Securities and Exchange Commission v. Charles C. Liu, Xin Wang, Pacific Proton Therapy Regional Center, LLC, Pacific Proton EB-5 Fund, LLC, and Beverly Proton Center, LLC

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JOHN W. BERRY (Cal. Bar No.295760)

Email: [email protected]

JACOB A. REGENSTREIF (Cal. Bar No. 234734)

E-mail: [email protected]

Attorneys for Plaintiff

Securities and Exchange Commission

Michele Wein Layne, Regional Director

Alka N. Patel, Associate Regional Director

John W. Berry, Regional Trial Counsel

444 S. Flower Street, Suite 900

Los Angeles, California 90071

Telephone: (323) 965-3998

Facsimile: (213) 443-1904

05/26/16
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
4"$7
$+$
	"(3Y

SECURITIES AND EXCHANGE     Case    No.

COMMISSION,

Plaintiff,
COMPLAINT
vs.
CHARLES C. LIU;
XIN WANG a/k/a LISA WANG;
PACIFIC PROTON THERAPY
REGIONAL CENTER, LLC;
PACIFIC PROTON EB-5 FUND, LLC;
and BEVERLY PROTON CENTER,
LLC f/k/a LOS ANGELES COUNTY
PROTON THERAPY, LLC,
Defendants.
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
COMPLAINT
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Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),
78u(d)(3)(A), 78u(e) & 78aa(a).  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.
2. 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 Charles C. Liu and Xin Wang
reside in this district.
SUMMARY
3. This case involves an ongoing fraudulent scheme perpetrated by
defendant Charles C. Liu (“Liu”) and his wife, defendant Xin Wang, a/k/a Lisa Wang
(“Wang”), to defraud Chinese investors in the federal “EB-5 Immigrant Investor
Program,” which is administered by the United States Citizenship and Immigration
Service (“USCIS”).  To date, the defendants have defrauded at least 50 Chinese
investors of almost $27 million by falsely claiming that their monies would be
invested in a program that met the requirements of the EB-5 program, and would be
used to build and operate a proton therapy cancer treatment center in Southern
California.
4. The EB-5 Immigrant Investor Program was created to stimulate the U.S.
economy with capital investment from foreign investors.  Under the program, foreign
investors can receive a permanent visa to live and work in the U.S. if they make a
capital investment that satisfies certain conditions over a two-year period, including
the creation of jobs.  Under the program’s regulations, the foreign investors must put
“the required amount of capital at risk for the purpose of generating a return.”
5. From at least October 2014 to the present, the defendants have offered
COMPLAINT
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and sold, and continue to offer, EB-5 investments to Chinese investors, allegedly to
fund the development and operation of the cancer treatment center.  The investors
made their investment in two parts: a $500,000 “Capital Contribution,” which was to
be escrowed for use in developing and operating the center, and a $45,000
“Administrative Fee.”
6. Rather than invest the investors’ Capital Contributions as promised—
and as required for the investors to meet the EB-5 program requirements—the
defendants misappropriated or diverted approximately $17.4 million from the
accounts where the contributions were deposited.  Liu misappropriated at least
$6,285,000 for himself, and his wife and co-defendant, Wang, misappropriated at
least $1,400,000.  Liu also transferred over $11,845,000 to three marketing firms in
China, including $3,500,000 to a firm of which Wang is CEO and chairman of the
board.  Liu also allowed most of the Administrative Fees to be used for undisclosed
purposes.  As a result, the EB-5 eligible cancer treatment center that the defendants
represented would be constructed with investor funds has not been built.  Liu and
Wang have carried out this fraud through a number of entities, three of which are
named as defendants.
7. The defendants’ fraud is still ongoing.  The majority of the funds
dissipated by the defendants were transferred as recently as February and March
2016, shortly after the SEC subpoenaed Liu for investigative testimony.  Also, the
website primarily used to offer the EB-5 investments to Chinese investors remains
active, and continues to market and promote the investments in a materially
misleading manner.
8. By engaging in this conduct, the defendants have violated, and continue
to violate, the antifraud provisions of Sections 17(a) of the Securities Act, 15 U.S.C.
§ 77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-
5(a) and (c) thereunder, 17 C.F.R. 240.10b-5(a) & 240.10b-5(c), and Liu and the
corporate defendants have violated, and continue to violate Exchange Act Rule 10b-
COMPLAINT
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5(b), 17 C.F.R. § 240.10b-5(b).  Liu is also violating Section 10(b) and Rule 10b-5 as
a control person of each of the corporate defendants.
THE DEFENDANTS
9. Charles C. Liu (“Liu”) resides in Laguna Niguel, California.  He holds
an MFA degree in Arts Administration.  From 2004 to 2009, Liu sold medical
equipment relating to proton therapy for a company based in Hong Kong.  Liu
controls each of the three corporate defendants.
10. Xin Wang a/k/a Lisa Wang (“Wang”) is Liu’s wife and resides with
him in Laguna Niguel, California.  Wang was trained in China as a pharmacist, and
worked in China as a pharmacist for approximately one year.  Wang holds key
positions at the corporate defendants and is CEO and chairman of the board of one of
the China-based firms that solicited investors for the defendants.
11. Pacific Proton Therapy Regional Center, LLC (“Pacific Proton”) is
a California limited liability company, headquartered in Laguna Niguel, California.
Liu controls Pacific Proton and is its president.  On June 28, 2012, USCIS approved
Pacific Proton’s application to become a regional center under the EB-5 program.
12. Pacific Proton EB-5 Fund, LLC (“PPEB5 Fund”), is a Delaware
limited liability company formed on November 15, 2010 and headquartered in
Montebello, California.  In its offering materials, PPEB5 Fund claimed that it offered
an EB-5-eligible investment that used investor proceeds to loan funds to develop and
operate a proton therapy cancer treatment center in Los Angeles County.  Pacific
Proton is the sole manager of the PPEB5 Fund.
13. Beverly Proton Center, LLC f/k/a Los Angeles County Proton
Therapy, LLC (“Beverly Proton”) is a California limited liability company,
headquartered in Laguna Niguel, California.  Liu co-founded Beverly Proton to
develop and operate a proton therapy cancer treatment center using funds raised by
the PPEB5 Fund.  Liu is president of Beverly Proton, and is its treasurer and
managing member.  Wang is Beverly Proton’s “Vice President in Marketing of Asia
COMPLAINT
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[sic].”
THE FRAUDULENT SCHEME
A. The EB-5 Immigrant Investor Program
14. The EB-5 Immigrant Investor Program sets aside EB-5 visas for
participants who invest in commercial enterprises associated with regional centers
approved by USCIS based on proposals for promoting economic growth.
15. Under the EB-5 Immigrant Investor Program, foreign investors who
invest capital in a “commercial enterprise” in the United States may petition the
USCIS (called an “I-526 Petition”) and receive conditional permanent residency
status for a two-year period.  USCIS defines a “commercial enterprise” as any for-
profit activity formed for the ongoing conduct of lawful business.
16. The EB-5 Immigrant Investor Program requires a showing that the
foreign investor has placed the required amount of capital at risk for “the purpose of
generating a return” on the capital placed at risk.  The foreign investor must invest at
least $500,000 in a “Targeted Employment Area” and thereby create at least ten full-
time jobs for United States workers.  If the foreign investor satisfies these and other
conditions within the two-year period, the foreign investor may apply to have the
conditions removed from his or her visa and live and work in the United States
permanently.
17. Many EB-5 investments are administered by entities called “regional
centers.”  EB-5 regional centers are designated by USCIS to administer the EB-5
investment projects based on proposals for promoting economic growth.
18. Regional center investment vehicles are typically offered as limited
partnership interests or limited liability company units, which are managed by a
person or entity other than the foreign investor, who acts as a general partner or
managing member of the investment vehicle.  To become a regional center, the entity
must demonstrate, with supporting economic and statistical studies, how it will
promote economic growth, including job creation.
COMPLAINT
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B. Designation Of Defendant Pacific Proton As A Regional Center
19. On or about November 19, 2010, Liu applied to USCIS, on behalf of
Pacific Proton, for its designation as a “regional center” under the EB-5 immigrant
investor program.
20. Liu signed the application on behalf of Pacific Proton as its president.
Liu reviewed the application before it was submitted to USCIS.
21. In the application, Liu made the following representations, among

others:

