)