The second individual subject to clawback litigation in the USFIA case, is Steve Chen’s wife, Li Zhao (aka Jennifer Zhao).
Through a number of shell companies, Zhao received and/or benefited from millions of dollars in stolen investor funds.
The primary company used to launder investor funds for the benefit of Zhao was Ally Investors LLC.
Despite opposition from Zhao, the Receiver has so far managed to recover over $3 million from a frozen Ally account in 2015.
In late 2017 Zhao was also stripped of a $2.3 million dollar San Marino, California mansion, paid for entirely with USFIA investor funds.
Now the Receiver is pursuing additional clawback litigation against Zhao which, if successful, will recover a further $370,000 or so.
Companies used to launder funds to and from USFIA and Ally Investors include Jet profit Trading, Tongyi Trading Co. and Xiangxin Electronic Trading.
The Receiver alleges that, through this network, Zhao received over $370,000 in stolen USFIA investor funds.
These payments were made over the course of years and appear to have been used to pay for, among other things, a luxury automobile, school tuition, and other personal expenses.
Based on the Receiver’s review of the Receivership Entities’ books and records, there do not appear to have been any legitimate business transactions underlying these payments, and the Receivership Entities do not appear to have received any value in exchange for these payments.
Instead, it appears Defendant Steve Chen simply used funds raised from investors to make gratuitous transfers to Zhao and pay her personal expenses.
Despite being informed of the Receiver’s intention to recover what she was paid, Zhao ‘has not agreed to turn over any funds and a settlement has not been reached.‘
Based on the information and evidence gathered to date, the Receiver believes there are strong fraudulent transfer and disgorgement claims against Zhao for recovery of the funds she received.
That said, the Receiver
believes a full trial is highly unlikely and the case will likely be resolved via settlement or summary judgment with legal fees of $100,000 or less.
This is in line with clawback litigation I’ve tracked in other MLM fraud cases over the years, none of which have gone to trial.
At this stage the Receiver is seeking permission to go after Zhao. A hearing on the matter has been scheduled for July 30th.
The first USFIA clawback litigation was filed against Steve Chen’s ex-wife, Wei He.
Last October the Receiver applied for permission to pursue He for around $5.3 million.
Permission was granted and the Receiver filed clawback litigation against He in January, 2018.
On June 26th the He clawback lawsuit was referred to mediation for potential settlement.