SEC v. Johnny Tseng; Kevin Zhang; and Summitcrest Capital, Inc., No. 5:23-cv-01488, Central District of California (July 28, 2023) — Complaint

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KATHRYN WANNER (Cal. Bar No. 269310)
Email:  [email protected]
MARISA G. WESTERVELT (Cal. Bar No. 217172)
Email:  [email protected]

Attorneys for Plaintiff
Securities and Exchange Commission
Katharine Zoladz, Co-Acting Regional Director
Gary Leung, Regional Trial Counsel
444 S. Flower Street, Suite 900
Los Angeles, California 90071
Telephone: (323) 965-3998
Facsimile: (213) 443-1904
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

vs.
JOHNNY TSENG (a/k/a Kuanhao J.
Tseng, Kuanhao Tseng), KEVIN
ZHANG (a/k/a Kevin Huapeng Zhang,
Huapeng Zhang), and
SUMMITCREST CAPITAL, INC.,
Defendants.

    Case    No.

COMPLAINT

Plaintiff Securities and Exchange Commission (“SEC”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to Sections 20(b),
20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§
77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),

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78u(d)(3)(A), 78u(e) & 78aa(a).
2. Defendants have, directly or indirectly, made use of the means or
instrumentalities of interstate commerce, of the mails, or of the facilities of a national
securities exchange in connection with the transactions, acts, practices and courses of
business alleged in this complaint.
3. Venue is proper in this district pursuant to Section 22(a) of the Securities
Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a)
because certain of the transactions, acts, practices, and courses of conduct
constituting violations of the federal securities laws occurred within this district.  In
addition, venue is proper in this district because defendants Johnny Tseng, a/k/a
Kuanhao J. Tseng, Kuanhao Tseng (“Tseng”) and Kevin Zhang, a/k/a Kevin
Huapeng Zhang, Huapeng Zhang (“Zhang”) reside in this district and defendant
Summitcrest Capital, Inc. (“Summitcrest”) has its principal place of business here.
SUMMARY
4. Defendants orchestrated an affinity offering fraud in connection with an
unregistered offering for SC Development Fund, LLC, f/k/a SC Development Fund
V, LLC (“SCDF”), a real estate investment fund that raised approximately $19.8
million from about 30 investors in the United States and China during the period from
approximately February 2018 to November 2019.
5. Tseng, a California real estate broker, and Zhang, a California real estate
developer, managed SCDF through Summitcrest, which they co-owned.
6. The SCDF private placement memoranda (“PPM”) for the SCDF
offering claimed that investor funds would be to make loans to the “general public.”
7. However, contrary to the representations in the SCDF PPM, Defendants
actually used SCDF investor funds to make loans exclusively to Zhang’s real estate
development and contracting business, and other real estate development entities
under Zhang’s control, which ended in default in less than two years.

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8. Defendants also transferred $200,000 of investor funds to another real
estate investment fund controlled by Tseng and Zhang and paid purported “finder’s
fees” to two entities that were ostensibly third parties, but were actually controlled by
Tseng and Zhang, respectively.
9. SCDF ultimately collapsed after the Zhang entities that had received
loans from SCDF began to default on those loans.
10. SCDF then filed for bankruptcy in July of 2020 and is now defunct.
11. By this conduct, Defendants violated Sections 5(a), 5(c), and 17(a) of the
Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
12. The SEC seeks permanent injunctions against future violations of
Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange
Act and Rule 10b-5; conduct-based injunctions; disgorgement with prejudgment
interest; and civil penalties against all Defendants.  In addition, the SEC seeks officer
and director bars as to Tseng and Zhang.
THE DEFENDANTS
13. Johnny Tseng, a/k/a Kuanhao J. Tseng, Kuanhao Tseng, age 43, is a
resident of Eastvale, California.  Tseng owns 50% of the shares of SCDF’s manager,
Summitcrest.  Tseng also is the principal of UBEST Capital, Inc. (“UBEST”), a
Nevada corporation that received purported finder’s fees from SCDF.  UBEST is
inactive and its Nevada state registration was revoked as of early 2021.
14. Kevin Zhang, a/k/a Kevin Huapeng Zhang, Huapeng Zhang, age 41,
resides in Chino Hills, California.  Zhang indirectly owns, through two other
companies he controls, 50% of the shares of SCDF’s manager, Summitcrest.  Zhang
is the founder and former president of Rockport Development, Inc., d/b/a Maestro
Construction (“Rockport”), a California real estate development and contracting
company, and the president and/or control person of each of the twelve other real
estate development entities that received loans from SCDF (collectively, the “Zhang
entities”).  In addition, Zhang was the principal of Cloverleaf Associate

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(“Cloverleaf”), a Nevada corporation that received purported finder’s fees from
SCDF, and was dissolved in December 2019.  After Rockport filed for Chapter 11
bankruptcy in May 2020, Zhang resigned as its president.
15. Summitcrest Capital, Inc., is a California corporation with its principal
place of business in Chino Hills, California.  Summitcrest is co-owned by Tseng and
Zhang and was the manager of SCDF.  Summitcrest has never been registered with
the Commission in any capacity.
RELATED PARTY
16. SC Development Fund, LLC, f/k/a SC Development Fund V, LLC,
was a California limited liability company with its principal place of business in
Pasadena, California.  SCDF has never been registered with the Commission in any
capacity.  SCDF filed for Chapter 7 bankruptcy in July 2020 and is now defunct.
THE ALLEGATIONS
A. The SCDF Offering
17. From approximately February 2018 to November 2019, SCDF offered
and sold approximately $19.8 million in promissory notes to about 30 investors,
including approximately 19 investors residing in the United States, and 11 investors
residing in China.
18. The PPM offered up to $50 million in either membership units or
promissory notes.  Upon information and belief only promissory notes were sold to
investors.
19. The PPM represented that investors who purchased membership units
would receive a 12% annual preferred return, while investors who purchased
promissory notes would receive interest at a fixed annual rate of 8% or 10% for
investments under or over $100,000, respectively.
20. The promissory notes also would be due and payable in two to two and a
half years.