(a) Pacific Proton had formed the PPEB5 Fund to serve as the
investment vehicle for its first project.  EB-5 investors would make their qualifying
investment in the PPEB5 Fund, which would then pool the funds and make a loan to
Beverly Proton (then known as Los Angeles County Proton Therapy, LLC), to
partially finance the development and operation of a proton therapy center and
commercial office space.
(b) Beverly Proton would develop and operate an innovative new
cancer treatment center using proton beam radiation for treatment of oncology
patients in Montebello, California.  In addition to the proton therapy center, the
building was expected to contain 125,000 square feet of medical office space and
ancillary facilities.  Beverly Proton would also develop and construct a new 30,000
square foot office building in Monterey Park, California, which would contain a
restaurant, pharmacy, and radiation therapy office and multiple-use medical office
space.
(c) Each investor would be required to invest $500,000 as a “Capital
Contribution” in the PPEB5 Fund and to pay an “Administrative Fee” of
approximately $45,000 before applying to USCIS for their I-526 petition.  Pacific
Proton would use an escrow account to hold the foreign investor’s $500,000 Capital
Contribution.  Once the escrow agent receives confirmation that the investor’s I-526
Petition was approved, the escrowed funds would be released to the PPEB5 Fund for
COMPLAINT
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deployment to Beverly Proton.  If USCIS were to deny the I-526 Petition, then the
$500,000 Capital Contribution investment would be returned to the investor, together
with 50% of the Administrative Fee.
(d) According to an economic report included with the application,
the project would “create an estimated 4,775 permanent new jobs, boost output by
$728 million per year, and increase labor (household) income by $217 million per
year.”
(e) Pacific Proton and the project would have a “transformative
effect” and “a substantial and ongoing economic impact” on the counties of Los
Angeles, Orange, Riverside and San Bernardino, “creating over 4,500 permanent,
full-time jobs and yielding an economic impact of nearly $728 million per year once
completed.”
22. On June 28, 2012, USCIS approved the designation of Pacific Proton as
a regional center under the EB-5 Immigrant Investor Program.
C. Liu and Wang’s Roles in the Corporate Defendants
23. Liu has been the president of the regional center, Pacific Proton, since
2010.  Until recently, Liu owned 75% of the membership interests in Pacific Proton.
24. Liu receives $350,000 a year in compensation from Pacific Proton.
25. From about January 19, 2016 to April 4, 2016, Wang was the secretary
of Pacific Proton.  Wang was “elected” to this position by her husband, Liu.
26. Beverly Proton is the purported job-creating vehicle sponsored by
Pacific Proton in connection with Pacific Proton’s status as a USCIS-approved
regional center.  It is the entity that is supposed to develop and operate the proton
therapy cancer treatment center.
27. Liu co-founded Beverly Proton with Dr. John Thropay, a radiation
oncologist.  Liu has been Beverly Proton’s president since 2010, and is its treasurer
and managing member.  He owns 75% of its membership interests.
28. On January 19, 2016, Liu and Wang were elected by Liu as the two sole
COMPLAINT
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directors of Beverly Proton.  Wang has also been Beverly Proton’s “Vice President in
Marketing of Asia [sic]” since 2011.
29. Liu receives $550,000 a year in compensation from Beverly Proton.
30. On January 28, 2016, Wang entered into an agreement with Beverly
Proton pursuant to which she is to receive a $280,000 annual salary from Beverly
Proton, going back to 2011.  Liu signed the employment agreement with Wang on
behalf of Beverly Proton.
31. Once released from escrow, the PPEB5 Fund received the Capital
Contributions paid by the investors, and then loaned the pooled Capital Contributions
to Beverly Proton.  Pacific Proton received the Administrative Fees paid by investors.
Liu, through his control of Pacific Proton, is the sole manager of the PPEB5 Fund,
and has been its manager since 2010.
32. Liu receives $200,000 a year in compensation from the PPEB5 Fund.
33. During the entire relevant period, up to and including the present, Liu
has been the sole signatory on all bank accounts held in the name of each entity
defendant, except that Dr. Thropay, was also a signatory on the Beverly Proton
account from October 2015 until Liu caused passage of a board resolution on January
19, 2016, removing Thropay from the account.
D. The EB-5 Offering
34. From at least October 1, 2014 to the present, the defendants have offered
and sold investments in the form of limited liability company, or “LLC,” units in the
PPEB5 Fund.  To date, the defendants have raised at least $26,967,918 from at least
50 investors in China.
35. Of that amount, at least $24,712,217 was raised as “Capital
Contributions” through an offering of the LLC units in the PPEB5 Fund.  The
remainder, or at least $2,255,701, was received by Pacific Proton as required
“Administrative Fees.”
36. Liu and the PPEB5 Fund provided offering materials to each investor
COMPLAINT
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consisting of: (1) a private offering memorandum (“POM”) dated May 1, 2013; (2) an
Escrow Agreement attached to the POM as Appendix A; (3) an Operating Agreement
attached to the POM as Appendix B; and (4) a Subscription Agreement attached to
the POM as Appendix C.
37. The POM states that the PPEB5 Fund is offering the LLC units for
$500,000 each, and can offer up to 300 LLC units (one per each accredited investor)
for a maximum offering of $150 million.
38. The POM further states that each $500,000 investment, or “Capital
Contribution,” would be held in escrow until notice was given to the PPEB5 Fund
that the investor’s I-526 Petition had been filed with USCIS.
39. The POM that was provided to investors differs from the original POM
provided to and approved by USCIS in at least two material respects.  First, the
amount of the offering had been reduced from $193 million to $150 million.  Second,
the POM provided to investors states that the investor’s Capital Contribution will be
released from escrow when the investor files an I-526 Petition for residency with
USCIS, rather than when that application is approved.
40. The POM further states that, once released from escrow, the offering
proceeds were to be loaned from the PPEB5 Fund to Beverly Proton to develop and
operate a proton therapy center in Los Angeles County under the medical direction of
Dr. Thropay.  The POM states that Beverly Proton “intends to use the proceeds from
this Offering to finance development and operation” of the proton therapy center.
41. Additionally, the POM states that the PPEB5 Fund would charge
investors an “Administrative Fee” of $45,000 to pay for “Offering Expenses,
including legal, accounting and administration expenses, and commissions and fees
related to this Offering.”  Investors paid the Administrative Fee directly to Pacific
Proton.
42. The POM explicitly states that “Proceeds of this Offering do not include
Administrative Fees.  	Offering expenses, commissions and fees incurred in
COMPLAINT
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connection with this Offering shall be paid from the proceeds of Administrative Fees
and not from EB-5 Capital Contributions.”
43. Liu provided the information contained in the POM, and reviewed and
approved it.
44. The investments in the PPEB5 Fund were securities.  In fact, the POM
refers to the investments as “securities,” even noting that “these securities have not
been registered under the Securities Act of 1933” [capitalized in original].
45. The investments in the PPEB5 Fund were investments of money.  As set
forth in the POM, each investor was required to invest a minimum of $500,000 as a
“Capital Contribution” for one LLC unit.  As required by USCIS regulations, the
investor’s investment money must be “at risk for the purpose of generating a return
on such capital.”
46. The investments in the PPEB5 Fund were also investments in a common
enterprise.  The investors’ $500,000 Capital Contributions were pooled together in a
single escrow account, and, once released from that account were pooled together in a
single account held by the PPEB5 Fund.  The PPEB5 Fund, in turn, lent those funds
to Beverly Proton in order to develop and operate a proton therapy center.  The
investor funds were pooled together in a single account held by Beverly Proton.
47. According to the POM, Beverly Proton is to pay the PPEB5 Fund an
annual interest payment of 0.25% on the loan (comprised of the investors’ Capital
Contributions).
48. Any profits from investments in the PPEB5 Fund were to be derived
from the efforts of others.  Liu solely manages the PPEB5 Fund; the investors have
no management role.  The POM further provides that Pacific Proton is the sole
manager of the PPEB5 Fund, and that investors will have limited involvement in the
management of PPEB5 Fund.
49. Additionally, the POM emphasizes that the success of the PPEB5 Fund
and Beverly Proton is principally dependent on current management personnel for
COMPLAINT
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operation of the business.  In particular, the POM states that Beverly Proton “is
dependent upon the continued involvement of Dr. Thropay and Mr. Liu in this Project
personally.  The loss of services of either Dr. Thropay or Mr. Liu would have a
material adverse effect on PPEB5 [Fund]’s and the Borrower’s business, financial
condition and results of operations.”
50. The POM further states that Beverly Proton “will be required to hire and
retain skilled employees at all levels of operations in a market where such qualified
employees are in high demand and are subject to receiving competing offers.  The
inability to hire needed employees on a timely basis . . . could have a material adverse
effect on the ability to meet the schedules of the strategic plan.”  Investors are
therefore dependent on the efforts of others to ensure that the venture is profitable.
E. The Sales Efforts
51. Liu retained at least three China-based marketing firms to solicit
investors:  (a) Overseas Chinese Immigration Consulting Ltd. (“Overseas Chinese”),
based in Hong Kong; (b) United Damei Group, United Damei Investment Company,
Ltd. and/or Beijing Pacific Damei Consulting Co. Ltd. (collectively, “UDG”), based
in China; and (c) Hong Kong Delsk Business Co., Ltd. (“Delsk”), based in Hong
Kong or China.
52. Wang is CEO and chairman of the board of UDG.  The UDG website
describes Wang in different places as “CEO” and “Chairman” (as also stated on her
business card).  It also includes her picture at the top of a group of pictures of the
“Executive Team.”
53. As alleged below, Oversees Chinese, UDG and Delsk received

substantial sums of investor funds.

54. Liu personally participated in the offer and sale of investments in the

PPEB5 Fund to Chinese investors.  Liu met investors a number of times at the

proposed site for the proton center in Southern California.

55. Wang also participated in the sales effort on behalf of Beverly Proton
COMPLAINT
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and UDG.  She held the title of “Vice President in Marketing of Asia [sic]” for

Beverly Proton.  Her responsibilities included promotions and marketing, and

attracting patients from overseas for cancer treatment.

56. With Liu’s knowledge, Wang spoke about the project to potential
investors and patients at multiple meetings organized in China in 2014 and 2015,
including in Beijing, Shanghai and Guangzhou.  Wang was aware when she spoke to
potential patients that the Beverly Proton proton therapy cancer treatment center was
not completed.  Wang also met with investors and answered questions about living in
the United States, such as questions about schools, taxes and the real estate market.
57. In 2015, Liu and Wang attended a meeting about proton therapy in
Beijing organized by UDG, which had an audience of about 200 people, including
potential investors.
F. The UDG Promotional Materials
58. UDG has an active website that continues to promote the investments in
the PPEB5 Fund.
59. The website touts the proton therapy cancer treatment center that was to
be constructed and operated with investor funds.
60. For example, UDG’s website states that the Beverly Proton therapy

center project “is a secure and reliable investment project.”

61. The UDG website also states:  “Among the various American EB-5
programs currently, the advantages of Los Angeles Proton Therapy Center are quite
outstanding, and our company has a very professional case processing team and
customer service team, application process of clients are quite smooth, and there have
been [sic] good news frequently, we will continue sharing these good news with
you!”
62. UDG’s website also claims that the Beverly Proton project is using the
proton therapy technology of Optivus Proton Therapy, Inc. (“Optivus”).  UDG’s
website has descriptions of the Optivus technology, including that it was used by
COMPLAINT
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Loma Linda University, and a description of Loma Linda University’s cancer
treatment program.  The website touts the Optivus proton therapy technology, stating
that “Optivus is the equipment supplier of Los Angeles Proton Therapy Center.  It is .
. . the most effective, reliable, precise and environmental proton therapy system in the
market currently . . . .  LAPTC will use new Optivus Conforma 3000 System . . . .”
63. UDG’s website also includes a section entitled “Government Support,”
which includes pictures of government officials, including former president George
Herbert Walker Bush and former California Governor Arnold Schwarzenegger,
accompanied by copies of letters from each of them.
64. Wang understood that the photograph of former Governor
Schwarzenegger, which was also hanging at UDG’s offices, was maybe there “for
promotional purposes.”
65. The letter from former President Bush (dated April 2008 and addressed
to the “Party Secretary of Shanghai City”) and the letter from then-Governor
Schwarzenegger (dated July 2007 and also to the “Shanghai Party Secretary”) both
touted Optivus and its technology.  While the letters appear to be letters of support for
proton therapy in general at the time they were written, they are completely unrelated
to the Beverly Proton project and predated its formation.  Nevertheless, the UDG
website presents them under the heading and on a specific page entitled “Government
Support.”
G. The Stalled Therapy Center Project
66. Dr. Thropay owned a medical office building on the site where the
proton therapy center was purportedly to be built with PPEB5 Fund investor monies.
Liu caused that office building to be demolished in or about mid-2015 but there is
presently no construction at that site for the new Beverly Proton treatment center.  In
fact, no construction permits have been obtained for the project.
67. Liu knows that construction for the new therapy center has not begun.
He has personally toured the site, both before and after the demolition of the office
COMPLAINT
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building. Similarly, Wang is aware that construction is not complete.
68. Beverly Proton also paid Optivus approximately $368,100 for Optivus
equipment.  However, in 2015, Liu decided to purchase radiation therapy equipment
from a competing manufacturer.  No Optivus equipment was ever delivered to the
project.  Nor has any equipment from the competitor been delivered to the project
site.
69. Furthermore, on March 18 and 22, 2016, respectively, counsel for
Optivus and Loma Linda University wrote separate letters to the PPEB5 Fund in care
of Liu, protesting the defendants’ continued use of their names, and instructing that
their names not be used in conjunction with the project.
70. The Optivus letter stated that Optivus viewed it as “highly
inappropriate” for Pacific Proton and Beverly Proton to suggest that Optivus is
involved in the project on an ongoing basis or to use Optivus’ name and reputation
for purposes of promoting the proposed facility.  It also stated that, to the extent
Pacific Proton or Beverly Proton have held themselves out to any investors as
affiliated, associated or otherwise endorsed by Optivus, “any such representation is
false and misleading and must be properly addressed, by (without limitation) the
immediate notification to any investors that Optivus has no ongoing involvement” in
the project.
71. Similarly, Loma Linda University stated in its letter that the use of its
name, logo and health care services “are presented in a manner that is likely to
confuse visitors to the [Pacific Proton] website into believing that there is an
affiliation or sponsorship between [Pacific Proton/Beverly Proton] on the one hand,
and [the University and its medical center] on the other.”  It also states that, to the
extent that Pacific Proton or Beverly Proton have held themselves out to investors as
being affiliated, associated or otherwise endorsed by the university, “any such
representation was, and is, false and misleading, and [Pacific Proton and Beverly
Proton] must promptly address such misrepresentations by, without limitation,
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immediately notifying investors that [Loma Linda University] and its affiliates,
including [its medical center], have no sponsorship or affiliation” with the project.
H. The Removal of Dr. Thropay
72. Liu has also recently made a series of management changes that

