The Securities and Exchange Commission announced charges Friday against the California-based company eAdGear for running an international pyramid scheme and issued a temporary restraining order and asset freeze against the firm.
A federal court in San Francisco charged eAdGear Inc.; its Hong Kong entity, eAdGear Holdings Ltd.; CEO Charles S. Wang, 52; his wife, Qian Cathy Zhang, 52; and Chief Financial Officer Francis Y. Yuen, 53. Laurata Chan, the company’s accounting manager, is named as a relief defendant, according to an SEC statement.
The company was running primarily in the U.S., China and Taiwan, and it raised more than $129 million from investors worldwide, the SEC said.
The company claimed to be a successful internet marketing firm. However, the SEC complaint said that eAdGear used 99% of the funds received from new investors to pay off the early investors.
The operators pocketed some of that money to repay a personal loan and purchased million-dollar homes for themselves.
“eAdGear and its operators falsely claimed that they were running a profitable Internet marketing company when in reality, they were operating a Ponzi and pyramid scheme that preyed on Chinese communities and caused investors to lose millions of dollars,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office, in a statement.
The company has been running since 2010. Its website describes the company mission as “global advertising” and states that it “provide[s] vital internet tools to small and midsize companies who market their products and/or services online.”
Claims that the company generated millions of dollars from its “breezing technology” to increase page rankings or from its search engine optimization marketing were false, the SEC said.
According to the company’s own records, there were no sales to paying customers until November 2012, even though the company had been supposedly running successfully for two years.
As of April 2014, eAdGear had approximately $370,000 in its bank account and was on the verge of collapse. Wang claimed that eAdGear owed investors approximately $5 million; the SEC says the actual amount is “far higher.”
The federal court granted the SEC’s request to freeze assets and issue a temporary restraining order. The order prohibits the accused from obtaining more investors from any of its other websites — www.eadgear.com, www.eadgear.net, www.winteam777.com and www.winteam168.com. A hearing has been scheduled for Oct. 10.
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