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21. The PPM described both the membership units and promissory notes as
securities, explicitly stating that “[t]he Membership Units and [Promissory] Notes
being sold in the offering are restricted securities under the Securities Act.”
22. The PPM claimed that the offering was exempt from registration, stating
“[SCDF] is offering the Membership Units and the [Promissory] Notes in reliance on
exemptions from the registration requirements of the Securities Act and other
applicable laws.”
23. SCDF also filed a Form D Notice of Exempt Offering of Securities with
the Commission on February 15, 2018, claiming a Regulation D, Rule 506(b)
exemption from registration.
B. Solicitation of the SCDF Offering
24. SCDF solicited investors from Chinese-speaking communities in the
United States, and China.
25. The PPM was printed in English, with corresponding Mandarin Chinese
translations included below each paragraph.
26. SCDF paid purported finder’s fees of $60,000 to Tseng’s entity UBEST,
and purported finder’s fees of $112,100 to Zhang’s entity Cloverleaf, for bringing in
investors from the United States and China.
27. Tseng and Zhang also enlisted one of Zhang’s salaried Rockport
employees, who was a Chinese immigrant, to recruit prospective investors from the
local Chinese immigrant community.
28. In addition, Summitcrest held at least one in-person seminar for Chinese-
speaking real estate agents and insurance agents; at least one of the seminar attendees
referred a client who became an investor in SCDF.
29. The subscription agreements for the SCDF offering sought information
from investors residing in the United States as to whether they met the requirements
for “accredited investors” under Regulation D.

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30. SCDF relied upon investors’ own representations as to whether they met
the accreditation requirements under Regulation D.
C. SCDF’s Use of Investor Funds
31. All of the known SCDF investors purchased promissory notes rather
than membership units.
32. SCDF investors received promissory notes that specified the principal
amount, the interest rate and schedule for interest payments, and the maturity date.
33. SCDF investors mailed checks to SCDF or wired funds to one of two
SCDF bank accounts controlled by Tseng and Zhang.  Both Tseng and Zhang were
signatories on these accounts.
34. The PPM represented that SCDF would use investor funds to make
mortgage loans to the “general public.”
35. These loans were expected to generate income from which SCDF would
make the promised interest payments and return of capital to investors who purchased
the promissory notes.
36. SCDF used approximately $18.7 million of investor funds to make
sixteen real estate-related loans to Zhang’s company Rockport and the Zhang entities.
Each of these loans was secured by a deed of trust on real property located in
Southern California.
37. SCDF also transferred $200,000 to Hillcrest Asset Based Fund I, LLC
(“Hillcrest Fund”), another real estate investment fund controlled by Tseng and
Zhang.
38. Transfers to Hillcrest Fund were not disclosed in the PPM as a possible
use of investor funds.
39. In addition, SCDF used investor funds to pay fund expenses and to pay
management fees to Summitcrest, as well as to pay purported finder’s fees to Tseng
and Zhang’s entities, UBEST and Cloverleaf.

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40. From approximately March 2018 through October 2019, SCDF made
monthly interest payments to investors, totaling approximately $2.3 million.
41. In or around October 2019, Rockport and the Zhang entities began to
default on the loans they had received from SCDF.
42. In or around May 2020, Rockport filed for Chapter 11 bankruptcy.
43. On or around November 21 or November 22, 2019, Summitcrest sent an
email to SCDF investors which stated that SCDF had “recently been notified by
certain borrowers of the fund related to Rockport Development, Inc. (“Borrower”)
that Borrower will be defaulting on its interest payments to [SCDF]” and that this
would “negatively affect [SCDF]’s ability to make timely interest payments to its
Note Holders.”
44. After the November 2019 email to investors, SCDF stopped making
monthly interest payments to investors.
45. SCDF filed for Chapter 7 bankruptcy on July 13, 2020.  This bankruptcy
proceeding closed on April 26, 2022, following the court-appointed trustee’s
determination that there were insufficient funds to administer, having collected just
$26,231 on claims of about $19.5 million.
46. SCDF is now defunct.
B. Violations of the Antifraud Provisions
1.       Misrepresentations       Concerning SCDF’s Business Model and
Misuse of Investor Funds
47. SCDF made misrepresentations to prospective investors concerning its
business model and misused investor funds.
48. The PPM represented that SCDF’s business model would involve
assembling a portfolio of mortgage loans, which Tseng and Zhang would select from
the general public.
49. Both the PPM cover page and the Summary of the Offering section
located on the first few pages of the PPM stated clearly and prominently that SCDF

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would engage in business as a mortgage lender for the purpose of making and
acquiring loans “to the general public” (emphasis added).
50. In reality, Defendants conducted SCDF’s business in a manner that was
completely opposite to that described in the PPM.  Rather than make loans to the
general public, SCDF made loans exclusively to entities affiliated with Zhang.
51. Specifically, SCDF made sixteen loans, four of which were loans to
Zhang’s company Rockport, and twelve of which were loans to the Zhang entities.
52. The loans that SCDF made to Rockport and the Zhang entities went into
default in less than two years, leaving SCDF without the means to pay the remaining
promised interest payments and return of capital to its investors.
53. These business practices resulted in SCDF’s bankruptcy and SCDF
investors’ loss of their investments.
54. SCDF also misused investor funds by transferring $200,000 to Hillcrest
Fund, another real estate investment fund controlled by Tseng and Zhang.  This use
of funds was not disclosed in the PPM.
2.       Misrepresentations       Concerning Payment of Finder’s Fees to
Third Parties and Additional Misuse of Investor Funds
55. SCDF also made misrepresentations to prospective investors concerning
its payment of finder’s fees to third parties and again misused investor funds.
56. The PPM represented that SCDF membership units and promissory
notes would be offered and sold by SCDF.
57. The PPM also represented that Summitcrest, as manager of SCDF, “may
retain the services of independent third parties to locate prospective Investors, who
may receive LLC paid finder fees on a case-by-case basis” and that “[u]p to 2% in
finder’s fees may be paid to third parties.”
58. Tseng and Zhang had SCDF pay finder’s fees to entities that were
ostensibly third parties, but were in fact companies under their control, not
independent third parties.

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59. Specifically, during the period from approximately March 2018 through
December 2018, SCDF paid finder’s fees of approximately $60,000 to UBEST,
which was controlled by Tseng, and finder’s fees of approximately $112,100 to
Cloverleaf, which was controlled by Zhang.
60. UBEST and Cloverleaf submitted invoices to SCDF for finder’s fees and
received payment on those invoices.
61. Tseng and Zhang thus hid behind the corporate veneers of UBEST and
Cloverleaf, respectively, in order to misappropriate finder’s fees for themselves.