significantly diminished Dr. Thropay’s role in the project.

73. In late October 2015, Liu entered into a memorandum of understanding
with a southern California cancer treatment hospital, to develop a proton therapy
center.  In connection with this agreement, Liu stated that the hospital would operate
the Beverly Proton therapy center and be able to name the center’s medical director,
which appears to have ended Dr. Thropay’s role as medical director of the treatment
facility as set forth in the offering documents.
74. While the hospital had been negotiating a letter of intent with Liu, the
negotiations stalled and eventually ceased.  Thus, as of now, there is no clearly
designated medical director of the proposed proton therapy center.
75. Earlier this year, Liu then reorganized Pacific Proton and Beverly Proton
to diminish Dr. Thropay’s role and interest in those entities.  On January 19, 2016,
Liu, as the member holding 75% of the membership interests of Pacific Proton,
removed Dr. Thropay as an officer of the regional center, and appointed himself
president and treasurer/chief financial officer, and appointed Wang secretary.  That
same day, at the annual meeting for Beverly Proton, Liu, as the member holding 75%
of the membership interests, nominated and elected himself and Wang as the sole
directors of Beverly Proton, and authorized himself, as managing member, to execute
documents, agreements and instruments.
76. On April 4, 2016, after being subpoenaed and providing investigative
testimony to the SEC, Liu reorganized the companies again.  He purportedly sold
50% of Pacific Proton to a former salesperson of a company that sold proton therapy
equipment, for $1 per unit.  No payments have been made by this person for the
purchase of Pacific Proton, however.  At that time, the former salesman allegedly
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replaced Liu as Pacific Proton’s president and treasurer, and Liu replaced Wang as its
secretary.
77. In purportedly selling part of Pacific Proton to this former salesman, Liu
diluted Dr. Thropay’s interest in Pacific Proton from 25% to 12.5% by giving the
putative purchaser a 50% ownership, Liu a 37.5% ownership, and Dr. Thropay only a
12.5% ownership.  Before this purported change in ownership structure, Liu owned
75% of the membership interests in Pacific Proton.
I. Delsk’s Letter to Liu
78. Delsk understood that they were the exclusive marketing agent in the
Chinese region for the Beverly Proton EB-5 project after September 24, 2014, and
Liu was aware that Delsk had that understanding.
79. In or after November 3, 2015, Delsk sent Liu a letter expressing its
concerns that its exclusive sales agency agreement with Pacific Proton was still valid,
and that “the project and all relevant materials provided by Pacific Proton . . . for
promotion of EB-5 project in Chinese region must be authentic, timely, complete and
comply with the relevant laws and regulations of the United States and China.”
80. In the letter, Delsk stated that: “Due to the capital structure problem
(namely, the absence of equity capital), in [the project],” in September 2015, Delsk
had formally requested that Liu suspend promotional activities for the project in
China, “while we wait for legal proof from you demonstrating that the capital
structure problem has been solved,” and that it met with Liu “again regarding the
capital structure of this project on November 3, 2015.”  Delsk concluded by stating,
that in its view, the PPEB5 Fund needed to issue a written document to inform all of
its investors of, among other things: “the current status of capital raised by [the]
project company,” “explaining the progress of construction,” and “[e]xplaining the
status of the capital of all investors (in which account their funds are currently
deposited, and whether the funds have been embezzled or misappropriated).”
81. Notwithstanding that Delsk’s letter placed Liu on notice that additional
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disclosure to investors was necessary regarding the material facts of the progress of
construction and the use of their monies, no such further disclosure has been provided
investors.
J. The Misappropriation of Investor Funds
82. Approximately $24 million in Capital Contributions were raised from
the investors, but at least $17.4 million (net of funds returned by Overseas Chinese as
alleged below) was not used to develop or construct the proton therapy center, as
represented in the POM sent to investors.  Instead, these funds were misappropriated
by Liu, Wang and the three corporate defendants.
83. Specifically, at least $19,530,000 was diverted to Liu, Wang and the
three China-based marketing firms; Overseas Chinese returned $2,060,130 of these
funds to the PPEB5 Fund and Beverly Proton.  Thus, at least $17,469,870 was
misappropriated or otherwise diverted for uses other than those disclosed in the
investor disclosures.  Most of these funds came from the investors’ Capital
Contributions.
84. Liu personally received at least $6,285,000 from the accounts where
investor proceeds were deposited.  Of that amount, $4,270,000 was transferred to him
as recently as February and March 2016, shortly after he was subpoenaed to give
investigative testimony to the SEC.
85. Wang personally received at least $1,400,000 from the accounts where
investor proceeds were deposited.  Of that amount, $996,000 was transferred to her in
March 2016.
86. Liu also transferred over $11,845,000 to the three marketing firms in

China (Overseas Chinese, UDG and Delsk) from the accounts where investor

proceeds were deposited.

87. The three firms also received a substantial amount of the Administrative
Fees paid by the investors.
88. Liu also misused a portion of the Administrative Fees, taking at least
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$1,600,000 for his and Wang’s personal use.
a. Overseas Chinese Was Paid Over $7.7 Million
89. Liu knew that, pursuant to an agreement he reviewed, approved and
signed on or about March 8, 2013, on behalf of Beverly Proton with Overseas
Chinese, Overseas Chinese was being paid $75,000 for each investor it obtained, plus
an annual marketing fee of $800,000.  The agreement further provided that Overseas
Chinese would return all marketing fees plus a $1,000,000 penalty within 36 months
if funds less than $50,000,000 are raised by Overseas Chinese in 36 months.
90. Overseas Chinese solicited 11 investors who invested in the PPEB5

Fund.

91. Overseas Chinese was paid a total of $7,722,000—the vast majority of
which came from investor Capital Contributions—to recruit the 11 investors.
92. Subsequently, Overseas Chinese returned $2,060,130 it apparently owes
Beverly Proton, apparently as a result of its failure to raise the required $50 million.
It appears that Liu has dissipated most of the funds returned by Overseas Chinese.
Overseas Chinese currently retains $5,661,870 in investor funds.
b. UDG Was Paid $3,815,000
93. Liu knew that, pursuant to identical agreements he signed on behalf of
Pacific Proton on or about August 18 and August 12, 2013, with, respectively, United
Damei Investment Co. Ltd. and Beijing Pacific Damei Consulting Co. Ltd., which
had identical addresses in Beijing, UDG was to be paid a net present value “interest
fee” by Beverly Proton (who was not a party to the agreement) of $35,000 for each
investor it obtained, the entire $45,000 Administrative Fee, an immediate “document
preparation fee” of $500,000 upon signing of the Agreement, and a $650,000 annual
marketing fee.
94. The agreement with UDG was signed by Wenli Yao on behalf of United
Damei Investment Co. Ltd.  Ms. Yao is Wang’s mother and Liu’s mother-in-law.
Ms. Yao lives with Liu and Wang in Laguna Niguel.  She does not speak or read
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English, the language in which the Agreement is written.
95. UDG solicited 10 investors who invested in the PPEB5 Fund.
96. UDG was paid a total of $3,815,000—the vast majority of which came
from Capital Contributions—to recruit the ten investors.  All of these monies were
paid to International and Commercial Bank of China, in Hong Kong.
c. Delsk Was Paid $1,387,500
97. Liu also caused fees to be paid to Delsk, based in China, which was

another entity he hired to solicit investors.

98. Delsk solicited 37 investors who invested in the PPEB5 Fund.
99. Delsk was paid a total of $1,387,500—the vast majority of which came
from Capital Contributions—to recruit the 37 investors.  All of these monies were
paid to Hang Seng Bank, in Hong Kong.
K. The Defendants’ State of Mind in Carrying Out the Fraud
100. At all relevant times, Liu and Wang knowingly, recklessly and/or
negligently engaged in a fraudulent scheme by misappropriating the Capital
Contributions and Administrative Fees paid by investors, so that most of these funds
have not been used as represented in the POM and other disclosures to investors.
101. As president of Pacific Proton and Beverly Proton, and, through Pacific
Proton, the sole manager of the PPEB5 Fund, Liu’s state of mind is imputed to each
of these entities.
102. Liu understood that the sole source of funds for the offering expenses,
including legal, accounting and administrative expenses, and commissions and fees
relating to the offering would come from the $45,000 Administrative Fee, paid by
each investor, and not the $500,000 Capital Contribution each investor made.  He
further understood that the Administrative Fee was paid by the investor directly to the
regional center, Pacific Proton, and not the investment fund, PPEB5 Fund.
103. Liu also understood that the investors were investing in the PPEB5
Fund, which then made a loan to Beverly Proton, the purpose of which was to fund
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and develop the project by partially financing construction and operation of a proton
therapy center.  Liu further understood that all of the investor funds from the PPEB5
Fund, consisting of each investor’s $500,000 Capital Contribution, were to be paid
towards this loan.
104. Notwithstanding Liu’s understanding that the Capital Contributions were
to be used, according to the POM and other investor disclosures, to develop and
operate the therapy center and that commissions and fees relating to the offering were
required to be paid from the Administrative Fees and not the Capital Contributions,
Liu knew that (a) he and Wang received millions of dollars from the Capital
Contributions and Administrative Fees and (b) both Pacific Proton, which received
the Administrative Fee, and Beverly Proton, which received the loan consisting of the
investors’ Capital Contributions, were paying commissions to the three Chinese
firms.
105. Also, during the relevant time, Liu was, and is, the signatory on the

relevant bank accounts of the three corporate defendants through which the

misappropriation of investor funds took place.

