Date: February 19, 2020
LOS ANGELES – A Bradbury man has agreed to plead guilty to federal criminal charges that he falsely promised profits to more than 70,000 victim investors worldwide in a scheme where a multinational company issued a sham digital currency purportedly asset-backed by billions of dollars' worth of amber and other precious gemstones.
Steve Chen aka "Li Chen" and "Boss," agreed to plead guilty to one count of conspiracy to commit wire fraud and one count of tax evasion. The criminal information and plea agreement in this case was filed late Tuesday in United States District Court, and Chen is scheduled to make his first court appearance in this case on March 10.
According to his plea agreement, Chen was the owner and chief executive officer of U.S. Fine Investment Arts, Inc. (USFIA), and six other companies that used the same Arcadia address. From July 2013 until September 2015, Chen fraudulently promoted and solicited USFIA investments, and he ultimately obtained approximately $147 million from victim-investors.
Chen admitted in his plea agreement that he falsely promoted USFIA as a successful multi-level marketing company that extracted amber and other gemstones from non-existent mines it "owned" in the United States, the Dominican Republic, Argentina and Mexico. Investors were duped into buying USFIA investments in amounts ranging between $1,000 and $30,000 each, court documents state. These "packages" purportedly were comprised of amber and other gemstones, as well USFIA "points," which could be converted to USFIA shares when the company had its IPO in the near future. Chen admitted that he never intended for USFIA to have an IPO.
USFIA also offered other bonuses – including cash, travel, luxury cars, homes in the Los Angeles area, and EB-5 visas for immigrant investors – to investors who recruited other people to purchase these "packages," Chen admitted.
Beginning in September 2014, Chen and others altered the promotion by substituting quantities of "Gem Coins" instead of points. They falsely promoted these "coins" as a legitimate digital currency backed by the company's gemstone holdings. Chen also falsely represented that these "coins" already were in wide circulation in the jewelry and finance industries.
Chen also admitted that the company did not generate any significant revenue from its business operations, apart from sales of investment packages to victim-investors. The amber and other gemstones provided in the investment packages – including those displayed at USFIA's Arcadia headquarters – were obtained from domestic and foreign commercial suppliers, assigned grossly inflated prices, and worth much less than what investors paid USFIA for them. Chen admitted that "Gem Coins" had no circulation in any industry, were not accepted by any merchants, and had no economic value.
"Steven Chen defrauded thousands of victims in order to fund his extravagant lifestyle. Chen funneled $4,816,193 of his ill-gotten gains to purchase homes and fund his gambling habit. Chen's criminal activity did not stop with stealing from his victims. Chen also defrauded the government of $1,885,094 in taxes. IRS-CI used its financial investigative expertise and critical law enforcement partnerships to untangle the web created by Chen and bring him to justice," said Ryan L. Korner, Special Agent in Charge.
"Mr. Chen lured victim investors around the globe by creating a mirage made of fashionable cryptocurrency features and dynamic marketing tactics," said Paul Delacourt, the Assistant Director in Charge of the FBI's Los Angeles Field Office. "The investing public should be aware that cryptocurrency schemes are more prevalent and more sophisticated than ever, but those who perpetrate them use the same tactics as con-artists always have - by convincing investors to risk their money in the bank based on false promises of imminent wealth."
"Mr. Chen's promises to investors were as worthless as his non-existent mines and phony digital currency," said United States Attorney Nick Hanna. "This case should remind all investors that trappings of success may convey legitimacy, but everyone should exercise extreme care when considering giving hard-earned money to any outfit promoting trendy products and extravagant profits."
Chen also admitted to attempting to evade payment of federal income taxes. He reported gross income for 2014 was $138,015, when in fact his income for that year was approximately $4,816,193, upon which Chen owed $1,885,094 – before interest and penalties.
Once he pleads guilty, Chen will face a statutory maximum sentence of 10 years in federal prison.
Leonard Stacy Johnson of Huntington Beach who worked at Chen's direction in promoting USFIA and Gem Coins, pleaded guilty in July 2019 to one count of tax evasion and one count of making a false statement on an immigration document. Johnson is scheduled to be sentenced on June 22.
The Securities and Exchange Commission successfully brought an enforcement action against Chen, USFIA, and 12 other Chen-controlled entities. A receiver has been appointed by a court in that matter, and maintains a website for victims at: http://usfiareceiver.com/
This matter was investigated by the IRS-Criminal Investigation, FBI, and Homeland Security Investigations.
This case is being prosecuted by Assistant United States Attorneys Richard E. Robinson and Katherine A. Rykken of the Major Frauds Section.