C. The Misrepresentations and Misuse of Investor Funds were
Material
62. SCDF’s false and misleading statements and the misuse of investor
funds were material.
63. A reasonable investor would have considered it important to know that
their investments would be used to make mortgage loans that were not made “to the
general public,” as had been represented to them, but exclusively to Zhang’s
company Rockport and the Zhang entities.
64. A reasonable investor also would have considered it important to know
that their investments would be used to pay finder’s fees that were not paid to
independent third parties, as had been represented to them, but to entities controlled
by Tseng and Zhang, respectively.
65. In addition, a reasonable investor would have considered it important to
know that their funds were not used as described in the PPM, but that $200,000 in
investor money was transferred to Hillcrest Fund.
66. Because Tseng and Zhang controlled SCDF through Summitcrest, which
was the manager of SCDF with absolute authority over the business of SCDF, the
Defendants had ultimate authority over the false statements.

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 D. Defendants Acted with Scienter
67. As co-owners of Summitcrest, which was the manager of SCDF with
absolute authority over the business of SCDF, and as signatories on SCDF’s bank
accounts, Tseng and Zhang knew, or were reckless in not knowing, that despite the
disclosures in the PPM, SCDF was actually only making loans only to Zhang’s
company Rockport and the Zhang entities, paying finder’s fees to their own
companies, and transferring funds to their Hillcrest Fund.
68. Tseng and Zhang’s scienter is attributable to Summitcrest because they
controlled it.
E. Defendants Obtained Money By Means of the Misrepresentations
69. Defendants obtained money directly by means of the misrepresentations
because SCDF paid finder’s fees to Tseng and Zhang’s entities, UBEST and
Cloverleaf, and paid management fees to Summitcrest.
70. Tseng and Zhang also were the principals of SCDF and Summitcrest,
and therefore obtained money through these entities.
F. Registration Violations: Sections 5(a) and 5(c) of the Securities Act

71. SCDF offered and sold securities, raising approximately $19.8 million
from about 30 investors in the United States and China from approximately
February 2018 to November 2019.
72. The SCDF offering was never registered with the SEC.
73. The SCDF securities were offered and sold through interstate commerce,
including through the mail and bank wire transfers.
74. The SCDF offering was not exempt from registration.
75. SCDF, as the issuer of the securities, directly offered and sold securities
through general solicitation, including an in-person seminar for Chinese speaking real
estate agents and insurance agents.
76. SCDF offered and sold securities to investors residing outside of
California and the United States.

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77. SCDF did not take reasonable steps to verify whether investors residing
in the United States were accredited.
78. SCDF, as the issuer of the securities, directly offered and sold securities
through a general solicitation, raising approximately $19.8 million by marketing the
offering to investors.
79. Tseng and Zhang are liable for SCDF’s offer and sale of securities
because they controlled SCDF through Summitcrest, which was the manager of
SCDF with absolute authority over the business of SCDF.
FIRST CLAIM FOR RELIEF
Fraud in Connection with the Purchase or Sale of Securities
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against All Defendants)
80. The SEC realleges and incorporates by reference paragraphs 1 through
79 above.
81. In connection with the purchase or sale of securities, Defendants
engaged in a scheme to defraud and made material misrepresentations to investors.
These included statements to potential investors that SCDF would use their funds to
make loans to “the general public[.]”  Although SCDF did fund real estate loans, not
a single loan was to the general public; rather, all of the loans were to companies
affiliated with Zhang or under Zhang’s control.  Defendants also used investor funds
to pay purported finder’s fees to entities controlled by Tseng and Zhang, while
claiming in the offering documents that finder’s fees would be paid to third parties.
Finally, Defendants misused investor funds by transferring money to another
investment fund without disclosing that potential use of funds to investors.
82. Because Defendants controlled SCDF, Defendants are the makers of
these material misrepresentations and/or omissions.
83. By engaging in the conduct described above, Defendants, and each of
them, directly or indirectly, in connection with the purchase or sale of a security, and

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by the use of means or instrumentalities of interstate commerce, of the mails, or of
the facilities of a national securities exchange:  (a) employed devices, schemes, or
artifices to defraud; (b) made untrue statements of a material fact or omitted 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) engaged in acts,
practices, or courses of business which operated or would operate as a fraud or deceit
upon other persons.
84. Summitcrest acted through Tseng and/or Zhang.  Therefore, Tseng’s and
Zhang’s knowledge, recklessness, and/or negligence may be imputed to Summitcrest.
85. Defendants, with scienter, employed devices, schemes, or artifices to
defraud; made untrue statements of material facts or omitted to state material facts
necessary in order to make the statements mad, in the light of the circumstances
under which they were made, not misleading; and engaged in acts, practices, or
courses of business which operated or would operate as a fraud or deceit upon other
persons, including purchasers and sellers of securities by the conduct described in
detail above.
86. By engaging in the conduct described above, Defendants each violated,
and unless restrained and enjoined will continue to violate, Section 10(b) of the
Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
SECOND CLAIM FOR RELIEF
Fraud in the Offer or Sale of Securities
Violations of Sections 17(a) of the Securities Act
(Against All Defendants)
87. The SEC realleges and incorporates by reference paragraphs 1 through
79 above.
88. In connection with the purchase or sale of securities, Defendants
engaged in a scheme to defraud and made material misrepresentations to investors.
These included statements to potential investors that SCDF would use their funds to

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make loans to “the general public[.]”  Although SCDF did fund real estate loans, not
a single loan was to the general public; rather, all of the loans were to companies
affiliated with Zhang or under Zhang’s control.  Defendants also used investor funds
to pay purported finder’s fees to entities controlled by Tseng and Zhang, while
claiming in the offering documents that finder’s fees would be paid to third parties.
Finally, Defendants misused investor funds by transferring money to another
investment fund without disclosing that potential use of funds to investors.
89. By engaging in the conduct described above, Defendants, directly or
indirectly, in the offer or sale of securities by the use of means or instruments of
transportation or communication in interstate commerce or by use of the mails (a)
employed devices, schemes, or artifices to defraud; (b) obtained money or property
by means of untrue statements of a material fact or by omitting to state a material fact
necessary in order to make the statements made, in light of the circumstances under
which they were made, not misleading; or (c) engaged in transactions, practices, or
courses of business which operated or would operate as a fraud or deceit upon the
purchaser.
90. Summitcrest acted through Tseng and/or Zhang.  Therefore, Tseng’s and
Zhang’s knowledge, recklessness, and/or negligence may be imputed to Summitcrest.
91. Defendants, with scienter, employed devices, schemes, or artifices to
defraud; and Defendants, with scienter or negligence, obtained money or property by
means of untrue statements of material fact or by omitting to state a material fact
necessary in order to make the statements made, in light of the circumstances under
which they were made, not misleading, and engaged in transactions, practices, or
courses of business which operated or would operate as a fraud or deceit upon the
purchaser.
92. Defendants obtained money directly by means of the misrepresentations
because SCDF paid finder’s fees to Tseng and Zhang’s companies and paid
management fees to Summitcrest.  Tseng and Zhang were the principals of SCDF and

