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September 1, 2010

Plaintiffs object to ‘gifted trader’ court challenge

Lawsuit involves alleged Ponzi scheme

Mark Schlachtenhaufen The Edmond Sun

EDMOND — Plaintiffs have objected to an Edmond man’s plan to show a co-defendant is a “gifted trader” and not behind an alleged $8.7 million Ponzi scheme, court records show.

The U.S. Commodity Futures Trading Commission and Oklahoma Department of Securities filed suit against Prestige Ventures Corp., Federated Management Group Inc., Kenneth Wayne Lee, of Mt. Pleasant, S.C., and Simon Yang, of Edmond, in November 2009 in U.S. District Court’s Western District of Oklahoma.

The defendants are accused of operating a fraudulent commodity futures pool with at least $8.7 million in assets and 140 participants from about July 2003 to the fall of 2009.

The alleged scheme targeted members of the Oklahoma City metro area’s Chinese community.

They are accused of falsely representing that Lee was consistently profitable and never suffered losses in his trading on behalf of Prestige Enterprise, that the profits generated were extraordinarily high, that Federated Management Group’s marketers or solicitors were members of the National Futures Association and registered with the Commodity Futures Trading Commission, that in December 2003, Prestige Enterprise had $1 billion in assets, that Prestige Enterprise would guarantee profitable returns on all investments and that Yang was merely Lee’s friend and a Prestige Enterprise investor.

Prestige Enterprise and Lee allegedly operated a Ponzi scheme by paying so-called profits that actually came not from successful trading but from either existing participants’ original investments or money invested by subsequent participants.

Lee sustained net losses of about $4.3 million trading almost exclusively commodity futures and foreign currency from January 2004 to July 2009, the government alleges.

The defendants, through Yang, provided false and misleading information, and failed to disclose material information, the government alleges.

Last month, Yang laid out a 10-part proposal that boils down to a motion to stay the proceedings for six months to let Lee trade commodities and other financial products in a $5,000 “test trading account” to be funded and controlled by Yang.

Yang asserts that if Lee were to earn monthly returns averaging 2 percent or higher during the six-month period, Lee must be a “gifted trader” and must not have operated a Ponzi scheme.

If that were to happen, the court would dismiss the lawsuit and the parties would not ask each other for compensation of losses and other damages, Yang proposed.

“I am confident that this court will find me innocent of these charges,” Yang stated in his self-written proposal, filed in court on Aug. 10. “And I do not think that the plaintiffs can demonstrate to the court that Ken Lee has operated a successful Ponzi scheme.”

Conversely, Yang proposed that if Lee were to earn less than a 1 percent average during the six-month trading period, it would show that Lee is not a gifted trader.

On Monday, the plaintiffs filed an objection to Yang’s proposal.

“Yang’s underlying basis for this proposal appears to be his belief that, ‘It is the responsibility of Prestige Ventures and Ken Lee to return all investors’ capitals to its clients in a reasonable shortest period with its resources and skills,’” the plaintiffs stated.  

Yang’s proposal should be denied because it is based on flawed logic, it fails to account for certain responsibilities of the federal and state agencies and it undermines the law and judicial system, the plaintiffs argued.

Both Yang and Lee are representing themselves in this litigation.

In court papers, Yang stated that his legal name is Xiao Yang and he never used the name “Simon Chen,” as the plaintiffs believed. In his response to the original complaint, he said the plaintiffs put forth numerous “misrepresented or twisted facts among the statements from the government and witnesses.”

In court papers, Lee stated that from time to time he and Yang would communicate via e-mail, but they were “never in any collective act to defraud any persons” in the case.



marks@edmondsun.com | 341-2121, ext. 367

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