The U.S. Securities and Exchange Commission announced fraud charges and an asset freeze against a once high-profile figure on the Miami tech scene and his company.
The SEC alleges that Alberto Chang-Rajii, a Chilean national who fled the U.S. earlier this year, and his Miami Beach-based asset management company, Onix Capital, defrauded investors in promissory notes that “guaranteed” double-digit annual returns, and bilked others who were told their funds would be invested in promising startups, including at least two based in Miami. Chang-Rajii and Onix Capital also are alleged to have falsely depicted Chang-Rajii as a multimillionaire investor with aStanford MB.
From 2012 until March 2016, Chang-Rajii and Onix raised about $7.4 million from investors, while misrepresenting the investments offered, the use of the funds raised, and his own background, according to an SEC complaint filed in U.S. Southern District of Florida Nov. 8.
“According to our complaint, Chang-Rajii and Onix Capital guaranteed returns and touted Chang-Rajii’s wealth and investment success to entice investors,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “However, Onix’s purported investment revenue was non-existent and Chang-Rajii’s claims about his background were not true.”
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Chang-Rajii said he was an early investor in Google, where he supposedly made a fortune as the story goes, received his MBA at Stanford University, and was a successful angel investor. None of that was true, according to the SEC complaint and numerous media accounts.
After his scheme began to unravel, he fled to Malta, ceased making “guaranteed” return payments on promissory notes to investors and transferred about $4 million from accounts in the U.S. to overseas banks, the complaint said.
Chilean authorities launched a criminal investigation. Chang-Rajii has petitioned for Maltese residency. He has not returned to the U.S. or Chile, the SEC complaint said.
The SEC’s complaint charges Chang-Rajii and Onix Capital, an investment management affiliate of his firm, Grupo Arcano, with six counts of fraud and two other counts against Chang-Rajii concerning the way he pooled investments. The SEC seeks return of allegedly ill-gotten gains, prejudgment interest and financial penalties, among other relief for investors. Judge Marcia G. Cooke granted the SEC’s request for a temporary asset freeze against Onix Capital, Chang-Rajii, and various relief defendants, and a hearing will be set by the court.
Chang-Rajii, 42, founded Grupo Arcano in his native Santiago, Chile, in 2001. The company maintained additional offices in Miami Beach, London and Sydney and employed 46 people until this spring when the scandal unfolded. He set up Onix Capital in 2012 and maintained its principal office in Miami Beach.
For years, Chang-Rajii fooled a lot of people in both Miami and Chile, where his funds were raised. In 2013, he was named to the founding board of Endeavor Miami, a nonprofit that supports and accelerates high-impact entrepreneurs, and resigned from the board in March after news reports first in Chile and then in Miami surfaced questioning his academic credentials and the health of his company. Board members are typically active in the entrepreneurship community and offer substantial financial support to the nonprofit. In addition, he invested in at least two Miami-based companies, Open English, an online English-language school, and Yodel, a social media startup. Grupo Arcano was a presenting sponsor of eMerge Americas Startup Showcase this spring but was dropped before the conference.
Other details revealed in the 21-page SEC complaint:
▪ Chang-Rajii and Onix Capital sold investors — including 10 in the U.S. — more than $5.7 million in Onix Capital promissory notes, which carried “guaranteed” annual returns of 12 percent to 19 percent, and sold more than $1.7 million of membership interests in various “special purpose” private equity vehicles. These included ones for Uber, Square, Snapchat, Open English, Yodel and others.
▪ Chang-Rajii misled investors by telling them that he had an excess of $100 million on deposit at J.P. Morgan, when the amount was less than $1 million.
▪ Chang-Rajii falsely claimed to investors that he became wealthy by earning $700 million from a $10,000 investment in Google for a 1 percent stake and had a large network of contacts. He also said he won a “Best Angel Investor” award from the Angel Capital Association. That was also false.
▪ Between 2012 and 2016, Chang-Rajii compensated himself by transferring more than $11 million from Onix bank accounts to his personal accounts. He spent $1.4 million on property in the British Virgin Islands and went on a $90,000 trip to Africa.
The SEC’s investigation was conducted by Sean M. O’Neill, Eric E. Morales and Paul Hopker in the Miami Regional Office and supervised by Jason R. Berkowitz. The SEC’s litigation is being led by Morales and Andrew O. Schiff. The SEC was assisted by the Federal Bureau of Investigation, Chile’s Superintendencia de Valores y Seguros and Ministerio Publico, the Malta Financial Services Authority, and the Australian Securities and Investments Commission.
Nancy Dahlberg: 305-376-3595; @ndahlberg