Jan. 14 (Bloomberg) --- Albert K. Hu, who was convicted of running a California hedge-fund fraud scheme that the government said cheated investors of at least $6.5 million, was sentenced to 12 years in prison.
Hu, 50, formerly of Fremont, California, and Hong Kong, was found guilty by a jury in June of seven counts of wire fraud. Evidence showed that he carried out an investment scheme from 2002 to 2008 that defrauded investors of millions of dollars, federal prosecutors said. Hu also faces a civil lawsuit by the U.S. Securities and Exchange Commission.
“What is fairly clear is Mr. Hu was involved in a fraudulent scheme that took a lot of money from a group of people,” and it “definitely had a major impact on their lives,” U.S. District Judge Ronald M. Whyte in San Jose, California, said today when he imposed the sentence.
Jerry Fong, a lawyer for Hu, had no immediate comment on the sentence.
Hu founded and operated hedge funds under the names Asenqua Beta Fund and Fireside LS Fund out of San Francisco, Singapore, and Sunnyvale, California, prosecutors said.
He lured investors with promises of returns as high as 30 percent a year and assurances that law firms including Pillsbury Winthrop Shaw Pittman LLP and Heller Ehrman LLP served as legal counsel for his funds, according to prosecutors. A purportedly independent auditing firm was a facade, the government said.
Instead of investing the money as promised, Hu “converted that money for his own personal use and for other non-investment purposes,” according to an indictment.
Fong argued for a sentence of no longer than 6 1/2 years. The government asked for 19 years and seven months, based on advisory guidelines.
Hu is “an extremely intelligent individual, who’s done some good things in his lifetime,” though his contribution to society “cuts both ways” because he “had more things going for him than most people, and yet he turns to criminal activity when he had proved that he could teach at a college level or run a company,” the judge said.
Whyte agreed with prosecutors’ argument that the fraud involved a “sophisticated means,” which adds time to a prison term under the guidelines.
“The whole set-up was a sophisticated means,” Whyte said.
Hu told Whyte that he read “each and every victims’ statement” and that he is “sorry for their loss.” During his years in custody, Hu said he has learned the “true meaning of sympathy, redemption, mercy.”
Fong told the judge Hu wants to leave finance and return to the technology industry, saying he would be “more likely to pay restitution to people if he were out innovating.” Whyte said he will take up the question of restitution at a separate hearing.
The maximum penalty for each count of wire fraud is 20 years in prison and a fine of $250,000, plus restitution.
The SEC case against Hu is pending in federal court in San Francisco. The agency will move for a judgment against him based on the outcome of the criminal case, Robert Tashjian, a lawyer for the agency, said in an interview.
Hu has been in custody since his arrest in Hong Kong in 2009, followed by extradition to the U.S., according to prosecutors.
The criminal case is U.S. v. Hu, 09-70057, U.S. District Court, Northern District of California (San Jose). The SEC case is U.S. v. Hu, 09-1177, U.S. District Court, Northern District of California (San Francisco).
To contact the reporter on this story: Joel Rosenblatt in San Francisco at firstname.lastname@example.org.
To contact the editor responsible for this story: Michael Hytha at email@example.com.