On March 15, 2023, the United States Attorney for the Southern District of New York unsealed a twelve-count Indictment that charges Ho Wan Kwok (“Kwok”) and his financier, Kin Ming Je (“Je”), with various sprawling schemes – including one involving cryptocurrency – in which the defendants solicited investments in several entities and other programs via fraudulent misrepresentations to hundreds of thousands of Kwok’s online followers. Moreover, the Indictment alleges that Kwok and Je misappropriated hundreds of millions of dollars in fraudulently obtained funds during the conspiracy.
Specifically, the Indictment charges Kwok with conspiracy to commit wire fraud, securities fraud, bank fraud, and money laundering. He was also charged with the underlying acts of wire fraud, securities fraud, international “promotional” money laundering (in violation of 18 U.S.C. § 1956(a)(2)(A)), international “concealment” money laundering (in violation of 18 U.S.C. § 1956(a)(2)(B)(i)), and “spending” money laundering (in violation of 18 U.S.C. § 1957), with the last charge resting on a single $100 million wire transfer. Je was also charged with these crimes, in addition to obstruction of justice.
In regards to the money laundering schemes, the Indictment alleges that the defendants attempted to conceal the source of their illicit proceeds by transferring “money into and through more than approximately 500 accounts held in the names of at least 80 different entities or individuals[,]” through bank accounts in the U.S., the Bahamas, and the United Arab Emirates (“UAE”). Further, the Indictment alleges that the defendants used over $300 million of fraudulent proceeds for the benefit of themselves and their family members. The Indictment therefore contains a detailed notice of forfeiture, listing numerous assets that allegedly constituted or were derived from proceeds traceable to the charged offenses. These assets include numerous bank account balances collectively amounting to hundreds of millions of dollars, as well as a luxurious mansion in New Jersey, several extremely high-end automobiles, and a 46-meter “superyacht.” The government’s press release includes photos of some of these assets, included in the visual above.
According to the Indictment, Kwok is an exiled Chinese businessman who fled to the United States in around 2015. Upon his arrival, he purchased a penthouse in New York City hotel for around $67.5 million. Around 2017, Kwok amassed a massive online following. He engaged in various interviews and posted on social media, claiming to initiate a movement against the Chinese Communist Party (“CCP”). In 2018, Kwok founded two nonprofit organizations: the Rule of Law Foundation and the Rule of Law Society. The Indictment alleges that Kwok used these organizations to garner more followers who aligned with his campaign against the CCP and who were also inclined to believe Kwok’s statements regarding money-making opportunities.
We now discuss the charged schemes, and one defendant’s alleged attempt to wire substantial funds offshore before they were seized. All of the following refers to allegations in the Indictment.
The GTV Private Placement
Between April 2020 and June 2020, Kwok and Je obtained over $400 million in victim funds via an illegal private stock offering related to GTV Media Group, Inc. (“GTV”). GTV was a news-focused social media platform based in New York City that Kwok functionally owned and controlled.
On April 21, 2020, Kwok posted a video on social media that announced the unregistered offering of GTV common stock through a private placement. In the video, Kwok described the investment terms of the private placement. The video and other materials, which included a “Confidential Information Memorandum,” were transmitted to thousands of potential investors. Among other things, those materials included a chart that itemized the use of proceeds raised from the private placement, all of which generally related to strengthening the business.
Between April 20, 2020 and June 5, 2020, around $452 million worth of GTV common stock was sold to over 5,500 investors. According to the Indictment, investors participated in the private placement because of their belief that their money would be invested into GTV to develop and grow the business. A large portion of the proceeds from the private placement, however, were deposited instead directly into the bank accounts of GTV’s parent company, Saraca Media Group, Inc. (“Saraca”), which is beneficially owned by Kwok’s close family member.
Moreover, in around early June 2020, Kwok and Je misappropriated roughly $100 million raised from investors in the private placement and directed those funds to be placed with a high-risk hedge fund for Saraca’s benefit.
Beginning in June 2020, Kwok and Je separately obtained over $150 million in victim funds through the “Himalaya Farm Alliance.” This was a collective of informal groups, each known as a “Farm,” located in different cities around the world. Kwok and Je received these funds by making further misrepresentations to investors of the GTV private placement and by fraudulently soliciting additional investments in the form of “loans” to a Farm. Then, Kwok and Je would promise that those loans would be convertible into GTV common stock at a conversion rate of one share per dollar loaned. The Indictment describes this activity as the “Farm Loan Program.”
Based on several social media videos and campaigns, thousands of victims “loaned” money to the Farms by sending money to bank accounts controlled by the Farms. Kwok and Je misappropriated the funds sent to the Farms. As one example among many others, around $2.3 million was used to cover maintenance expenses associated with a 145-foot luxury yacht worth $37 million owned by Kwok’s close relative.
Kwok and Je also, according to the Indictment, fraudulently induced investors to buy memberships into their “G|Clubs.” Formally launched in October 2020, G|Clubs claimed on its website to be “an exclusive, high-end membership program offering a full spectrum of services” and a “gateway to a carefully curated world-class products, services, and experiences.” Members could join G|Clubs by purchasing an annual membership, the price of which varied depending on the tier of membership that the member would select. Like with GTV and the Farm Loan Program, Kwok and Je promised that members would receive substantial benefits from being a G|Club member. But, in reality, the Indictment alleges that G|Clubs were shams. All in all, Kwok and Je fraudulently obtained over $250 million in victim funds through their G|Clubs programs.
The Himalaya Exchange
Between April 2021 and March 2023, Kwok and Je fraudulently obtained more than $262 million in victim funds through the “Himalaya Exchange,” a purported cryptocurrency “ecosystem” on the internet. The Himalaya Exchange included a stablecoin called the Himalaya Dollar (“HDO” or “H Dollar”) and a trading coin called the Himalaya Coin (“HCN” or “H Coin”). The Himalaya Exchange claimed that the HDO was a digital asset with a fixed 1-to-$1 value backed by reserves, and the HCN was a cryptocurrency with valuation based on supply and demand.
The initial coin offering of HCN and HDO occurred on November 1, 2021. HCN started trading at 10 cents, and, within two weeks, the Himalaya Exchange website claimed that each HCN was worth roughly 27 HDO (or $27), which represented a 26,900 percent value increase.
Kwok heavily marketed HCN to his online fanbase. For example, Kwok released an official music video for a song he made called “HCoin to the Moon.” Kwok himself stars in the music video.
Contrary to Kwok’s representations, HCN and HDO could only be traded on the Himalaya Exchange. In addition, unlike cryptocurrencies, HCN could not be traded for other currencies. HCN could only be traded for HDO, and HDO could only be converted to or from fiat currency.
Around April 2022, Kwok and Je arranged for the transfer of $47 million in Himalaya Exchange funds from a Himalaya Exchange bank account to an escrow account. That money was structured was a “loan” to cover the cost of a yacht that Kwok had previously purchased and used.
On September 20 and September 21, 2022, U.S. authorities served seizure warrants on several domestic banks and seized $335 million of proceeds from accounts held in the names of Himalaya Exchange entities and other Kwok-affiliated entities. Shortly after these seizures, Je tried to transfer $46 million from a domestic bank account to another bank account in the UAE that Je controlled, emphasizing to the domestic bank that the wire was for the benefit of a “VIP,” or Very Important Person – which turned out to be Je himself.
On October 16, 2022, US authorities seized an additional $274 million of proceeds from several Himalaya Exchange and G|Clubs accounts at the domestic bank from which Je tried to perform the $46 million transfer.