Litigation Release No. 19464 / November 16, 2005
WMDS, Inc. One Universe Online, Inc., Seng Tan, James Bunchan and Christian Rochon (United States District Court for the District of Massachusetts, Civil Action No.05-12268-RCL)
SEC HALTS FRAUDULENT INVESTMENT SCHEME TARGETING CAMBODIAN IMMIGRANTS AND OBTAINS EMERGENCY RESTRAINING ORDERS AND ASSET FREEZES
The Securities and Exchange Commission announced that on November 15, 2005, it filed an emergency enforcement action in federal district court in Massachusetts and obtained a temporary restraining order, asset freezes, and other relief against three individuals and two corporate entities in connection with a fraudulent investment scheme targeting Cambodian immigrants. The Commission alleged in its complaint that the defendants falsely promised members of the Cambodian immigrant community guaranteed monthly returns that would pass on to future generations. The complaint alleged that the defendants emphasized their shared Cambodian heritage with their victims, and written solicitation documents drew a parallel between investing in WMDS and fulfilling the American dream, stating that WMDS "urges you to sign up now or you will miss your best chance of fulfilling your American dream." In fact, according to the complaint, the defendants were operating a fraudulent pyramid scheme and ceased making the promised monthly payments recently.
According to the Commission's complaint, Seng Tan, Christian Rochon and James Bunchan and the two Massachusetts corporations which they controlled, WMDS, Inc., and One Universe Online, Inc. (also known as 1UOL) operated a scheme that raised at least several million dollars from hundreds of investors, mainly members of the Cambodian immigrant community. Tan and Rochon are residents of Massachusetts. Bunchan is a resident of Florida. The Commission's complaint alleged that, for an investment in WMDS of approximately $26,000, Tan and WMDS promised investors that the corporations would make an initial lump sum payment to them of approximately $2,400, and thereafter would pay the investor $300 per month for life, a monthly payment that would then purportedly pass on to the investors' children. Investors were told that their monthly payments would increase if they invested more money or if they recruited additional investors. In fact, according to the complaint, the defendants ceased making the promised monthly payments in approximately June 2005.
The Commission alleged in its complaint that the defendants violated anti-fraud provisions of the federal securities laws, specifically Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission also alleged that the defendants violated the registration provisions of the securities laws, namely Sections 5(a) and 5(c) of the Securities Act of 1933. In response to the Commission's request for emergency relief, the Honorable Reginald C. Lindsay, United States District Judge for the District of Massachusetts, issued a temporary restraining order prohibiting the defendants from directly or indirectly continuing to violate the federal securities laws, and froze most of the defendants' assets. The Court has scheduled a hearing on the matter for November 22, 2005.
In addition to the civil complaint filed against them by the Commission, two of the individual defendants, Rochon and Bunchan, were arrested on November 15, 2005, in Massachusetts and Florida, respectively, by special agents of the Federal Bureau of Investigation. The arrests were made pursuant to an arrest warrant obtained by the Office of the United States Attorney for the District of Massachusetts. The Commission wishes to acknowledge the assistance of those offices in connection with this matter.
