In a pair of separate proceedings, the U.S. Securities and Exchange Commission (SEC) secured penalties against a couple of firms that, it alleged, made false regulatory filings as part of a larger investment scam.
In the U.S. district court for the Southern District of New York (SDNY), the SEC obtained a final judgment by default against Supreme Power Capital Management Ltd., a firm it had previously charged with making material misrepresentations in regulatory filings.
At the same time, in the U.S. district court in Colorado, it also obtained a judgment against another AI Investment Education Foundation Ltd., a firm it had also charged with making false statements in filings with the SEC.
In both cases, the SEC alleged that the firms claimed to be operating private fund advisers, but that the firms didn’t actually exist.
In the case of Supreme Power, in a 2023 filing with the SEC, the firm claimed to be operating a New York-based exempt private fund advisor with US$10 million in assets under management, the SEC said.
However, the regulator alleged that it was unable to contact the firm or its purported executives to verify its filings, and that the manager of its purported office space had no knowledge of the firm.
The SEC alleged that AI Investment Education also made similar false claims in a filing with the regulator in 2024.
Now, the courts have ordered each of the firms to pay US$1.2 million penalties, and they imposed permanent injunctions against them.
Both firms were originally charged as part of an action brought by the SEC against 10 firms alleging that they made false filings with regulators as part of a scheme to create the impression that the firms were legitimate, so that they could be used in social media-based pump-and-dump schemes targeting retail investors.
In November last year, a federal grand jury in the District of Columbia handed down an indictment that charged a Hong Kong man, Guanhua Su (aka Michael Su), with conspiracy to commit securities fraud and with making false statements to regulators.
In that case, U.S. authorities alleged that Su, along with his co-conspirators, created at least 10 sham advisory firms — including Supreme Power and AI Investment — and filed false forms with regulators, and that at least two of those firms were used in so-called “ramp-and-dump” schemes.
The allegations in that case have not been proven and he is presumed to be innocent of the charges.