SEC: Mequon woman used investor funds on personal items – Greater Milwaukee Today | GMToday.com

MEQUON A Mequon woman is accused of diverting millions of dollars of investor funds into personal expenses, such as vacations, gambling and real estate, causing some of them to lose their entire investment.

According to a 21-page Securities and Exchange Commission complaint filed in the U.S. District Court of the Eastern District of Wisconsin last Wednesday, Kay X. Yang, 40, misappropriated about $4.06 million of the approximately $16.5 million she was given by investors, who were primarily Hmong-Americans from Wisconsin and Minnesota.

The funds were spent on cash withdrawals at casinos, luxury automobiles, real estate, extensive travel and repaying certain investors from a previous venture, the complaint said.

According to the SEC, she gave another $800,000 to her husband, Chao Yang, 47, whom the SEC said had no right to receive these investor funds.

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The SEC says that Yang raised about $16.5 million from investors through two entities she controlled: AK Equity Group and Xapphire Fund, LLC.

She told investors that she would use money primarily in foreign exchange trading and that investors would earn between 20% and 50% annually, according to the SEC. She said the foreign exchange trading had been consistently successful.

Each of these representations was false, the SEC complaint said.

The SEC said that Yang and her husband spent more than $3 million between April 2017 and June 2021 on items such as the following:

- Nearly $1.5 million on real estate, including $716,000 on a home in Mequon in 2018; $259,900 on a home in Zimmerman, Minn. in 2018; $223,191 for a Sheboygan home in 2018; and $261,871 in Saukville in 2019;

- More than $790,000 for living expenses, including nearly $70,000 on restaurants; more than $46,000 to Amazon; $27,500 to Columbia College in Chicago; $20,000 to Sams Club; and thousands of dollars more for landscaping and lawn care, house cleaning services, BTS concert tickets, pet stores, spa services, groceries and other retailers, including Gucci, Louis Vuitton and Kay Jewelers;

- An estimated $585,000 on personal and family travel. At least $110,000 was spent on Kays Family Trip to Maui in June 2018; at least $80,000 for a trip to 20 to Bangkok, Thailand in June 2019; at least $52,000 for a Royal Caribbean cruise in February 2019; and trips to other places, such as Cancun, Mexico and Las Vegas;

- An estimated $313,000 on luxury cars, including a 2019 Lexus NX 300 in 2018; a 2018 Tesla Model S in 2018; a 2019 BMW i8 in 2019; and a 2019 BMW X7 in March 2019; The complaint also said that between 2017 and 2021, the Yangs withdrew approximately $1.4 million from investor funds in more than 1,000 separate transactions, including from ATM machines and cash advances on credit cards.

The couple also made cash withdrawals and spent investor funds in a number of different gaming establishments, according to the SEC complaint. That included Potawatomi in Milwaukee, Ho-Chunk Gaming in Black River Falls, Ho-Chunk Gaming in Wisconsin Dells and at more than a dozen casinos in Las Vegas; Atlantic City, N.J.; Lake Tahoe, Calif.; Biloxi, Miss.; Des Plaines, Ill.; Reno. Nev.; Temecula, Calif.; and Friant, Calif.

According to the suit, Yang repeatedly told investors that the returns achieved by AK Equity and Xapphire Fund were profitable and performing well. She provided investors with materials showing that AK Equitys foreign exchange trading achieved positive monthly returns between January through August 2018. Based on that, at least three people invested in the company based on those reports.

These representations were false, the complaint said. AK Equity actually experienced monthly trading losses in January, February, May, June and August 2018.

There was no trading activity at all in March or April 2018.

Similar positive reports were sent to Xapphire Fund investors that indicated the fund achieved positive monthly returns every month of 2018 and that investors could expect annual returns of 20% and 40%.

But the Xapphire Fund did not exist until December 2018, the SEC complaint alleges.

The SEC also said that Yang sent investors documents showing that their funds were generating annual profits of between 40% and 50% Yang offered glowing reports about the AK Equity investments as well, saying that it was generating annual profits of between 40% and 50% in 2019. Based on those reports, several of the AK Equity investors put money into the Xapphire Fund.

But the reports were again false, the SEC said.

AK Equity had never had a year with positive trading results, let alone a year with gains of between 40% and 50% returns, the complaint said.

On July 13, 2020, the Wisconsin Department of Financial Institutions, Division of Securities, issued a final order against Yang, according to the SEC. The order revealed that neither of Yangs funds were registered with the Wisconsin division of Securities.

The order required that Yang pay more than $16.9 million in restitution to her investors, give up more than $4.2 million in profits and pay a $50,000 civil penalty.

To date, Yang has not paid the amount owed, the SEC said.

She has returned some money to a few investors, the SEC said, but has denied repaying others. The most recent repayment occurred in January 2021 in the amount of $7,000. She has since ceased all communications with her investors, the SEC claims.

Furthermore, they said that she is continuing to raise funds from Hmong Americans through the Xapphire G Fund. The SEC says it can confirm the existence of an offshore bank and brokerage accounts, but has been unable to obtain sufficient investment documents to determine if Xapphire G is a real investment fund or fraud.

Yang has produced some documents to the SEC, but asserted her Fifth Amendment privilege against producing more. The News Graphic has tried multiple numbers listed to Yang, but was not able to reach her for comment.

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SEC: Mequon woman used investor funds on personal items - Greater Milwaukee Today | GMToday.com