U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19483 / December 5, 2005
Securities And Exchange Commission v. WMDS, Inc. et al. (Civil Action No.05-12268-RCL) (D. Mass)
SEC Obtains Preliminary Injunctions in Case Involving Fraudulent Investment Scheme Targeting Cambodian Immigrants
The Securities and Exchange Commission announced today that it obtained preliminary injunctive relief against all five defendants in an emergency enforcement action filed by the Commission on November 15, 2005 in federal district court in Massachusetts. On November 23, 2005, the Honorable Reginald C. Lindsay, United States District Judge for the District of Massachusetts, entered an order granting preliminary injunctions, asset freezes, and other relief against James Bunchan, Christian Rochon, WMDS, Inc. and One Universe Online, Inc. On December 2, 2005, Judge Lindsay entered an order granting a preliminary injunction, an asset freeze, and other relief against the remaining individual defendant, Seng Tan.
The Commission alleged in its complaint that the defendants operated a fraudulent investment scheme in which they 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, the defendants operated a scheme that raised at least several million dollars from hundreds of investors, mainly members of the Cambodian immigrant community. In papers filed in support of the preliminary injunctions the Commission informed the Court that (a) fifty-eight alleged victims have been identified and interviewed by the Commission thus far; (b) records seized from the defendants indicate that at least 300-400 people invested in WMDS; (c) the total amount of money invested by the fifty-eight alleged victims identified to date exceeds $8.8 million; (d) the net losses suffered by those fifty-eight alleged victims exceeds $5.6 million; and (e) the amounts of monies invested by other potential victims, and the losses suffered by them, have not yet been quantified. 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 addition to the civil complaint filed against them by the Commission, all three individual defendants have been arrested by federal criminal authorities in connection with the scheme described above. The arrests were made pursuant to a criminal complaint and arrest warrant obtained by the Office of the United States Attorney for the District of Massachusetts. The arrest warrants were executed by special agents of the Federal Bureau of Investigation. Defendants Tan and Bunchan have been ordered detained pending trial in the criminal matter by United States Magistrate Judges in Boston, Massachusetts and Miami, Florida, respectively. Defendant Rochon was released pending trial after a bail hearing in which a Magistrate Judge imposed various conditions on an unsecured bond.
For further information, see Litigation Release No. 19464 (November 16, 2005)