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Summitcrest, and therefore obtained money through these entities.
93. By engaging in the conduct described above, Defendants each violated,
and unless restrained and enjoined will continue to violate, Section 17(a) of the
Securities Act, 15 U.S.C. § 77q(a).
THIRD CLAIM FOR RELIEF
Unregistered Offer and Sale of Securities
Violations of Sections 5(a) and 5(c) of the Securities Act
(Against All Defendants)
94. The SEC realleges and incorporates by reference paragraphs 1 through
79 above.
95. SCDF’s offer and sale of securities was not registered with the SEC and
the securities were offered and sold through interstate commerce.  There was no
registration statement in effect or filed with the SEC with respect to the offering.
96. No exemption applies to SCDF’s offer and sale of securities.  SCDF
engaged in general solicitation, including an in-person seminar for Chinese-speaking
real estate and insurance agents.  In addition, SCDF failed to take reasonable steps to
verify whether investors actually qualified as accredited investors, relying instead
upon investors’ own representations as to whether they met the applicable
requirements.  SCDF also sold notes to investors residing outside of California and
the United States.
97. Defendants are liable under Section 5 of the Securities Act for SCDF’s
offer and sale of securities because Tseng and Zhang controlled SCDF through
Summitcrest, which was the manager of SCDF with absolute authority over the
business of SCDF.
98. By engaging in the conduct described above, Defendants, and each of
them, directly or indirectly, singly and in concert with others, made use of the means
or instruments of transportation or communication in interstate commerce, or of the
mails, to offer to sell or to sell securities, or carried or caused to be carried through

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the mails or in interstate commerce, by means or instruments of transportation,
securities for the purpose of sale or for delivery after sale, when no registration
statement had been filed or was in effect as to such securities, and when no
exemption from registration was applicable.
99. By engaging in the conduct described above, Defendants each violated,
and unless restrained and enjoined, will continue to violate, Sections 5(a) and 5(c) of
the Securities Act, 15 U.S.C. §§ 77e(a) & 77e(c).
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that Defendants committed the
alleged violations.
II.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Defendants and their officers, agents,
servants, employees, and attorneys, and those persons in active concert or
participation with any of them, who receive actual notice of the judgment by personal
service or otherwise, and each of them, from violating Sections 5(a), 5(c), and 17(a)
of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], and Section 10(b) of
the Exchange Act [15 U.S.C. §§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. §
240.10b-5].
III.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C.
§ 78u(d)(5)], permanently enjoining Defendants and their officers, agents, servants,
employees and attorneys, and those persons in active concert or participation with
any of them, who receive actual notice of the judgment by personal service or
otherwise, from, directly or indirectly, including, but not limited to, through any

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entity owned or controlled by Defendants, participating in the issuance, purchase,
offer, or sale of any security; provided, however, that such injunction shall not
prevent Tseng or Zhang from purchasing or selling securities for their own personal
account.
IV.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. §
78u(d)(2)] and/or Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)], prohibiting
Defendants Tseng and Zhang from acting as an officer or director of any issuer that
has a class of securities registered pursuant to Section 12 of the Exchange Act [15
U.S.C. § 78l] or that is required to file reports pursuant to Section 15(d) of the
Exchange Act [15 U.S.C. § 78o(d)].
V.
Order Defendants to disgorge all funds received from their illegal conduct,
together with prejudgment interest thereon, pursuant to Exchange Act Sections
21(d)(5) and 21(d)(7) [15 U.S.C. §§ 78u(d)(5) and 78u(d)(7)].
VI.
Order Defendants to pay civil penalties under Section 20(d) of the Securities
Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §
78u(d)(3)].
VII.
Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court.

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VIII.
Grant such other and further relief as this Court may determine to be just and
necessary.

Dated:  July 28, 2023
/s/ Kathryn Wanner
Kathryn Wanner
Marisa G. Westervelt
Attorney for Plaintiff
Securities and Exchange Commission

Complaints and Other Initiating Documents
5:23-cv-01488 Securities and Exchange Commission v. Tseng et al
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Notice of Electronic Filing
The following transaction was entered by Wanner, Kathryn on 7/28/2023 at 6:53 AM PDT and filed on 7/28/2023
Case Name:Securities and Exchange Commission v. Tseng et al
Case Number:5:23-cv-01488
Filer:Securities and Exchange Commission
Document Number:1
Docket Text:
COMPLAINT No Fee Required - US Government, filed by Plaintiff Securities and Exchange
Commission. (Attorney Kathryn C. Wanner added to party Securities and Exchange
Commission(pty:pla))(Wanner, Kathryn)
5:23-cv-01488 Notice has been electronically mailed to:
Kathryn C. Wanner     [email protected], [email protected], [email protected], [email protected],
[email protected]
5:23-cv-01488 Notice has been delivered by First Class U. S. Mail or by other means BY THE FILER to :
The following document(s) are associated with this transaction:
Document description:Main Document
Original filename:C:\fakepath\2023.07.26 SCDF Complaint KH.pdf
Electronic document Stamp:
[STAMP cacdStamp_ID=1020290914 [Date=7/28/2023] [FileNumber=36267411-0
] [0e6b19cf1825842f3dd63f0394d884a06e848eb904c4ed9f01b71d3656a6a19a5f4
df7b434b02c4097b462b1faf09fc45f3cefce7231162f909b907d47e4715f]]

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KATHRYN WANNER (Cal. Bar No. 269310) 
Email:  [email protected] 
MARISA G. WESTERVELT (Cal. Bar No. 217172) 
Email:  [email protected] 
 
Attorneys for Plaintiff 
Securities and Exchange Commission 
Katharine Zoladz, Co-Acting Regional Director 
Gary Leung, Regional Trial Counsel 
444 S. Flower Street, Suite 900 
Los Angeles, California 90071 
Telephone: (323) 965-3998 
Facsimile: (213) 443-1904 

UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

 

 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 
 

vs. 

JOHNNY TSENG (a/k/a Kuanhao J. 
Tseng, Kuanhao Tseng), KEVIN 
ZHANG (a/k/a Kevin Huapeng Zhang, 
Huapeng Zhang), and 
SUMMITCREST CAPITAL, INC., 

Defendants. 
 

 Case No.  
 
