The Securities and Exchange Commission has filed fraud charges against China-based investment advisor QZ Asset Management, its CEO — whose touted AI investing algorithms gained media attention — and its holding company, alleging they scammed hundreds of customers out of millions of dollars before halting contact with clients and shutting down their website.
"Clients lost all access to their accounts and funds," the commission said in the lawsuit filed Monday in U.S. District Court in South Dakota, where the holding company was established. The SEC said it couldn't verify the CEO's identity or whereabouts, and alleges the firm solicited clients globally, including in the U.S., on Facebook, YouTube and other social media.
QZ Asset had at least 285 clients that sent the firm, and lost, at least $6 million, according to the lawsuit. The SEC also issued a press release about the alleged scheme.
Guaranteed Returns?
The defendants falsely promised investors that QZ Asset, also known as Qianze Asset Management, would provide exceptional returns using artificial intelligence while ensuring clients' capital was 100% protected, and that holding company QZ Global Ltd. had taken steps to go public and had positive interactions with the SEC staff, the commission alleged.
They also told investors that reputable firms were providing legal and financial services to QZ Asset, according to the complaint.
CEO Blake Yeung Pu Lei, also known as Yang Pulei, "whose identity SEC staff cannot corroborate, is purportedly age 37 or 38. His state or country of residence is unknown," the complaint states. An SEC filing lists Yeung as CEO for both QZ Asset and QZ Global, which was founded as a South Dakota holding company early last year, according to the lawsuit.
The SEC, which alleges QZ Asset and Yeung violated securities and investment advisor laws, seeks a permanent injunction against all the defendants, and disgorgement of all ill-gotten gains from QZ Asset and Yeung, among other remedies. The agency seeks to bar Yeung from serving as a public company officer or director.
"The defendants' brazen fraud alleged in our complaint, including their abuse of the SEC's filing process to prey on individuals in the United States and across the world, is reprehensible," Jason J. Burt, regional director for the SEC's Denver regional office, said in the release.
"We will continue to hold accountable those who deceive investors, including by misusing the SEC's name and processes to provide an air of legitimacy to their fraudulent endeavors," he said.
There was no immediate response Tuesday to a message that ThinkAdvisor left at the phone number listed on a QZ Global SEC filing. An SEC spokesperson told ThinkAdvisor there's no known defense counsel in the case.
Social Media Solicitation
From October 2022 through May 2023, QZ Asset solicited clients to open advisory accounts, asking existing and potential clients globally to provide funds for investment, the complaint says. The firm solicited clients on social media, especially Facebook, WhatsApp, Zoom and YouTube, it says.
QZ Asset marketed advisory accounts as packages or contracts with guaranteed returns on investments, promising higher returns for bigger investments, the SEC alleges. The lawsuit cites an Easter promotion in which the firm offered a 2% daily ROI and a new iPhone for customers investing at least $10,000.
Clients opened their accounts through QZ Asset's website and provided the firm with crypto assets, especially tether, according to the complaint. Client accounts reflected that QZ Asset purported to double the investments, it says.
