SEC Uncovers $1.6M Fraud at Upright Financial

📎 Source Note: The legal sources referenced to write this article are attached at the bottom of the page.

Corporate Greed Case Study: Upright Financial Corp. & Its Impact on Retail Investors

Table of Contents

  • Introduction
  • Inside the Allegations: Corporate Misconduct
  • Regulatory Capture & Loopholes
  • Profit-Maximization at All Costs
  • The Economic Fallout
  • The PR Machine: Corporate Spin Tactics
  • Corporate Accountability Fails the Public
  • Pathways for Reform & Consumer Advocacy
  • Legal Minimalism: Doing Just Enough to Stay Plausibly Legal
  • How Capitalism Exploits Delay: The Strategic Use of Time
  • The Language of Legitimacy: How Courts Frame Harm
  • This Is the System Working as Intended
  • Conclusion
  • Frivolous or Serious Lawsuit?

Introduction

Imagine entrusting your hard-earned money to a mutual fund, believing it’s managed according to stated rules designed to protect your investment. Now, picture the fund manager, the very person responsible for safeguarding that money, repeatedly breaking those rules, even after being caught and promising to stop. This isn’t a hypothetical scenario; it’s the reality alleged in the case against David Yow Shang Chiueh and his company, Upright Financial Corp. The most damning allegation is that, despite a prior settlement with the Securities and Exchange Commission (SEC) for the same misconduct, Chiueh and Upright continued a multi-year fraudulent scheme, operating the Upright Growth Fund in blatant violation of its fundamental investment policy. This breach of trust and fiduciary duty not only put retail investors’ money at undue risk but also highlights systemic failures where promises of compliance become mere words, and regulatory actions fail to curb repeat offenses. The scale of the alleged harm reached approximately $1.6 million in investor losses, while the defendants collected advisory fees on the very assets that exceeded the mandated limits. This case serves as an important reminder of how easily financial safeguards can be undermined when profit motives overshadow ethical obligations.  

Inside the Allegations: Corporate Misconduct

The core of the case against David Yow Shang Chiueh and Upright Financial Corp. revolves around the persistent and knowing violation of the Upright Growth Fund’s “Concentration Policy.” This policy, a fundamental rule disclosed to investors since the fund’s inception in 1998, explicitly stated that the Fund would invest no more than 25% of its total assets in any single industry. This is a crucial safeguard designed to mitigate risk for investors by ensuring diversification.  

However, the SEC alleges a prolonged and deliberate disregard for this policy. Between July 2017 and June 2020, Upright and Chiueh were found to have violated this Concentration Policy by over-concentrating assets in specific industries, including the semiconductor industry. This initial misconduct led to a settled order with the SEC in November 2021 (the “2021 Order”), where Defendants promised to cease such activities.  

Shockingly, the misconduct allegedly didn’t stop there. The current complaint asserts that “despite Defendants’ promise…they continued their fraud unabated”. From at least November 24, 2021, through September 29, 2023—the period immediately following their settlement—Chiueh and Upright continued to invest more than 25% of the Fund’s total assets, not just in a single industry, but in a single company, referred to as “Company A”. Even after finally reducing the holdings in Company A below the 25% threshold on September 29, 2023, they allegedly continued to violate the Concentration Policy by keeping over 25% of the Fund’s assets in the broader semiconductor industry through at least June 23, 2024.  

The legal filings detail how Chiueh, who was not only the founder and owner of Upright but also the CEO, portfolio manager, and Board chairman of Upright Trust (the entity of which the Fund is a series), was fully aware of these violations. He had received a deficiency letter from the SEC’s Division of Examinations back in March 2019, explicitly pointing out these concentration violations and stating they occurred “due to [Upright’s] recklessness”. Furthermore, an Independent Compliance Consultant (ICC), retained as part of the 2021 Order, explicitly informed Upright in June 2022 that Company A stock ranged from 22% to 47% of assets across Upright Trust’s funds and recommended amending documents to reflect the correct 25% limit and manage the Fund accordingly. Upright was also advised by the ICC to “be responsible for any losses to [the Fund] for the portfolio adjustments”.  

Beyond the concentration violations, the defendants are accused of other serious misconduct concerning the Upright Trust’s board of trustees. This includes failing to provide the Board with information reasonably necessary to evaluate Upright’s advisory contract and misleading the Board about past securities law violations and the 2021 Order itself. Chiueh is also accused of misrepresenting the renewal process of the advisory contract in SEC filings, falsely claiming the Board was supplied with and discussed extensive supporting information when, in reality, discussions were largely limited to fund performance. Additionally, they allegedly hired an accountant to audit Upright Trust without the required Board vote by a majority of independent directors.

david chiueh evil corporations
David Chiueh (founder and CEO of Upright Financial Corp)

Regulatory Capture & Loopholes

While the legal document doesn’t explicitly use the term “regulatory capture,” the narrative surrounding Upright Financial Corp. and David Yow Shang Chiueh strongly suggests an environment where initial regulatory actions failed to achieve their intended corrective effect, allowing misconduct to persist. This situation often arises in a broader context of neoliberal capitalism, where deregulation and a weakening of oversight mechanisms can create opportunities for such failures.