COMPLAINT 
 

 
 

Plaintiff Securities and Exchange Commission (“SEC”) alleges: 

JURISDICTION AND VENUE 

1. The Court has jurisdiction over this action pursuant to Sections 20(b), 

20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 

77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the 

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1), 

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78u(d)(3)(A), 78u(e) & 78aa(a). 

2. Defendants have, directly or indirectly, made use of the means or 

instrumentalities of interstate commerce, of the mails, or of the facilities of a national 

securities exchange in connection with the transactions, acts, practices and courses of 

business alleged in this complaint.  

3. Venue is proper in this district pursuant to Section 22(a) of the Securities 

Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a) 

because certain of the transactions, acts, practices, and courses of conduct 

constituting violations of the federal securities laws occurred within this district.  In 

addition, venue is proper in this district because defendants Johnny Tseng, a/k/a 

Kuanhao J. Tseng, Kuanhao Tseng (“Tseng”) and Kevin Zhang, a/k/a Kevin 

Huapeng Zhang, Huapeng Zhang (“Zhang”) reside in this district and defendant 

Summitcrest Capital, Inc. (“Summitcrest”) has its principal place of business here. 

SUMMARY 

4. Defendants orchestrated an affinity offering fraud in connection with an 

unregistered offering for SC Development Fund, LLC, f/k/a SC Development Fund 

V, LLC (“SCDF”), a real estate investment fund that raised approximately $19.8 

million from about 30 investors in the United States and China during the period from 

approximately February 2018 to November 2019. 

5. Tseng, a California real estate broker, and Zhang, a California real estate 

developer, managed SCDF through Summitcrest, which they co-owned. 

6. The SCDF private placement memoranda (“PPM”) for the SCDF 

offering claimed that investor funds would be to make loans to the “general public.” 

7. However, contrary to the representations in the SCDF PPM, Defendants 

actually used SCDF investor funds to make loans exclusively to Zhang’s real estate 

development and contracting business, and other real estate development entities 

under Zhang’s control, which ended in default in less than two years. 

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8. Defendants also transferred $200,000 of investor funds to another real 

estate investment fund controlled by Tseng and Zhang and paid purported “finder’s 

fees” to two entities that were ostensibly third parties, but were actually controlled by 

Tseng and Zhang, respectively. 

9. SCDF ultimately collapsed after the Zhang entities that had received 

loans from SCDF began to default on those loans. 

10. SCDF then filed for bankruptcy in July of 2020 and is now defunct. 

11. By this conduct, Defendants violated Sections 5(a), 5(c), and 17(a) of the 

Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

12. The SEC seeks permanent injunctions against future violations of 

Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange 

Act and Rule 10b-5; conduct-based injunctions; disgorgement with prejudgment 

interest; and civil penalties against all Defendants.  In addition, the SEC seeks officer 

and director bars as to Tseng and Zhang. 

THE DEFENDANTS 

13. Johnny Tseng, a/k/a Kuanhao J. Tseng, Kuanhao Tseng, age 43, is a 

resident of Eastvale, California.  Tseng owns 50% of the shares of SCDF’s manager, 

Summitcrest.  Tseng also is the principal of UBEST Capital, Inc. (“UBEST”), a 

Nevada corporation that received purported finder’s fees from SCDF.  UBEST is 

inactive and its Nevada state registration was revoked as of early 2021. 

14. Kevin Zhang, a/k/a Kevin Huapeng Zhang, Huapeng Zhang, age 41, 

resides in Chino Hills, California.  Zhang indirectly owns, through two other 

companies he controls, 50% of the shares of SCDF’s manager, Summitcrest.  Zhang 

is the founder and former president of Rockport Development, Inc., d/b/a Maestro 

Construction (“Rockport”), a California real estate development and contracting 

company, and the president and/or control person of each of the twelve other real 

estate development entities that received loans from SCDF (collectively, the “Zhang 

entities”).  In addition, Zhang was the principal of Cloverleaf Associate 

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(“Cloverleaf”), a Nevada corporation that received purported finder’s fees from 

SCDF, and was dissolved in December 2019.  After Rockport filed for Chapter 11 

bankruptcy in May 2020, Zhang resigned as its president. 

15. Summitcrest Capital, Inc., is a California corporation with its principal 

place of business in Chino Hills, California.  Summitcrest is co-owned by Tseng and 

Zhang and was the manager of SCDF.  Summitcrest has never been registered with 

the Commission in any capacity. 

RELATED PARTY 

16. SC Development Fund, LLC, f/k/a SC Development Fund V, LLC, 

was a California limited liability company with its principal place of business in 

Pasadena, California.  SCDF has never been registered with the Commission in any 

capacity.  SCDF filed for Chapter 7 bankruptcy in July 2020 and is now defunct. 

THE ALLEGATIONS 

A. The SCDF Offering 

17. From approximately February 2018 to November 2019, SCDF offered 

and sold approximately $19.8 million in promissory notes to about 30 investors, 

including approximately 19 investors residing in the United States, and 11 investors 

residing in China. 

18. The PPM offered up to $50 million in either membership units or 

promissory notes.  Upon information and belief only promissory notes were sold to 

investors. 

19. The PPM represented that investors who purchased membership units 

would receive a 12% annual preferred return, while investors who purchased 

promissory notes would receive interest at a fixed annual rate of 8% or 10% for 

investments under or over $100,000, respectively.   

20. The promissory notes also would be due and payable in two to two and a 

half years. 

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21. The PPM described both the membership units and promissory notes as 

securities, explicitly stating that “[t]he Membership Units and [Promissory] Notes 

being sold in the offering are restricted securities under the Securities Act.” 

22. The PPM claimed that the offering was exempt from registration, stating 

“[SCDF] is offering the Membership Units and the [Promissory] Notes in reliance on 

exemptions from the registration requirements of the Securities Act and other 

applicable laws.” 

23. SCDF also filed a Form D Notice of Exempt Offering of Securities with 

the Commission on February 15, 2018, claiming a Regulation D, Rule 506(b) 

exemption from registration. 

B. Solicitation of the SCDF Offering 

24. SCDF solicited investors from Chinese-speaking communities in the 

United States, and China.   

25. The PPM was printed in English, with corresponding Mandarin Chinese 

translations included below each paragraph. 

26. SCDF paid purported finder’s fees of $60,000 to Tseng’s entity UBEST, 

and purported finder’s fees of $112,100 to Zhang’s entity Cloverleaf, for bringing in 

investors from the United States and China. 

27. Tseng and Zhang also enlisted one of Zhang’s salaried Rockport 

employees, who was a Chinese immigrant, to recruit prospective investors from the 

local Chinese immigrant community. 

