On February 19th, Steve Chen filed a sealed motion to stay the SEC’s case against himself and
USFIA
.

Over the course of the past month, a whole bunch of correspondence regarding the motion has been filed by both Chen and the SEC.

The SEC have opposed Chen’s motion, with Chen filing several memorandums in support of it – all filed under seal.

On April 8th Judge Klausner denied Chen’s motion, with the order revealing Chen is the subject of criminal investigations by multiple US regulatory agencies.

The FBI investigation into Steve Chen and USFIA is ongoing.

As per Judge Klausner’s ruling, it might have been triggered by
investor complaints in Arcadia
.

On September 17, 2015, Arcadia Police Department interviewed Chen about complaints from disgruntled investors who felt they had been defrauded by Chen.

All evidence pertaining to that interview has since been turned over to the FBI in an ongoing investigation into Chen’s alleged securities fraud.

Following the
raid on USFIA offices
in September,

FBI Special Agent Clint Wilmsen purported to serve Chen with grand jury subpoenas as Custodian of Records for a number of corporate entities, most of which are alleged to be wholly-owned by Chen.

These grand jury subpoenas involve subject matter at the core of the civil enforcement action.

The documents requested by the FBI via a grand jury are likely to further incriminate Chen.

Chen’s counsel had a phone call with Assistant United States Attorney Rich Robinson

in which he confirmed that Chen is a “focus” of the ongoing criminal investigation.

Unfortunately grand jury proceedings are held in secret. Pending an indictment and/or litigation filed by the FBI, further details were not available at the time of publication.

In addition to the FBI, Chen and USFIA are also under criminal investigation by the IRS.

Counsel for Chen have also learned that former USFIA employees and distributors have been interviewed by an IRS criminal investigator and FBI agent Wilmsen.

The specifics of the IRS investigation are yet to be made public.

Chen meanwhile appears to have been aware of the criminal investigations as far back as last November.

Given the overlap between the SEC’s civil action and the United States Attorney’s Office

(“USAO”) criminal investigation, on November 5, 2015, Chen was compelled to assert his Fifth Amendment privilege in response to the SEC’s request for an accounting of his personal assets.

Likewise, on November 20, 2015, Chen filed an Answer in which he invoked his Fifth Amendment privilege not to be compelled to testify against himself.

In an attempt to prevent having to testify against himself until the conclusion of criminal proceedings, Chen sought to stay the SEC’s civil proceedings against him in their entirety.

In his decision to deny Chen’s motion for a stay, Judge Klausner suggests it is preemptive.

Currently, no indictment has been returned against Chen, and he cannot point to any concrete evidence that a crimina

🤖 Quick Answer

Who is Steve Chen and what investigations does he face?
Steve Chen is a defendant in SEC enforcement proceedings involving USFIA. As of April 2015, he is under criminal investigation by the FBI and IRS. Judge Klausner's ruling disclosed these investigations, potentially triggered by investor complaints filed in Arcadia regarding allegedly fraudulent investment practices.

What was Chen's legal motion in February 2015?
Chen filed a sealed motion requesting the SEC case against himself and USFIA be stayed. The SEC opposed this motion, while Chen submitted multiple supporting memorandums under seal. Judge Klausner ultimately denied the motion on April 8th.

What role did Arcadia investors play in triggering investigations?
Disgruntled investors in Arcadia filed complaints with local police regarding their investments. These complaints reportedly triggered the FBI investigation into Chen and USFIA, leading authorities to examine potential securities fraud allegations.

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