UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF WISCONSIN 

COMMODITY FUTURES TRADING 

COMMISSION, 

Plaintiff, 

v. 

KAY YANG, AK EQUITY GROUP LLC, and 

XAPPHIRE LLC, 

Defendants, 

and 

CHAO YANG, 

Relief Defendant. 

Civil Action No. 2:22-cv-00449 

Hon. Lynn Adelman 

ORDER FOR FINAL JUDGMENT BY DEFAULT, PERMANENT INJUNCTION, 

CIVIL MONETARY PENALTIES, AND OTHER STATUTORY AND EQUITABLE 

RELIEF 

On April 13, 2022, the Commodity Futures Trading Commission’s (“Plaintiff” or 

“CFTC”) filed a Complaint charging Defendants Kay Yang (“Defendant Yang”), AK Equity 

Group LLC (“AK Equity”), and Xapphire LLC (“Xapphire”) (collectively, “Defendants”) with 

violating anti-fraud and registration provisions of the Commodity Exchange Act (“Act”), 

7 U.S.C §§ 2(c)(2)(C)(iii)(I)(cc), 6b(a)(2)(A)-(C), 6k(2), 6m(1), 6o(1), and 17 C.F.R. §§ 3.12, 

4.41(a), 5.2(b), 5.3(a)(2)(i), and 5.3(a)(2)(ii) (2022). In addition, the Complaint alleged that 

Relief Defendant Chao Yang, Defendant Yang’s husband, received funds and assets from 

Defendants, to which he held no legitimate interest or entitlement and which were derived from 

Defendants’ fraudulent and violative acts. Relief Defendant Chao Yang was not charged with 

violations of the Act or Regulations. 

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On June 4, 2022, the CFTC served Defendant Yang with the Summons and Complaint. 

(ECF No. 7) Defendant Yang’s period to answer the Complaint expired on June 27, 2022. On 

May 27, 2022, the CFTC served Defendant AK Equity with the Summons and Complaint 

through its registered agent. (ECF No. 6) Defendant AK Equity’s period to answer the 

Complaint expired on June 17, 2022. On May 27, 2022, the CFTC served Defendant Xapphire 

with the Summons and Complaint through its registered agent. (ECF No. 5) Defendant 

Xapphire’s period to answer the Complaint expired on June 17, 2022. On June 8, 2022, the 

CFTC served Relief Defendant Chao Yang with the Summons and Complaint. (ECF No. 8) 

Relief Defendant Chao Yang’s period to answer the Complaint expired on June 29, 2022. 

None of the Defendants nor the Relief Defendant filed an answer or otherwise properly 

responded to the Complaint. At the Commission’s request, the Clerk of the Court entered their 

defaults on July 18, 2022, pursuant to Fed. R. Civ. P. 55(a). 

The Commission has moved this Court to grant final judgment by default against 

Defendants, order permanent injunctive relief, and impose a restitution obligation and civil 

monetary penalty. The Commission has further moved this Court to grant final judgment by 

default against Relief Defendant and order disgorgement of ill-gotten funds to which he is not 

entitled. 

The Court has carefully considered the Complaint, the allegations of which are wellpleaded and hereby taken as true, the Commission’s memorandum in support of its motion, the 

record in this case, and the Court being otherwise advised in the premises, it is hereby: 

ORDERED that the Plaintiff’s Motion for Final Judgment by Default, Permanent 

Injunction, Civil Monetary Penalties, and Other Statutory and Equitable Relief against 

Defendants and Relief Defendant is GRANTED. Accordingly, the Court enters findings of fact, 

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conclusions of law, and an Order of Final Judgment by Default, Permanent Injunction, Civil 

Monetary Penalties, and Other Statutory and Equitable Relief (“Order”) pursuant to Sections 6c 

and 6d of the Act, 7 U.S.C. § 13a-1, as set forth herein. 

I. FINDINGS OF FACT AND CONCLUSIONS OF LAW

A. Findings of Fact

1. The Parties

1. Plaintiff Commodity Futures Trading Commission is an independent federal

regulatory agency charged by Congress with the administration and enforcement of the Act and 

the Regulations promulgated thereunder. 

2. Defendant Kay Yang is the founder and chief executive officer of Defendants AK

Equity and Xapphire. Yang’s last known address is in Mequon, Wisconsin. Yang has never 

been registered with the Commission. 

3. Defendant AK Equity was a Delaware limited liability company formed by Yang

on March 28, 2017, with a registered office in Dover, Delaware. AK Equity’s last known 

principal place of business is in Mequon, Wisconsin. Yang, as the founder and chief executive 

officer of AK Equity, controlled its day-to-day operations, finances, accounts, and books and 

records. AK Equity has never been registered with the Commission. 

4. Defendant Xapphire is a Delaware limited liability company formed by Yang on

December 19, 2018, with a registered office in Dover, Delaware. Xapphire’s last known 

principal place of business is in Mequon, Wisconsin. Xapphire is the managing member of 

various entities that purportedly invested in foreign currency (“forex”) and other products, 

including AK Equity and Xapphire Fund LLC (“Xapphire Fund”). Yang, as the founder and 

chief executive officer of Xapphire, controls its day-to-day operations, finances, accounts, and 

books and records. Xapphire has never been registered with the Commission. 

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5. Relief Defendant Chao Yang is the husband of Defendant Yang. His last known

address is in Mequon, Wisconsin. He has never been registered with the Commission in any 

capacity. 

