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U.S. Securities and Exchange Commission v. Yang

United States District Court, N.D. Illinois, Eastern Division

February 3, 2014

U.S. SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
SIMING YANG, PRESTIGE TRADE INVESTMENTS LIMITED, CAIYIN FAN and SHUI CHONG (ERIC) CHANG, Defendants.

Robert R. Cohen, Frankel & Cohen, Chicago, IL, One of the Attorneys for Shui Chong (Eric) Chang.

Jedediah B. Forkner, U.S. Securities & Exchange Commission, Chicago, IL, One of the Attorneys for U.S. Securities & Exchange Commission.

JOINT MOTION FOR ENTRY OF FINAL JUDGMENT, BY CONSENT, AGAINST DEFENDANT SHUI CHONG (ERIC) CHANG AND ORDER DISBURSING FUNDS AND DISSOLVING ASSET FREEZE

MATTHEW F. KENNELLY, District Judge.

Plaintiff U.S. Securities and Exchange Commission (the "Commission") and Defendant Shui Chong (Eric) Chang") hereby jointly move for entry of a Final Judgment as to Chang in the form attached hereto as Exhibit A and an Order Disbursing Funds and Dissolving Asset Freeze in the form attached hereto as Exhibit C. In support of this motion, the Commission and Chang state as follows:

1. The Commission and Chang have reached a proposed settlement in this action, which would resolve the claims asserted against Chang.

2. Attached hereto as Exhibit A is a proposed Final Judgment as to Chang.

3. Attached hereto as Exhibit B is the executed Consent of Chang, in which he has agreed to the terms of the proposed Final Judgment and consented to its immediate entry.

4. The proposed Final Judgment provides for, among other things

a. a permanent injunction against Chang prohibiting him from future violations of the provisions of the federal securities laws that the Commission alleges Chang violated;

b. an order requiring Chang to pay disgorgement in the amount of $59, 965, plus prejudgment interest thereon in the amount of $3, 062.67; and

c. an order requiring Chang to pay a civil penalty in the amount of $59, 965.

5. Entry of the proposed Final Judgment as to Chang will further the interests of justice and judicial economy.

6. The Commission and Chang agree that the disgorgement, prejudgment interest and civil penalty required by the Final Judgment should be paid from the frozen assets held in Chang's brokerage account with E and that the asset freeze should be lifted in its entirety after the amounts due under the Final Judgment are paid. Attached hereto as Exhibit C is a proposed Order Disbursing Funds and Dissolving Asset Freeze that would give effect to the parties' agreement.

WHEREFORE, for the foregoing reasons, the Commission and Chang respectfully request that the Court grant this motion and enter the proposed Final Judgment as to Defendant Shui Chong (Eric a copy of which is attached hereto as Exhibit A, and the proposed Order Disbursing Funds and Dissolving Asset Freeze, a copy of which is attached hereto as Exhibit C.

Respectfully Submitted by,

FINAL JUDGMENT AS TO DEFENDANT SHUI CHONG (ERIC) CHANG

The Securities and Exchange Commission having filed a Complaint and Defendant Shui Chong (Eric over Defendant and the subject matter of this action; consented to entry of this Final Judgment without admitting or denying the allegations of the Complaint (except as to jurisdiction and except as otherwise provided herein in paragraph IV; waived findings of fact and conclusions of law; and waived any right to appeal from this Final Judgment

I.

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant and Defendant's agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Final Judgment by personal service or otherwise are permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of any security

(a) to employ any device, scheme, or artifice to defraud;
(b) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
(c) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

II.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for disgorgement of $59, 965.00, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $3, 062.67 and a civil penalty in the amount of $59, 965.00 pursuant to Section 21A of the Exchange Act [15 U.S.C. § 78u-1]. Defendant shall satisfy this obligation by paying $122, 992.67 to the Securities and Exchange Commission within 14 days after entry of this Final Judgment.

Defendant may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request. Payment may also be made directly from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified check, bank cashier's check, or United States postal money order payable to the Securities and Exchange Commission, which shall be delivered or mailed to

and shall be accompanied by a letter identifying the case title, civil action number, and name of this Court; Shui Chong (Eric made pursuant to this Final Judgment.

