“Despite Defendants’ promise, made as part of their settlement with the Commission, that they would stop this conduct, they continued their fraud unabated. From at least November 24, 2021, through September 29, 2023, Defendants continued to invest more than 25% of the Fund’s total assets in a single company, Company A.”

💡 This shows defendants allegedly resumed the exact misconduct they settled with the SEC for stopping.

“Defendants’ conduct from November 24, 2021, through at least June 23, 2024 (‘Relevant Period’), harmed the Fund and its investors. By waiting nearly two years to reduce the Fund’s Company A holdings below the 25% limit, and then continuing to overconcentrate the Fund in the semiconductor industry, Defendants caused losses of approximately $1.6 million.”

💡 This establishes the concrete financial damage to retail investors from the delay in compliance.

“Meanwhile, Defendants collected advisory fees of approximately $100,000 on the Fund’s assets that exceeded the 25% limit.”

💡 This shows the direct financial benefit defendants gained from continuing the concentration violations.

“The 2019 Deficiency Letter explained that these violations occurred ‘due to [Upright’s] recklessness’ because ‘the Fund was forced to buy massive quantities of the underlying shares upon the options being exercised.’ Accordingly, the 2019 Deficiency Letter stated that the Fund ‘repeatedly violated its industry concentration restrictions.'”

💡 This proves defendants were explicitly warned about concentration violations years before continuing them.

“The Preliminary Report also stated that Upright should ‘[a]djust the portfolio to bring it in line with the correct fundamental policy’ and that Upright ‘should be responsible for any losses to [the Fund] for the portfolio adjustments.'”

💡 This shows the independent consultant explicitly told Upright to fix the problem and accept responsibility for losses.

“When Chiueh provided the Preliminary Report to the Board, he misled the Board about the ICC’s recommendations contained therein. Specifically, Chiueh told the trustees that the ICC’s findings in the Preliminary Report regarding the Fund’s violations of its 25% Concentration Policy limit were mistaken because the Fund had allegedly conducted a shareholder vote in August 2018 to change its Concentration Policy limit. As Chiueh well knew, the Fund did not conduct a shareholder vote to change its Concentration Policy limit in August 2018 and had not done so as of September 13, 2022.”

💡 This demonstrates defendants allegedly lied directly to the board to avoid accountability for ongoing violations.

“Chiueh knew, or recklessly disregarded, that the statements in the June 2022 SAI and January 2023 SAI that the Fund had a 50% Concentration Policy limit were false, because, as described in paragraphs 34 through 42, the Fund’s registration statement contained a 25% Concentration Policy limit and the Fund did not conduct a proxy vote of its shareholders to change this limit during the Relevant Period.”

💡 This shows defendants filed official documents with the SEC containing false information about fundamental fund policies.

“The ICC recommended in the Preliminary Report that Upright use a single, reputable third-party source to provide classifications because ‘[t]his helps ensure [Upright] cannot manipulate the classifications and also ensures [Upright] cannot pick multiple classification providers in order to use different classifications to stay in compliance (cherry picking in order to increase exposure to a security).'”

💡 This proves the consultant explicitly warned against the classification manipulation defendants allegedly engaged in.

“Accordingly, by waiting until June 28, 2023, to begin selling its share of Company A stock, the Fund lost an additional approximately $1,586,394.”

💡 This quantifies exactly how much the two-year delay in compliance cost fund investors.

“As a result, the 2019 Deficiency Letter stated that it is the Examinations staff’s opinion that ‘[Upright] failed to satisfy its fiduciary duty owed to the Fund.'”

💡 This shows the SEC explicitly found a breach of fiduciary duty years before the violations continued.

“Upright did not certify its compliance with the undertakings in the 2021 Order by the Certification Date. To date, Upright has not certified its compliance with the undertakings in the 2021 Order.”

💡 This demonstrates defendants failed to follow through on required corrective actions from the settlement.

“Chiueh did not share the 2019 Deficiency Letter with the Board either before or during the Relevant Period, despite the Examinations staff’s request that Chiueh forward to them the results of any Board review undertaken in response to the 2019 Deficiency Letter.”

💡 This shows defendants hid critical regulatory findings from the board that was supposed to oversee them.

“Beginning at its inception in 1998, and for more than two decades later, the Fund had a disclosed fundamental policy to invest no more than 25% of its total assets in one industry (‘Concentration Policy’).”

💡 This establishes the concentration limit was a core, fundamental rule the fund promised investors from day one.

“In November 2021, the Commission issued a settled order that found that Defendants violated the Concentration Policy between July 2017 and June 2020 by concentrating more than 25% of the Fund’s total assets in one industry, including the semiconductor industry, and, in doing so, that Defendants committed fraud and breached their fiduciary duties to the Fund (among other securities law violations).”

💡 This shows the SEC had already found and settled the same type of violations before defendants allegedly resumed them.

“Defendants engaged in a multi-year fraudulent scheme to operate the mutual fund Upright Growth Fund (‘Fund’) as a highly concentrated fund in violation of the Fund’s investment mandate and Defendants’ fiduciary duties, at the expense of the Fund and its retail investor base.”

💡 This establishes that ordinary retail investors, not sophisticated institutions, were the primary victims.