106. Wang acted negligently, at a minimum, with respect to the misleading
UDG website statements.  She marketed the proton therapy to investors and patients,
and she and her husband received millions of dollars from the project.  Given that,
and her role at the corporate defendants and UDG, Wang should have known that
investor money was being misused, contrary to the claims on UDG’s website.
107. Wang was also UDG’s CEO and chairman, and thus should have known
that its website was materially misleading in the way it touted the success of the
project, and did so with photographs and letters of government officials, which Wang
understood were used for promotional reasons.
108. Wang acted at least negligently in obtaining at least $1.4 million of

investor money by means of these misleading claims.

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L. The Misrepresentations and Omissions
109. In addition to their fraudulent scheme, the defendants have made
materially false and misleading statements and omissions to the PPEB5 Fund
investors, and have obtained investor proceeds by means of these misstatements and
omissions.
110. As alleged above, the POM states that Capital Contributions from
investors would be placed at risk, for the purpose of satisfying the EB-5 program
criteria, in order to fund the development and operation of a proton therapy center in
Los Angeles, and that the Administrative Fees paid by investors would be used for
administrative expenses.
111. These representations were materially false and misleading because the
majority of the Capital Contributions were not used for that stated purpose.  Instead,
they were misappropriated by Liu and Wang, and dispersed to the three Chinese
firms.  In addition, as alleged above, the Administrative Fees were misused.
112. Also, even though construction of the treatment center has not even
begun, and the investor funds set aside for that construction have largely been
misappropriated and dissipated, Liu and the three corporate defendants have omitted,
and not disclosed, this material information to investors and potential investors.
113. In addition, notwithstanding that the POM states that the project “is
dependent upon the continued involvement of Dr. Thropay” and that the “loss of
services” of Dr. Thropay “would have a material adverse effect on PPEB5 [Fund]’s
and [Beverly Proton’s] business, financial condition and results of operations,” Liu
and the three corporate defendants have omitted, and not disclosed to actual and
potential investors that Dr. Thropay has been effectively removed from the project
and that there is, currently, no medical director.
114. At all relevant times, Liu, who is ultimately responsible for the POM and
other disclosures to investors, knew, or was reckless and negligent in not knowing,
that these representations and omissions were false and misleading.  His state of mind
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is imputed to Pacific Proton, Beverly Proton and the PPEB5 Fund, due to his control
and/or management of them.
115. In addition, UDG’s website misleadingly implies that the proton therapy
project is going well and is a “safe and reliable” investment.
116. The website also misleadingly implies the project will use the Optivus
proton therapy technology, including letters touting that specific technology from
former President Bush and then-Governor Schwarzenegger, when, in fact, the
Beverly Proton project is no longer using that specific technology.  Moreover, the
website presents these letters as “support” for the project, but they are completely
unrelated to the Beverly Proton project and are dated before the project was ever
formed.
117. UDG’s website was therefore materially misleading because the project
has stalled and is not being constructed, the investor proceeds were being dissipated
and misused, and the Optivus technology was not being used at the site.
118. At all relevant times, Wang, who is the CEO and chairman of the board
of UDG, was, and is, at least negligent in not knowing that these misleading
representations were and are being made on UDG’s website to actual and potential
investors.
M. The Ongoing Fraud
119. UDG’s website, which markets and promotes the investment in the
PPEB5 Fund, is still active and thus continues to promote and encourage investments
in the fund.
120. Of the at least $17,469,870 misappropriated and dissipated by

defendants, $5,266,000 was diverted from the project as recently as February and

March 2016, shortly after the SEC subpoenaed Liu for investigative testimony.

121. Specifically, in February and March 2016, $4,270,000 was transferred to
Liu and $996,000 was transferred to Wang.  The overwhelming majority of these
funds came from investor Capital Contributions.
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FIRST CLAIM FOR RELIEF

Fraud in the Offer or Sale of Securities

Violations of Section 17(a) of the Securities Act

(against all Defendants)

122. The SEC realleges and incorporates by reference paragraphs 1 through
121 above.
123. By engaging in the conduct described above, each of the defendants,
directly or indirectly, in the offer or sale of securities, and by the use of means or
instruments of transportation or communication in interstate commerce or by use of
the mails directly or indirectly:  (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; and
(c) engaged in transactions, practices, or courses of business which operated or would
operate as a fraud or deceit upon the purchaser.
124. Each of the defendants knew, or was reckless in not knowing, that he,
she or it employed devices, schemes and artifices to defraud.  Each of the defendants
knew, or was reckless or negligent in not knowing, that he, she or it 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; and engaged in
transactions, practices, or courses of business which operated or would operate as a
fraud or deceit upon the purchaser.
125. By engaging in the conduct described above, each of the defendants

violated, and unless restrained and enjoined will continue to violate, Sections

17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act, 15 U.S.C. §§ 77q(a)(1),

77q(a)(2), & 77q(a)(3).

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SECOND CLAIM FOR RELIEF

Fraud in Connection with the Purchase or Sale of Securities

Violations of Section 10(b) of the Exchange Act

and Rules 10b-5(a) and 10b-5(c) Thereunder

(against all Defendants as primary violators, and, alternatively,

 against Liu as a control person under Section 20(a) of the Exchange Act)

126. The SEC realleges and incorporates by reference paragraphs 1 through
121 above.
127. By engaging in the conduct described above, each of the defendants,
directly or indirectly, in connection with the purchase or sale of a security, 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; and (b) engaged in acts, practices, or courses of business which operated or
would operate as a fraud or deceit upon other persons.
128. Each of the defendants knew, or was reckless in not knowing, that he,
she or it employed devices, schemes and artifices to defraud; and engaged in acts,
practices or courses of conduct that operated as a fraud on the investing public by the
conduct described in detail above.
129. By engaging in the conduct described above, each of the defendants
violated, and unless restrained and enjoined will continue to violate, Section 10(b) of
the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-5(a) and 10b-5(c) thereunder,
17 C.F.R. §§ 240.10b-5(a) & 240.10b-5(c).
130. Defendant Liu was a control person of defendants Pacific Proton, PPEB5
Fund and Beverly Proton because he possessed, directly or indirectly, the power to
direct or cause the direction of the management and policies of each of these entities.
Accordingly, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a),
defendant Liu is liable to the SEC to same extent as each of these corporate
defendants for those defendants’ violations of Section 10(b) and Rules 10b-5(a) and
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(c) thereunder.
THIRD 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(b) Thereunder

(against Defendants Liu, Pacific Proton, PPEB5 Fund and Beverly Proton as

primary violators, and, alternatively, against Liu as a control person under

Section 20(a) of the Exchange Act)

131. The SEC realleges and incorporates by reference paragraphs 1 through
121 above.
132. By engaging in the conduct described above, defendant Liu, Pacific
Proton, PPEB5 Fund and Beverly Proton, and each of them, directly or indirectly, in
connection with the purchase or sale of a security, by the use of means or
instrumentalities of interstate commerce, of the mails, or of the facilities of a national
securities exchange, 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.
133. Defendants Liu, Pacific Proton, PPEB5 Fund and Beverly Proton, and
each of them, knew, or was reckless in not knowing, that he or it 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.
134. By engaging in the conduct described above, defendants Liu, Pacific
Proton, PPEB5 Fund and Beverly Proton violated, and unless restrained and enjoined
will continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and
Rules 10b-5(b) thereunder, 17 C.F.R. § 240.10b-5(b).
135. Defendant Liu was a control person of defendants Pacific Proton, PPEB5
Fund and Beverly Proton because he possessed, directly or indirectly, the power to
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direct or cause the direction of the management and policies of each of these entities.
Accordingly, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a),
defendant Liu is liable to the SEC to same extent as each of the entity defendants for
those defendants’ violations of Section 10(b) and Rule 10b-5(b) thereunder.
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 orders, in forms consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, temporarily, preliminarily and permanently enjoining defendants Liu,
Wang, Pacific Proton, PPEB5 Fund and Beverly Proton, 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 orders by personal
service or otherwise, and each of them, from violating Section 17(a) of the Securities
Act, 15 U.S.C. §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 orders, in forms consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, temporarily, preliminarily and permanently enjoining defendants Liu,
Wang, Pacific Proton, PPEB5 Fund and Beverly Proton, 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 orders by personal
service or otherwise, and each of them, from, directly or indirectly, participating in
the offer or sale of any security which constitutes an investment in a “commercial
enterprise” under the United States Government EB-5 visa program administered by
the USCIS, including engaging in activities with a broker, dealer, or issuer, or a
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Regional Center designated by the USCIS, for purposes of issuing, offering, trading,
or inducing or attempting to induce the purchase or sale of any such EB-5 investment.
IV.
Issue in a form consistent with Fed. R. Civ. P. 65, a temporary restraining order
and a preliminary injunction freezing the funds and assets of defendants; ordering
repatriation of any funds or assets transferred overseas; prohibiting each of the
defendants from destroying documents; and ordering accountings by each of the
defendants.
V.
Order defendants to disgorge all funds received from their illegal conduct,
together with prejudgment interest thereon, and to repatriate any funds or assets they
caused to be sent overseas.
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.
VIII.
Grant such other and further relief as this Court may determine to be just and
necessary.
Dated:  May 26, 2016
/s/ John W. Berry
John W. Berry
Attorney for Plaintiff
Securities and Exchange Commission
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Case 8:16-cv-00974-CJC-AGR Document 1 Filed 05/26/16 Page 1 of 27 Page ID #:1 

JOHN W. BERRY (Cal. Bar No.295760)

Email: [email protected]

JACOB A. REGENSTREIF (Cal. Bar No. 234734)

E-mail: [email protected] 


Attorneys for Plaintiff

Securities and Exchange Commission 

Michele Wein Layne, Regional Director

Alka N. Patel, Associate Regional Director 

John W. Berry, Regional Trial Counsel

444 S. Flower Street, Suite 900

Los Angeles, California 90071

Telephone: (323) 965-3998

Facsimile: (213) 443-1904 


05/26/16 

UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

4"$7���������$+$�	"(3Y
 

SECURITIES AND EXCHANGE  Case No. 

COMMISSION, 


Plaintiff, COMPLAINT 

vs. 

