An unregistered investment advisor has been ordered to pay $8.3 million to the Securities and Exchange Commission for an alleged Ponzi scheme involving unsophisticated Hmong-American investors in Minnesota and Wisconsin.
Kay Yang of Mequon, Wis., raised at least $16.5 million from 70 people between 2017 and 2021, according to an SEC complaint filed last year in U.S. District Court in Wisconsin.
She was supposed to use the money for foreign currency exchange trading and other investments but instead spent much of it at casinos and on luxury goods and travel.
In 2020, Wisconsin regulators ordered Yang to return $17 million to her investors, but she never paid, according to a judge’s order this week in the SEC case.
What’s more, Yang went on to raise millions more from the same Hmong-American communities for a new venture also focused on foreign currency exchanges, using offshore bank and brokerage accounts. The SEC isn’t sure whether that venture is legitimate or not.
Yang, who never hired an attorney following the SEC complaint last year, has submitted multiple filings in the case that U.S. District Court Judge J.P. Stadtmueller described as “irrelevant” and nonresponsive.
Stadtmueller on Wednesday entered a default judgment against Yang, her investment company Xapphire, and her husband, Chao Yang.
“Kay and Xapphire targeted a vulnerable group of victims for millions of dollars in a years-long scheme rife with fabricated documents and material misrepresentations and omissions. Kay continues to make these choices today. Kay and Xapphire must be held accountable for their pervasive and knowing violations of the Securities, Exchange, and Advisers Acts, and their victims must receive some semblance of hope for restitution,” the judge wrote.
The $8.3 million represents a conservative calculation of what the Yangs misappropriated, plus a civil penalty in the same amount, plus interest.
Charter school connection
Kay Yang was a friend of Christianna Hang, the founder and former superintendent of Hmong College Prep Academy. The St. Paul charter school lost $4.3 million that Hang improperly invested with a London-based hedge fund following a referral from Yang in 2019.
The school went on to sue the hedge fund, Woodstock Capital, LLC, in hopes of recovering that money; the case could go to trial as soon as December.
Hang and her husband, school chief operating officer Pao Yang, left Hmong College Prep at the end of 2021 under separation agreements that paid them a combined $350,000.
The SEC case against Yang does not mention anything about Hang or the charter school.
