SEC: California woman ran multimillion dollar Ponzi scheme targeting Tongan Americans

According to the SEC's complaint, from approximately January 2021 through October 2021, Sumchai convinced retail investors to acquire shares of an investment she created called "Tongi Tupe" by falsely claiming that she would use a secret algorithm to generate guaranteed high returns. The complaint alleges that Sumchai first targeted respected Tongan American leaders, who were paid substantial returns on their investments, which convinced many of the leaders to believe that Tongi Tupe was legitimate.

Sumchai then organized meetings hosted by these leaders at which Sumchai promoted Tongi Tupe to other members of the Tongan American community. As alleged, Sumchai promised exceedingly high returns, including a $146,000 return in 16 weeks on a $3,000 investment. In reality, the complaint alleges, Tongi Tupe did not generate any returns; instead, Sumchai operated a Ponzi scheme that relied on new investor money to pay earlier investors. Additionally, as alleged in the complaint, Sumchai used investor money for unauthorized and undisclosed purposes, including to pay for casino trips, travel, and shopping.

"As we allege in our complaint, Sumchai sought to enrich herself by exploiting retail investors within the Tongan American community," said Monique C. Winkler, Director of the SEC's San Francisco Regional Office. "The SEC will continue to aggressively pursue affinity frauds, which prey on the trust that members of a close-knit community have in each other."

The SEC's complaint, filed in U.S. District Court for the Eastern District of California, charges Sumchai with violating the antifraud provisions of the federal securities laws. The SEC seeks permanent injunctions, including a conduct-based injunction, disgorgement with prejudgment interest, a civil penalty, and an officer and director bar.

The SEC's Office of Investor Education and Advocacy has issued an Investor Alert with tips on how investors can avoid becoming a victim of an affinity fraud.

The SEC's investigation was conducted by Kashya Shei and Ellen Chen and supervised by Jason H. Lee and David Zhou of the San Francisco Regional Office. The litigation will be led by Sheila O'Callaghan and Ms. Shei.

* * *

Original text here: https://www.sec.gov/news/press-release/2023-187