U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23420 / December 7, 2015
Securities and Exchange Commission v. Hui Feng, et al., Civil Action No. 2:15-cv-09420 (Central District of California, Complaint filed December 7, 2015)
SEC Charges New York-Based Immigration Lawyer and His Law Firm with Defrauding Immigrant Investors and Acting as Unregistered Brokers
The SEC alleges that Hui Feng and his firm, Law Offices of Feng & Associates P.C., acted as unregistered brokers by selling EB-5 investments to over 100 foreign investors, who were also their legal clients, and that they, directly or indirectly, received over $1.1 million in commissions in connection with these sales and are contractually entitled to at least an additional $3.1 million in commissions. The complaint also alleges that Feng and his firm defrauded their investor clients by failing to disclose their receipt of commissions on the investments in breach of their fiduciary and legal duties to their clients, and that they also defrauded some of the entities offering the EB-5 investments.
According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, since 2010, Feng and his firm have promoted EB-5 investments to potential investors and immigration law clients, many of whom were located in China. In 2013, Feng opened four offices in China that were each staffed with an employee who was instructed to promote the Feng & Associates website, which was primarily focused on the EB-5 investment program. The investors entered into retainer agreements with Feng & Associates, agreeing to pay a legal fee of between $10,000 and $15,000 for legal work associated with a petition for residency under the EB-5 program. The clients made investments in EB-5 securities, which were offered pursuant to exemptions from the registration requirements of the U.S. securities laws, of either $1 million or $500,000 and expected to receive a return on their investments. The complaint alleges that in addition to receiving legal fees, Feng and his firm also received undisclosed commissions from the entities whose EB-5 offerings they sold. According to the complaint, when some of the entities selling EB-5 investments began to refuse to pay commissions to U.S.-based persons as part of an apparent effort to avoid running afoul of the broker registration requirements contained in the federal securities laws, Feng and his firm used Feng’s overseas relatives as nominees to fraudulently receive commissions on their behalf.
The SEC’s complaint charges Feng and Feng & Associates with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. They are also charged with violating Section 15(a) of the Exchange Act, the broker-dealer registration provision. The SEC’s complaint seeks disgorgement, prejudgment interest, and penalties, along with permanent injunctions. The SEC’s investigation was conducted by Megan Bergstrom and supervised by Spencer Bendell. The litigation will be led by Donald Searles. The SEC appreciates the assistance of the USCIS.