SEC Obtains Final Judgment against IIG Co-Founder for Engaging in Fraud
Litigation Release No. 25530/ September 28, 2022
Securities and Exchange Commission v. David Hu, Civil Action No. 1:20-cv-5496 (S.D.N.Y. filed July 17, 2020).
On September 22, 2022, the U.S. District Court for the Southern District of New York entered a final consent judgment against David Hu, the co-founder and chief investment officer of International Investment Group (IIG), a formerly registered investment adviser, enjoining Hu from violating the antifraud provisions of the federal securities laws.
According to the SEC's complaint, from October 2013, Hu orchestrated multiple frauds on IIG's investment advisory clients. As alleged, Hu grossly overvalued the assets in IIG's flagship hedge fund, resulting in the fund paying inflated fees to IIG, some of which went to Hu personally. In addition, through IIG, Hu allegedly sold at least $60 million in fake trade finance loans to other investors and used the proceeds to pay the redemption requests of earlier investors and other liabilities. The complaint alleges that Hu deceived IIG clients into purchasing the purported trade finance loans by directing others at IIG to create and provide to the clients fake loan documentation to substantiate the non-existent loans, including fake promissory notes and a forged credit agreement.
The complaint, filed on July 17, 2020, charged Hu with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. On February 1, 2021, the Court entered a partial judgment against Hu by consent in which Hu agreed to be permanently enjoined from violations of the charged provisions.
The final judgment orders disgorgement of $4,798,232, representing Hu's ill-gotten gains, and prejudgment interest of $461,477, and that disgorgement shall be deemed satisfied by the restitution order entered against Hu in the parallel criminal proceeding, United States v. Hu, et al., 20 Cr. 360 (S.D.N.Y.) (AKH). In that proceeding, Hu pleaded guilty and has been sentenced and ordered to pay restitution and forfeit assets.
The SEC previously charged IIG with fraud on November 21, 2019, and revoked IIG's registration as an investment adviser on November 26, 2019. On March 30, 2020, the SEC obtained a final judgment on consent enjoining IIG from violating the antifraud provisions of the federal securities laws and requiring IIG to pay more than $35 million in disgorgement and prejudgment interest.
The SEC's investigation was conducted by Philip A. Fortino, Lindsay Moilanen, and Diego Brucculeri of the New York Regional Office, with assistance from Eli Bass of the Division of Examinations. The litigation was handled by Mr. Fortino and Ms. Moilanen. The matter was supervised by Sheldon L. Pollock and Osman Nawaz. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.