Investment Chief Gets 12 Years for Running $100 Million Scam

The chief investment officer of a New York firm specializing in trade finance was ordered to spend 12 years in prison for defrauding clients of more than $100 million.

David Hu, one of the founders of International Investment Group, was sentenced on Monday by U.S. District Judge Alvin Hellerstein in Manhattan. Hu and his partner, Martin Silver, both pleaded guilty last year to running a Ponzi-like scheme targeting investors in IIG funds.

Federal prosecutors had asked for Hu, whos in his 60s, to receive 15 years in prison, saying the “impact of harm caused by the defendant, the lies he peddled to investor victims and the damage he caused to funds he advised” shows the need for a substantial sentence.

“Day in and day out, throughout the course of more than a decade, the defendant abandoned his fiduciary responsibilities as an investment adviser and defrauded IIG funds and investors, causing more than a hundred million dollars in losses to those funds and investors,” prosecutors said in a memo ahead of sentencing.

Fake Loans

While the victims of the alleged fraud weren‘t identified in the case, prosecutors said the firm’s investments were marketed to hedge funds, insurers and pension funds.

According to prosecutors, Hu and Silver cheated investors by overvaluing defaulted or distressed loans held by IIG funds and falsifying documents to create fake ones that were purportedly performing well. The loans were sold to a collateralized loan obligation trust, with the proceeds used to pay off earlier investors.

Hus lawyers had sought a five-year sentence, saying he “worked tirelessly throughout his life to build a life befitting the American dream, but made a terrible error in judgment and continued to double down on that mistake.”

They also stressed that his age and health issues meant a lengthy term could become a de facto life sentence.

Hu and Silver, the firms chief operating officer, founded IIG together in 1994. The company specialized in global trade financing, providing loans to small and medium-sized businesses in Central or South America secured by using coffee, fish and other food products as collateral.

IIG also operated investment funds and told the SEC in March 2018 it had more than $373 million in assets under management. It agreed to pay $35 million in March 2020 to settle fraud charges brought by the regulator.