Financial adviser pleads guilty to $10 million fraud scheme
SAN DIEGO (CNS) – A financial adviser with a prior criminal history pleaded guilty in San Diego Thursday to carrying out a fraud scheme that resulted in combined investor losses of more than $10 million.
James Yiu Lee, 59, admitted to obstructing justice, hiding stolen funds in shell corporation accounts and using a series of elaborate transactions to avoid having to pay restitution he owed the government from his previous felony conviction.
Lee, a former part-time resident of La Jolla, was convicted in December 1997 of defrauding investors and embezzling from their pension funds. He was sentenced in November 1998 to 30 months in custody and ordered to pay $2.88 million in restitution.
Lee has paid less than $30,000 of the owed restitution, according to the U.S. Attorney’s Office in San Diego. In 2007, Lee began a new scheme in which he intentionally designed to obstruct the federal government from collecting his income to pay the outstanding restitution, prosecutors allege.
As noted in his plea agreement, by 2009, Lee was soliciting new investors and falsely promising to share 50 percent of all realized gains and losses incurred from his online trading activity. In addition, he attracted clients by falsely informing them that he was a CPA, with Ph.D., JD, and MBA degrees. Lee also allegedly failed to disclose his 1997 felony fraud conviction.
In entering his plea, Lee admitted instructing clients to send management fees and profits from trades to bank accounts he opened in the name of shell corporations, including San Diego-based ELX Int. Inc., which failed to list Lee as a corporate officer or on its bank account.
Lee obtained use of his clients’ funds by directing them to send payments to the ELX bank account. Once the assets were under his control, Lee would transfer them to other shell accounts under his control and then use the hundreds of thousands of dollars of these stolen funds for personal expenses, according to court documents.
By January 2011, Lee’s trading activity created significant realized losses to client accounts, prosecutors allege. Rather than pay clients for 50 percent of the losses, as promised, Lee allegedly restructured billing invoices to disguise the losses, then falsely billed his clients for nonexistent gains.
Lee’s trading activity led to over $10 million in losses for over 14 clients, according to court papers.
Lee is scheduled to be sentenced Jan 19.
