Prevalence of Securities Fraud: $700 Million Case in San Francisco

Zintro Money picThe Department of Justice recently filed felony charges against Walter and Kelly Ng in what may be the largest securities fraud case in California’s history. It involves more than $700 million taken from approximately 2800 investors. The Ng’s are charged with ‘structuring transactions for the purpose of evading a reporting requirement.’ The charging document states the Ngs looted the funds by making repeated cash withdrawals. Walter Ng was charged with 11 counts and Kelly Ng was charged with 20 counts.

Although only certain cases garner extensive media coverage, corporate fraud is prevalent in the U.S. Daniel W. Draz, a Certified Fraud Examiner and founder of Fraud Solutions, is an international fraud consultant. “Every state in the country, and the federal government, has investigators solely dedicated to securities and fraud related issues,” explains Draz. “There are several private regulatory entities that have key roles in securities and fraud oversight. The Bureau typically averages over 500 major corporate fraud cases a year, despite regulatory acts designed to protect the public, with some exceeding a billion dollars in losses. And some of those statistics are comprised of sophisticated securities related fraud cases like the Ng case.”

The Ng’s will be arraigned November 6. Says Draz, “While all persons are presumed innocent until proven guilty, the mere fact that the government was able to bring these charges, and the depth and number of charges, suggests that they have a significant amount of evidence and victims with which to proceed with criminal charges. The multitude of charges ensures that there are likely going to be convictions on at least a portion of the ones they brought against the defendants for their alleged securities fraud activities.”

Many of the victims lost hundreds of thousands of dollars. The SEC has filed a civil suit against the Ngs for accusing them of lying to investors and using new asset to fund a collapsing fund. According to Draz, “In a civil case, plaintiffs only have to prove ‘preponderance of the evidence’- which means that the standard for proving that they were defrauded is only 51%, significantly less than the ‘beyond a reasonable doubt’ standard used in criminal cases. The plaintiffs ‘will go to school’ during the criminal case learning about the Ng’s alleged financial improprieties and gathering information which can then be used during civil trial. If the evidence that the government has is substantial, the plaintiffs have an excellent chance of winning their civil cases, yet a small chance of actually recovering a significant portion of their lost financial assets.”

Dan Noyes is the chief investigative reporter for ABC7 News and has followed the case since the beginning. On the station’s website, Noyes reports that Walter Ng and Kelly Ng will probably waive their right to have the case heard by the Grand Jury. Says Noyes, “They may plead guilty on the spot.”

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