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Arcadia Gem Coin Mastermind Sentenced to 10 Years in Prison
Arcadia Weekly Jan 12, 2021
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ByTerry Miller
Oneof Arcadia’s largest financial scandals in 2015 involved crypto currency and a hostof well-known public officials, including a former Arcadia mayor, forinvolvement in a Ponzi scheme that ultimately shut down the operations of the Arcadiabusiness known as U.S. Fine Investment Arts, Inc. (USFIA).
Thebusiness was raided by federal authorities in 2015.
In February 2020, Gem Coin’s owner, Steve Chen, agreed to plead guilty to federal criminal charges that he falsely promised profits to more than 70,000 victim investors worldwide in a scheme where a multinational company issued a sham digital currency purportedly asset-backed by billions of dollars’ worth of amber and other precious gemstones.
Chen,63, a.k.a. “Li Chen” and “Boss,” agreed to plead guilty to one count ofconspiracy to commit wire fraud and one count of tax evasion.
In2015 Gem Coin investors named former Arcadia Mayor John Wuo as being involvedin the Ponzi scheme. The story was first broken by Arcadia Weeklyreporter Joe Taglieri in 2015.
Chenwas sentenced Monday to 120 months in federal prison for fraudulently obtaining$147 million from tens of thousands of investors around the world in the investmentscam.
Chen,of Bradbury, was sentenced by U.S. District Judge John F. Walter, who foundthat Chen’s “litany of lies” promoted a scam of “epic proportions.” Chen pleadedguilty in June 2020 to one count of conspiracy to commit wire fraud and onecount of tax evasion.
Chenwas the owner and chief executive officer of USFIA Arcadia, and six othercompanies that used the same Arcadia address. From July 2013 until September2015, Chen fraudulently promoted and solicited USFIA investments, and heultimately obtained approximately $147 million from 72,000 victims, in one ofthe largest pyramid schemes ever prosecuted in this district.
Hefalsely promoted USFIA as a successful multi-level marketing company thatextracted amber and other gemstones from non-existent mines it “owned” in the U.S.,the Dominican Republic, Argentina and Mexico.
Chen“promoted his Pyramid/Ponzi scam using a multi-level marketing program in whichcompensation for recruiting other investors primarily came from new USFIAinvestors’ payments,” prosecutors wrote in their sentencing memorandum.“Because the primary focus was on recruiting other investors, rather thanselling USFIA products to retail customers, the vast majority of investors weredestined to lose money — while making [Chen] very wealthy.”
Investorswere duped into buying USFIA investments in amounts ranging between $1,000 and$30,000 each. These “packages” purportedly comprised amber and other gemstones,as well USFIA “points,” which could be converted to USFIA shares when thecompany had its IPO. But Chen never intended for USFIA to go public.
USFIAoffered other bonuses — including cash, travel, luxury cars, homes in the LosAngeles area, and EB-5 visas for immigrant investors — to investors whorecruited other people to purchase these “packages.”
Beginningin September 2014, Chen and others altered the promotion by substitutingquantities of “Gem Coins” instead of points. They falsely promoted these“coins” as a legitimate digital currency backed by the company’s gemstoneholdings. Chen also falsely represented that these “coins” already were in widecirculation in the jewelry and finance industries.
Thecompany did not generate any significant revenue from its business operations,apart from sales of investment packages to victim-investors. The amber andother gemstones provided in the investment packages — including those displayedat USFIA’s Arcadia headquarters — were obtained from domestic and foreigncommercial suppliers, assigned grossly inflated prices, and worth much lessthan what investors paid USFIA for them. “Gem Coins” had no circulation in anyindustry, were not accepted by any merchants, and had no economic value.
Chenalso committed tax evasion when he reported that his gross income for 2014 was$138,015, when in fact his income for that year was approximately $4,816,193,upon which Chen owed $1,885,094 — before interest and penalties.
JudgeWalter ordered Chen to pay restitution of $1,885,094 to the IRS on the taxevasion count and scheduled a July 16 restitution hearing for USFIA victiminvestors.
LeonardStacy Johnson, 54, of Huntington Beach, who worked at Chen’s direction inpromoting USFIA and Gem Coins, pleaded guilty in July 2019 to one count of taxevasion and one count of making a false statement on an immigration document.Johnson is scheduled to be sentenced on May 24.
The Securities and Exchange Commission successfully brought an enforcement action against Chen, USFIA, and 12 other Chen-controlled entities. A receiver has been appointed by a court in that matter and maintains a website for victims at: usfiareceiver.com.
Thismatter was investigated by the FBI, IRS Criminal Investigation, and HomelandSecurity Investigations.
Thiscase was prosecuted by Assistant United States Attorneys Richard E. Robinson ofthe Major Frauds Section and Katherine A. Rykken of the U.S. Attorney’s Officefor the District of Oregon.
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