A Milwaukee-area developer and investment adviser has been ordered by a judge to repay $4.06 million to investors − and pay the same amount as a fine − after using investment funds to finance her luxurious lifestyle.

Kay X. Yang, who operates Mequon-based Xapphire LLC, must make those payments within 30 days or face collection efforts. That includes contempt of court proceedings that could result in being jailed, according to a Wednesday ruling issued by U.S. District Judge J.P. Stadtmueller.

Her husband, Chao Yang, was ordered to repay $830,502 of ill-gotten gains.

"Kay and Xapphire must be held accountable for their pervasive and knowing violations" of federal securities law, Stadtmueller said in the ruling.

"Kay and Xapphire targeted a vulnerable group of victims for millions of dollars in a years-long scheme rife with fabricated documents and material misrepresentations and omissions. Kay continues to make these choices today," the judge said.

Kay Yang didn't respond to the Milwaukee Journal Sentinel's request for comment.

One question: will federal authorities be able to compel Yang to comply with Stadtmueller's order?

In July 2020, the Wisconsin Department of Financial Institutions found that Yang was operating as unregistered investment advisor.

She was ordered to pay $16,950,777 in restitution to her investors, disgorge up to $4,231,998 in profits, and pay a $50,000 civil penalty. However, Yang has not paid the amounts she owes.

Meanwhile, Yang has continued to raise millions of dollars from the Hmong-American communities in Wisconsin and Minnesota, according to federal court records.

Also, in February 2022, a search warrant affidavit filed in U.S. District Court said Yang was the subject of a criminal investigation for alleged money laundering and wire fraud. 

"The Court can only hope that this Order, as the Wisconsin Order apparently failed to do, will deter Kay and Xapphire from future violations of the securities laws," Stadtmueller wrote.

Yang raised at least $16.5 million from investors in 8 states

Yang raised at least $16.5 million from approximately 70 investors in at least eight states through two fraudulent offerings from around April 2017 through April 2021, the ruling said.

Most of the investors are Hmong-American, including some who do not speak English as a first language and "were not sophisticated investors," Stadtmueller wrote.

Kay and Chao Yang used more than $3 million in investor funds to pay for real estate, living expenses, travel, and luxury automobiles.

That included four homes in Wisconsin and Minnesota; trips to Hawaii, Thailand, Cancun and Las Vegas, and gambling. Some of the cash was used to repay investors in a previous venture.

Kay Yang also is vice president of 5xen Inc., which operated 5xen Asian Super Market, 6300 N. 76th St. − leaving a once-thriving business in dire straits.

5xen Inc. operated the market from April 2020 until Jan. 7. That's when control of the property was turned back over to Pai Yang (no relation), who in 2009 launched the business, then known as Phongsavan Asian Market.

Pai Yang sold the business to 5xen through a land contract. She remained liable for the property's mortgage debt even though 5xen agreed to take over making payments to the bank.

When 5xen stopped making mortgage payments, Chicago-based Byline Bank in 2022 filed a foreclosure suit and obtained a judgment. Milwaukee County Circuit Judge Thomas McAdams in January ordered 5xen to turn the property over to Yang after 5xen failed to make a $3.6 million payment to her.

Yang has since sued 5xen, saying it ruined the property and committed theft by removing commercial kitchen equipment, chairs, tables, carts, shelves, price guns, garbage bins − and even toilets and other restroom fixtures. The suit also says 5xen owes $11,920 in January rent collected from the market's vendors.

In February, McAdams issued an injunction barring 5xen from selling or mortgaging a neighboring property it owns at 6270 N. 76th St.

Yang's attorney, Jason Baltz, said that building − with an assessed value of $485,000 − could eventually be used to pay down damages Yang hopes to collect from 5xen through her lawsuit.

Tom Daykin can be emailed at tdaykin@jrn.com and followed on Instagram, Twitter and Facebook.

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This article originally appeared on Milwaukee Journal Sentinel: Milwaukee-area investment adviser ordered to repay $4 million