The Kirkland financial adviser told them the fund was called Pishon & Co. LLC, a reference to a river in the Garden of Eden. Hong, who also went by the name Lawrence, described his impressive history as a fund manager, one that dated back at least a decade. He had hit the ground running, it seemed. As he stated in a prospectus he handed out to would-be clients, his fund earned a 58 percent return-on-investment in 2008. In 2010, it soared to 167 percent.
They were stunning, unbelievable numbers — and they weren't real.
The 47-year-old multimillionaire didn't mention that he had been in prison in 2008, serving a nearly three-year sentence for defrauding a neighbor out of $800,000. After doing 33 months, he promised the sentencing judge he'd go straight. “You’ll never see me here again,” he vowed. Within months of his release, Hong was grifting again. This time, he and wife, Hyun Joo Hong, for whom Sung named the couple’s 56-foot yacht, conjured up a hedge fund scam. Their target: churchgoers.
With God as his co-pilot, Hong's fortunes soared, allowing him to pocket millions over the next seven years by lying to his clients about why they weren't earning more from their investments and stalling them with excuses. Meanwhile, he and his wife were spending their money on an Eastside mansion, exotic cars, and vacations to Beverly Hills and the Bahamas. He was no Bernie Madoff, the conman who went to prison for 150 years after bilking thousands of investors out of billions of dollar in the world's largest Ponzi scheme. But Hong clearly had Madoff's lust for easy money.
Hong’s clients — many from Korean church congregations around Seattle and throughout California — were eager for easy money as well. Anxious to earn the extraordinary returns he promised, 57 investors accepted his doctored portfolios and fabricated tales of success. Hong immediately began diverting their funds into his own bank account and continued to do so for the better part of a decade. When necessary, he would pay those early investors with funds from newer clients, a high-risk balancing act repeated as other investors signed up. He stalled clients who questioned the lack of returns, telling some they could be killed if he paid them. One client told the court that when he asked Hong for money just to live on, Hong claimed the investments were tied up with an international crime syndicate, and that the syndicate would kill Hong, the client and his daughter if Hong returned any funds to the investor.
Like most houses of cards, it would eventually collapse. On a June morning in 2017, a fleet of cars pulled up at the 9,000-square-foot Clyde Hill mansion the couple rented for $12,000 a month. A small army of men in dark blue FBI jackets emerged waving a search warrant, then began carrying boxes and papers from the home in the wealthy enclave, not far from the Medina estates of the world's two richest men, Jeff Bezos and Bill Gates. Agents conducted a preliminary inventory of furnishings, jewelry, housewares, and luxury autos — a BMW, Maserati, Aston Martin and Lamborghini were all parked in the garage. All were fruits of the crime, subject to seizure. The Hongs were taken into custody and their three children, ages 2, 4, and 6, were put in the hands of assigned caregivers.
While in custody, the Hongs confessed. They had stolen $20 million from their clients, prosecutors said.
U.S. Attorney Annette L. Hayes said in a statement that some of the Hongs' “victims now live paycheck to paycheck with college and retirement funds depleted and a very different financial future than they expected.” What little they may receive in reparations will come from a portion of Hong's prison earnings and, later, his post-release earnings.
The Hongs’ future is gloomy as well. On Oct. 11, each was dispatched to a different federal prison. At the U.S. Courthouse in Seattle, Grace Hong received a six-year sentence after pleading guilty to making illegal wire transfers. Prosecutors said she was a willing actor in the scam, falsely touting a background at Deutsche Bank and announcing God had blessed her and her husband with the talents to help churches and members become financially sound.
Lawrence Hong was facing more severe punishment. His Seattle attorney, James Frush, had asked that his client receive an eight- to 10-year term, calling it “a just punishment.” Assistant U.S. Attorneys Justin Arnold and Steven Masada sought 24 years, arguing in a sentencing brief that “considering his repugnant history, the scope and depravity of his current fraud, and the absolute lack of mitigating circumstances, Lawrence Hong, in the United States’ view, stands alone as arguably the worst fraud offender ever sentenced in Western Washington. The court should impose a lengthy sentence that acknowledges and reflects Lawrence Hong’s unique case.”
Lawrence Hong pled guilty to wire fraud, laundering funds, and lying to federal investigators — a deal for which the feds dropped 20 additional counts. U.S. District Court Judge Thomas Zilly sentence him to 15 years, but suggested that Hong refrain from making any promises this time.
“You clearly did not learn anything from the fact you were convicted and sentenced to prison” for bilking the Kirkland neighbor, Zilly said. “You are one of those con men who will never be able to stop conning people.”
When he addressed the church conference in 2016, exaggerating and lying about his success, Lawrence Hong kept his 2008 criminal conviction a secret. But a secret more than four decades old was being kept from him, too, it turns out. His family and attorneys think it helps explain how Hong came to prey on churchgoers, in some cases crassly stealing their life savings and destroying any hopes they had of retirement.
