A San Diego man has settled SEC allegations that he and another man ran a $61.5-million Ponzi scheme that defrauded more than 350 investors across multiple states.
The lawsuit, filed in federal court in San Diego last week, accuses Jonny Ngo, 32, and Donato “Mick” Baca Jr., 36, of raising money from investors between 2013 and 2017 that was supposedly to be used to buy bulk electronics such as iPhone screens and drone aircraft overseas. These products were then to be distributed in the U.S. and sold at a substantial profit, investors were allegedly told.
According to the SEC, the men promised investors returns of 5% to 15% every two weeks to 45 days through Ngo’s wholesale technology import business, NL Technology.
NL Technology has a storefront in San Diego offering cellphone and computer repairs, but it engaged in little or no wholesale import business activity, according to the SEC.
Ngo has settled with the SEC without admitting wrongdoing. The final judgment prohibits him from raising money in connection with any offering of securities, and orders him to repay $4.5 million. He also must pay a $480,000 civil penalty and $245,726 in prejudgment interest.
The complaint alleges Ngo and Baca used money raised by new investors to pay prior investors in a classic Ponzi scheme. About $52 million was distributed in this way.
The SEC claims the rest went to fund Ngo’s and Baca’s “extravagant lifestyles, including gambling and purchasing luxury cars, watches and homes.”
To conceal the scheme, Ngo fabricated bank statements and financial records, forged invoices and created phony email addresses, the SEC claims. He also impersonated people with whom NL Technology was supposedly doing business.
Baca owned a company called MR Media and claimed to be an investor who helped gather other investors. Later, he said he held various executive positions at NL Technology.
The scheme began to fall apart in April 2017, according to the SEC, when Ngo and Baca stopped paying most investors, claiming delays were due to switching banks, supplier problems and an SEC audit.
When confronted by a suspicious investor in May 2017, Baca disavowed knowledge of the scheme but did not inform other investors. Instead, Baca told investors that he was leaving NL Technology but that they could invest directly with Ngo, according to the complaint.
According to the SEC, Baca personally misappropriated at least $4.7 million of investor funds, including funds paid to MR Media. The SEC claims the money was used for rent, luxury watches and payments on personal credit cards. Investor funds also were used for a down payment on a $3.5-million home.
The SEC lawsuit seeks return of ill-gotten gains, civil penalties and interest and an injunction to prevent fundraising from investors.
Freeman writes for the San Diego Union-Tribune.