CHARLES C. LIU; 
XIN WANG a/k/a LISA WANG;    
PACIFIC PROTON THERAPY 
REGIONAL CENTER, LLC; 
PACIFIC PROTON EB-5 FUND, LLC; 
and BEVERLY PROTON CENTER, 
LLC f/k/a LOS ANGELES COUNTY
PROTON THERAPY, LLC, 

Defendants.

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 

COMPLAINT 1 

mailto:[email protected]
mailto:[email protected]


    

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Case 8:16-cv-00974-CJC-AGR Document 1 Filed 05/26/16 Page 2 of 27 Page ID #:2 

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

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

2. 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 Charles C. Liu and Xin Wang 

reside in this district. 

SUMMARY 

3. This case involves an ongoing fraudulent scheme perpetrated by 

defendant Charles C. Liu (“Liu”) and his wife, defendant Xin Wang, a/k/a Lisa Wang 

(“Wang”), to defraud Chinese investors in the federal “EB-5 Immigrant Investor 

Program,” which is administered by the United States Citizenship and Immigration 

Service (“USCIS”). To date, the defendants have defrauded at least 50 Chinese 

investors of almost $27 million by falsely claiming that their monies would be 

invested in a program that met the requirements of the EB-5 program, and would be 

used to build and operate a proton therapy cancer treatment center in Southern 

California. 

4. The EB-5 Immigrant Investor Program was created to stimulate the U.S. 

economy with capital investment from foreign investors.  Under the program, foreign 

investors can receive a permanent visa to live and work in the U.S. if they make a 

capital investment that satisfies certain conditions over a two-year period, including 

the creation of jobs. Under the program’s regulations, the foreign investors must put 

“the required amount of capital at risk for the purpose of generating a return.” 

5. From at least October 2014 to the present, the defendants have offered 

COMPLAINT 2 



    

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and sold, and continue to offer, EB-5 investments to Chinese investors, allegedly to 

fund the development and operation of the cancer treatment center. The investors 

made their investment in two parts: a $500,000 “Capital Contribution,” which was to 

be escrowed for use in developing and operating the center, and a $45,000 

“Administrative Fee.” 

6. Rather than invest the investors’ Capital Contributions as promised— 

and as required for the investors to meet the EB-5 program requirements—the 

defendants misappropriated or diverted approximately $17.4 million from the 

accounts where the contributions were deposited. Liu misappropriated at least 

$6,285,000 for himself, and his wife and co-defendant, Wang, misappropriated at 

least $1,400,000. Liu also transferred over $11,845,000 to three marketing firms in 

China, including $3,500,000 to a firm of which Wang is CEO and chairman of the 

board. Liu also allowed most of the Administrative Fees to be used for undisclosed 

purposes. As a result, the EB-5 eligible cancer treatment center that the defendants 

represented would be constructed with investor funds has not been built. Liu and 

Wang have carried out this fraud through a number of entities, three of which are 

named as defendants.   

7. The defendants’ fraud is still ongoing. The majority of the funds 

dissipated by the defendants were transferred as recently as February and March 

2016, shortly after the SEC subpoenaed Liu for investigative testimony.  Also, the 

website primarily used to offer the EB-5 investments to Chinese investors remains 

active, and continues to market and promote the investments in a materially 

misleading manner.    

8. By engaging in this conduct, the defendants have violated, and continue 

to violate, the antifraud provisions of Sections 17(a) of the Securities Act, 15 U.S.C. 

§ 77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-

5(a) and (c) thereunder, 17 C.F.R. 240.10b-5(a) & 240.10b-5(c), and Liu and the 

corporate defendants have violated, and continue to violate Exchange Act Rule 10b-

COMPLAINT 3 



    

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5(b), 17 C.F.R. § 240.10b-5(b). Liu is also violating Section 10(b) and Rule 10b-5 as 

a control person of each of the corporate defendants. 

THE DEFENDANTS 

9. Charles C. Liu (“Liu”) resides in Laguna Niguel, California.  He holds 

an MFA degree in Arts Administration.  From 2004 to 2009, Liu sold medical 

equipment relating to proton therapy for a company based in Hong Kong.  Liu 

controls each of the three corporate defendants. 

10. Xin Wang a/k/a Lisa Wang (“Wang”) is Liu’s wife and resides with 

him in Laguna Niguel, California.  Wang was trained in China as a pharmacist, and 

worked in China as a pharmacist for approximately one year. Wang holds key 

positions at the corporate defendants and is CEO and chairman of the board of one of 

the China-based firms that solicited investors for the defendants. 

11. Pacific Proton Therapy Regional Center, LLC (“Pacific Proton”) is 

a California limited liability company, headquartered in Laguna Niguel, California. 

Liu controls Pacific Proton and is its president.  On June 28, 2012, USCIS approved 

Pacific Proton’s application to become a regional center under the EB-5 program. 

12. Pacific Proton EB-5 Fund, LLC (“PPEB5 Fund”), is a Delaware 

limited liability company formed on November 15, 2010 and headquartered in 

Montebello, California. In its offering materials, PPEB5 Fund claimed that it offered 

an EB-5-eligible investment that used investor proceeds to loan funds to develop and 

operate a proton therapy cancer treatment center in Los Angeles County.  Pacific 

Proton is the sole manager of the PPEB5 Fund. 

13. Beverly Proton Center, LLC f/k/a Los Angeles County Proton 

Therapy, LLC (“Beverly Proton”) is a California limited liability company, 

headquartered in Laguna Niguel, California. Liu co-founded Beverly Proton to 

develop and operate a proton therapy cancer treatment center using funds raised by 

the PPEB5 Fund. Liu is president of Beverly Proton, and is its treasurer and 

managing member.  Wang is Beverly Proton’s “Vice President in Marketing of Asia 

COMPLAINT 4 



    

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Case 8:16-cv-00974-CJC-AGR Document 1 Filed 05/26/16 Page 5 of 27 Page ID #:5 

[sic].” 

THE FRAUDULENT SCHEME 

A. The EB-5 Immigrant Investor Program 

14. The EB-5 Immigrant Investor Program sets aside EB-5 visas for 

participants who invest in commercial enterprises associated with regional centers 

approved by USCIS based on proposals for promoting economic growth.   

15. Under the EB-5 Immigrant Investor Program, foreign investors who 

invest capital in a “commercial enterprise” in the United States may petition the 

USCIS (called an “I-526 Petition”) and receive conditional permanent residency 

status for a two-year period. USCIS defines a “commercial enterprise” as any for-

profit activity formed for the ongoing conduct of lawful business. 

16. The EB-5 Immigrant Investor Program requires a showing that the 

foreign investor has placed the required amount of capital at risk for “the purpose of 

generating a return” on the capital placed at risk.  The foreign investor must invest at 

least $500,000 in a “Targeted Employment Area” and thereby create at least ten full-

time jobs for United States workers. If the foreign investor satisfies these and other 

conditions within the two-year period, the foreign investor may apply to have the 

conditions removed from his or her visa and live and work in the United States 

permanently.   

17. Many EB-5 investments are administered by entities called “regional 

centers.” EB-5 regional centers are designated by USCIS to administer the EB-5 

investment projects based on proposals for promoting economic growth.   

18. Regional center investment vehicles are typically offered as limited 

partnership interests or limited liability company units, which are managed by a 

person or entity other than the foreign investor, who acts as a general partner or 

managing member of the investment vehicle.  To become a regional center, the entity 

must demonstrate, with supporting economic and statistical studies, how it will 

promote economic growth, including job creation.  

COMPLAINT 5 



    

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B. Designation Of Defendant Pacific Proton As A Regional Center 

19. On or about November 19, 2010, Liu applied to USCIS, on behalf of 

Pacific Proton, for its designation as a “regional center” under the EB-5 immigrant 

investor program. 

20. Liu signed the application on behalf of Pacific Proton as its president. 

Liu reviewed the application before it was submitted to USCIS.   

21. In the application, Liu made the following representations, among 


others:
 

(a) Pacific Proton had formed the PPEB5 Fund to serve as the 

investment vehicle for its first project.  EB-5 investors would make their qualifying 

investment in the PPEB5 Fund, which would then pool the funds and make a loan to 

Beverly Proton (then known as Los Angeles County Proton Therapy, LLC), to 

partially finance the development and operation of a proton therapy center and 

commercial office space. 

(b) Beverly Proton would develop and operate an innovative new 

cancer treatment center using proton beam radiation for treatment of oncology 

patients in Montebello, California. In addition to the proton therapy center, the 

building was expected to contain 125,000 square feet of medical office space and 

ancillary facilities. Beverly Proton would also develop and construct a new 30,000 

square foot office building in Monterey Park, California, which would contain a 

restaurant, pharmacy, and radiation therapy office and multiple-use medical office 

space. 

(c) Each investor would be required to invest $500,000 as a “Capital 

Contribution” in the PPEB5 Fund and to pay an “Administrative Fee” of 

approximately $45,000 before applying to USCIS for their I-526 petition.  Pacific 

Proton would use an escrow account to hold the foreign investor’s $500,000 Capital 

Contribution. Once the escrow agent receives confirmation that the investor’s I-526 

Petition was approved, the escrowed funds would be released to the PPEB5 Fund for 

COMPLAINT 6 



    

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deployment to Beverly Proton.  If USCIS were to deny the I-526 Petition, then the 

$500,000 Capital Contribution investment would be returned to the investor, together 

with 50% of the Administrative Fee. 

(d) According to an economic report included with the application, 

the project would “create an estimated 4,775 permanent new jobs, boost output by 

$728 million per year, and increase labor (household) income by $217 million per 

year.” 

(e) Pacific Proton and the project would have a “transformative 

effect” and “a substantial and ongoing economic impact” on the counties of Los 

Angeles, Orange, Riverside and San Bernardino, “creating over 4,500 permanent, 

full-time jobs and yielding an economic impact of nearly $728 million per year once 

completed.”   

22. On June 28, 2012, USCIS approved the designation of Pacific Proton as 

a regional center under the EB-5 Immigrant Investor Program. 

C. Liu and Wang’s Roles in the Corporate Defendants 

23. Liu has been the president of the regional center, Pacific Proton, since 

2010. Until recently, Liu owned 75% of the membership interests in Pacific Proton.  

24. Liu receives $350,000 a year in compensation from Pacific Proton. 

25. From about January 19, 2016 to April 4, 2016, Wang was the secretary 

of Pacific Proton. Wang was “elected” to this position by her husband, Liu. 

26. Beverly Proton is the purported job-creating vehicle sponsored by 

Pacific Proton in connection with Pacific Proton’s status as a USCIS-approved 

regional center. It is the entity that is supposed to develop and operate the proton 

therapy cancer treatment center. 