After pleading guilty this year, Hong for the first time learned a cold truth about his birth and who his parents were. The revelation came in a letter his mother wrote to the federal court and was put into the public record two months ago: Sung was a foundling, she wrote, left at his mother's Seoul, South Korea, home as a newborn in 1971. She had never told Hong.
“One day I woke up and found a three-day-old baby on my doorstep,” Hyo Soon Hong, 89, wrote. “I had always wanted a baby but could never have one. I decided to take him as my own. I boiled rice and water and fed it to him and took care of him even though I was so poor. I never told Lawrence this and to this day he believes I am his biological mother.
“Though I love him, I raised him the way I was raised, and abused him daily,” she continued. “I beat him with the poker I used to tend the coal stove. I told him terrible things and said he was worthless and a dog. My husband also abused both of us daily, punching and kicking us.”
In 1980, when Sung was almost 9, his mother accepted a friend's invitation to come to America. She left her husband behind and moved with Sung to Seattle. With a small loan, she bought a grocery store. When Sung wasn't at school, he was at work in the store, she said. Later she bought a motel, where he worked long hours every day.
“Even in high school and middle school,” she wrote, “Lawrence worked till 4 in the morning [at] the front desk of the motel. Most of my clients were drug addicts and hookers, and when they had no food, Lawrence would make them rice and kimchi.”
Hong went on to take classes in finance at Seattle University. “I nagged him constantly to make more money and provide for me,” the mother recalled. “When he started making money, I finally told him I loved him and was proud of him.”
Frush, Hong's attorney, asked the court to consider his client’s upbringing in deciding a proper sentence.
“Some victims were horribly treated, there is no question,” he conceded in a sentencing brief. “However, for some individuals Lawrence actually made money and, at times, made money for himself. Instances of direct misappropriation were present but not consistent or prevalent.” Frush also noted that losses by the two largest investors amounted to about half of the stolen money — one was stung for more than $3 million. They were “both sophisticated and knowledgeable about Lawrence’s criminal record,” he said, though it wasn’t clear why that should be a mitigating factor in sentencing.
What is clear is that millions were stolen in comparatively smaller amounts. One of the victims was an unnamed church that lost $300,000. Another was a minister who was duped out of $55,000. The minister told federal prosecutors in a letter, “The trauma is felt not just financially, but emotionally and spiritually.”
Other victims — identified only by their initials — described their losses as life-altering. Wrote one couple, P.N. and J.N., “The Hongs presented themselves as devout Christians and had all the lingo to go with it. We felt good about them and believed them.” But “As a result of the Hongs’ crimes we no longer have any money left to invest. Our retirement funds are completely gone. We are trying to rebuild our assets and [P.N.] is working 70 hours per week in his mortgage business and doing this at 79 years of age.”
Investor K.G. wrote that “what caused me to trust them even more was the fact that they presented themselves as Christians, and they had ties to ministers and Christian leaders that I personally know and highly respect.” One couple, S.Q. and J.Q., stated that the con “greatly affected our marriage and relationships with our family, and the church community. We have been dealing with issues of anger, shame, and regret from being victimized by the Hongs.”
Prosecutors pointed out the couple chose to overlook the harm they could do to their own family, children included. The three kids today are with Hong's elderly mother, but, at almost 90, she can't properly care for them, said Hong's attorney. Attempts are being made to place the children with family friends and others in Korea. So far, no takers.
“There admittedly will be a significant impact on the Hongs’ children, and any negative consequence is regrettable,” the two prosecutors said in their sentencing recommendation. “However, those consequences flow entirely from the Hongs’ own misconduct — a natural and foreseeable byproduct of their decisions to engage in a years-long, multimillion-dollar fraud, all to indulge an extravagant lifestyle few can legitimately afford.” For that matter, they added, “the Hongs also victimized the children of those who invested with them, and there will be long-lasting effects on those children.”
If Hong is released after 15 years — 2033, when he would turn 62 — he'll likely spend the remainder of his life paying back his victims or their survivors. After his cars, valuables and other property were seized for auction, he was left with, the court ruled, exactly $12,726,352.67 due in restitution. Twenty-five percent of whatever he earns monthly as a prisoner will go to the victims and after he is freed he will be obligated to pay at least 10 percent of his earnings monthly as a free man.
That sounds like a permanent obligation. And, of course, it must be paid with legitimate earnings. Prosecutors expressed doubts about that. There was little hope Hong could be reformed, even by a long sentence, they said, pointing out that when he was arrested for the 2007 fraud against a neighbor, he wasted no time finding his next target — a fellow Korean inmate at the federal detention center in SeaTac, where Hong was awaiting trial.
Hong talked the inmate into persuading his mother to send $300,000, then $100,000 more, from Korea to Hong's bank as a hedge fund investment. Hong, pressured by the inmate, eventually returned some of the money, though prosecutors couldn't document how much.
Hong, they said, was “a career con man, a recidivist in the truest sense of the word ... with absolutely no moral compass and driven by only one thing — pure, unadulterated greed.”