2. Factual Overview

Defendants Fraudulently Solicited and Misappropriated Pool Participants’ Funds 

6. From at least April 2017 through March 2020 (the “Relevant Period”), Defendant

Yang, individually and as the founder and chief executive officer of AK Equity and Xapphire, 

engaged in a fraudulent scheme through which she solicited and received at least $15.7 million 

from at least 67 individuals or entities (“Pool Participants”) for participation in a commodity 

pool (“commodity pool” or “Pool”) that purported to trade off-exchange, retail forex on a 

leveraged, margined, and/or financed basis with participants who were not eligible contract 

participants (“ECPs”). (ECF No. 1 ¶¶ 1, 20, 49) Most prospective Pool Participants were 

members of the local Hmong community in Wisconsin, and were introduced to Yang by family 

members, friends, or acquaintances. (Id. ¶ 22) In soliciting funds, Defendants falsely 

represented that: (1) Defendants successfully managed hundreds of millions of dollars in a 

variety of investment vehicles; (2) Defendants consistently achieved positive monthly returns; 

(3) 100% of Pool Participants’ funds would be allocated to forex trading; and (4) Defendants

would adhere to a trading strategy that included low leverage ratios and moderate trading 

frequencies. (Id. ¶¶ 2, 4, 33, 41, 42, 43) Defendants made these false representations orally and 

via email, text message, instant message, and other documents. (Id. ¶¶ 2, 4, 23, 38, 45) Further, 

Defendants omitted material facts, including that they routinely suffered trading losses, 

misappropriated Pool Participants’ funds, and were not registered with the Commission. (Id. 

¶¶ 3, 36, 37, 42, 48) 

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7. Defendants also misappropriated Pool Participants’ funds by, among other things,

comingling Pool Participants’ funds with Defendants’ funds, paying for personal expenses of 

Defendant Yang and her family, transferring a large portion of the funds to Defendant Yang’s 

husband, Relief Defendant Chao Yang, and failing to return funds to Pool Participants when 

requested. (ECF No. 1 ¶¶ 47, 52) In total, Defendants spent approximately $4.8 million of 

customer funds on Defendant Yang’s personal expenses. (Id. ¶ 52; Decl. of Futures Trading 

Investigator (“Koh Decl.”) ¶ 17) For example, bank records indicate that Yang spent over 

$700,000 at casinos and on gambling-related purchases, approximately $439,000 on travel and 

luxury hotels, and approximately $248,000 on cars and car-related expenses. (ECF No. 1 ¶ 52; 

Koh Decl. ¶ 17) Additionally, Defendant Yang made net transfers of approximately $200,000 to 

bank accounts in her name, approximately $1.4 million to bank accounts in the name of her 

husband, Relief Defendant Chao Yang, and approximately $1 million to joint bank accounts 

shared with her husband. (ECF No. 1 ¶ 52; Koh Decl. ¶ 17) As a result of Defendants’ fraud 

and misappropriation, Pool Participants have lost most, if not all, of their funds. (ECF No. 1 ¶ 5) 

8. Moreover, to conceal and perpetuate their fraud, Defendants provided false

account updates to Pool Participants that reflected the promised positive returns from 

Defendants’ purported successful forex trading. (ECF No. 1 ¶¶ 4, 44, 50) The false account 

updates concealed Defendants’ misappropriation, lack of trading, and trading losses. (Id. ¶¶ 4, 

44, 48) Defendants provided these updates via email, text message, and an online client portal. 

(Id. ¶¶ 2, 4) 

Defendants Failed to Register as Required with the CFTC 

9. During the Relevant Period, AK Equity and Xapphire, through Yang, each acted

as a commodity pool operator (“CPO”) by soliciting and accepting funds for a pooled investment 

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vehicle that is not an ECP for the purpose of trading in commodity interests, including retail 

forex on a leveraged, margined, and/or financed basis. Defendants AK Equity and Xapphire 

used emails, wire transfers, text messaging, and other means or instrumentalities of interstate 

commerce to solicit, accept, and receive Pool Participants funds for the purpose of trading forex. 

(ECF No. 1 ¶¶ 2, 4, 23, 38, 45) However, during the Relevant Period, Defendants AK Equity 

and Xapphire were never registered as CPOs, as required by the Act and Regulations. (Id. 

¶¶ 17, 18) 

10. Similarly, Yang acted as an associated person (“AP”) of CPOs AK Equity and

Xapphire by soliciting funds for participation in these pooled investment vehicles trading retail 

forex, while associated with AK Equity and Xapphire as an officer, employee, or agent. 

Defendant Yang used emails, text messaging, and other means or instrumentalities of interstate 

commerce to solicit, accept, and receive Pool Participant funds for the purpose of trading forex. 

(ECF No. 1 ¶¶ 2, 4, 23, 38, 45) However, during the Relevant Period, Defendant Yang was 

never registered with the Commission as an AP of AK Equity or Xapphire, as required by the 

Act and Regulations. (Id. ¶ 16) 

Relief Defendant Chao Yang Received Funds Derived from Defendants’ Fraudulent 

Acts 

11. Relief Defendant Chao Yang is not charged with violations of the Act. However,

during the Relevant Period, he received from Defendants approximately $1.4 million, which was 

derived from Defendant’s fraudulent acts and in which he had no legitimate interest or 

entitlement. (ECF No. 1 ¶ 52; Koh Decl. ¶ 17) Accordingly, Relief Defendant Chao Yang is 

ordered to pay disgorgement as set forth below. 

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B. Conclusions of Law

1. Jurisdiction and Venue

12. This Court possesses jurisdiction over this action pursuant to 28 U.S.C. § 1331

(codifying federal question jurisdiction) and 28 U.S.C. § 1345 (providing that U.S. district courts 

have original jurisdiction over civil actions commenced by the United States or by any agency 

expressly authorized to sue by Act of Congress). (ECF No. 1 ¶ 12) In addition, the Court has 

jurisdiction over the conduct and transactions at issue in this case pursuant to 7 U.S.C. § 13a-1, 

which authorizes the CFTC to seek injunctive and other relief in a U.S. district court against any 

person whenever it shall appear to the Commission that such person has engaged, is engaging, or 

is about to engage in any act or practice constituting a violation of any provision of the Act or 

any rule, regulation, or order thereunder. (Id.) The Commission has jurisdiction over the forex 

solicitations and transactions at issue in this case pursuant to Section 2(c)(2)(C) of the Act, 

7 U.S.C. § 2(c)(2)(C). (Id. ¶ 13) 

13. Venue lies properly in this District pursuant to Section 6c(e) of the Act, 7 U.S.C.

§ 13a-1(e), because the Defendants transacted business in the Eastern District of Wisconsin, one

or more of the victims resides in this District, and some of the Defendants’ acts and practices in 

violation of the Act and Regulations occurred within this District. (ECF No. 1 ¶ 14) 

2. A Default Judgment is Warranted

14. After a party’s default has been entered by the clerk, the party who sought the

default may file a motion requesting a default judgment. Fed. R. Civ. P. 55(b); UMG 

Recordings, Inc. v. Stewart, 461 F. Supp. 2d 837, 840 (S.D. Ill. 2006). The decision to grant a 

motion for default judgment is within the sound discretion of the district court. Dundee Cement 

Co. v. Howard Pipe & Concrete Prods., Inc., 722 F.2d 1319, 1322 (7th Cir. 1983). 

