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Steven Chen got 10 years in prison for his role in a scheme to solicit money from investors using a fake digital currency backed by gemstones mined from non-existent sites.
Los Angeles—A California man has been sentenced to a decade in prison for his role in a scheme to cheat investors out of millions using a fake digital currency backed by gemstones.
The U.S. Attorney’s Office for the Central District of California announced Monday that 63-year-old Steven Chen of Bradbury, California pleaded guilty in June 2020 to one count of conspiracy to commit wire fraud and one count of tax evasion.
Chen was the owner and CEO of a company called U.S. Fine Investment Arts (USFIA), as well as six other companies that used the same address.
The attorney’s office said from July 2013 to September 2015, Chen, or “Boss” as he was also known, solicited investments in USFIA, ultimately obtaining about $147 million from 72,000 victims in what the office has called “one of the largest pyramid schemes ever prosecuted in [that] district.”
He falsely promoted USFIA as a successful multi-level marketing company that extracted amber and other gemstones from non-existent mines the company claimed to own in the United States, Dominican Republic, Argentina and Mexico.
Chen promoted his scam, prosecutors said, through a scheme in which compensation for recruiting other investors came primarily from new USFIA investor payments.
The investors were duped into buying investment “packages” ranging in price between $1,000 and $30,000, with each package supposedly comprised of amber and other gemstones as well as USFIA “points,” which could be converted into shares in the company when it went public.
Chen, however, never intended for the business to go public, the attorney’s office said.
USFIA also offered other bonuses, like cash, travel, luxury cars and homes, to investors who recruited others.
Starting in September 2014, Chen and others changed the promotion by offering “Gem Coins” instead of points.
They falsely ensured the coins were a legitimate digital currency backed by the company’s gemstone holdings. Chen also lied about the coins already being in wide circulation in the jewelry and finance industries.
According to prosecutors, USFIA did not generate any “significant revenue” from its business operations, apart from selling the investment packages.
It also said the amber and other gemstones provided in the packages—which Chen and his associates claimed they were mining—were bought from domestic and international suppliers and given “grossly inflated” prices.
And the “Gem Coins” were not circulated in any industry, weren’t accepted by any merchants and, essentially, have no economic value.
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attorney’s office said Chen also committed tax evasion when he reported his gross income in 2014 as $138,015, when it was actually was about $4.8 million, for which he owes nearly $1.9 million before interest and penalties.
U.S. District Judge John F. Walter, who handled Chen’s sentencing, ordered him to pay $1.9 million in restitution to the IRS and the judge scheduled a July 16 restitution hearing for USFIA investors who were victimized in the scheme.
Meanwhile, 54-year-old Leonard Stacy Johnson of Huntington Beach, California, whom prosecutors say helped promote USFIA and Gem Coins under Chen’s direction, pleaded guilty in July 2019 to one count of tax evasion and one count of making a false statement on an immigration document.
Johnson’s sentencing is scheduled for May 24.
U.S. District Judge John F. Walter, who handled Chen’s sentencing, ordered him to pay $1.9 million in restitution to the IRS and the judge scheduled a July 16 restitution hearing for USFIA investors who were victimized in the scheme.
Meanwhile, 54-year-old Leonard Stacy Johnson of Huntington Beach, California, whom prosecutors say helped promote USFIA and Gem Coins under Chen’s direction, pleaded guilty in July 2019 to one count of tax evasion and one count of making a false statement on an immigration document.
Johnson’s sentencing is scheduled for May 24.
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