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SEC halts fraudulent Beverley Hills hedge fund and wealth management business

Date: Wednesday, April 27, 2011
Author: Wendy Chothia, HedgeWeek

The Securities and Exchange Commission has obtained an emergency court order to shut down a Beverly Hills, California hedge fund and wealth management business targeting retirees, university professors, and members of the Christian community.

The SEC alleges that IU Group Inc, its principal Elijah Bang, and its salesperson Daniel Lee targeted retirees and claimed on websites to have been founded by “devoted Christians who believe in God, Jesus Christ, and the Holy Spirit.” Lee allegedly also sent “cold call” e-mail solicitations to university professors.

It appears that IU Group was unsuccessful in obtaining any hedge fund investors or wealth management clients before the SEC’s emergency action halted its operations.

According to the SEC’s complaint filed in federal court in Los Angeles, Bang and Lee made numerous false representations to potential investors and wealth management clients, including the following statements: the hedge fund was operational and had a successful performance history since January 2007; the majority of IU Wealth’s clients are professional athletes, actors, producers, doctors, professors, politicians, and executives of private corporations; and IU Wealth has over USD800 million under management.

The SEC alleges that Bang and Lee solicited potential investors and wealth management clients using various company names and websites, including IU Wealth Management, LLC and Icon Capital Management LLC. Lee also tried to find potential investors and clients using “cold call” e-mail solicitations.

According to the SEC’s complaint, IU Group and IU Wealth are not registered with the SEC. IU Group’s business license was suspended by the State of California, and IU Wealth and Icon Capital are not companies of record in California. These entities have a mailing address in Beverly Hills, Calif., and Bang is believed to be a California resident. On May 19, 2009, California’s Department of Corporations ordered IU Investments LLC, Bang, and Lee to desist and refrain from the unlawful offer or sale of securities and from the fraudulent sale of securities.

The SEC’s complaint charges all defendants with violations of the registration and antifraud provisions of Sections 5(c) and 17(a) of the Securities Act of 1933. The complaint also charges defendant Bang with violations of the investment adviser antifraud provisions of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Honorable Margaret M. Morrow, U.S. District Judge for the Central District of California, granted the SEC’s request for emergency relief for investors, including an order temporarily enjoining defendants IU Group and Bang from future violations of the antifraud provisions. A hearing on whether a preliminary injunction should be issued against the defendants IU Group and Bang is scheduled for May 6, 2011, at 10:00 a.m. PT.