Couple Sentenced to Lengthy Prison Terms for $12.7 Million Affinity Investment Fraud

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https://www.justice.gov/usao-wdwa/pr/couple-sentenced-lengthy-prison-terms-127-million-affinity-investment-fraud

Department of Justice
U.S. Attorney’s Office
Western District of Washington

FOR IMMEDIATE RELEASE
Thursday, October 11, 2018

Couple Sentenced to Lengthy Prison Terms for $12.7 Million Affinity Investment Fraud

Defendants Preyed on Faith Communities to Fund Lavish Lifestyle

SUNG HONG, 47, and HYUN JOO HONG, 42, of Clyde Hill, Washington were sentenced today in U.S. District Court in Seattle to lengthy prison terms for defrauding more than 55 clients out of $12.7 million, announced U.S. Attorney Annette L. Hayes. SUNG HONG, aka LAURENCE HONG or LAWRENCE HONG, was sentenced to 15 years in prison. His wife, HYUN JOO HONG, aka GRACE HONG, was sentenced to six years in prison. From 2010 until their arrest in June 2017, the couple held themselves out as experienced investment advisors with a track record of performance in order to solicit investor funds for their hedge fund, Pishon Holdings, and for management through separately managed accounts. In fact, SUNG HONG had just completed a 33 month sentence for committing investment fraud when he launched this new scheme in 2010.
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According to records filed in the case, the HONGs recruited investors using religious organizations and shared religious beliefs. The couple claimed that LAURENCE HONG privately invested billions of dollars for wealthy Korean families and that GRACE HONG held a Series 65 securities license and previously worked for a large international investment firm. None of these statements were true. Likewise, the defendants did not disclose LAURENCE HONG’s past criminal conviction for investment fraud. The couple sent potential investors misleading and false investment prospectuses that contained an inaccurate record of their past investment performance and other plagiarized investment outlooks.

Throughout their fraudulent scheme, the HONGs used stolen investor funds for their own benefit, including payments for a 9,000 square foot rental home in Clyde Hill; a 45-foot yacht; multiple high-end vehicles, such as BMWs, a Maserati, an Aston Martin, and a Lamborghini; and numerous expensive vacations to locations such as the Bahamas and Beverly Hills.

One church in California invested $1 million with the HONGs and lost about $300,000 on a single trade. Still, despite the steep losses and a fee arrangement based on investment gains, the HONGs withdrew almost $150,000, ostensibly as advisor fees, from the church’s account. Another couple allowed the HONGs to manage their $180,000 in retirement funds only to lose $100,000 within less than a year. After meeting with the HONGs, that couple then invested their remaining retirement funds in the HONGs’ hedge fund, only for those funds to be redirected into GRACE HONG’s personal account. The HONGs used those funds to pay credit card bills and other personal expenses, including a $16,000 payment to a resort in the Bahamas for a HONG family vacation.
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Judge Zilly ordered the pair to pay more than $12.7 million in restitution. The losses for certain investors represented their entire life or retirement savings.
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1. Link to AP

https://apnews.com/c1cb422fd12f47099f5d300d691f9ea5