Defendant shall simultaneously transmit photocopies of evidence of payment and case identifying information to the Commission's counsel in this action. By making this payment, Defendant relinquishes all legal and equitable right, title, and interest in such funds and no part of the funds shall be returned to Defendant. The Commission shall send the funds paid pursuant to this Final Judgment to the United States Treasury.

The Commission may enforce the Court's judgment for disgorgement, civil penalties, and prejudgment interest by moving for civil contempt (and/or through other collection procedures authorized by law) at any time after 14 days following entry of this Final Judgment. Defendant shall pay post judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961.

III.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Consent is incorporated herein with the same force and effect as if fully set forth herein, and that Defendant shall comply with all of the undertakings and agreements set forth therein.

IV.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the allegations in the complaint are true and admitted by Defendant, and further, any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by Defendant under this Final Judgment or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation by Defendant of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §'523(a)(19).

V.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment.

VI.

There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.

ORDER DISBURSING FUNDS AND DISSOLVING ASSET FREEZE AS TO DEFENDANT SHUI CHONG (ERIC) CHANG

The Court, having considered the Joint Motion by Plaintiff, U.S. Securities and Exchange Commission (the "Commission"), and Defendant Shui Chong (Eric) Chang ("Chang") to Disburse Funds and Dissolve Asset Freeze, HEREBY ORDERS THAT:

1. The Commission's and Chang's Joint Motion is GRANTED.

2. E*Trade Financial is directed to pay $122, 992.67 from Chang's brokerage account (Account No. 7****968) to the U.S. Securities and Exchange Commission by certified check, which shall be delivered or mailed to

and shall be accompanied by a letter identifying the case title, civil action number, and name of this Court; identifying Shui Chong (Eric) Chang as a defendant in this action; and specifying that payment is made pursuant to this Final Judgment. E*Trade Financial is further directed to transmit photocopies of evidence of payment and case identifying information to the Commission's counsel in this action.

3. After E*Trade Financial has processed the payment described in paragraph 2 above, the terms of the Court's June 19, 2012 Preliminary Injunction and Asset Freeze as to Defendant Chang (Dkt. #51) as amended on September 25, 2012 (Dkt. #93) and February 20, 2013 (Dkt. #145) shall be dissolved in their entirety. As a result of the dissolution, all funds and other assets of Defendant Chang, including but not limited to the remaining funds in his brokerage account with E*Trade Financial #7****968, will no longer be frozen. In addition, Chang may then withdraw funds from E*Trade Financial #7****968, and all other funds and accounts.

IT IS SO ORDERED.

CONSENT OF DEFENDANT SHUI CHONG (ERIC) CHANG

1. Defendant Shui Chong (Eric) Chang ("Defendant") acknowledges having been served with the complaint in this action, enters a general appearance, and admits the Court's jurisdiction over Defendant and over the subject matter of this action.

2. Without admitting or denying the allegations of the complaint (except as provided herein in paragraph 11 and except as to personal and subject matter jurisdiction, which Defendant admits), Defendant hereby consents to the entry of the final Judgment in the form attached hereto (the "Final Judgment") and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendant from violation of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. § 78j(b)] and Rules 10b-5 thereunder [17 C.F.R. § 240.10b-5];
(b) orders Defendant to pay disgorgement in the amount of $59, 965, plus prejudgment interest thereon in the amount of $3, 062.67; and
(c) orders Defendant to pay a civil penalty in the amount of $59, 965 under Section 21A of the Exchange Act [15 U.S.C. § 78u-1.]

3. Defendant agrees that he shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy, with regard to any civil penalty amounts that Defendant pays pursuant to the Final Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors. Defendant further agrees that he shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any penalty amounts that Defendant pays pursuant to the Final Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors.

4. Defendant waives the entry of findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

5. Defendant waives the right, if any, to a jury trial and to appeal from the entry of the Final Judgment.

6. Defendant enters into this Consent voluntarily and represents that no threats, offers, promises, or inducements of any kind have been made by the Commission or any member, officer, employee, agent, or representative of the Commission to induce Defendant to enter into this Consent.

