Additional Information for AK Equity Group LLC

Commodity Futures Trading Commission v. Kay X Yang

The following describes a pending government action that has been formally brought by a government agency but has not yet been resolved. We are providing a summary of the government’s allegations, which have not yet been proven.

The Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Eastern District of Wisconsin against Kay Yang of Mequon, Wisconsin, and her companies, AK Equity Group LLC and Xapphire LLC. The complaint charges Yang, AK Equity, and Xapphire with fraud and misappropriation related to an off-exchange foreign currency (forex) trading scheme in which they solicited funds totaling at least $15.7 million from at least 67 investors. Yang’s husband, Chao Yang, is named as a relief defendant for receiving investor funds to which he was not entitled. 

According to the complaint, from approximately April 2017 through March 2020, the defendants solicited and pooled millions of dollars of investors’ funds in bank and trading accounts for the purported purpose of trading forex.

The complaint alleges, among other things, the defendants falsely represented to existing and potential pool participants that they successfully managed hundreds of millions of dollars in a variety of investment vehicles; consistently achieved positive monthly returns; would allocate 100% of pool participants’ funds to forex trading; and would adhere to a trading strategy that included low leverage ratios and moderate trading frequencies. These were false claims and the defendants routinely suffered trading losses using high leverage and high frequency trading strategies. The defendants also failed to disclose they misappropriated significant amounts of pool participants’ funds to pay for Kay Yang’s personal expenses. For example, Yang spent over $700,000 at casinos and on gambling-related purchases, more than $439,000 on travel and luxury hotels, and at least $248,000 on cars and car-related expenses. Furthermore, Yang made net transfers of approximately $200,000 to bank accounts in her name, at least $1.4 million to bank accounts in her husband’s name  and more than $1 million to joint bank accounts she shared with her husband.         

In continuing its litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act, as charged.  

SEC Complaint - Kay X Yang

The following describes a government action that has been resolved by either a settlement or a decision by a court or administrative agency. If the matter is being appealed, it will be noted below.

The Securities and Exchange Commission filed fraud charges today against Kay X. Yang and her company, Xapphire LLC, for allegedly raising $16.5 million by making false and misleading statements to approximately 70 investors and for misappropriating more than $4 million of the investors' funds.

According to the SEC's complaint, between April 2017 and April 2021, Yang, a resident of Mequon, Wisconsin, and Xapphire LLC engaged in the unregistered offer and sale of securities issued by her entities AK Equity Group LLC and Xapphire Fund LLC. The complaint further alleges that Yang falsely represented to prospective investors, many of whom were members of the Hmong-American community in Wisconsin and Minnesota, that she would invest their money primarily through foreign exchange trading, they could expect annual returns ranging from 20% to 50%, and the trading was consistently successful. As alleged in the complaint, in reality, Yang used less than half of the investors' money for foreign exchange trading and had many months with large net trading losses, resulting in negative returns. In addition, the complaint alleges that Yang also misappropriated approximately $4,060,000 of the investors' money to fund her and her family's lifestyle, including spending on casinos, travel, homes, and cars, and to repay investors in a previous venture. The SEC also named Yang's husband, Chao Yang, as a relief defendant for improperly receiving proceeds of the fraud according the complaint.

The SEC's complaint, filed in the Eastern District of Wisconsin, alleges that Yang and Xapphire LLC violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933, and the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. It also seeks injunctive relief, disgorgement plus prejudgment interest, civil penalties, and a prohibition on Yang serving as the officer or director of a public company.

On April 26, 2023, the U.S. District Court for the Eastern District of Wisconsin granted the SEC's motion for default judgment, and entered final judgments, against defendants Kay X. Yang and Xapphire LLC, whom the SEC previously charged with violations of the federal securities laws. The court also entered a final judgment against Kay Yang's husband, Chao Yang, who the SEC charged as a relief defendant for improperly receiving proceeds from the fraudulent scheme.

The judgments, entered on the basis of default, enjoined Kay Yang and Xapphire LLC from violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. In addition, Kay Yang was barred from acting as an officer or director of a public company. The judgments ordered Kay Yang and Xapphire LLC to pay, on a joint-and-several basis, $4,060,212 in disgorgement, prejudgment interest in the amount of $188,787.16, and a civil penalty in the amount of $4,060,212. Chao Yang was ordered to pay up to $830,502 in disgorgement and $38,615.75 in prejudgment interest.