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SEC Granted Default Judgments Against Operators of $4 Million Fraudulent Scheme

The U.S. District Court for the Eastern District of Wisconsin granted the SEC’s motion for default judgment, and entered final judgments, against defendants Kay X. Yang and Xapphire LLC, whom the SEC previously charged with violations of the federal securities laws.

The court also entered a final judgment against Kay Yang’s husband, Chao Yang, who the SEC charged as a relief defendant for improperly receiving proceeds from the fraudulent scheme.

According to the SEC’s amended complaint, and the court’s findings, between April 2017 and April 2021, Kay Yang engaged in the unregistered offer and sale of securities issued by two entities she owned, AK Equity Group LLC and Xapphire Fund LLC. Yang represented to prospective investors, many of whom were members of the Hmong-American community, that she would invest their money primarily through foreign exchange trading, they could expect annual returns ranging from 20% to 50%, and that her trading was consistently successful. Allegedly, in reality, Yang used less than half of the investors’ contributions for foreign exchange trading and had many months with large net trading losses, resulting in negative returns. In addition, Yang misappropriated approximately $4,060,000 of the investors’ money to fund her and her family’s lifestyle, including spending on casinos, travel, homes, and cars, and to repay investors in a previous venture.

The judgments, entered on the basis of default, enjoined Kay Yang and Xapphire LLC from violating the anti-fraud provisions of the SEC.

In addition, Kay Yang was barred from acting as an officer or director of a public company. The judgments ordered Kay Yang and Xapphire LLC to pay, on a joint-and-several basis, $4,060,212 in disgorgement, prejudgment interest in the amount of $188,787.16, and a civil penalty in the amount of $4,060,212. Chao Yang was ordered to pay up to $830,502 in disgorgement and $38,615.75 in prejudgment interest.

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