27. Liu co-founded Beverly Proton with Dr. John Thropay, a radiation 

oncologist. Liu has been Beverly Proton’s president since 2010, and is its treasurer 

and managing member.  He owns 75% of its membership interests.   

28. On January 19, 2016, Liu and Wang were elected by Liu as the two sole 

COMPLAINT 7 



    

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directors of Beverly Proton. Wang has also been Beverly Proton’s “Vice President in 

Marketing of Asia [sic]” since 2011. 

29. Liu receives $550,000 a year in compensation from Beverly Proton.   

30. On January 28, 2016, Wang entered into an agreement with Beverly 

Proton pursuant to which she is to receive a $280,000 annual salary from Beverly 

Proton, going back to 2011. Liu signed the employment agreement with Wang on 

behalf of Beverly Proton. 

31. Once released from escrow, the PPEB5 Fund received the Capital 

Contributions paid by the investors, and then loaned the pooled Capital Contributions 

to Beverly Proton. Pacific Proton received the Administrative Fees paid by investors.  

Liu, through his control of Pacific Proton, is the sole manager of the PPEB5 Fund, 

and has been its manager since 2010. 

32. Liu receives $200,000 a year in compensation from the PPEB5 Fund. 

33. During the entire relevant period, up to and including the present, Liu 

has been the sole signatory on all bank accounts held in the name of each entity 

defendant, except that Dr. Thropay, was also a signatory on the Beverly Proton 

account from October 2015 until Liu caused passage of a board resolution on January 

19, 2016, removing Thropay from the account. 

D. The EB-5 Offering 

34. From at least October 1, 2014 to the present, the defendants have offered 

and sold investments in the form of limited liability company, or “LLC,” units in the 

PPEB5 Fund. To date, the defendants have raised at least $26,967,918 from at least 

50 investors in China. 

35. Of that amount, at least $24,712,217 was raised as “Capital 

Contributions” through an offering of the LLC units in the PPEB5 Fund. The 

remainder, or at least $2,255,701, was received by Pacific Proton as required 

“Administrative Fees.”   

36. Liu and the PPEB5 Fund provided offering materials to each investor 

COMPLAINT 8 



    

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consisting of: (1) a private offering memorandum (“POM”) dated May 1, 2013; (2) an 

Escrow Agreement attached to the POM as Appendix A; (3) an Operating Agreement 

attached to the POM as Appendix B; and (4) a Subscription Agreement attached to 

the POM as Appendix C. 

37. The POM states that the PPEB5 Fund is offering the LLC units for 

$500,000 each, and can offer up to 300 LLC units (one per each accredited investor) 

for a maximum offering of $150 million. 

38. The POM further states that each $500,000 investment, or “Capital 

Contribution,” would be held in escrow until notice was given to the PPEB5 Fund 

that the investor’s I-526 Petition had been filed with USCIS. 

39. The POM that was provided to investors differs from the original POM 

provided to and approved by USCIS in at least two material respects. First, the 

amount of the offering had been reduced from $193 million to $150 million.  Second, 

the POM provided to investors states that the investor’s Capital Contribution will be 

released from escrow when the investor files an I-526 Petition for residency with 

USCIS, rather than when that application is approved. 

40. The POM further states that, once released from escrow, the offering 

proceeds were to be loaned from the PPEB5 Fund to Beverly Proton to develop and 

operate a proton therapy center in Los Angeles County under the medical direction of 

Dr. Thropay. The POM states that Beverly Proton “intends to use the proceeds from 

this Offering to finance development and operation” of the proton therapy center. 

41. Additionally, the POM states that the PPEB5 Fund would charge 

investors an “Administrative Fee” of $45,000 to pay for “Offering Expenses, 

including legal, accounting and administration expenses, and commissions and fees 

related to this Offering.” Investors paid the Administrative Fee directly to Pacific 

Proton. 

42. The POM explicitly states that “Proceeds of this Offering do not include 

Administrative Fees.  	Offering expenses, commissions and fees incurred in 

COMPLAINT 9 



    

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connection with this Offering shall be paid from the proceeds of Administrative Fees 

and not from EB-5 Capital Contributions.” 

43. Liu provided the information contained in the POM, and reviewed and 

approved it. 

44. The investments in the PPEB5 Fund were securities. In fact, the POM 

refers to the investments as “securities,” even noting that “these securities have not 

been registered under the Securities Act of 1933” [capitalized in original]. 

45. The investments in the PPEB5 Fund were investments of money.  As set 

forth in the POM, each investor was required to invest a minimum of $500,000 as a 

“Capital Contribution” for one LLC unit. As required by USCIS regulations, the 

investor’s investment money must be “at risk for the purpose of generating a return 

on such capital.” 

46. The investments in the PPEB5 Fund were also investments in a common 

enterprise. The investors’ $500,000 Capital Contributions were pooled together in a 

single escrow account, and, once released from that account were pooled together in a 

single account held by the PPEB5 Fund. The PPEB5 Fund, in turn, lent those funds 

to Beverly Proton in order to develop and operate a proton therapy center. The 

investor funds were pooled together in a single account held by Beverly Proton. 

47. According to the POM, Beverly Proton is to pay the PPEB5 Fund an 

annual interest payment of 0.25% on the loan (comprised of the investors’ Capital 

Contributions). 

48. Any profits from investments in the PPEB5 Fund were to be derived 

from the efforts of others.  Liu solely manages the PPEB5 Fund; the investors have 

no management role. The POM further provides that Pacific Proton is the sole 

manager of the PPEB5 Fund, and that investors will have limited involvement in the 

management of PPEB5 Fund. 

49. Additionally, the POM emphasizes that the success of the PPEB5 Fund 

and Beverly Proton is principally dependent on current management personnel for 

COMPLAINT 10 



    

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operation of the business. In particular, the POM states that Beverly Proton “is 

dependent upon the continued involvement of Dr. Thropay and Mr. Liu in this Project 

personally. The loss of services of either Dr. Thropay or Mr. Liu would have a 

material adverse effect on PPEB5 [Fund]’s and the Borrower’s business, financial 

condition and results of operations.” 

50. The POM further states that Beverly Proton “will be required to hire and 

retain skilled employees at all levels of operations in a market where such qualified 

employees are in high demand and are subject to receiving competing offers.  The 

inability to hire needed employees on a timely basis . . . could have a material adverse 

effect on the ability to meet the schedules of the strategic plan.”  Investors are 

therefore dependent on the efforts of others to ensure that the venture is profitable. 

E. The Sales Efforts 

51. Liu retained at least three China-based marketing firms to solicit 

investors: (a) Overseas Chinese Immigration Consulting Ltd. (“Overseas Chinese”), 

based in Hong Kong; (b) United Damei Group, United Damei Investment Company, 

Ltd. and/or Beijing Pacific Damei Consulting Co. Ltd. (collectively, “UDG”), based 

in China; and (c) Hong Kong Delsk Business Co., Ltd. (“Delsk”), based in Hong 

Kong or China. 

52. Wang is CEO and chairman of the board of UDG.  The UDG website 

describes Wang in different places as “CEO” and “Chairman” (as also stated on her 

business card). It also includes her picture at the top of a group of pictures of the 

“Executive Team.” 

53. As alleged below, Oversees Chinese, UDG and Delsk received 


substantial sums of investor funds.
 

54. Liu personally participated in the offer and sale of investments in the 


PPEB5 Fund to Chinese investors. Liu met investors a number of times at the 


proposed site for the proton center in Southern California. 


55. Wang also participated in the sales effort on behalf of Beverly Proton 

COMPLAINT 11 



    

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and UDG. She held the title of “Vice President in Marketing of Asia [sic]” for 


Beverly Proton. Her responsibilities included promotions and marketing, and 


attracting patients from overseas for cancer treatment. 


56. With Liu’s knowledge, Wang spoke about the project to potential 

investors and patients at multiple meetings organized in China in 2014 and 2015, 

including in Beijing, Shanghai and Guangzhou. Wang was aware when she spoke to 

potential patients that the Beverly Proton proton therapy cancer treatment center was 

not completed.  Wang also met with investors and answered questions about living in 

the United States, such as questions about schools, taxes and the real estate market. 

57. In 2015, Liu and Wang attended a meeting about proton therapy in 

Beijing organized by UDG, which had an audience of about 200 people, including 

potential investors. 

F. The UDG Promotional Materials 

58. UDG has an active website that continues to promote the investments in 

the PPEB5 Fund. 

59. The website touts the proton therapy cancer treatment center that was to 

be constructed and operated with investor funds. 

60. For example, UDG’s website states that the Beverly Proton therapy 


center project “is a secure and reliable investment project.” 


61. The UDG website also states: “Among the various American EB-5 

programs currently, the advantages of Los Angeles Proton Therapy Center are quite 

outstanding, and our company has a very professional case processing team and 

customer service team, application process of clients are quite smooth, and there have 

been [sic] good news frequently, we will continue sharing these good news with 

you!” 

62. UDG’s website also claims that the Beverly Proton project is using the 

proton therapy technology of Optivus Proton Therapy, Inc. (“Optivus”). UDG’s 

website has descriptions of the Optivus technology, including that it was used by 

COMPLAINT 12 



    

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Loma Linda University, and a description of Loma Linda University’s cancer 

treatment program. The website touts the Optivus proton therapy technology, stating 

that “Optivus is the equipment supplier of Los Angeles Proton Therapy Center.  It is . 

. . the most effective, reliable, precise and environmental proton therapy system in the 

market currently . . . . LAPTC will use new Optivus Conforma 3000 System . . . .” 

63. UDG’s website also includes a section entitled “Government Support,” 

which includes pictures of government officials, including former president George 

Herbert Walker Bush and former California Governor Arnold Schwarzenegger, 

accompanied by copies of letters from each of them. 

64. Wang understood that the photograph of former Governor 

Schwarzenegger, which was also hanging at UDG’s offices, was maybe there “for 

promotional purposes.”  

65. The letter from former President Bush (dated April 2008 and addressed 

to the “Party Secretary of Shanghai City”) and the letter from then-Governor 

Schwarzenegger (dated July 2007 and also to the “Shanghai Party Secretary”) both 

touted Optivus and its technology. While the letters appear to be letters of support for 

proton therapy in general at the time they were written, they are completely unrelated 

to the Beverly Proton project and predated its formation.  Nevertheless, the UDG 

website presents them under the heading and on a specific page entitled “Government 

Support.” 

G. The Stalled Therapy Center Project 

66. Dr. Thropay owned a medical office building on the site where the 

proton therapy center was purportedly to be built with PPEB5 Fund investor monies.  

Liu caused that office building to be demolished in or about mid-2015 but there is 

presently no construction at that site for the new Beverly Proton treatment center. In 

fact, no construction permits have been obtained for the project. 