7. Defendant agrees that this Consent shall be incorporated into the Final Judgment with the same force and effect as if fully set forth therein.

8. Defendant will not oppose the enforcement of the Final Judgment on the ground, if any exists, that it fails to comply with Rule 65(d) of the Federal Rules of Civil Procedure, and hereby waives any objection based thereon.

9. Defendant waives service of the Final Judgment and agrees that entry of the Final Judgment by the Court and filing with the Clerk of the Court will constitute notice to Defendant of its terms and conditions. Defendant further agrees to provide counsel for the Commission, within thirty days after the Final Judgment is filed with the Clerk of the Court, with an affidavit or declaration stating that Defendant has received and read a copy of the Final Judgment,

10. Consistent with 17 C.F.R. 202.5(f), this Consent resolves only the claims asserted against Defendant in this civil proceeding. Defendant acknowledges that no promise or representation has been made by the Commission or any member, officer, employee, agent, or representative of the Commission with regard to any criminal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liability. Defendant waives any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or civil penalty herein. Defendant further acknowledges that the Court's entry of a permanent injunction may have collateral consequences under federal or state law and the rules and regulations of self-regulatory organizations, licensing boards, and other regulatory organizations. Such collateral consequences include, but are not limited to, a statutory disqualification with respect to membership or participation in, or association with a member of, a self-regulatory organization. This statutory disqualification has consequences that are separate from any sanction imposed in an administrative proceeding.

11. Defendant understands and agrees to comply with the terms of 17 C.F.R. § 202.5(e), which provides in part that it is the Commission's policy "not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings, " and "a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations." As part of Defendant's agreement to comply with the terms of Section 202.5(e), Defendant: (i) will not take any action or make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis; (ii) will not make or permit to be made any public statement to the effect that Defendant does not admit the allegations of the complaint, or that this Consent contains no admission of the allegations, without also stating that Defendant does not deny the allegations; (iii) upon the filing of this Consent, Defendant hereby withdraws any papers filed in this action to the extent that they deny any allegation in the complaint; and (iv) stipulates solely for purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 1] U.S.C. §523, that the allegations in the complaint are true, and further, that any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by Defendant under the Final Judgment or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation by Defendant of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11' U.S.C. §523(a)(19). If Defendant breaches this agreement, the Commission may petition the Court to vacate the Final Judgment and restore this action to its active docket. Nothing in this paragraph affects Defendant's: (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the Commission is not a party.

12. Defendant hereby waives any rights under the Equal Access to Justice Act, the Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to seek from the United States, or any agency, or any official of the United States acting in his or her official capacity, directly or indirectly, reimbursement of attorney's fees or other fees, expenses, or costs expended by Defendant to defend against this action. For these purposes, Defendant agrees that Defendant is not the prevailing party in this action since the parties have reached a good faith settlement.

13. In connection with this action and any related judicial or administrative proceeding or investigation commenced by the Commission or to which the Commission is a party, Defendant (i) agrees to appear and be interviewed by Commission staff at such times and places as the staff requests upon reasonable notice; (ii) will accept service by mail or facsimile transmission of notices or subpoenas issued by the Commission for documents or testimony at depositions, hearings, or trials, or in connection with any related investigation by Commission staff; (iii) appoints Defendant's undersigned attorney as agent to receive service of such notices and subpoenas; (iv) with respect to such notices and subpoenas, waives the territorial limits on service contained in Rule 45 of the Federal Rules of Civil Procedure and any applicable local rules, provided that the party requesting the testimony reimburses Defendant's travel, lodging, and subsistence expenses at the then-prevailing U.S. Government per diem rates; and (v) consents to personal jurisdiction over Defendant in any United States District Court for purposes of enforcing any such subpoena.

14. Defendant agrees that the Commission may present the Final Judgment to the Court for signature and entry without further notice.

15. Defendant agrees that this Court shall retain jurisdiction over this matter for the purpose of enforcing the terms of the Final Judgment.


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