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Date: 10-12-2018

Case Style:

United States of America v. Sung Hong and Hyun Joo Hong

Case Number: 2:17-cr-00163-TSZ

Judge: Thomas S. Zilly

Court: United States District Court for the Western District of Washington (King County)

Plaintiff's Attorney: Justin Arnold and Steven Masada

Defendant's Attorney: James Frush for Sung Hong


Tom Hillier and Michelle Maley for Hyun Joo Hong, a/k/a Grace Hong

Description:





Seattle, WA - Couple Sentenced to Lengthy Prison Terms for $12.7 Million Affinity Investment Fraud
Defendants Preyed on Faith Communities to Fund Lavish Lifestyle

SUNG HONG, 47, and HYUN JOO HONG, 42, of Clyde Hill, Washington were sentenced today in U.S. District Court in Seattle to lengthy prison terms for defrauding more than 55 clients out of $12.7 million, announced U.S. Attorney Annette L. Hayes. SUNG HONG, aka LAURENCE HONG or LAWRENCE HONG, was sentenced to 15 years in prison. His wife, HYUN JOO HONG, aka GRACE HONG, was sentenced to six years in prison. From 2010 until their arrest in June 2017, the couple held themselves out as experienced investment advisors with a track record of performance in order to solicit investor funds for their hedge fund, Pishon Holdings, and for management through separately managed accounts. In fact, SUNG HONG had just completed a 33 month sentence for committing investment fraud when he launched this new scheme in 2010. At the sentencing hearing U.S. District Judge Thomas S. Zilly said, “This scheme was a serious, complex fraud over seven years. You targeted religious victims. You used God as a way to gain trust…. You have emotionally and spiritually damaged these victims and most of them will never recover.”

“Using faith and fraud, this couple stole millions from people whose dreams of a better life have now been shattered,” said U.S. Attorney Annette L. Hayes. “Both repeatedly lied to their investors, all while spending their hard earned money on high-end shopping sprees, luxurious vacations, a yacht and an expensive rental home. Their victims now live paycheck to paycheck with college and retirement funds depleted and a very different financial future than they expected.”

According to records filed in the case, the HONGs recruited investors using religious organizations and shared religious beliefs. The couple claimed that LAURENCE HONG privately invested billions of dollars for wealthy Korean families and that GRACE HONG held a Series 65 securities license and previously worked for a large international investment firm. None of these statements were true. Likewise, the defendants did not disclose LAURENCE HONG’s past criminal conviction for investment fraud. The couple sent potential investors misleading and false investment prospectuses that contained an inaccurate record of their past investment performance and other plagiarized investment outlooks.

Throughout their fraudulent scheme, the HONGs used stolen investor funds for their own benefit, including payments for a 9,000 square foot rental home in Clyde Hill; a 45-foot yacht; multiple high-end vehicles, such as BMWs, a Maserati, an Aston Martin, and a Lamborghini; and numerous expensive vacations to locations such as the Bahamas and Beverly Hills.

One church in California invested $1 million with the HONGs and lost about $300,000 on a single trade. Still, despite the steep losses and a fee arrangement based on investment gains, the HONGs withdrew almost $150,000, ostensibly as advisor fees, from the church’s account. Another couple allowed the HONGs to manage their $180,000 in retirement funds only to lose $100,000 within less than a year. After meeting with the HONGs, that couple then invested their remaining retirement funds in the HONGs’ hedge fund, only for those funds to be redirected into GRACE HONG’s personal account. The HONGs used those funds to pay credit card bills and other personal expenses, including a $16,000 payment to a resort in the Bahamas for a HONG family vacation.

Speaking to LAWRENCE HONG, Judge Zilly noted his prior conviction for a similar fraud: “You clearly did not learn anything from the fact you were convicted and sentenced to prison…. You are one of those con men who will never be able to stop conning people.” Judge Zilly noted that GRACE HONG played “an intricate and important role in the entire scheme. She misrepresented her credentials… she took God’s name – she used that to entice investors to put money in their pockets.”

Judge Zilly ordered the pair to pay more than $12.7 million in restitution. The losses for certain investors represented their entire life or retirement savings.

The case was investigated by the FBI. The United States Attorney’s Office thanks the Commodity Futures Trading Commission (CFTC) for its assistance in the investigation.


Charges:


Wire Fraud 18:1343 and 2
(1-6)
Conspiracy to Commit Wire Fraud 18:1349
(1s)
Wire Fraud 18:1343 and 2
(2s-12s)
Laundering of Monetary Instruments 18:1956(a)(1)(B)(i) and 2
(7-9)
Transacting in Criminally Derived Property 18:1957 and 2
(10)
Conspiracy to Launder Monetary Instruments 18:1956(h)
(11)
Aggravated Identity Theft 18:1028A(a) and 2
(13s)
Laundering of Monetary Instruments 18:1956(a)(1)(B)(i) and 2
(14s-16s)
Transacting in Criminally Derived Property 18:1957 and 2
(17s-20s)
Conspiracy to Launder Monetary Instruments 18:1956(h)
(21s)
Conspiracy to Defraud the United States 18:371
(22s)
False Statements 18:1001(a)(2) and 2
(24s)

Outcome: 10/11/2018 126 MINUTE ORDER granting Government's 115 Motion to Seal Document as to Sung Hong (1); granting Government's 118 Motion to Seal Document as to Hyun Joo Hong (2). Authorized by Judge Thomas S. Zilly. (SWT) (Entered: 10/11/2018)
10/11/2018 127 PRELIMINARY ORDER OF FORFEITURE as to Sung Hong re Government's 107 MOTION for Forfeiture of Property Preliminary Order of Forfeiture. Signed by Judge Thomas S. Zilly. (TH) cc: USMO (AF); (Main Document 127 replaced on 10/11/2018 to correct date. NEF regenerated.) (SWT). (Entered: 10/11/2018)
10/11/2018 128 PRELIMINARY ORDER OF FORFEITURE as to Hyun Joo Hong re United States' 108 MOTION, by Judge Thomas S. Zilly. (cc: USMO (AF)) (SWT) (Entered: 10/11/2018)

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Defendant's Experts:

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