Securities and Exchange Commission v. Lam, et al. was filed in the United States District Court for the Central District of California on September 22, 2022, claiming Defendants Brian Lam (“Lam”), Nathan Nguyen (“Nguyen”), NineSquare Capital Partners LLC (“NineSquare Capital”), and Nguyen Group LLC (“NGL”) (collectively, “Defendants”) violated several provisions of the Securities Act and Securities Exchange Act. Specifically, the SEC seeks permanent injunctive relief against all Defendants to prevent future violations of the federal securities laws, permanent injunctions prohibiting Defendants Lam and Nguyen from participating in an unregistered securities offering, disgorgement with prejudgment interest from Defendants and Relief Defendants Yi Ping Lu and Thy Stacy Nguyen (the “Relief Defendants”), and civil penalties against Defendants.

The SEC filed this action against Defendants for operating an offering fraud that targeted the Vietnamese-American community, which raised $11.7 million from 73 investors nationwide from March 2020 to January 2022. Defendant Lam orchestrated the fraud through his company NineSquare, a Delaware limited partnership which purported to be a hedge fund. Defendant Nguyen is the principal of NGL, a company that helped solicit investors in NineSquare. The two Relief Defendants, Yi Ping Lu, Lam’s wife, and Thy Stacy Nguyen, Nguyen’s wife, purportedly used proceeds from the fraud to pay for luxury homes purchased in their names.

According to the Complaint, Defendants Lam and NineSquare told investors that Lam pooled investors’ money and used it to day-trade securities and reported monthly returns ranging from 1.24% to 100%. However, in reality, Lam and NineSquare used less than 60% of investor money to trade securities, and that trading resulted in an almost total loss. As to the remaining investments, Defendants Lam and NineSquare used that money to personally enrich themselves and made Ponzi-like payments to some earlier investors. The Complaint alleges that most of the investors were solicited through Defendant Nguyen and NGL’s monthly “Money Smarts” classes which purported to provide knowledge and skills trading to achieve financial freedom and retire early. Defendant Nguyen ultimately redeemed more than $2 million from the scheme.

The Complaint asserts claims against Defendants Lam and Nine Square for (i) violations of Section 17(a) of the Securities Act; (ii) violations of Section 10(b) of the Exchange Act and Rule 10b-5; and (iii) violations of Section 206(4) of the Advisers Act and Rule 206(4)-8(a)(1) and 206(4)-8(a)(2). The Complaint also asserts one claim against all Defendants for violations of Sections 5(a) and 5(c) of the Securities Act, and one claim against the Relief Defendants for violation of Section 15(a) of the Exchange Act.