Korean-American investors allegedly bilked of $80M in affinity fraud

Two California men and the companies they ran were charged today with conducting an $80 million Ponzi scheme that targeted Korean-American investors with false promises of annual returns of up to 36% from foreign currency trading, the Securities and Exchange Commission announced.

About 500 investors in the United States, South Korea and Taiwan were induced to invest in the scheme, the SEC said in a statement.

The money was not invested in foreign exchange funds, but was instead used to pay cash returns to some early investors, and the two men spent some of the funds on themselves, the SEC said.

Between 2003 and 2008, defendants Peter C. Son of Danville, Calif., and Jin K. Chung of Los Altos, Calif., raised more than $80 million from investors, the SEC said in a complaint filed in the U.S. District Court for the Northern District of California in San Francisco.

Mr. Son was chief executive of SNC Asset Management Inc. of Pleasanton, Calif., and SNC Investment Inc. of New York, and Mr. Chung was chief financial officer of the two companies.

Both companies stopped operating in October 2008, the SEC said.

The two defendants and the companies were charged with securities fraud.

“Son and Chung portrayed themselves and their companies as highly successful in the forex industry, while in reality the tremendous forex trading profits they claimed did not exist,” Marc Fagel, director of the SEC’s San Francisco regional office, said in a release.

“They placed ads in Korean-language newspapers and used sales agents to target Korean-Americans in typical affinity-fraud fashion as they preyed on the trust within close-knit communities,” he said.

An attorney representing Mr. Son and the companies could not be reached for comment, nor could Mr. Chung.