28. In addition, Summitcrest held at least one in-person seminar for Chinese-

speaking real estate agents and insurance agents; at least one of the seminar attendees 

referred a client who became an investor in SCDF. 

29. The subscription agreements for the SCDF offering sought information 

from investors residing in the United States as to whether they met the requirements 

for “accredited investors” under Regulation D. 

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30. SCDF relied upon investors’ own representations as to whether they met 

the accreditation requirements under Regulation D. 

C. SCDF’s Use of Investor Funds 

31. All of the known SCDF investors purchased promissory notes rather 

than membership units.   

32. SCDF investors received promissory notes that specified the principal 

amount, the interest rate and schedule for interest payments, and the maturity date. 

33. SCDF investors mailed checks to SCDF or wired funds to one of two 

SCDF bank accounts controlled by Tseng and Zhang.  Both Tseng and Zhang were 

signatories on these accounts. 

34. The PPM represented that SCDF would use investor funds to make 

mortgage loans to the “general public.” 

35. These loans were expected to generate income from which SCDF would 

make the promised interest payments and return of capital to investors who purchased 

the promissory notes. 

36. SCDF used approximately $18.7 million of investor funds to make 

sixteen real estate-related loans to Zhang’s company Rockport and the Zhang entities.  

Each of these loans was secured by a deed of trust on real property located in 

Southern California. 

37. SCDF also transferred $200,000 to Hillcrest Asset Based Fund I, LLC 

(“Hillcrest Fund”), another real estate investment fund controlled by Tseng and 

Zhang. 

38. Transfers to Hillcrest Fund were not disclosed in the PPM as a possible 

use of investor funds.  

39. In addition, SCDF used investor funds to pay fund expenses and to pay 

management fees to Summitcrest, as well as to pay purported finder’s fees to Tseng 

and Zhang’s entities, UBEST and Cloverleaf. 

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40. From approximately March 2018 through October 2019, SCDF made 

monthly interest payments to investors, totaling approximately $2.3 million. 

41. In or around October 2019, Rockport and the Zhang entities began to 

default on the loans they had received from SCDF.   

42. In or around May 2020, Rockport filed for Chapter 11 bankruptcy. 

43. On or around November 21 or November 22, 2019, Summitcrest sent an 

email to SCDF investors which stated that SCDF had “recently been notified by 

certain borrowers of the fund related to Rockport Development, Inc. (“Borrower”) 

that Borrower will be defaulting on its interest payments to [SCDF]” and that this 

would “negatively affect [SCDF]’s ability to make timely interest payments to its 

Note Holders.” 

44. After the November 2019 email to investors, SCDF stopped making 

monthly interest payments to investors. 

45. SCDF filed for Chapter 7 bankruptcy on July 13, 2020.  This bankruptcy 

proceeding closed on April 26, 2022, following the court-appointed trustee’s 

determination that there were insufficient funds to administer, having collected just 

$26,231 on claims of about $19.5 million.   

46. SCDF is now defunct. 

B. Violations of the Antifraud Provisions 

1. Misrepresentations Concerning SCDF’s Business Model and 

Misuse of Investor Funds 

47. SCDF made misrepresentations to prospective investors concerning its 

business model and misused investor funds. 

48. The PPM represented that SCDF’s business model would involve 

assembling a portfolio of mortgage loans, which Tseng and Zhang would select from 

the general public. 

49. Both the PPM cover page and the Summary of the Offering section 

located on the first few pages of the PPM stated clearly and prominently that SCDF 

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would engage in business as a mortgage lender for the purpose of making and 

acquiring loans “to the general public” (emphasis added). 

50. In reality, Defendants conducted SCDF’s business in a manner that was 

completely opposite to that described in the PPM.  Rather than make loans to the 

general public, SCDF made loans exclusively to entities affiliated with Zhang. 

51. Specifically, SCDF made sixteen loans, four of which were loans to 

Zhang’s company Rockport, and twelve of which were loans to the Zhang entities.   

52. The loans that SCDF made to Rockport and the Zhang entities went into 

default in less than two years, leaving SCDF without the means to pay the remaining 

promised interest payments and return of capital to its investors.   

53. These business practices resulted in SCDF’s bankruptcy and SCDF 

investors’ loss of their investments. 

54. SCDF also misused investor funds by transferring $200,000 to Hillcrest 

Fund, another real estate investment fund controlled by Tseng and Zhang.  This use 

of funds was not disclosed in the PPM. 

2. Misrepresentations Concerning Payment of Finder’s Fees to 

Third Parties and Additional Misuse of Investor Funds 

55. SCDF also made misrepresentations to prospective investors concerning 

its payment of finder’s fees to third parties and again misused investor funds. 

56. The PPM represented that SCDF membership units and promissory 

notes would be offered and sold by SCDF. 

57. The PPM also represented that Summitcrest, as manager of SCDF, “may 

retain the services of independent third parties to locate prospective Investors, who 

may receive LLC paid finder fees on a case-by-case basis” and that “[u]p to 2% in 

finder’s fees may be paid to third parties.” 

58. Tseng and Zhang had SCDF pay finder’s fees to entities that were 

ostensibly third parties, but were in fact companies under their control, not 

independent third parties.   

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59. Specifically, during the period from approximately March 2018 through 

December 2018, SCDF paid finder’s fees of approximately $60,000 to UBEST, 

which was controlled by Tseng, and finder’s fees of approximately $112,100 to 

Cloverleaf, which was controlled by Zhang. 

60. UBEST and Cloverleaf submitted invoices to SCDF for finder’s fees and 

received payment on those invoices.   

61. Tseng and Zhang thus hid behind the corporate veneers of UBEST and 

Cloverleaf, respectively, in order to misappropriate finder’s fees for themselves. 

C. The Misrepresentations and Misuse of Investor Funds were 

Material 

62. SCDF’s false and misleading statements and the misuse of investor 

funds were material.   

63. A reasonable investor would have considered it important to know that 

their investments would be used to make mortgage loans that were not made “to the 

general public,” as had been represented to them, but exclusively to Zhang’s 

company Rockport and the Zhang entities.   

64. A reasonable investor also would have considered it important to know 

that their investments would be used to pay finder’s fees that were not paid to 

independent third parties, as had been represented to them, but to entities controlled 

by Tseng and Zhang, respectively.   

65. In addition, a reasonable investor would have considered it important to 

know that their funds were not used as described in the PPM, but that $200,000 in 

investor money was transferred to Hillcrest Fund. 