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15. A default judgment establishes, as a matter of law, that a defendant is “liable to

plaintiff as to each cause of action alleged in the complaint.” Bruer Elec. Mfg. Co. v. Toronado 

Sys. of Am., Inc., 687 F.2d 182, 186 (7th Cir. 1982). If the Court determines that a defendant is 

in default, “the factual allegations of a complaint relating to liability are taken as true,” although 

the “allegations relating to the amount of damages suffered are ordinarily not.” Dundee Cement 

Co., 722 F.2d at 1323; see also Merrill Lynch Mortg. Corp. v. Narayan, 908 F.2d 246, 253 (7th 

Cir. 1990). A judgment by default may be entered without a hearing on damages if “the amount 

claimed is liquidated or capable of ascertainment from definite figures contained in the 

documentary evidence or in detailed affidavits.” Dundee Cement Co., 722 F.2d at 1323. 

3. Defendants Committed Fraud in Connection with Forex Contracts

(Count One)

16. 7 U.S.C. § 6b(a)(2)(A)-(C) makes it unlawful for any person: (1) to cheat or

defraud or attempt to cheat or defraud another person; (2) willfully to make or cause to be made 

to the other person any false report or statement or willfully to enter or cause to be entered for 

the other person any false record; or (3) willfully to deceive or attempt to deceive another person 

by any means whatsoever in connection with certain off-exchange commodity contracts. 

Pursuant to 7 U.S.C. § 2(c)(2)(C)(iv), 7 U.S.C. § 6b applies to the forex agreements, contracts, or 

transactions offered by Defendants “as if” they were contracts of sale of a commodity for future 

delivery. Further, 7 U.S.C. § 2(c)(2)(C)(ii)(I) makes the forex agreements, contracts, or 

transactions at issue here “subject to” 7 U.S.C. § 6b. Finally, 7 U.S.C. § 2(c)(2)(C)(vii) makes 

clear that the CFTC has jurisdiction over an account or pooled investment vehicle that is offered 

for the purpose of forex transactions described in 7 U.S.C. § 2(c)(2)(C)(i). 

17. In substantially identical language to 7 U.S.C. § 6b(a)(2)(A)-(C), 17 C.F.R.

§ 5.2(b)(1)-(3) (2022) makes it unlawful for any person, by use of the mails or any means or

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instrumentality of interstate commerce, directly or indirectly, in or in connection with any retail 

forex transaction: (1) to cheat or defraud or attempt to cheat or defraud any person; (2) willfully 

to make or cause to be made to any person any false report or statement or cause to be entered 

for any person any false record; or (3) willfully to deceive or attempt to deceive any person by 

any means whatsoever. However, unlike in 7 U.S.C. § 6b(a)(2)(A)-(C), 17 C.F.R. § 5.2(b)(1)-(3) 

requires that the acts or omissions involve “instrumentalities of interstate commerce.” 

18. Here, Defendants used instrumentalities of interstate commerce, including

interstate wires, e-mail, and websites, to fraudulently solicit, misrepresent, or omit material facts, 

misappropriate funds, and provide false trading account statements to participants in violation of 

7 U.S.C. § 6b(a)(2)(A)-(C) and 17 C.F.R. § 5.2(b). 

Misrepresentations to Pool Participants 

19. To establish that Defendants made fraudulent misrepresentations and/or omissions

in violation of the Act, the Commission must prove three elements: (1) that a defendant 

misrepresented or failed to disclose certain information; (2) that the defendant acted with 

scienter; and (3) that the misrepresentation was material. CFTC v. R.J. Fitzgerald & Co., 310 

F.3d 1321, 1328 (11th Cir. 2002), cert. denied, 543 U.S. 1034 (2004). Proof of customer

reliance is not required. See Slusser v. CFTC, 210 F.3d 783, 785-86 (7th Cir. 2000). All three 

elements are established here. 

Defendants Made Misrepresentations and Misleading Statements 

and Omissions 

20. “Whether a misrepresentation has been made depends on the ‘overall message’

and the ‘common understanding of the information conveyed.’” CFTC v. Kratville, 796 F.3d 

873, 892 (8th Cir. 2015) (quoting R.J. Fitzgerald, 310 F.3d at 1328). Fraudulent conduct can 

occur during the solicitation of commodity accounts as well as in the handling of commodity 

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accounts. Saxe v. E.F. Hutton & Co., Inc., 789 F.2d 105, 110-11 (2d Cir. 1986); Hirk v. AgriResearch Council, Inc., 561 F.2d 96, 103-04 (7th Cir. 1977). 

21. During the Relevant Period, to induce individuals to participate in the pools,

and/or to induce them to keep their funds invested in the pools, Defendants willfully 

misrepresented and omitted information concerning trading performance. Among numerous 

other misstatements, Defendants falsely represented that: (1) Defendants successfully managed 

hundreds of millions of dollars in a variety of investment vehicles; (2) Defendants consistently 

achieved positive monthly returns; (3) 100% of Pool Participants’ funds would be allocated to 

forex trading; and (4) Defendants would adhere to a trading strategy that included low leverage 

ratios and moderate trading frequencies. (ECF No. 1 ¶¶ 2, 4, 33, 41, 42, 43) Further, Defendants 

omitted material facts, including that they routinely suffered trading losses, misappropriated Pool 

Participants’ funds, and were not registered with the Commission. (Id. ¶¶ 3, 36, 37, 42, 48) 

Defendants Acted with Scienter 

22. To establish the scienter element of fraud, the CFTC must show that Defendants’

conduct was either reckless or intentional. “‘[S]cienter is established if Defendant intended to 

defraud, manipulate, or deceive, or if Defendant’s conduct represents an extreme departure from 

the standards of ordinary care.’” Kratville, 796 F.3d at 893 (quoting R.J. Fitzgerald, 310 F.3d at 

1328). The CFTC proves scienter by showing that the “Defendant's conduct involves ‘highly 

unreasonable omissions or misrepresentations ... that present a danger of misleading [customers] 

which is either known to the Defendant or so obvious that Defendant must have been aware of 

it.’” Id. (alterations in original) (quoting Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 

(11th Cir. 2001)). 