The most striking example is the Defendants’ alleged continuation of fraudulent behavior after a formal settlement with the SEC. In November 2021, the SEC issued a settled order (the “2021 Order”) which found that Upright and Chiueh had violated the Fund’s Concentration Policy between July 2017 and June 2020. As part of this settlement, Defendants agreed to “cease-and-desist from committing or causing future violations”. However, the complaint states they “continued their fraud unabated” from at least November 24, 2021, onwards, repeatedly breaching the same Concentration Policy.  

This brazen continuation of the prohibited conduct, despite a direct SEC order, points to a potential weakness in the enforcement-deterrence cycle. It raises questions about whether the penalties or undertakings in the 2021 Order were sufficient to compel genuine compliance or if the defendants perceived the regulatory risk as manageable enough to continue their actions. The system appears to have relied on the defendants’ promise to comply, a promise that was allegedly broken.

Furthermore, the requirement to retain an Independent Compliance Consultant (ICC) as part of the 2021 Order was meant to be a corrective measure. The ICC did identify the ongoing concentration issues and recommended corrective actions, including managing the fund according to the 25% limit and Upright being responsible for any resulting losses. However, these recommendations were allegedly not fully implemented. Upright even failed to certify its compliance with the undertakings of the 2021 Order by the set deadline and, as of the complaint’s filing, had still not done so. This suggests a breakdown in the oversight mechanism designed to ensure the 2021 Order was effectively implemented.  

The alleged manipulation of industry classifications also hints at exploiting gray areas. The complaint notes that while Chiueh stated in shareholder reports that the Fund used Yahoo Finance as its industry classification source since June 2023, during the Relevant Period, the Defendants classified Company A (a major semiconductor company) as “IC Design”—a classification Yahoo Finance did not use. Prior to this, in 2018, they had classified Company A as being in the semiconductor industry. The ICC had warned that using more than one classification provider “enabled manipulation of classifications to meet concentration limits” and recommended using a single, reputable third-party source to prevent “cherry picking”. This attempt to use different classifications could be seen as an effort to operate within a perceived loophole or to obscure the true extent of the concentration.  

The failure to provide adequate information to the Board of Trustees for the renewal of Upright’s advisory contract and the hiring of an auditor without proper board approval further illustrate how internal governance structures, which are themselves subject to regulatory requirements under the Investment Company Act, were allegedly bypassed or undermined. These actions, if proven, show a disregard for the checks and balances designed to protect the Fund and its investors.  

In many instances under neoliberal economic frameworks, the emphasis on deregulation can lead to under-resourced regulatory bodies or a legal environment where penalties for non-compliance are seen as a “cost of doing business” rather than a significant deterrent. While the SEC took action in this case, the alleged recidivism suggests that the initial intervention was insufficient to ensure lasting adherence to fundamental investment policies and securities laws.

Profit-Maximization at All Costs

The actions of Upright Financial Corp. and David Yow Shang Chiueh, as detailed in the SEC’s complaint, appear to reflect a pattern where the drive for profit and advisory fees took precedence over adherence to fundamental investment policies, fiduciary duties, and ultimately, the well-being of the Upright Growth Fund and its investors. This aligns with a common critique of business decisions made under a neoliberal capitalist framework, where shareholder value and revenue generation can often overshadow ethical considerations and investor protection.

The core of the alleged misconduct—repeatedly violating the Fund’s 25% Concentration Policy—directly served to maintain higher advisory fees for Upright. The complaint explicitly states that during the Relevant Period (November 24, 2021, to at least June 23, 2024), Upright charged the Fund approximately $541,087 in advisory fees. Critically, of this amount, approximately $100,169 in advisory fees were charged on the assets in the Fund’s portfolio that exceeded the 25% Concentration Policy limit. This suggests a direct financial incentive for the defendants to continue the over-concentration, despite the risks to investors and despite prior SEC sanctions. By keeping the Fund heavily invested in a single company (Company A) and then a single industry (semiconductors), beyond the disclosed limits, Defendants were able to maintain a larger asset base upon which their fees were calculated.  

