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U.S. Securities and Exchange Commission

Litigation Release No. 23754 / February 17, 2017

Securities and Exchange Commission v. James Y. Lee, et al., No. 3:14-cv-00347 (S.D. Cal. filed Feb. 13, 2014)

United States of America v. James Yiu Lee, No. 3:14-cr-02937 (S.D. Cal. filed. Oct. 9, 2014)

Court Enters Final Judgment In Favor of SEC Against Seven Relief Defendants Who Received Proceeds of Advisory Client Fraud

On February 3, 2017, the Honorable Larry Alan Burns of the U.S. District Court for the Southern District of California entered a final judgment against seven relief defendants who received the proceeds of a fraudulent scheme conducted by James Y. Lee.

On February 13, 2014, the SEC charged Lee with defrauding his advisory clients in several ways, including providing false performance reports to clients, charging unearned fees, misrepresenting the risks associated with option trading, and misrepresenting his background. According to the SEC's complaint, Lee diverted the proceeds of his fraud to relief defendants ELX International, Inc. (ELX), Advanced Century Corp. (ACC), SOT Group, Inc. (SOT), and Ultra International, Inc. (Ultra) - shell corporations Lee controlled - to avoid holding assets in his name. The SEC alleged that ELX, ACC, SOT, and Ultra funneled the proceeds of Lee's fraud to relief defendants Larissa Ettore (Lee's girlfriend), Clayton K. Lee (Lee's son), and Lolita Gatchalian (Lee's long-time associate).

On October 9, 2014, Lee pleaded guilty to one count of obstruction of justice in a related criminal matter. On May 4, 2015, Lee was sentenced to 78 months imprisonment.

On July 15, 2016, the district court entered a final judgment against Lee, permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Sections 17(a) of the Securities Act of 1933, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940; and ordering Lee to pay approximately $2.2 million in disgorgement plus prejudgment interest. Lee's liability is subject to a dollar-for-dollar credit for any payments made to satisfy the restitution order imposed against him in the related criminal matter.

On January 12, 2017, the district court granted the SEC's motion for case-terminating sanctions against relief defendants Ettore, Clayton K. Lee, and Gatchalian for discovery abuses and for failing to comply with the court's orders. On January 13, 2017, the district court granted default judgment against relief defendants ELX, SOT, ACC, and Ultra on the SEC's motion for reconsideration of a prior order.

The final judgment against the seven relief defendants orders them to pay more than $2.2 million in disgorgement and prejudgment interest. The final judgment further orders reductions to Lee's liability for payments made by the relief defendants and reductions to the four shell company relief defendants for payments made by the individual relief defendants.

 

https://www.sec.gov/litigation/litreleases/2017/lr23754.htm


Modified: 02/17/2017