23. Here, Defendants acted with the requisite scienter because they knew the

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representations they made to Pool Participants were false. (ECF No. 1 ¶ 54) In particular, they 

knew that Defendant Yang’s forex trading was not profitable and was suffering consistent 

monthly losses. (Id.) They also knew that they were not trading all of the Pool Participants’ 

funds as they represented that they would, and rather misappropriated a portion of the funds. (Id.) 

The Misrepresentations and Omissions are Material 

24. “‘A representation or omission is material if a reasonable investor would consider

it important in deciding whether to make an investment.’” Kratville, 796 F.3d at 895 (quoting 

R.J. Fitzgerald, 310 F.3d at 1328–29. Any fact that enables customers to assess independently 

the risk inherent in their investment and the likelihood of profit is a material fact. CFTC v. 

Driver, 877 F. Supp. 2d 968, 977 (C.D. Cal. 2012). Misrepresentations concerning the 

likelihood of profiting from trading and risk of loss “go to the heart of a customer’s investment 

decision and are therefore material as a matter of law.” CFTC v. Noble Wealth Data Info. Servs., 

Inc., 90 F. Supp. 2d 676, 686 (D. Md. 2000), aff’d in relevant part, vacated in part sub nom. 

CFTC v. Baragosh, 278 F.3d 319 (4th Cir. 2002); see also Kratville, 796 F.3d at 895. It is well 

recognized that “[m]isrepresentations regarding the trading record and experience of a firm or 

broker are fraudulent because past success and experience are material factors which a 

reasonable investor would consider when deciding to invest.” CFTC v. Commonwealth Fin. 

Group, Inc., 874 F. Supp. 1345, 1353-54 (S.D. Fla. 1994) (citations omitted); see also CFTC v. 

Rosenberg, 85 F. Supp. 2d 424, 447-48 (D.N.J. 2000) (finding the promise to open trading 

account in customer’s name, reporting of erroneous account balances and unlawful trading 

activity material misrepresentations that a reasonable investor would consider important). 

25. Defendants misrepresentations and omissions were material as reasonable

customers would want to know that Defendant Yang was not a successful forex trader, that 

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Defendants had incurred consistent monthly trading losses, that the profits they reported were 

false, and that Defendants would not trade all of participants’ funds but would rather 

misappropriate a portion of those funds. Accordingly, through Defendants’ misrepresentations 

and omissions, Defendants violated 7 U.S.C. § 6b(a)(2)(A)-(C) and 17 C.F.R. § 5.2(b)(1)-(3). 

Misappropriation of Pool Funds 

26. Misappropriation of investors’ funds constitutes “willful and blatant” fraudulent

activity that violates the anti-fraud provisions of the Act. Noble Wealth, 90 F. Supp. 2d at 687 

(internal quotation marks and citation omitted); see also In re Slusser, CFTC No. 94-14, 1999 

WL 507574, at *12 (CFTC July 19, 1999) (finding respondents violated 7 U.S.C. § 6b by 

surreptitiously retaining money in their own bank accounts that should have been traded on 

behalf of the investors), aff’d in relevant part sub nom. Slusser, 210 F.3d 783; Driver, 877 F. 

Supp. 2d at 978 (finding that “[s]oliciting or obtaining funds from investors for trading, then 

failing to trade the funds while using them for personal and business expenses, is 

misappropriation” and granting summary judgment to CFTC on claims that CPO’s 

misappropriation of customer funds violated 7 U.S.C. § 6b and 6o). As shown above, 

Defendants misappropriated at least $4.8 million of Pool Participants’ funds and used those 

funds to pay Defendant Yang’s personal expenses. (ECF No. 1 ¶¶ 48, 52; Koh Decl. ¶ 17) 

False Account Statements 

27. Delivering, or causing the delivery of, false account statements to customers also

constitutes a violation of 7 U.S.C. § 6b(a)(2)(B). See, e.g., CFTC v. Int’l Fin. Servs. (New York), 

Inc., 323 F. Supp. 2d at 500 (finding defendant violated 7 U.S.C. § 6b(a) by issuing false or 

misleading account statements); CFTC v. Skorupskas, 605 F. Supp. 923, 932-33 (E.D. Mich. 

1985) (same); CFTC v. Weinberg, 287 F. Supp. 2d 1100, 1107 (C.D. Cal. 2003) (same). Here, 

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Defendants defrauded Pool Participants by sending, or causing to be sent, numerous statements 

reflecting the promised positive returns from Defendants’ purported successful forex trading. 

(ECF No. 1 ¶¶ 4, 44, 45) 

28. By the conduct described above, Defendants violated 7 U.S.C. § 6b(a)(2)(A)-(C)

and 17 C.F.R. § 5.2(b)(1)-(3). 

4. Defendants Committed Fraud by a CPO and AP of a CPO (Count

Two)

29. 7 U.S.C. § 6o(1) makes it unlawful for a CPO or AP of a CPO to use the mails or

any other means of interstate commerce to: (A) “employ any device, scheme, or artifice to 

defraud any client or participant or prospective client or participant; or (B) engage in any 

transaction, practice, or course of business which operates as a fraud or deceit upon any client or 

participant or prospective client or participant.” 7 U.S.C. § 6o applies to forex pools pursuant to 

7 U.S.C. § 2(c)(2)(C)(iv). Unlike §§ 6b and 6o(1)(A), § 6o(1)(B) does not require “knowing” or 

“willful” conduct to establish liability. See Messer v. E.F. Hutton & Co., 847 F.2d 673, 678-79 

(11th Cir. 1988). Section 6o applies to all CPOs, whether registered, required to be registered, or 

exempted from registration. See, e.g., Skorupskas, 605 F. Supp. at 932. 17 C.F.R. § 5.4 (2022), 

states that 17 C.F.R. pt. 4 applies to any person required to register as a CPO pursuant to 17 

C.F.R. pt. 5 related to off-exchange forex transactions. 17 C.F.R. § 4.41(a) (2022) makes it

unlawful for any CPO to advertise in a manner that: (1) employs any device, scheme, or artifice 

to defraud any participant or client or prospective participant or client; or (2) involves any 

transaction, practice, or course of business which operates as a fraud or deceit upon any 

participant or client or any prospective participant or client. 