The decision to delay selling down the over-concentrated position in Company A, even after the 2021 SEC Order and warnings from the Independent Compliance Consultant (ICC), also points to a prioritization of other factors over swift compliance and risk mitigation for the Fund. The Fund had bought its shares of Company A for an average price of approximately $12.84 per share. When Defendants finally began selling these shares between June 28, 2023, and September 29, 2023, the average sale price was only $6.54 per share, resulting in an actual loss to the Fund of $2,606,716. The SEC calculates that if Defendants had begun these sales on November 24, 2021 (the date of the 2021 Order), at the same average daily rate, the shares could have been sold at an average price of approximately $10.80 per share. This delay allegedly caused the Fund to lose an additional approximately $1,586,394. While the reasons for this delay aren’t explicitly stated as profit-driven in this context, the outcome was continued fee generation on the over-concentrated assets and ultimately, substantial financial harm to the Fund’s investors.  

Furthermore, the alleged efforts to obscure the concentration issue, such as Chiueh misstating the Fund’s Concentration Policy as 50% (instead of the actual 25%) in SEC filings and using non-standard industry classifications, could be interpreted as attempts to continue a business model that benefited Upright through higher fees, at the expense of transparency and adherence to fundamental policies. The failure to provide the Board with adequate information to evaluate Upright’s advisory contract and misleading them about past violations further suggest that decisions were made to protect Upright’s position and revenue stream, rather than ensure robust oversight and the Fund’s best interests.  

In a system that heavily incentivizes profit maximization, the pressure to generate returns and grow assets under management can sometimes lead fiduciaries to take undue risks or bend rules. The advisory fees collected on assets exceeding the concentration limit represent a tangible financial benefit directly linked to the alleged misconduct. This behavior, if proven, exemplifies a scenario where the incentive structure appears to have prioritized Upright’s revenue over its core duties to the Fund and its retail investor base.

The Economic Fallout

The alleged misconduct of Upright Financial Corp. and David Yow Shang Chiueh had direct and significant financial consequences for the Upright Growth Fund and its investors, primarily retail investors. The primary economic fallout detailed in the complaint is the substantial loss incurred by the Fund due to the delayed sale of its over-concentrated holdings in “Company A.”  

According to the SEC, by waiting nearly two years after the November 2021 Order to begin significantly reducing the Fund’s holdings in Company A (which far exceeded the 25% concentration limit), Defendants caused approximately $1.6 million in losses to the Fund and its investors.  

Here’s a breakdown of the financial impact:

  • The Fund had acquired its shares in Company A at an average price of approximately $12.84 per share.  
  • Defendants only began selling these shares in significant quantities between June 28, 2023, and September 29, 2023.  
  • During this period, 413,138 shares of Company A stock held by the Fund were sold at an average price of $6.54 per share.  
  • This resulted in an actual loss to the Fund of $2,606,716 based on the Fund’s cost basis.  

The SEC further calculates that if Defendants had commenced selling the Company A stock at the same average daily rate starting on November 24, 2021 (the date of the SEC’s previous cease-and-desist order regarding the concentration violations), they would have sold 498,111 shares at a significantly better average price of approximately $10.80 per share.  

  • These hypothetical, earlier sales would have resulted in a smaller hypothetical loss to the Fund of approximately $1,016,322.  
  • Therefore, the delay in selling, from November 2021 until June 2023, allegedly caused an additional loss to the Fund of approximately $1,586,394 (rounded to $1.6 million by the SEC elsewhere in the document).  

The complaint notes that the actual sales of Company A stock by the Fund between June and September 2023 did not have a material impact on the share price, suggesting that a similar volume of sales could likely have been absorbed by the market in late 2021 without adverse price effects.  

While the Fund and its investors were suffering these losses, Upright Financial Corp. and Chiueh were benefiting. During the “Relevant Period” (November 24, 2021, through at least June 23, 2024), Upright charged the Fund advisory fees.

  • A portion of these fees, approximately $100,169, was collected on the assets in the Fund’s portfolio that exceeded the 25% Concentration Policy limit.  

This situation represents a direct transfer of wealth, or potential wealth, away from the Fund’s retail investors due to the alleged breaches of fiduciary duty and investment policy. The investors bore the brunt of the increased risk from over-concentration and the subsequent financial losses from the poorly timed sales, while the investment adviser collected fees on those very improperly managed assets.

The legal document does not detail broader economic consequences like regional destabilization or layoffs, as the scope of the alleged harm is primarily contained within the Fund’s investor base. However, for the individual retail investors involved, the economic fallout was tangible, diminishing their savings and undermining trust in the mechanisms designed to protect their investments. This is a clear example of how corporate misconduct in the financial sector can directly impact the financial well-being of ordinary people, diminishing consumer protection in practice.

