A Mequon investment adviser, and developer of the stalled 5xen Asian Market, is the focus of a money laundering and wire fraud investigation
Tom Daykin
Milwaukee Journal Sentinel
A Mequon investment adviser, who's also a developer of the stalled 5xen Asian Super Market expansion, is under investigation for alleged money laundering and wire fraud — including a claim she used funds from investors to gamble millions of dollars at a Milwaukee casino.
That's according to a search warrant affidavit filed in U.S. District Court.
The warrant was issued for the Mequon home of Kay Yang on Feb. 23 by Nancy Joseph, a federal magistrate.
That court record shows that Yang is the subject of a criminal investigation in connection with a Ponzi scheme allegedly conducted through her firms: AK Equity Group LLC, AK Global Investing LLC, Xapphire Fund LLC, Xapphire G Fund LLC and Xapphire LLC.
The warrant was issued to search for financial statements, titles to foreign assets and other records, according to the court filing. The search occurred on Feb. 24, with several written and electronic business records seized, according to a warrant inventory.
Yang didn't respond Monday to the Milwaukee Journal Sentinel's requests for an interview.
IRS requested search warrant
There is reasonable cause to believe Yang has committed wire fraud and money laundering violations, wrote Park Jones, an Internal Revenue Service special agent, in requesting the search warrant. However, charges haven't been filed.
Since 2017, Yang received more than $15 million from investors throughout the United States.
"Yang solicited these investments under the materially false pretense that she would invest the funds in international markets and foreign exchange trading for profit," the court filing said.
The warrant affidavit cited interviews investigators conducted with five investors, who are not named.
Those investors, who were promised big returns, said Yang rebuffed requests to withdraw funds from their accounts.
Also, investigators checked on Yang's bank records.
"In performing an analysis of the withdrawals from the account, it appears that only a portion of the investor funds received were used for investment purposes," according to the review of one bank account, which received $13.1 million from Yang's investors.
"Instead, the investor funds were used to pay other investors, to pay expenses of the business and to pay for Yang’s personal expenses," the filing said.
Yang was conducting a Ponzi scheme — using money from new investors to pay the returns promised to earlier investors, it said.
"Yang has made approximately $2.5 million of return payments to investors. Based upon review of the financial records, it appears Yang is using new investor funds for these return payments," the filing said.
At some point, a Ponzi scheme runs out of new investors. And, because the underlying product isn't profitable, most of the scheme’s participants lose their money.
The underlying product for Yang's investments was "an extremely risky type of investing that involves speculating in foreign currency by using the currency of one country to purchase the currency of another," the filing said.
While Yang did legitimate trading in foreign currencies, records show she lost $11 million from May 2017 to January 2021.
300-plus visits to Potawatomi casino
Also, it appears that Yang used investor funds for her personal expenses, including gambling, travel and real estate purchases, the filing said.
From January 2016 through August 2020, Yang and her husband, Chao Yang, spent $10.7 million on slot machines during more than 300 visits to Milwaukee's Potawatomi Hotel and Casino, the filing said.
Between them, the couple lost $854,242 in gambling on slot machines there, it said.
Additional personal expenses included ATM withdrawals at Las Vegas casinos, the purchase of a Sheboygan home for Yang's sister, money sent to an international wire transfer business, the purchase of the couple's Mequon home and a $54,125 payment to Tesla Motors
Yang acted as an unregistered investment adviser, a violation of state law, according to a Wisconsin Department of Financial Institutions order issued in 2020.
The department ordered Yang to pay restitution of nearly $17 million within five years to investors. She also was ordered to repay $4.2 million in profit and pay a $50,000 civil penalty.
A lawsuit filed by investors in Ozaukee County Circuit Court claims Yang has violated the state's order by failing to make restitution payments and is financially liable for $2.1 million in investments made by the seven plaintiffs. She's disputing those claims.
Asian market project stalled
Also, Yang has been leading plans to expand 5xen Asian Super Market, 6300 N. 76th St.
The Journal Sentinel reported in February that the $20 million project, which has stalled, is facing a foreclosure suit.
5xen was to build a three-story, 44,000-square-foot addition to the market's newer two-story, 71,000-square-foot building.
The market's older one-story, 14,000-square-foot building, as well as two other neighboring buildings, were to be demolished to make way for more parking on the 4.5-acre site.
The plans, which city officials approved in fall 2020, called for an Asian grocery store, food court featuring Hmong cuisine, and other retail space on the first floor.
The project would include office space for local and emerging businesses as well as improved meeting rooms and a banquet hall on the second floor for weddings, parties and other events.
But those plans haven't proceeded.
Cary Spivak of the Journal Sentinel staff contributed to this report.
Tom Daykin can be emailed at
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https://www.jsonline.com/story/money/real-estate/commercial/2022/03/08/5-xen-asian-super-market-developer-facing-money-laundering-wire-fraud-probe-milwaukee-kay-yang/9411467002/
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