66. Because Tseng and Zhang controlled SCDF through Summitcrest, which 

was the manager of SCDF with absolute authority over the business of SCDF, the 

Defendants had ultimate authority over the false statements. 

 

 

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 D. Defendants Acted with Scienter 

67. As co-owners of Summitcrest, which was the manager of SCDF with 

absolute authority over the business of SCDF, and as signatories on SCDF’s bank 

accounts, Tseng and Zhang knew, or were reckless in not knowing, that despite the 

disclosures in the PPM, SCDF was actually only making loans only to Zhang’s 

company Rockport and the Zhang entities, paying finder’s fees to their own 

companies, and transferring funds to their Hillcrest Fund.  

68. Tseng and Zhang’s scienter is attributable to Summitcrest because they 

controlled it. 

E. Defendants Obtained Money By Means of the Misrepresentations 

69. Defendants obtained money directly by means of the misrepresentations 

because SCDF paid finder’s fees to Tseng and Zhang’s entities, UBEST and 

Cloverleaf, and paid management fees to Summitcrest. 

70. Tseng and Zhang also were the principals of SCDF and Summitcrest, 

and therefore obtained money through these entities. 

F. Registration Violations: Sections 5(a) and 5(c) of the Securities Act 

71. SCDF offered and sold securities, raising approximately $19.8 million 

from about 30 investors in the United States and China from approximately 

February 2018 to November 2019. 

72. The SCDF offering was never registered with the SEC. 

73. The SCDF securities were offered and sold through interstate commerce, 

including through the mail and bank wire transfers. 

74. The SCDF offering was not exempt from registration. 

75. SCDF, as the issuer of the securities, directly offered and sold securities 

through general solicitation, including an in-person seminar for Chinese speaking real 

estate agents and insurance agents. 

76. SCDF offered and sold securities to investors residing outside of 

California and the United States. 

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77. SCDF did not take reasonable steps to verify whether investors residing 

in the United States were accredited. 

78. SCDF, as the issuer of the securities, directly offered and sold securities 

through a general solicitation, raising approximately $19.8 million by marketing the 

offering to investors. 

79. Tseng and Zhang are liable for SCDF’s offer and sale of securities 

because they controlled SCDF through Summitcrest, which was the manager of 

SCDF with absolute authority over the business of SCDF. 

FIRST CLAIM FOR RELIEF 

Fraud in Connection with the Purchase or Sale of Securities 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 

(Against All Defendants) 

80. The SEC realleges and incorporates by reference paragraphs 1 through 

79 above. 

81. In connection with the purchase or sale of securities, Defendants 

engaged in a scheme to defraud and made material misrepresentations to investors.  

These included statements to potential investors that SCDF would use their funds to 

make loans to “the general public[.]”  Although SCDF did fund real estate loans, not 

a single loan was to the general public; rather, all of the loans were to companies 

affiliated with Zhang or under Zhang’s control.  Defendants also used investor funds 

to pay purported finder’s fees to entities controlled by Tseng and Zhang, while 

claiming in the offering documents that finder’s fees would be paid to third parties.  

Finally, Defendants misused investor funds by transferring money to another 

investment fund without disclosing that potential use of funds to investors.  

82. Because Defendants controlled SCDF, Defendants are the makers of 

these material misrepresentations and/or omissions. 

83. By engaging in the conduct described above, Defendants, and each of 

them, directly or indirectly, in connection with the purchase or sale of a security, and 

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by the use of means or instrumentalities of interstate commerce, of the mails, or of 

the facilities of a national securities exchange:  (a) employed devices, schemes, or 

artifices to defraud; (b) made untrue statements of a material fact or omitted 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) engaged in acts, 

practices, or courses of business which operated or would operate as a fraud or deceit 

upon other persons. 

84. Summitcrest acted through Tseng and/or Zhang.  Therefore, Tseng’s and 

Zhang’s knowledge, recklessness, and/or negligence may be imputed to Summitcrest. 

85. Defendants, with scienter, employed devices, schemes, or artifices to 

defraud; made untrue statements of material facts or omitted to state material facts 

necessary in order to make the statements mad, in the light of the circumstances 

under which they were made, not misleading; and engaged in acts, practices, or 

courses of business which operated or would operate as a fraud or deceit upon other 

persons, including purchasers and sellers of securities by the conduct described in 

detail above. 

86. By engaging in the conduct described above, Defendants each violated, 

and unless restrained and enjoined will continue to violate, Section 10(b) of the 

Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. 

SECOND CLAIM FOR RELIEF 

Fraud in the Offer or Sale of Securities 

Violations of Sections 17(a) of the Securities Act 

(Against All Defendants) 

87. The SEC realleges and incorporates by reference paragraphs 1 through 

79 above. 

88. In connection with the purchase or sale of securities, Defendants 

engaged in a scheme to defraud and made material misrepresentations to investors.  

These included statements to potential investors that SCDF would use their funds to 

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make loans to “the general public[.]”  Although SCDF did fund real estate loans, not 

a single loan was to the general public; rather, all of the loans were to companies 

affiliated with Zhang or under Zhang’s control.  Defendants also used investor funds 

to pay purported finder’s fees to entities controlled by Tseng and Zhang, while 

claiming in the offering documents that finder’s fees would be paid to third parties.  

Finally, Defendants misused investor funds by transferring money to another 

investment fund without disclosing that potential use of funds to investors. 

89. By engaging in the conduct described above, Defendants, directly or 

indirectly, in the offer or sale of securities by the use of means or instruments of 

transportation or communication in interstate commerce or by use of the mails (a) 

employed devices, schemes, or artifices to defraud; (b) obtained money or property 

by means of untrue statements of a material fact or by omitting to state a material fact 

necessary in order to make the statements made, in light of the circumstances under 

which they were made, not misleading; or (c) engaged in transactions, practices, or 

courses of business which operated or would operate as a fraud or deceit upon the 

purchaser. 

90. Summitcrest acted through Tseng and/or Zhang.  Therefore, Tseng’s and 

Zhang’s knowledge, recklessness, and/or negligence may be imputed to Summitcrest. 

91. Defendants, with scienter, employed devices, schemes, or artifices to 

defraud; and Defendants, with scienter or negligence, obtained money or property by 

means of untrue statements of material fact or by omitting to state a material fact 

necessary in order to make the statements made, in light of the circumstances under 

which they were made, not misleading, and engaged in transactions, practices, or 

courses of business which operated or would operate as a fraud or deceit upon the 

purchaser. 

