 "Frauds, Fraud investigation")
The Securities and Exchange Commission on Monday announced that it has obtained a temporary restraining order, asset freeze, and other emergency relief to halt an ongoing fraud targeting the Indian American community that has raised nearly USD 130 million since April 2021.
Nanban Ventures LLC, its three founders Gopala Krishnan, Manivannan Shanmugam, and Sakthivel Palani Gounder, collectively known as the Founders, and three other entities that these Founders control are allegedly involved in committing the fraud, the SEC said in a press statement.
Unsealed in the US District Court for the Eastern District of Texas, the SEC complaint alleged that the defendants raised more than USD 89 million from more than 350 investors for investments in purported venture capital funds that the Founders managed through Nanban Ventures LLC. They also raised over USD 39 million from 10 investors which was later invested directly in the three other entities controlled by the Founders.
The complaint added that the Founders overstated the profitability of the investments and paid investors at least USD 17.8 million in fake profits that were actually Ponzi payments. The SEC alleged that the defendants misrepresented Krishnan's expertise and success using his eponymous 'GK Strategies' options trading method.
According to the SEC's complaint, Krishnan claimed in a YouTube video that he achieved returns of more than a hundred per cent, and Nanban Ventures claimed in the private placement memorandums of its venture capital funds that Krishnan would manage the funds to generate returns that would consistently overperform the S&P 500 Index".
The complaint further alleged that the actual trading returns using GK Strategies were, with limited exceptions, lower than the returns of the S&P 500 index, lower than the percentage returns that Krishnan claimed in YouTube videos, and negative on numerous occasions, the media release said.
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We allege that the defendants engaged in a large-scale affinity fraud that targeted hundreds of investors, largely from the DFW-area Indian American community, said Gurbir S Grewal, Director of the SEC's Division of Enforcement.
Through allegedly false promises of unrealistic returns and lies about the success of their investing strategies, the defendants raised nearly USD 130 million from investors. But in classic Ponzi fashion, the complaint alleges, the defendants used investor money to make fake profit distribution payments, while allegedly siphoning off millions in investors' funds for themselves, Grewal said.
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