30. Defendants AK Equity and Xapphire acted as CPOs by soliciting and accepting

funds from members of the public to be pooled for the purpose of trading forex. Similarly, 

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Defendant Yang acted as an AP of AK Equity and Xapphire by soliciting and accepting funds 

from prospective participants in the purported pool. The conduct constituting Defendants’ 

violations of §6b(a), as described above, also constitutes violations of § 6o because AK Equity 

and Xapphire were CPOs and Yang acted as an AP of AK Equity and Xapphire. See, e.g.,

Skorupskas, 605 F. Supp. at 932-33. Similarly, Defendants’ fraudulent solicitation of funds from 

prospective pool participants in violation of 17 C.F.R. § 5.2 constitutes a violation of 17 C.F.R. § 

4.41(a). 

5. Defendants AK Equity and Xapphire Failed to Register as CPOs

(Count Three)

31. 7 U.S.C. § 2(c)(2)(C)(iii)(I)(cc) makes it unlawful for any person, unless

registered in such capacity as the Commission shall determine, to operate or solicit funds, 

securities, or property for any pooled investment vehicle that is not an eligible contract 

participant (as defined by Section 1a(18) of the Act, 7 U.S.C. § 1(18)) in connection with 

agreements, contracts, or transactions described in Section 2(c)(2)(C)(i) of the Act, 7 U.S.C. 

§ 2(c)(2)(C)(i) (leveraged or margined forex transactions), entered into with or to be entered into

with a person who is not described in item (aa), (bb), (ee), or (ff) of Section 2(c)(2)(B)(i)(II) of 

the Act, 7 U.S.C. § 2(c)(2)(B)(i)(II) (describing counterparties such as registered futures 

commission merchants). 7 U.S.C. § 6m(1) makes it unlawful for any CPO, unless registered 

with the Commission, to make use of the mails or any means or instrumentality of interstate 

commerce in connection with its business as a CPO. Similarly, 17 C.F.R. § 5.3(a)(2)(i) (2022) 

requires any CPO engaged in retail forex transactions to register with the Commission. 17 

C.F.R. § 5.1(d)(1) (2022) defines a CPO as any person who “operates or solicits funds,

securities, or property for a pooled investment vehicle . . . that engages in retail forex 

transactions.” 

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32. As set forth above, AK Equity and Xapphire each acted as a CPO during the

Relevant Period, and made use of the mails or one or more means or instrumentalities of 

interstate commerce in connection with its business as a CPO by operating or soliciting funds for 

a pooled investment vehicle that is not an ECP and that engaged in retail forex transactions. AK 

Equity and Xapphire engaged in this conduct without being registered with the Commission in 

violation of 7 U.S.C. §§ 2(c)(2)(C)(iii)(I)(cc) and 6m(1) and 17 C.F.R. § 5.3(a)(2)(i). 

6. Defendant Yang Failed to Register an AP of a CPO (Count Four)

33. 7 U.S.C. § 2(c)(2)(C)(iii)(I)(cc) prohibits any person from operating or soliciting

funds, securities, or property for any pooled investment vehicle that is not an ECP in connection 

with agreements, contracts, or transactions in forex, unless registered with the Commission, with 

certain exceptions not applicable to Defendants. 7 U.S.C. § 6k(2) and 17 C.F.R. § 5.3(a)(2)(ii) 

require registration with the Commission for any person who is associated with a CPO as a 

partner, officer, employee, consultant, or agent (or any person occupying a similar status or 

performing similar functions), in any capacity that involves the solicitation of funds, securities, 

or property for participation in a commodity pool or the supervision of any person or persons so 

engaged. 17 C.F.R. § 3.12 (2022) prohibits any person from being an AP of a CPO unless that 

person is registered with the Commission as an AP of the sponsoring CPO. 17 C.F.R. § 5.1(d)(2) 

(2022) defines an AP for purposes of the Part 5 of the Regulations relating to forex transactions, 

as any natural person associated with a CPO (as that term is defined in 17 C.F.R. § 5.1(d)(1)) as 

a partner, officer, employee, consultant, or agent that is involved in the solicitation of funds, 

securities, or property, or the supervision of any such person so engaged. 

34. During the Relevant Period, Yang acted as an AP of a CPO by: (i) soliciting

funds, securities, or property for participation in a commodity pool operated by AK Equity and 

Xapphire, and (ii) operating or soliciting funds, securities, or property for the AK Equity and 

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Xapphire pooled investment vehicles, which were not ECPs, in connection with forex 

transactions. Yang engaged in this conduct without being registered with the Commission as an 

AP of CPOs AK Equity and Xapphire, in violation of 7 U.S.C. §§ 2(c)(2)(C)(iii)(I)(cc) and 

6k(2), and 17 C.F.R. §§ 3.12, 5.3(a)(2)(ii). 

7. Yang is Liable for AK Equity’s and Xapphire’s Violations as a

Controlling Person

35. To establish controlling person liability under 7 U.S.C. §13c(b), the CFTC must

show that the person possesses the requisite degree of control and either: (1) knowingly induced, 

directly or indirectly, the acts constituting the violation; or (2) failed to act in good faith. CFTC 

v. Equity Fin. Grp. LLC, 572 F.3d 150, 160-61 (3d Cir. 2009) (finding individual defendants

liable as controlling persons for corporation’s failure to register as commodity pool operator). 

36. Defendant Yang, as the founder and chief executive officer of AK Equity and

Xapphire, controlled the day-to-day operations, finance, accounts, and books and records of AK 

Equity and Xapphire. (ECF No. 1 ¶¶ 16-18) Defendant Yang directly made omissions and 

misrepresentations to participants and misappropriated participants’ funds. Moreover, Yang 

knowingly induced the violations because she individually had knowledge of the wrongdoing. 

