The U.S. Securities and Exchange Commission (SEC) announced on Aug. 27 that it had charged China-based investment adviser QZ (Qianze) Asset Management Ltd., its South Dakota-based holding company, and its CEO, Blake Yeung (Pu Lei), for fraud.
The SEC alleges Yeung and his companies defrauded hundreds of people out of at least $6 million in a pre-IPO scheme. Yeung had previously been accused of running a pyramid scheme.
“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,” stated Jason J. Burt, regional director of the SEC’s Denver office.
“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.”
In courting investors to buy shares of QZ ahead of an initial public offering (IPO), Yeung touted SEC filings that were actually “materially deficient,” according to the SEC complaint.
Yeung proposed an IPO price of $5 per share for 60 million Class A shares, or a total of $300 million. In an SEC filing, Yeung said QZ was a “leading global alternative asset manager with a successful 10-year track record of innovation and organic growth.”
According to the filing, QZ was founded in Guangzhou, China, in 2012, and primarily invested in Chinese stocks. It said it had managed $8.4 billion in assets as of Dec. 31, 2022, and that it had increased its assets under management by 2,000 percent from 2016, and it attributed its growth in investment to big data artificial intelligence (BDAI) technology. In that same period, revenue increased 288 percent, Yeung claimed in the SEC filing.
“We are positioned for rapid, profitable growth, which we believe will compound in the years ahead as we expand our existing platforms, launch new market-leading products and platforms, and pursue inorganic growth opportunities,” the filing reads.
Yeung also claimed to have direct partnerships with 50 institutions and that QZ was “backed by the most sophisticated global asset allocators.”
The SEC alleges Yeung falsely claimed it would use “proprietary AI-based technology to help generate extraordinary weekly returns” and that he promised “100 percent” protection for client funds.
The complaint also alleges Yeung claimed that “well-known and reputable financial and legal firms” were providing services to QZ Global and that he had had positive communications with Nasdaq and SEC staff already.
This was done with the intent to “lure clients and prospective clients into handing over their funds to QZ Asset,” the SEC alleges.
After engaging in this scheme, Yeung and QZ stopped communicating with clients and took down its website, according to the complaint. The website listed on the SEC filing, www.qzinvest.com, which was allegedly used to communicate with the investors who were defrauded, is no longer active.
The SEC is asking for the return of QZ and Yeung’s allegedly ill-gotten gains, and additional penalties.
The investigation is led by Yamini Piplani Grema, and the litigation will be led by Jodanna Haskins, both from the SEC’s Denver office.
In 2019, Yeung was given a Pioneer in Finance Award at the Shanghai Fintech Summit for QZ’s BDAI technology.
In 2022, QZ announced an expansion into South America and Africa. In March 2023, it set terms for an IPO on Nasdaq in an announcement touting its AI resources.
In June 2023, South African authorities warned the public against doing business with QZ, citing “numerous complaints” that the China-based company was a multilevel marketing scheme.
The Financial Sector Conduct Authority of South Africa launched an investigation after QZ investors were promised returns of up to 400 percent and found they could no longer access QZ’s website or withdraw their funds.
