Knight Nguyen Investments raised millions from its retail investor clients to invest in securities that met the firm’s investment criteria:
(a) always allocate “secured” capital to attract at least 10% returns, and would select entities
(b) with taxable income to support returns and that often do over $10 million of revenue;
(c) that are already making money and not dependent on investor funds; and
(d) that have financials that have been audited by KNI.
Instead, the firm put its clients into extremely risky investments that did not meet the stated investment criteria. Instead, the firm invested its clients’ capital into high risk or fraudulent companies that, in most cases, were owned, controlled, or associated with principals of the firm.
One was investments in promissory notes issued by a Seychelles-based company that was purportedly involved in the purchase and sale of gold from a Lebanese refinery. The company later defaulted on the notes and the firm’s clients lost their capital.
Another was a Florida bioscience company that purportedly held patents for peptides that have potential applications ranging from cancer and burn treatments to crop solutions. The investment was speculative and did not meet the investment criteria, because the company de minimis revenues, its financials were not audited, and it was not actually offering secured investments.
A Texas widow lost her entire $30,000 retirement investment. A Nevada individual lost his entire $92,000 retirement portfolio. A Kansas veteran and military professor, who was months away from retirement, lost almost all of his $320,000 retirement savings. An Alabama retiree lost $105,000. A retiree in Houston who had been seriously injured at work, and feared she could never work again, was seeking safety and income from her investments. Instead, says the SEC, she lost her entire $75,000 retirement portfolio. The SEC mentions others who lost between $30,000 and $150,000 their retirement accounts.
There looked to be a lot of other shenanigans going on at the firm. The big one problem the SEC hung its charges on was how the actual investments differed from the promised investment criteria.
Sources:
- SEC Charges Texas Investment Adviser and Three Individuals with Defrauding Advisory Clients and Retail Investors https://www.sec.gov/litigation/litreleases/2021/lr25089.htm
- SEC Complaint https://www.sec.gov/litigation/complaints/2021/comp25089.pdf