37. Thus, pursuant to 7 U.S.C. §13c(b), Defendant Yang is liable for AK Equity’s and

Xapphire’s violations of the Act and Regulations. 

8. AK Equity and Xapphire are Liable for Yang’s Violations as

Principals

38. Under 7 U.S.C. § 2(a)(1)(B) and 17 C.F.R. § 1.2 (2022), a principal is strictly

liable for the violations of its officials, agents, or other persons acting for it within the scope of 

their employment or office. Rosenthal & Co. v. CFTC, 802 F.2d 963, 966 (7th Cir. 1986) (“[W]e 

have no doubt that section 2(a)(1) imposes strict liability on the principal . . . provided, of course, 

as the statute also states expressly, that the agent’s misconduct was within the scope or 

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(equivalently but more precisely) in furtherance of the agency.”). 

39. The foregoing acts and/or omissions by Defendant Yang occurred within the

scope of her employment, office, or agency with AK Equity and Xapphire; therefore, pursuant to 

7 U.S.C. § 2(a)(1)(B) and 17 C.F.R. § 1.2, AK Equity and Xapphire are each liable for Yang’s acts, 

omissions, and failures in violation of the Act and Regulations. 

9. Relief Defendant Yang Must Disgorge Ill-Gotten Funds (Count Five)

40. A district court may order disgorgement from a relief defendant who is not

accused of wrongdoing upon a finding that he: “(1) is in possession of ill-gotten funds and (2) 

lacks a legitimate claim to those funds.” CFTC v. Walsh, 618 F.3d 218, 225 (2d Cir. 2010); see 

also CFTC v. Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 191-92 (4th Cir. 2002). The 

Commission does not need to show that the relief defendant was aware that the funds were 

obtained illegally. See, e.g., Walsh, 618 F.3d at 229, n. 8. 

41. The Complaint does not accuse Relief Defendant Chao Yang of violating the Act

or Commission Regulations. However, Chao Yang received from his wife approximately $1.4 

million of ill-gotten funds that had been misappropriated from Pool Participants, and he has no 

legitimate claim to those funds. (ECF No. 1 ¶ 52; Koh Decl. ¶ 17) Relief Defendant Chao Yang 

has failed to establish his entitlement to the $1.4 million and is therefore required to disgorge 

those funds. 

II. RELIEF GRANTED

IT IS HEREBY ORDERED THAT: 

A. Permanent Injunction

42. Based upon and in connection with the conduct described above, pursuant to

7 U.S.C. § 13a-1, Defendants are permanently restrained, enjoined, and prohibited from directly 

or indirectly: 

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a. Cheating or defrauding, or attempting to cheat or defraud, other persons;

issuing or causing to be issued false reports; willfully making or causing to

be made to other persons any false report or statement or willfully to enter

or cause to be entered for other persons any false record; and, willfully

deceiving or attempting to deceive other persons in or in connection with

any order to make, or the making of, any contract of sale of any

commodity for future delivery, or forex contract that is made, or to be

made, for or on behalf of, or with, any other person in violation of

7 U.S.C. § 6b(a)(2)(A)-(C) and 17 C.F.R. § 5.2(b)(1)-(3) (2022);

b. While acting as a CPO, using the mails or any means or instrumentalities

of interstate commerce, directly or indirectly to employ any device,

scheme, or artifice to defraud any participant or prospective participant, or

to engage in any transaction, practice, or course of business which

operates as a fraud or deceit upon any participant or prospective

participant, in violation of 7 U.S.C. § 6o(1)(A)-(B) and 17 C.F.R.

§ 4.41(a) (2022);

c. Acting as a CPO and making use of the mails or one or more means or

instrumentalities of interstate commerce in connection with its business as

a CPO by operating or soliciting funds for a pooled investment vehicle

that is not an ECP and that engages in retail forex transactions without be

registered with the CFTC in violation of 7 U.S.C. §§ 2(c)(2)(C)(iii)(I)(cc)

and 6m(1) and 17 C.F.R. § 5.3(a)(2)(i) (2022); and

d. Acting as an AP of a CPO without registering with the CFTC as an AP of

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a CPO in violation of 7 U.S.C. §§ 2(c)(2)(C)(iii)(I)(cc) and 6k(2) and 17 

C.F.R. § 5.3(a)(2)(ii) (2022);

43. Defendants are also permanently restrained, enjoined and prohibited from directly

or indirectly: 

a. Trading on or subject to the rules of any registered entity (as that term is

defined in Section 1a(40) of the Act, 7 U.S.C. § 1a(40));

b. Entering into any transactions involving “commodity interests” (as that

term is defined in Regulation 1.3, 17 C.F.R. § 1.3 (2022)), for thier own

personal account or for any account in which they have a direct or indirect

interest;

c. Having any commodity interests traded on their behalf;

d. Controlling or directing the trading for or on behalf of any other person or

entity, whether by power of attorney or otherwise, in any account

involving commodity interests;

e. Soliciting, receiving or accepting any funds from any person for the

purpose of purchasing or selling any commodity interests;

f. Applying for registration or claiming exemption from registration with the

Commission in any capacity, and engaging in any activity requiring such

registration or exemption from registration with the Commission, except

as provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2022);

and/or

g. Acting as a principal (as that term is defined in Regulation 3.1(a), 17

C.F.R. § 3.1(a) (2022)), agent or any other officer or employee of any

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person (as that term is defined in 7 U.S.C. § 1a(38)), registered, exempted 

from registration or required to be registered with the Commission except 

as provided for in 17 C.F.R. § 4.14(a)(9). 

B. Restitution

44. 7 U.S.C. § 13a-1(d)(3) authorizes the Commission to seek, and the Court to order,

“restitution to persons who have sustained losses proximately caused by such violation (in the 

amount of such losses.” Restitution exists to restore the status quo and make the injured party 

whole. Porter v. Warner Holding Co., 328 U.S. 395, 402 (1946) (equitable restitution consists of 

“restoring the status quo and ordering the return of that which rightfully belongs to the purchaser 

or tenant”). Accordingly, courts calculate restitution “as the difference between what [a 

defendant] obtained and the amount customers have already received back.” CFTC v. Ross, No. 

