The U.S. Securities and Exchange Commission has filed promissory note fraud charges against Onix Capital and it owner Albert Chang-Rajii. The Miami-based asset management company and Chang are accused of bilking investors who put their money into promissory notes and start-ups, as well as of falsely portraying the Chilean national as an award-winning multi-millionaire “angel” investor who had graduated from Stanford University’a business school.
According to the regulator’s complaint, Chang and Onix Capital sold over $5.7M in promissory notes that they falsely claimed he had guaranteed and told investors that the notes themselves “guaranteed” yearly returns of 12-19%. They also raised over $1.7M that Chang was supposed to invest in companies like Square, Snapchat and Uber.
The SEC said that, in truth, Onix Capital’s investment revenue was “non-existent” and Chang did not have the professional or educational background that he touted. The Commission alleges that rather than use the funds as promised, the money went to Chang and to pay other investors.
After Chang and Onix Capital’s misrepresentations were exposed earlier in the year, the asset manager fled the US for Malta and moved about $4M, including investor money, to banks abroad. The regulator is seeking the restoration of the allegedly ill-gotten gains, as well as prejudgment interest, and financial penalties.
Promissory Note Fraud
A promissory note is a type of debt issued by a company to raise funds. An investor usually agrees to lend the company money for a certain time period. In return, the company promises to pay that investor a fixed return on the investment, which is usually principal plus interest.
Promissory notes are real investments. However, fraud involving promissory notes does happen.
Signs of possible promissory note fraud include:
- The sale of promissory notes by unauthorized individuals.
- Investors are promised a high-fixed-return rate along with low risks.
- The seller falsely claims that the promissory notes are insured or guaranteed.
- Part of the investors’ funds is used to pay for the fraudster’s personal expenses.
- Proceeds may be used in a Ponzi scam involving new notes sales used to pay the interest on older notes that were sold to earlier investors
Read the SEC Complaint (PDF)