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Fighting financial fraud is like the world’s biggest game of whack-a-mole. Bang one scammer over the head and three more pop up.
That’s natural, because there’s a virtually unlimited supply of greedy dumb people and greedy unscrupulous people to take advantage of them. Regulators therefore have a hard, often thankless job trying to protect us from ourselves.
But sometimes they could be a bit more proactive?
From the SEC earlier this week:
Washington D.C., Aug. 27, 2024 — The Securities and Exchange Commission today announced charges against China-based investment adviser QZ Asset Management Limited a/k/a Qianze Asset Management Limited (QZ Asset), its South Dakota-based holding company QZ Global Limited, and the CEO of both entities, Blake Yeung Pu Lei a/k/a Yang Pulei (Yeung), with fraud for lying to clients and prospective clients regarding the safety of their investments, the investment adviser’s relationships with certain well-known banks and law firms, and the holding company’s initial public stock offering.
The SEC complaint alleges that QZ Asset, QZ Global, and Yeung defrauded hundreds of individuals out of at least $6 million. According to the complaint, QZ Asset and Yeung falsely claimed that QZ Asset would use its proprietary AI-based technology to help generate extraordinary weekly returns while promising “100%” protection for client funds and that well-known and reputable financial and legal firms were providing services to the company. The complaint also alleges that the defendants falsely claimed that QZ Global had applied to have its common stock listed on the Nasdaq Global Select Market and that they had positive communications with SEC staff regarding this effort.
In addition, QZ Global allegedly touted its SEC filings, which were materially deficient, to lure clients and prospective clients into handing over their funds to QZ Asset. According to the complaint, after engaging in this global, multi-million-dollar fraud, the defendants allegedly stopped communicating with clients and QZ Asset’s website, which clients used to access their funds, was taken down.
Good stuff, except . . . even a cursory Google search at any time over the past year would have revealed that QZ Asset Management/QZ Global/Qianze Asset Management Limited/QZ Asset was dodgy. These are all from over a year ago:
Yes, even after having been rumbled by regulators, central banks or media in Zambia, South Africa, Namibia, Eswatini, Botswana, Zimbabwe and the Philippines, the SEC was apparently oblivious while QZ scammed $6mn out of “hundreds” of Americans.
In the scale of scams this obviously isn’t even small potatoes. It’s only a tenth of the size of an alleged Ponzi scheme that the SEC cracked down on just the day before, and 1/50 the size of one from earlier this month. There are probably lots of bigger ones going undetected as we type.
But you’d hope that the “materially deficient” but real SEC filing that QZ made in *checks notes* February 2023 and seemingly used to dupe people with would have raised some automatic red flags, which would lead someone at the agency to do a quick internet search and crack down much earlier? QZ didn’t even bother changing its name.
The SEC has invested a lot of money into pretty sophisticated insider trading detection systems. It would be nice to think they could build something basic to detect obvious scams cropping up in their own filing system before anyone is duped out of their money.