Judge denies plaintiffs’ request to dismiss 2 charges in $13M investment fraud case

By Amanda Thomas | Apr 27, 2018

LOS ANGELES -- A federal judge has denied a request to voluntarily dismiss two charges in a securities fraud case involving Chinese nationals who claim they were victims of a $13 million investment scheme.

LOS ANGELES --  A federal judge has denied a request to voluntarily dismiss two charges in a securities fraud case involving Chinese nationals who claim they were victims of a $13 million investment scheme.

In a March 26 ruling, U.S. District Judge Otis D. Wright II denied the plaintiffs' motion to dismiss two counts of securities fraud. Wright also denied the plaintiffs' request for default judgment without prejudice. 

“Plaintiffs have improperly attempted to dismiss Counts I and II of the Complaint and, as a result, all four causes of action in the Complaint are still pending,” Wright wrote in his opinion. 

The plaintiffs -- Liu Hongwei, Liu Shuang, Xie Youshang, Wang Ying, Yu Zhihai, Wang Wei, Hou Yunhang and Zhou Wenqi -- filed a lawsuit in July 2015 accusing Jellick Rowland LLC and Michael Wang, CEO of Velocity Regional Center LLC, of orchestrating the fraud. Michael Wang is also the manager of Jellick. The plaintiffs accused Jellick Rowland and Michael Wang of intentional misrepresentation of fact and negligent misrepresentation. The suit also accused VRC of securities fraud, intentional misrepresentation of fact, negligent misrepresentation and breach of fiduciary duty.

According to the opinion, the case stems from a 2011 business plan devised by Velocity V Limited Partnership (VLP), which is VRC’s general partner. The plan was distributed to potential Chinese national investors, including the plaintiffs. It stated that VLP would collect an investment fund of $15 million from 30 investors “then loan the money to Jellick for the purchase, renovation, renting, and future management of four buildings." 

A total of 26 investors contributed $13 million. The plaintiffs “allege they were wrongfully induced to invest over $500,000 each, according to information in the ruling. They claim the defendants transferred $8,663,543.70 to several companies and falsely characterized the transfers as payments for construction expenses. 

“Little construction was ever actually completed on the Property,” the opinion said. 

In denying the request to dismiss the counts, Wright wrote, "The Ninth Circuit has held that a voluntary dismissal under Federal Rule of CivilProcedure 41 is not the proper vehicle for dismissing a single claim from a multi-claim complaint."

Instead, the plaintiffs must amend their complaint, Wright wrote.

Because the two counts were not dismissed and the plaintiffs were only seeking judgment on the other two counts, the court "is not able to enter a final judgment in this case as to all claims," Wright wrote.

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