The Securities and Exchange Commission has charged and frozen the assets of the operators of a global pyramid scheme targeting Asian and Latino communities in the US and abroad.

The Securities and Exchange Commission announced charges and asset freezes against the operators of a global pyramid scheme targeting Asian and Latino communities in the US and abroad.

Participants of a classic pyramid scheme attempt to make money solely by recruiting new participants into the program, promising high returns in a short period of time. Despite claims of legitimate products or services, fraudsters behind the scheme use money coming in from new recruits to pay off early stage investors.

“But eventually the pyramid will collapse. At some point the schemes get too big, the promoter cannot raise enough money from new investors to pay earlier investors, and many people lose their money,” the SEC says.

The SEC alleges that three California- and Hong Kong-based entities operating as WCM and WCM777 posed as “multi-level marketing firms” selling third-party cloud computing services including website hosting, data storage and software support.

The entities are controlled by “Phil” Ming Xu of Temple City, CA.

According to the SEC’s complaint - filed in federal court in Los Angeles, CA - WCM and WCM777 have raised over $65 million since March 2013 by “falsely promising tens of thousands of investors that the return on investment in the cloud services venture would be 100 per cent or more in 100 days.”

The US authority said in a statement that investors were told they would receive “points” for making investments or enrolling other investors, which would be convertible into equity in initial public offerings of high-tech companies.

“However, rather than building out cloud services or incubating high-tech companies, Xu and the WCM entities used investor funds to make Ponzi payments of purported investment returns to some investors,” the SEC said. “They also spent investor money to purchase golf courses and other US-based properties among other unauthorized expenditures.”

The SEC alleges that Xu and his entities made false claims to investors about purported partnerships with some 700 firms including Siemens, Denny’s and Goldman Sachs.

The complaint alleges that WCM, WCM777 and Xu violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934; and Rule 10b-5. The complaint further alleges that Xu violated Section 20(a) of the Exchange Act.

As well as the asset freezes and appointment of a temporary receiver, the SEC’s request for an order prohibiting the destruction of documents and requiring the defendants to provide accountings has also been granted.

A court hearing has been scheduled for April 10.