09-cv-5443, 2014 WL 6704572, at *3 (N.D. Ill. Nov. 26, 2014).

45. Here, Defendants’ illegal conduct, as described herein, proximately caused Pool

Participants to incur net losses totaling not less than $13,692,690.27, which is calculated as the 

difference between what Defendants obtained ($15,721,684.52) and the amount customers 

received back ($2,028,994.25). (Koh Decl. ¶¶ 14, 16) Accordingly, Defendants shall pay, 

jointly and severally, restitution in the amount of $13,692,690.27 (“Restitution Obligation”). 

46. If the Restitution Obligation is not paid immediately, post-judgement interest

shall accrue on the Restitution Obligation beginning on the date of entry of this Order and shall 

be determined by using the Treasury Bill rate prevailing on the date of entry of this Order, 

pursuant to 28 U.S.C. § 1961. 

47. To effect payment of the Restitution Obligation and the distribution of any

restitution payments to Defendants’ participants, the Court appoints the National Futures 

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Association (“NFA”) as Monitor (“Monitor”). The Monitor shall receive restitution payments 

from Defendants and make distributions as set forth below. Because the Monitor is acting as an 

officer of this Court in performing these services, the NFA shall not be liable for any action or 

inaction arising from NFA’s appointment as Monitor, other than actions involving fraud. 

48. Defendants shall make Restitution Obligation payments, and any post-judgment

interest payments, under this Order to the Monitor in the name “Kay Yang Restitution Fund” and 

shall send such payments by electronic funds transfer, or by U.S. postal money order, certified 

check, bank cashier’s check or bank money order, to the Office of Administration, National 

Futures Association, 300 South Riverside Plaza, Suite 1800, Chicago, Illinois 60606 under cover 

letter that identifies the paying Defendant and the name and docket number of this proceeding. 

The paying Defendant shall simultaneously transmit copies of the cover letter and the form of 

payment to the Chief Financial Officer, Commodity Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581. 

49. The Monitor shall oversee the Restitution Obligation and shall have the discretion

to determine the manner of distribution of such funds in an equitable fashion to Defendants’ 

participants identified by the CFTC or may defer distribution until such time as the Monitor 

deems appropriate. In the event that the amount of Restitution Obligation payments to the 

Monitor are of a de minimis nature such that the Monitor determines that the administrative cost 

of making a distribution to eligible Pool Participants is impractical, the Monitor may, in its 

discretion, treat such restitution payments as civil monetary penalty payments, which the 

Monitor shall forward to the CFTC following the instructions for civil monetary penalty 

payments set forth in Part II.D. below. 

50. Defendants shall cooperate with the Monitor as appropriate to provide such

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information as the Monitor deems necessary and appropriate to identify Defendants’ Pool 

Participants to whom the Monitor, in its sole discretion, may determine to include in any plan for 

distribution of any Restitution Obligation payments. Defendants shall execute any documents 

necessary to release funds that they have in any repository, bank, investment or other financial 

institution, wherever located, in order to make partial or total payment toward the Restitution 

Obligation. 

51. The Monitor shall provide the CFTC at the beginning of each calendar year with a

report detailing the disbursement of funds to Defendants’ Pool Participants during the previous 

year. The Monitor shall transmit this report under a cover letter that identifies the name and 

docket number of this proceeding to the Chief Financial Officer, Commodity Futures Trading 

Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581. 

52. The amounts payable to each Pool Participant shall not limit the ability of any

Pool Participant from proving that a greater amount is owed from Defendants or any other 

person or entity, and nothing herein shall be construed in any way to limit or abridge the rights of 

any Pool Participant that exist under state or common law. 

53. Pursuant to Rule 71 of the Federal Rules of Civil Procedure, each Pool Participant

of Defendants who suffered a loss is explicitly made an intended third-party beneficiary of this 

Order and may seek to enforce obedience of this Order to obtain satisfaction of any portion of 

the restitution that has not been paid by Defendants to ensure continued compliance with any 

provision of this Order and to hold Defendants in contempt for any violations of any provision of 

this Order. 

54. To the extent that any funds accrue to the U.S. Treasury for satisfaction of

Defendants’ Restitution Obligation, such funds shall be transferred to the Monitor for 

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disbursement in accordance with the procedures set forth above. 

C. Disgorgement from Relief Defendant Chao Yang

55. Relief Defendant Chao Yang shall pay, jointly and severally with Defendants,

disgorgement in the amount of $1,422,430.42 (“Disgorgement Obligation,”), which represents 

the amount of ill-gotten gains Chao Yang received and to which he has no legitimate claim. 

(Koh Decl. ¶ 17) If the Disgorgement Obligation is not paid immediately, post-judgement 

interest shall accrue on the Disgorgement Obligation beginning on the date of entry of this Order 

and shall be determined by using the Treasury Bill rate prevailing on the date of entry of this 

Order, pursuant to 28 U.S.C. § 1961. 

56. Relief Defendant shall pay his Disgorgement Obligation by electronic funds

transfer, U.S. postal money order certified check, bank cashier’s check, or bank money order. If 

payment is to be made other than by electronic funds transfer, then the payment shall be made 

payable to the Commodity Futures Trading Commission and sent to the address below: 

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 181 

Oklahoma City, OK 73169 

(405) 954-6569 office

(405) 954-1620 fax

9-AMC-AR-CFTC@faa.gov

If payment by electronic funds transfer is chosen, Relief Defendant shall contact Marie Thorne 

or her successor at the address above to receive payment instructions and shall fully comply with 

those instructions. Relief Defendant shall accompany payment of the Disgorgement Obligation 

with a cover letter that identifies Relief Defendant and the name and docket number of this 

proceeding. Relief Defendant shall simultaneously transmit copies of the cover letter and the 

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form of payment to the Chief Financial Officer, Commodity Futures Trading Commission, Three 

Lafayette Center, 1155 21st Street NW, Washington, D.C. 20581. 

D. Civil Monetary Penalty

57. 7 U.S.C. § 13a-1(d)(1)(A) authorizes the imposition of a CMP equal to the higher

of triple a defendant’s monetary gain from each violation of the Act, or $214,514 per violation.1

 

“Sanctions in CFTC enforcement proceedings should be determined with regard to the gravity of 

the offense and the need for deterrence.” Monieson v. CFTC, 996 F.2d 852, 862 (7th Cir. 1993). 

