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David Hu, co-founder and Chief Investment Officer of the New York-based firm International Investment Group (IIG), orchestrated one of the most significant private fund frauds in recent memory. Over the course of more than a decade, Hu led a scheme that defrauded investors of over $120 million, using forged documents, inflated valuations, and a Ponzi-style structure to keep the con alive. His actions resulted in a 12-year prison sentence and permanently shuttered his firm.
Who Is David Hu?
David Hu was a co-founder and the Chief Investment Officer of International Investment Group (IIG), a Manhattan-based investment advisory firm launched in 1994. IIG carved out a specialized niche in the finance world by focusing on trade finance, a relatively under-the-radar corner of the investment space. The firm’s strategy involved providing short-term loans to small and mid-sized businesses in emerging markets, often to finance cross-border transactions such as importing goods or materials.Under Hu’s leadership, IIG marketed itself as a safe but lucrative alternative to traditional fixed-income investments. The firm’s pitch was compelling: steady returns, backed by real-world trade deals and secured by receivables. Its flagship funds—including the Global Trade Finance Fund (GTFF) and the Structured Trade Finance Fund (STFF)—attracted a loyal base of institutional investors, including banks, pensions, and wealth management firms.
Hu was seen as a quiet but credible figure in the alternative investment world. He was often praised for his deep knowledge of global trade and his firm’s ability to generate consistent performance—even during periods of broader market volatility. IIG’s reported returns appeared stable and uncorrelated to stock market swings, which made the firm especially appealing to risk-averse investors looking for diversification.
However, behind IIG’s polished façade was a much darker reality. Hu had been fabricating loan documents, inflating asset values, and funneling investor funds to cover prior shortfalls—keeping up appearances while the firm’s actual performance deteriorated. For over a decade, this deception went undetected, until regulators and law enforcement finally exposed the truth.
How the Fraud Worked
From 2007 to 2019, David Hu engaged in a complex and sustained scheme to defraud investors by manipulating the operations and financial reporting of IIG. The fraud was not a single event—it evolved over time, becoming more elaborate as Hu worked to conceal losses and sustain investor confidence.Fictitious Loans
To cover underperforming or defaulted investments, Hu began creating entirely fictitious trade finance loans. These fake assets were backed by forged promissory notes, invoices, and credit agreements that looked legitimate on paper but had no actual borrowers or business activity behind them. By inserting these fabricated loans into IIG’s portfolio, Hu was able to disguise losses and maintain the appearance of solid asset performance.Overstated Valuations
In addition to inventing fake loans, Hu inflated the value of real but distressed assets, refusing to mark them down even after borrowers defaulted. This misvaluation allowed IIG to report artificially high returns, which in turn enabled the firm to continue collecting management and performance fees it had not truly earned.Ponzi-Like Payments
To fulfill redemption requests from earlier investors, Hu used funds raised from new investors or by selling the fake loans to other clients. This recycling of money mirrored the structure of a Ponzi scheme, where payouts to old clients are funded by incoming capital rather than real investment gains.Deception of Auditors and Investors
Throughout this period, Hu provided falsified financial documents to external auditors and lied to investors about the health of the funds. These misrepresentations kept the scheme alive—until regulators stepped in and the truth surfaced.Legal Consequences
After more than a decade of deception, David Hu’s scheme finally collapsed under the weight of regulatory investigation and mounting red flags. In 2020, the U.S. government filed civil and criminal charges against him, including investment adviser fraud, securities fraud, and wire fraud. The charges stemmed from his direct involvement in manufacturing fake loans, misleading investors, and manipulating fund valuations to sustain the illusion of strong performance at IIG.Rather than go to trial, Hu pleaded guilty in early 2021, acknowledging his role in orchestrating and executing the fraud. In April 2022, he appeared before a federal judge and was sentenced to 12 years in prison, one of the stiffest penalties handed down in recent years for a fund manager. The court emphasized the seriousness of his betrayal—not just of financial rules, but of the trust placed in him by long-term investors.
In addition to the prison sentence, Hu was ordered to forfeit more than $129 million in ill-gotten gains and to pay full restitution to the victims of his scheme. The judgment also included a permanent ban from the investment advisory industry. The case served as a sobering reminder of how financial crimes—even in seemingly obscure corners of the market like trade finance—can carry severe legal and reputational consequences when exposed.
