A U.S. industry executive has pleaded guilty to defrauding investors of more than US$100 million over 10 years through portfolio mismarking, fake loans and Ponzi scheming.
According to the U.S. Department of Justice (DoJ), David Hu, managing partner and chief investment officer of New York-based investment advisory firm International Investment Group (IIG), pleaded guilty to investment adviser fraud, securities fraud and wire fraud offenses.
Over a period of more than 10 years, Hu’s scheme included “creating fictitious investments and overvaluing investments used to generate funds to pay off earlier investors in a Ponzi-like manner,” the DoJ said.
In connection with his plea deal, Hu agreed to forfeit more than US$129 million, “representing proceeds traceable to the commission of the offenses,” the DoJ noted.
Hu is due to be sentenced on June 17.
“Today, David Hu admitted to shirking his fiduciary responsibilities and defrauding IIG funds and investors for more than a decade, causing millions of dollars of losses,” said Audrey Strauss, U.S. attorney for the Southern District of New York.
“Hu mismarked millions of dollars of loan assets, falsified paperwork to create fake loans, sold overvalued and fake loans and used the proceeds from those sales to pay off earlier investors, and falsified paperwork to deceive auditors and avoid scrutiny. He now faces a serious term of imprisonment,” Strauss added.
Last year, the U.S. Securities and Exchange Commission (SEC) also charged IIG in connection with the scheme.
IIG settled the case, without admitting or denying the SEC’s allegations, agreeing to pay more than US$35 million is disgorgement and prejudgment interest.