Courts routinely award significant CMPs in cases involving conduct that violates the core 

provisions of the Act, such as fraud. See, e.g., CFTC v. Battoo, No. 12-cv-07127, 2016 WL 

3059856, at *13 (N.D. Ill. Jan. 11, 2016) (entering a default judgment and ordering the 

Defendants to pay a CMP of $147 million, triple the Defendants’ gain of $49 million). Severe 

sanctions are warranted when a defendant repeatedly violates the Act, In re Slusser, CFTC 

Docket No. 94-14, 1999 WL 507574 at *18 (CFTC July 19, 1999). 

58. This case warrants a significant civil monetary penalty against Defendants.

Defendants’ conduct was serious, caused significant harm to customers, and involved attempts to 

cover up their fraud with fake account updates. (ECF No. 1 ¶¶ 4, 44, 50) Moreover, 

Defendants’ fraud was extensive and long-lasting. For almost three years, Defendants bilked 

more than 67 people (most of which were from the Hmong community) out of at least $15.7 

million. (ECF No. 1 ¶¶ 1, 20, 22, 49) Further, rather than trade all customer funds as promised, 

Defendant Yang spent millions of dollars of customer funds on gambling and vacations and also 

sent a portion of those funds to her husband, Relief Defendant Chao Yang. (Id. ¶¶ 48, 52) 

1 Pursuant to the associated regulation, 17 C.F.R. § 143.8(b)(1) (2022), the allowable inflation-adjusted civil 

monetary penalty is $214,514 per violation of the Act (effective Jan. 15, 2023) for non-manipulation claims brought 

in federal injunctive actions under 7 U.S.C. § 13a-1. 

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Finally, by not responding to the CFTC’s complaint and instead flooding the docket with 

improper filings including false UCC and IRS filings, Defendants offer no justification why the 

Court should not impose a significant civil monetary penalty. 

59. Accordingly, Defendants shall pay a civil monetary penalty in the amount of

$10,387,635.91 (“CMP Obligation”), which is equal to the Defendants’ gains. Defendants’ gains 

are calculated as the total Defendants obtained ($15,721,684.52), less the amount returned to 

Pool Participants ($2,028,994.25), trading losses ($2,939,856.22), and certain trading 

commissions and fees ($365,198.14). (Koh Decl. ¶¶ 14-17) If the CMP Obligation is not paid 

immediately, then post-judgment interest shall accrue on the CMP Obligation beginning on the 

date of entry of this Order and shall be determined by using the Treasury Bill rate prevailing on 

the date of entry of this Order pursuant to 28 U.S.C. § 1961. 

60. Defendants shall pay their CMP Obligation and any post-judgment interest, by

electronic funds transfer, U.S. postal money order, certified check, bank cashier’s check, or bank 

money order. If payment is to be made other than by electronic funds transfer, then the payment 

shall be made payable to the CFTC and sent to the address below: 

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 181 

Oklahoma City, OK 73169 

(405) 954-6569 office

(405) 954-1620 fax

9-AMC-AR-CFTC@faa.gov

If payment by electronic funds transfer is chosen, Defendants shall contact Marie Thorne or her 

successor at the address above to receive payment instructions and shall fully comply with those 

instructions. Defendants shall accompany payment of the CMP Obligation with a cover letter 

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that identifies Defendants and the name and docket number of this proceeding. Defendants shall 

simultaneously transmit copies of the cover letter and the form of payment to the Chief Financial 

Officer, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, 

N.W., Washington, D.C. 20581.

E. Miscellaneous Provisions

61. Partial Satisfaction: Acceptance by the CFTC of any partial payment of

Defendants’ Restitution Obligation or CMP Obligation, or Relief Defendant’s Disgorgement 

Obligation, shall not be deemed a waiver of their obligation to make further payments pursuant 

to this Order or a waiver of the CFTC’s right to seek to compel payment of any remaining 

balance. 

62. Notice: All notices required to be given by any provision in this Order

shall be sent certified mail, return receipt requested, as follows: 

Notice to Commission: 

Ian McGinley 

Director, Division of Enforcement 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, N.W. 

Washington, DC 20581 

Notice to NFA: 

Daniel Driscoll, Executive Vice President, COO 

National Futures Association 

300 S. Riverside Plaza, Suite 1800 

Chicago, IL 60606-3447 

All such notices to the CFTC shall reference the name and docket number of this action. 

63. Change of Address/Phone: Until such time as Defendants and Relief Defendant

satisfy in full their Restitution Obligation, Disgorgement Obligation, and CMP Obligation as set 

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forth in this Order, Defendants and Relief Defendant shall provide written notice to the 

Commission by certified mail of any change to their telephone number and mailing address 

within ten calendar days of the change. 

64. Invalidation: If any provision of this Order or if the application of any provision

or circumstance is held invalid, then the remainder of this Order and the application of the 

provision to any other person or circumstance shall not be affected by the holding. 

65. Continuing Jurisdiction of this Court: This Court shall retain jurisdiction of this

action to ensure compliance with this Order and for all other purposes related to this action, 

including any motion by Defendants or Relief Defendant to modify or for relief from the terms 

of this Order. 

66. Injunctive and Equitable Relief Provisions: The injunctive and equitable relief

provisions of this Order shall be binding upon Defendants and Relief Defendant, upon any 

person under the authority or control of any of the Defendants or Relief Defendant, and upon any 

person who receives actual notice of this Order, by personal service, e-mail, facsimile or 

otherwise insofar as he or she is acting in active concert or participation with Defendants or 

Relief Defendant. 

THERE BEING NO JUST REASON FOR DELAY, the Clerk of the Court is hereby 

ordered to enter this Order for Final Judgment by Default, Permanent Injunction, Civil Monetary 

Penalties, and other Statutory and Equitable Relief forthwith and without further notice. 

IT IS SO ORDERED, at Milwaukee, Wisconsin on this _______ day of _______, 2023. 

__________________________________ 

UNITED STATES DISTRICT JUDGE 

27 

5th June

/s/Lynn Adelman

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