92. Defendants obtained money directly by means of the misrepresentations 

because SCDF paid finder’s fees to Tseng and Zhang’s companies and paid 

management fees to Summitcrest.  Tseng and Zhang were the principals of SCDF and 

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Summitcrest, and therefore obtained money through these entities. 

93. By engaging in the conduct described above, Defendants each violated, 

and unless restrained and enjoined will continue to violate, Section 17(a) of the 

Securities Act, 15 U.S.C. § 77q(a). 

THIRD CLAIM FOR RELIEF 

Unregistered Offer and Sale of Securities 

Violations of Sections 5(a) and 5(c) of the Securities Act 

(Against All Defendants) 

94. The SEC realleges and incorporates by reference paragraphs 1 through 

79 above. 

95. SCDF’s offer and sale of securities was not registered with the SEC and 

the securities were offered and sold through interstate commerce.  There was no 

registration statement in effect or filed with the SEC with respect to the offering. 

96. No exemption applies to SCDF’s offer and sale of securities.  SCDF 

engaged in general solicitation, including an in-person seminar for Chinese-speaking 

real estate and insurance agents.  In addition, SCDF failed to take reasonable steps to 

verify whether investors actually qualified as accredited investors, relying instead 

upon investors’ own representations as to whether they met the applicable 

requirements.  SCDF also sold notes to investors residing outside of California and 

the United States. 

97. Defendants are liable under Section 5 of the Securities Act for SCDF’s 

offer and sale of securities because Tseng and Zhang controlled SCDF through 

Summitcrest, which was the manager of SCDF with absolute authority over the 

business of SCDF. 

98. By engaging in the conduct described above, Defendants, and each of 

them, directly or indirectly, singly and in concert with others, made use of the means 

or instruments of transportation or communication in interstate commerce, or of the 

mails, to offer to sell or to sell securities, or carried or caused to be carried through 

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the mails or in interstate commerce, by means or instruments of transportation, 

securities for the purpose of sale or for delivery after sale, when no registration 

statement had been filed or was in effect as to such securities, and when no 

exemption from registration was applicable. 

99. By engaging in the conduct described above, Defendants each violated, 

and unless restrained and enjoined, will continue to violate, Sections 5(a) and 5(c) of 

the Securities Act, 15 U.S.C. §§ 77e(a) & 77e(c). 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that the Court: 

I. 

Issue findings of fact and conclusions of law that Defendants committed the 

alleged violations. 

II. 

Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of 

Civil Procedure, permanently enjoining Defendants and their officers, agents, 

servants, employees, and attorneys, and those persons in active concert or 

participation with any of them, who receive actual notice of the judgment by personal 

service or otherwise, and each of them, from violating Sections 5(a), 5(c), and 17(a) 

of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], and Section 10(b) of 

the Exchange Act [15 U.S.C. §§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 

240.10b-5]. 

III. 

Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of 

Civil Procedure, pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C. 

§ 78u(d)(5)], permanently enjoining Defendants and their officers, agents, servants, 

employees and attorneys, and those persons in active concert or participation with 

any of them, who receive actual notice of the judgment by personal service or 

otherwise, from, directly or indirectly, including, but not limited to, through any 

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entity owned or controlled by Defendants, participating in the issuance, purchase, 

offer, or sale of any security; provided, however, that such injunction shall not 

prevent Tseng or Zhang from purchasing or selling securities for their own personal 

account. 

IV. 

Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of 

Civil Procedure, pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 

78u(d)(2)] and/or Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)], prohibiting 

Defendants Tseng and Zhang from acting as an officer or director of any issuer that 

has a class of securities registered pursuant to Section 12 of the Exchange Act [15 

U.S.C. § 78l] or that is required to file reports pursuant to Section 15(d) of the 

Exchange Act [15 U.S.C. § 78o(d)]. 

V. 

Order Defendants to disgorge all funds received from their illegal conduct, 

together with prejudgment interest thereon, pursuant to Exchange Act Sections 

21(d)(5) and 21(d)(7) [15 U.S.C. §§ 78u(d)(5) and 78u(d)(7)]. 

VI. 

Order Defendants to pay civil penalties under Section 20(d) of the Securities 

Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 

78u(d)(3)]. 

VII. 

Retain jurisdiction of this action in accordance with the principles of equity and 

the Federal Rules of Civil Procedure in order to implement and carry out the terms of 

all orders and decrees that may be entered, or to entertain any suitable application or 

motion for additional relief within the jurisdiction of this Court. 

 

 

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VIII. 

Grant such other and further relief as this Court may determine to be just and 

necessary. 

 

Dated:  July 28, 2023 /s/ Kathryn Wanner 
Kathryn Wanner 
Marisa G. Westervelt 
Attorney for Plaintiff 
Securities and Exchange Commission 

 

Case 5:23-cv-01488   Document 1   Filed 07/28/23   Page 17 of 17   Page ID #:17



Complaints and Other Initiating Documents
5:23-cv-01488 Securities and Exchange Commission v. Tseng et al

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Notice of Electronic Filing

The following transaction was entered by Wanner, Kathryn on 7/28/2023 at 6:53 AM PDT and filed on 7/28/2023
Case Name: Securities and Exchange Commission v. Tseng et al
Case Number: 5:23-cv-01488
Filer: Securities and Exchange Commission
Document Number:1

Docket Text:
COMPLAINT No Fee Required - US Government, filed by Plaintiff Securities and Exchange
Commission. (Attorney Kathryn C. Wanner added to party Securities and Exchange
Commission(pty:pla))(Wanner, Kathryn)

5:23-cv-01488 Notice has been electronically mailed to:

Kathryn C. Wanner     [email protected], [email protected], [email protected], [email protected],
[email protected]

5:23-cv-01488 Notice has been delivered by First Class U. S. Mail or by other means BY THE FILER to :

The following document(s) are associated with this transaction:

Document description:Main Document
Original filename:C:\fakepath\2023.07.26 SCDF Complaint KH.pdf
Electronic document Stamp:
[STAMP cacdStamp_ID=1020290914 [Date=7/28/2023] [FileNumber=36267411-0
] [0e6b19cf1825842f3dd63f0394d884a06e848eb904c4ed9f01b71d3656a6a19a5f4
df7b434b02c4097b462b1faf09fc45f3cefce7231162f909b907d47e4715f]]

https://ecf.cacd.uscourts.gov/cgi-bin/DktRpt.pl?893176
https://ecf.cacd.uscourts.gov/cgi-bin/DktRpt.pl?893176
https://ecf.cacd.uscourts.gov/doc1/031140519924?caseid=893176&de_seq_num=8&magic_num=MAGIC