SEC Sues Toronto Hedge-Fund Manager for Ponzi Scheme

Date: Wednesday, April 8, 2009
Author: David Scheer, Bloomberg.com

The U.S. Securities and Exchange Commission sued a Toronto hedge-fund manager, claiming he touted himself as a Chinese Warren Buffett while raising as much as $75 million for a fund the agency said became a Ponzi scheme.

Weizhen Tang, 50, admitted to investors in February that he used money from new clients to pay profits while suffering trading losses since 2006, the SEC said in a statement today announcing a lawsuit filed at federal court in Dallas. Tang denied the claims in an interview, and said that while his firm had “difficulties” he hasn’t misappropriated investor money.

“I didn’t call myself Warren Buffett” until other people coined the nickname, he said. “I wish I could be.”

The SEC’s case builds on accusations made last month by the Ontario Securities Commission, which said it wasn’t able to trace investors’ money and had evidence showing Tang didn’t disclose about $15 million in losses 2007 at his fund, Oversea Chinese Fund Ltd. Partnership. The Canadian regulator secured a temporary order barring the fund from trading while it investigates, according to agency’s Web site.

Tang, who also owns an investment advisory firm based in Plano, Texas, called WinWin Capital Management, has focused on the Chinese-American community, including investors in Dallas and California, the SEC said. In the past few weeks, he told clients he wants to raise $1 million to continue trading and “recoup” losses, the agency wrote in the complaint. WinWin is among six firms, funds and entities named as defendants.

‘Very Complicated’

Tang, reached by telephone, said he hasn’t seen the SEC’s complaint and that any characterization of his fund as a Ponzi scheme is “wrong.” The situation is “very complicated,” and he has repeatedly written to clients through his Web site to explain his side of the story, he said.

A federal court judge in Dallas agreed to freeze assets and appoint a receiver to recover clients’ money, the SEC said. The agency wants him to forfeit profits and pay unspecified fines.

Edwin Tomko, a Dallas attorney representing WinWin and related firms, said his clients are “cooperating completely with the SEC and the receiver.”

Buffett, ranked the world’s second-richest man by Forbes magazine, transformed Omaha, Nebraska-based Berkshire Hathaway Inc. from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate jet leasing. Buffett didn’t respond to a request for comment left with assistant Carrie Kizer.

To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net.