67. Liu knows that construction for the new therapy center has not begun. 

He has personally toured the site, both before and after the demolition of the office 

COMPLAINT 13 



    

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building. Similarly, Wang is aware that construction is not complete. 

68. Beverly Proton also paid Optivus approximately $368,100 for Optivus 

equipment.  However, in 2015, Liu decided to purchase radiation therapy equipment 

from a competing manufacturer.  No Optivus equipment was ever delivered to the 

project. Nor has any equipment from the competitor been delivered to the project 

site. 

69. Furthermore, on March 18 and 22, 2016, respectively, counsel for 

Optivus and Loma Linda University wrote separate letters to the PPEB5 Fund in care 

of Liu, protesting the defendants’ continued use of their names, and instructing that 

their names not be used in conjunction with the project.   

70. The Optivus letter stated that Optivus viewed it as “highly 

inappropriate” for Pacific Proton and Beverly Proton to suggest that Optivus is 

involved in the project on an ongoing basis or to use Optivus’ name and reputation 

for purposes of promoting the proposed facility. It also stated that, to the extent 

Pacific Proton or Beverly Proton have held themselves out to any investors as 

affiliated, associated or otherwise endorsed by Optivus, “any such representation is 

false and misleading and must be properly addressed, by (without limitation) the 

immediate notification to any investors that Optivus has no ongoing involvement” in 

the project. 

71. Similarly, Loma Linda University stated in its letter that the use of its 

name, logo and health care services “are presented in a manner that is likely to 

confuse visitors to the [Pacific Proton] website into believing that there is an 

affiliation or sponsorship between [Pacific Proton/Beverly Proton] on the one hand, 

and [the University and its medical center] on the other.”  It also states that, to the 

extent that Pacific Proton or Beverly Proton have held themselves out to investors as 

being affiliated, associated or otherwise endorsed by the university, “any such 

representation was, and is, false and misleading, and [Pacific Proton and Beverly 

Proton] must promptly address such misrepresentations by, without limitation, 

COMPLAINT 14 



    

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immediately notifying investors that [Loma Linda University] and its affiliates, 

including [its medical center], have no sponsorship or affiliation” with the project. 

H. The Removal of Dr. Thropay 

72. Liu has also recently made a series of management changes that 


significantly diminished Dr. Thropay’s role in the project.   


73. In late October 2015, Liu entered into a memorandum of understanding 

with a southern California cancer treatment hospital, to develop a proton therapy 

center. In connection with this agreement, Liu stated that the hospital would operate 

the Beverly Proton therapy center and be able to name the center’s medical director, 

which appears to have ended Dr. Thropay’s role as medical director of the treatment 

facility as set forth in the offering documents. 

74. While the hospital had been negotiating a letter of intent with Liu, the 

negotiations stalled and eventually ceased. Thus, as of now, there is no clearly 

designated medical director of the proposed proton therapy center. 

75. Earlier this year, Liu then reorganized Pacific Proton and Beverly Proton 

to diminish Dr. Thropay’s role and interest in those entities.  On January 19, 2016, 

Liu, as the member holding 75% of the membership interests of Pacific Proton, 

removed Dr. Thropay as an officer of the regional center, and appointed himself 

president and treasurer/chief financial officer, and appointed Wang secretary.  That 

same day, at the annual meeting for Beverly Proton, Liu, as the member holding 75% 

of the membership interests, nominated and elected himself and Wang as the sole 

directors of Beverly Proton, and authorized himself, as managing member, to execute 

documents, agreements and instruments.   

76. On April 4, 2016, after being subpoenaed and providing investigative 

testimony to the SEC, Liu reorganized the companies again.  He purportedly sold 

50% of Pacific Proton to a former salesperson of a company that sold proton therapy 

equipment, for $1 per unit.  No payments have been made by this person for the 

purchase of Pacific Proton, however. At that time, the former salesman allegedly 

COMPLAINT 15 



    

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replaced Liu as Pacific Proton’s president and treasurer, and Liu replaced Wang as its 

secretary.   

77. In purportedly selling part of Pacific Proton to this former salesman, Liu 

diluted Dr. Thropay’s interest in Pacific Proton from 25% to 12.5% by giving the 

putative purchaser a 50% ownership, Liu a 37.5% ownership, and Dr. Thropay only a 

12.5% ownership. Before this purported change in ownership structure, Liu owned 

75% of the membership interests in Pacific Proton. 

I. Delsk’s Letter to Liu 

78. Delsk understood that they were the exclusive marketing agent in the 

Chinese region for the Beverly Proton EB-5 project after September 24, 2014, and 

Liu was aware that Delsk had that understanding. 

79. In or after November 3, 2015, Delsk sent Liu a letter expressing its 

concerns that its exclusive sales agency agreement with Pacific Proton was still valid, 

and that “the project and all relevant materials provided by Pacific Proton . . . for 

promotion of EB-5 project in Chinese region must be authentic, timely, complete and 

comply with the relevant laws and regulations of the United States and China.” 

80. In the letter, Delsk stated that: “Due to the capital structure problem 

(namely, the absence of equity capital), in [the project],” in September 2015, Delsk 

had formally requested that Liu suspend promotional activities for the project in 

China, “while we wait for legal proof from you demonstrating that the capital 

structure problem has been solved,” and that it met with Liu “again regarding the 

capital structure of this project on November 3, 2015.”  Delsk concluded by stating, 

that in its view, the PPEB5 Fund needed to issue a written document to inform all of 

its investors of, among other things: “the current status of capital raised by [the] 

project company,” “explaining the progress of construction,” and “[e]xplaining the 

status of the capital of all investors (in which account their funds are currently 

deposited, and whether the funds have been embezzled or misappropriated).” 

81. Notwithstanding that Delsk’s letter placed Liu on notice that additional 

COMPLAINT 16 



    

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disclosure to investors was necessary regarding the material facts of the progress of 

construction and the use of their monies, no such further disclosure has been provided 

investors. 

J. The Misappropriation of Investor Funds 

82. Approximately $24 million in Capital Contributions were raised from 

the investors, but at least $17.4 million (net of funds returned by Overseas Chinese as 

alleged below) was not used to develop or construct the proton therapy center, as 

represented in the POM sent to investors.  Instead, these funds were misappropriated 

by Liu, Wang and the three corporate defendants. 

83. Specifically, at least $19,530,000 was diverted to Liu, Wang and the 

three China-based marketing firms; Overseas Chinese returned $2,060,130 of these 

funds to the PPEB5 Fund and Beverly Proton. Thus, at least $17,469,870 was 

misappropriated or otherwise diverted for uses other than those disclosed in the 

investor disclosures. Most of these funds came from the investors’ Capital 

Contributions. 

84. Liu personally received at least $6,285,000 from the accounts where 

investor proceeds were deposited. Of that amount, $4,270,000 was transferred to him 

as recently as February and March 2016, shortly after he was subpoenaed to give 

investigative testimony to the SEC. 

85. Wang personally received at least $1,400,000 from the accounts where 

investor proceeds were deposited. Of that amount, $996,000 was transferred to her in 

March 2016. 

86. Liu also transferred over $11,845,000 to the three marketing firms in 


China (Overseas Chinese, UDG and Delsk) from the accounts where investor 


proceeds were deposited.
 

87. The three firms also received a substantial amount of the Administrative 

Fees paid by the investors. 

88. Liu also misused a portion of the Administrative Fees, taking at least 

COMPLAINT 17 



    

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$1,600,000 for his and Wang’s personal use. 

a. Overseas Chinese Was Paid Over $7.7 Million 

89. Liu knew that, pursuant to an agreement he reviewed, approved and 

signed on or about March 8, 2013, on behalf of Beverly Proton with Overseas 

Chinese, Overseas Chinese was being paid $75,000 for each investor it obtained, plus 

an annual marketing fee of $800,000. The agreement further provided that Overseas 

Chinese would return all marketing fees plus a $1,000,000 penalty within 36 months 

if funds less than $50,000,000 are raised by Overseas Chinese in 36 months.   

90. Overseas Chinese solicited 11 investors who invested in the PPEB5 


Fund.
 

91. Overseas Chinese was paid a total of $7,722,000—the vast majority of 

which came from investor Capital Contributions—to recruit the 11 investors. 

92. Subsequently, Overseas Chinese returned $2,060,130 it apparently owes 

Beverly Proton, apparently as a result of its failure to raise the required $50 million.  

It appears that Liu has dissipated most of the funds returned by Overseas Chinese. 

Overseas Chinese currently retains $5,661,870 in investor funds. 

b. UDG Was Paid $3,815,000 

93. Liu knew that, pursuant to identical agreements he signed on behalf of 

Pacific Proton on or about August 18 and August 12, 2013, with, respectively, United 

Damei Investment Co. Ltd. and Beijing Pacific Damei Consulting Co. Ltd., which 

had identical addresses in Beijing, UDG was to be paid a net present value “interest 

fee” by Beverly Proton (who was not a party to the agreement) of $35,000 for each 

investor it obtained, the entire $45,000 Administrative Fee, an immediate “document 

preparation fee” of $500,000 upon signing of the Agreement, and a $650,000 annual 

marketing fee. 

94. The agreement with UDG was signed by Wenli Yao on behalf of United 

Damei Investment Co. Ltd.  Ms. Yao is Wang’s mother and Liu’s mother-in-law.  

Ms. Yao lives with Liu and Wang in Laguna Niguel. She does not speak or read 

COMPLAINT 18 



    

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English, the language in which the Agreement is written. 

95. UDG solicited 10 investors who invested in the PPEB5 Fund. 

96. UDG was paid a total of $3,815,000—the vast majority of which came 

from Capital Contributions—to recruit the ten investors.  All of these monies were 

paid to International and Commercial Bank of China, in Hong Kong. 

c. Delsk Was Paid $1,387,500 

97. Liu also caused fees to be paid to Delsk, based in China, which was 


another entity he hired to solicit investors.
 

98. Delsk solicited 37 investors who invested in the PPEB5 Fund. 

99. Delsk was paid a total of $1,387,500—the vast majority of which came 

from Capital Contributions—to recruit the 37 investors.  All of these monies were 

paid to Hang Seng Bank, in Hong Kong. 

K. The Defendants’ State of Mind in Carrying Out the Fraud 

100. At all relevant times, Liu and Wang knowingly, recklessly and/or 

negligently engaged in a fraudulent scheme by misappropriating the Capital 

Contributions and Administrative Fees paid by investors, so that most of these funds 

have not been used as represented in the POM and other disclosures to investors. 

101. As president of Pacific Proton and Beverly Proton, and, through Pacific 

Proton, the sole manager of the PPEB5 Fund, Liu’s state of mind is imputed to each 

of these entities.  

102. Liu understood that the sole source of funds for the offering expenses, 

including legal, accounting and administrative expenses, and commissions and fees 

relating to the offering would come from the $45,000 Administrative Fee, paid by 

each investor, and not the $500,000 Capital Contribution each investor made. He 

further understood that the Administrative Fee was paid by the investor directly to the 

regional center, Pacific Proton, and not the investment fund, PPEB5 Fund. 

103. Liu also understood that the investors were investing in the PPEB5 

Fund, which then made a loan to Beverly Proton, the purpose of which was to fund 

COMPLAINT 19 



    

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and develop the project by partially financing construction and operation of a proton 

therapy center. Liu further understood that all of the investor funds from the PPEB5 

Fund, consisting of each investor’s $500,000 Capital Contribution, were to be paid 

towards this loan. 

104. Notwithstanding Liu’s understanding that the Capital Contributions were 

to be used, according to the POM and other investor disclosures, to develop and 

operate the therapy center and that commissions and fees relating to the offering were 

required to be paid from the Administrative Fees and not the Capital Contributions, 

Liu knew that (a) he and Wang received millions of dollars from the Capital 

Contributions and Administrative Fees and (b) both Pacific Proton, which received 

the Administrative Fee, and Beverly Proton, which received the loan consisting of the 

investors’ Capital Contributions, were paying commissions to the three Chinese 

firms. 

105. Also, during the relevant time, Liu was, and is, the signatory on the 


relevant bank accounts of the three corporate defendants through which the 


misappropriation of investor funds took place. 


106. Wang acted negligently, at a minimum, with respect to the misleading 

UDG website statements.  She marketed the proton therapy to investors and patients, 

and she and her husband received millions of dollars from the project.  Given that, 

and her role at the corporate defendants and UDG, Wang should have known that 

investor money was being misused, contrary to the claims on UDG’s website.   

107. Wang was also UDG’s CEO and chairman, and thus should have known 

that its website was materially misleading in the way it touted the success of the 

project, and did so with photographs and letters of government officials, which Wang 

understood were used for promotional reasons. 

108. Wang acted at least negligently in obtaining at least $1.4 million of 


investor money by means of these misleading claims. 


COMPLAINT 201

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L. The Misrepresentations and Omissions 

109. In addition to their fraudulent scheme, the defendants have made 

materially false and misleading statements and omissions to the PPEB5 Fund 

investors, and have obtained investor proceeds by means of these misstatements and 

omissions.   

110. As alleged above, the POM states that Capital Contributions from 

investors would be placed at risk, for the purpose of satisfying the EB-5 program 

criteria, in order to fund the development and operation of a proton therapy center in 

Los Angeles, and that the Administrative Fees paid by investors would be used for 

administrative expenses. 

111. These representations were materially false and misleading because the 

majority of the Capital Contributions were not used for that stated purpose.  Instead, 

they were misappropriated by Liu and Wang, and dispersed to the three Chinese 

firms.  In addition, as alleged above, the Administrative Fees were misused. 

112. Also, even though construction of the treatment center has not even 

begun, and the investor funds set aside for that construction have largely been 

misappropriated and dissipated, Liu and the three corporate defendants have omitted, 

and not disclosed, this material information to investors and potential investors. 

113. In addition, notwithstanding that the POM states that the project “is 

dependent upon the continued involvement of Dr. Thropay” and that the “loss of 

services” of Dr. Thropay “would have a material adverse effect on PPEB5 [Fund]’s 

and [Beverly Proton’s] business, financial condition and results of operations,” Liu 

and the three corporate defendants have omitted, and not disclosed to actual and 

potential investors that Dr. Thropay has been effectively removed from the project 

and that there is, currently, no medical director. 

114. At all relevant times, Liu, who is ultimately responsible for the POM and 

other disclosures to investors, knew, or was reckless and negligent in not knowing, 

that these representations and omissions were false and misleading.  His state of mind 

COMPLAINT 21 



    

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is imputed to Pacific Proton, Beverly Proton and the PPEB5 Fund, due to his control 

and/or management of them. 

115. In addition, UDG’s website misleadingly implies that the proton therapy 

project is going well and is a “safe and reliable” investment. 

116. The website also misleadingly implies the project will use the Optivus 

proton therapy technology, including letters touting that specific technology from 

former President Bush and then-Governor Schwarzenegger, when, in fact, the 

Beverly Proton project is no longer using that specific technology. Moreover, the 

website presents these letters as “support” for the project, but they are completely 

unrelated to the Beverly Proton project and are dated before the project was ever 

formed. 

117. UDG’s website was therefore materially misleading because the project 

has stalled and is not being constructed, the investor proceeds were being dissipated 

and misused, and the Optivus technology was not being used at the site. 

118. At all relevant times, Wang, who is the CEO and chairman of the board 

of UDG, was, and is, at least negligent in not knowing that these misleading 

representations were and are being made on UDG’s website to actual and potential 

investors. 

M. The Ongoing Fraud 

119. UDG’s website, which markets and promotes the investment in the 

PPEB5 Fund, is still active and thus continues to promote and encourage investments 

in the fund. 

120. Of the at least $17,469,870 misappropriated and dissipated by 


defendants, $5,266,000 was diverted from the project as recently as February and 


March 2016, shortly after the SEC subpoenaed Liu for investigative testimony. 


121. Specifically, in February and March 2016, $4,270,000 was transferred to 

Liu and $996,000 was transferred to Wang. The overwhelming majority of these 

funds came from investor Capital Contributions. 

COMPLAINT 22 



    

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FIRST CLAIM FOR RELIEF 


Fraud in the Offer or Sale of Securities 


Violations of Section 17(a) of the Securities Act 


(against all Defendants) 


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

121 above. 

123. By engaging in the conduct described above, each of the defendants, 

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

instruments of transportation or communication in interstate commerce or by use of 

the mails directly or indirectly:  (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; and 

(c) engaged in transactions, practices, or courses of business which operated or would 

operate as a fraud or deceit upon the purchaser. 

124. Each of the defendants knew, or was reckless in not knowing, that he, 

she or it employed devices, schemes and artifices to defraud.  Each of the defendants 

knew, or was reckless or negligent in not knowing, that he, she or it 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; and engaged in 

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

fraud or deceit upon the purchaser. 

125. By engaging in the conduct described above, each of the defendants 


violated, and unless restrained and enjoined will continue to violate, Sections 


17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act, 15 U.S.C. §§ 77q(a)(1), 


77q(a)(2), & 77q(a)(3). 


COMPLAINT 23 



    

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SECOND CLAIM FOR RELIEF 


Fraud in Connection with the Purchase or Sale of Securities 


Violations of Section 10(b) of the Exchange Act 


and Rules 10b-5(a) and 10b-5(c) Thereunder 


(against all Defendants as primary violators, and, alternatively, 


 against Liu as a control person under Section 20(a) of the Exchange Act) 


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

121 above. 

127. By engaging in the conduct described above, each of the defendants, 

directly or indirectly, in connection with the purchase or sale of a security, 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; and (b) engaged in acts, practices, or courses of business which operated or 

would operate as a fraud or deceit upon other persons. 

128. Each of the defendants knew, or was reckless in not knowing, that he, 

she or it employed devices, schemes and artifices to defraud; and engaged in acts, 

practices or courses of conduct that operated as a fraud on the investing public by the 

conduct described in detail above. 

129. By engaging in the conduct described above, each of the defendants 

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

the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-5(a) and 10b-5(c) thereunder, 

17 C.F.R. §§ 240.10b-5(a) & 240.10b-5(c). 

130. Defendant Liu was a control person of defendants Pacific Proton, PPEB5 

Fund and Beverly Proton because he possessed, directly or indirectly, the power to 

direct or cause the direction of the management and policies of each of these entities. 

Accordingly, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), 

defendant Liu is liable to the SEC to same extent as each of these corporate 

defendants for those defendants’ violations of Section 10(b) and Rules 10b-5(a) and 

COMPLAINT 24 



    

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(c) thereunder. 

THIRD 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(b) Thereunder 


(against Defendants Liu, Pacific Proton, PPEB5 Fund and Beverly Proton as 


primary violators, and, alternatively, against Liu as a control person under 


Section 20(a) of the Exchange Act) 


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

121 above. 

132. By engaging in the conduct described above, defendant Liu, Pacific 

Proton, PPEB5 Fund and Beverly Proton, and each of them, directly or indirectly, in 

connection with the purchase or sale of a security, by the use of means or 

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

securities exchange, 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. 

133. Defendants Liu, Pacific Proton, PPEB5 Fund and Beverly Proton, and 

each of them, knew, or was reckless in not knowing, that he or it 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. 

134. By engaging in the conduct described above, defendants Liu, Pacific 

Proton, PPEB5 Fund and Beverly Proton violated, and unless restrained and enjoined 

will continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and 

Rules 10b-5(b) thereunder, 17 C.F.R. § 240.10b-5(b). 

135. Defendant Liu was a control person of defendants Pacific Proton, PPEB5 

Fund and Beverly Proton because he possessed, directly or indirectly, the power to 

COMPLAINT 25 



    

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direct or cause the direction of the management and policies of each of these entities. 

Accordingly, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), 

defendant Liu is liable to the SEC to same extent as each of the entity defendants for 

those defendants’ violations of Section 10(b) and Rule 10b-5(b) thereunder. 

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 orders, in forms consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, temporarily, preliminarily and permanently enjoining defendants Liu, 

Wang, Pacific Proton, PPEB5 Fund and Beverly Proton, 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 orders by personal 

service or otherwise, and each of them, from violating Section 17(a) of the Securities 

Act, 15 U.S.C. §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 orders, in forms consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, temporarily, preliminarily and permanently enjoining defendants Liu, 

Wang, Pacific Proton, PPEB5 Fund and Beverly Proton, 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 orders by personal 

service or otherwise, and each of them, from, directly or indirectly, participating in 

the offer or sale of any security which constitutes an investment in a “commercial 

enterprise” under the United States Government EB-5 visa program administered by 

the USCIS, including engaging in activities with a broker, dealer, or issuer, or a 

COMPLAINT 26 



    

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Regional Center designated by the USCIS, for purposes of issuing, offering, trading, 

or inducing or attempting to induce the purchase or sale of any such EB-5 investment. 

IV. 

Issue in a form consistent with Fed. R. Civ. P. 65, a temporary restraining order 

and a preliminary injunction freezing the funds and assets of defendants; ordering 

repatriation of any funds or assets transferred overseas; prohibiting each of the 

defendants from destroying documents; and ordering accountings by each of the 

defendants. 

V. 

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

together with prejudgment interest thereon, and to repatriate any funds or assets they 

caused to be sent overseas. 

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. 

VIII. 

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

necessary. 

Dated: May 26, 2016 
/s/ John W. Berry 
John W. Berry 
Attorney for Plaintiff 
Securities and Exchange Commission 

COMPLAINT 27