The PR Machine: Corporate Spin Tactics

While the legal document provided by the SEC primarily focuses on the alleged violations of securities laws and breaches of fiduciary duty, it also contains instances that can be interpreted as corporate spin tactics or attempts to manage information in a way that downplays or obscures misconduct. These actions align with common strategies used by entities facing scrutiny, aiming to control the narrative and maintain an appearance of compliance or legitimacy, even when internal realities may differ.

One significant area involves the communication, or lack thereof, with the Upright Trust’s Board of Trustees and misrepresentations in public filings.

  • Misleading SEC Filings about the Concentration Policy: Chiueh is accused of preparing and approving for filing with the Commission two Statements of Additional Information (SAIs) for the Fund (June 2022 SAI and January 2023 SAI) that falsely stated the Fund had a Concentration Policy limit of 50%, when the actual, fundamental policy limit was 25% and had not been changed by a shareholder vote. This act of filing official documents with incorrect information can be seen as an attempt to legitimize the Fund’s actual (over-concentrated) investment practices by presenting a different, more permissive policy to the public and regulators. It’s a form of information control that misleads investors about the true rules governing their investments.  
  • Misleading SEC Filings about Board Oversight: In the January 2023 SAI, Chiueh stated that the Board, during its May 26, 2022 meeting to approve Upright’s advisory contract, “was supplied with supporting information from [Upright] in advance of the meeting,” discussed “the nature, quality and extent of services,” a “Comparison with Other Contracts,” the “Cost of Services and Profits to be realized by [Upright],” and “economies of scale”. The SEC alleges these statements were false, as Chiueh did not provide such comprehensive information to the Board beyond fund performance data. This paints a picture of diligent oversight to investors and regulators that was allegedly not occurring, a classic spin tactic to project an image of robust governance.  
  • Controlling Information Flow to the Board:
    • Chiueh did not share the SEC’s 2019 Deficiency Letter (which detailed significant compliance issues, including concentration violations) with the Board, despite the SEC staff’s request for information on any Board review undertaken in response.  
    • The 2021 Order (the SEC’s settlement for prior violations) was not provided to the Board until September 13, 2022, just hours before a Board meeting, despite an earlier Board meeting in May 2022. Delaying or withholding critical negative information from oversight bodies is a way to manage perception and potentially avoid difficult questions or challenges.  
    • When Chiueh finally provided the 2021 Order and the Independent Compliance Consultant’s (ICC) Preliminary Report to the Board, he allegedly misled them. He stated that the violation of the 25% Concentration Policy limit had been resolved four years prior (which it hadn’t) and that the ICC’s findings about the ongoing violations were mistaken because of a supposed shareholder vote in 2018 to change the policy (which also hadn’t occurred for that purpose). This is a direct attempt to spin negative findings and portray the situation as less severe or already resolved.  
  • Manipulating Industry Classifications: The defendants classified “Company A” (a major holding) as “IC Design,” a classification not used by Yahoo Finance, which Chiueh later claimed was the Fund’s official source. Earlier, they had classified Company A within the semiconductor industry. The ICC warned that such practices could enable “manipulation of classifications to meet concentration limits” and “cherry picking”. This inconsistent and potentially self-serving classification can be seen as a tactic to obscure the true extent of industry concentration and maintain a facade of compliance.  

These actions, taken together, suggest an effort to control information, mislead investors and the Board, and downplay the severity and persistence of the alleged misconduct. In the broader context of neoliberal capitalism, where corporate reputation is a valuable asset, such spin tactics are unfortunately not uncommon when entities face legal or regulatory challenges. The focus often shifts from addressing the root cause of the problem to managing public and stakeholder perception.

Corporate Accountability Fails the Public

The case of Upright Financial Corp. and David Yow Shang Chiueh, as presented in the SEC’s First Amended Complaint, depressingly illustrates how mechanisms of corporate accountability can fall short of protecting the public, specifically retail investors. The alleged repeat offenses, even after formal regulatory intervention, highlight a potential breakdown in the deterrence and enforcement aspects of the accountability framework.

The most glaring failure is the alleged continuation of the fraudulent scheme after the November 2021 SEC Order. Defendants had consented to this order, which found they had violated the Fund’s Concentration Policy and other securities laws, and they agreed to cease and desist from future violations. Yet, the SEC now alleges that “despite Defendants’ promise… they continued their fraud unabated”. They proceeded to violate the same Concentration Policy by over-concentrating in a single company and then a single industry for nearly two more years, leading to approximately $1.6 million in additional investor losses. This suggests that the initial accountability measure—a settled order without admission or denial of findings, coupled with a cease-and-desist agreement—was insufficient to compel genuine, lasting compliance.  

Furthermore, the undertakings required by the 2021 Order, such as retaining an Independent Compliance Consultant (ICC) and implementing their recommendations, also appear to have been inadequately fulfilled. While an ICC was retained and did identify ongoing issues and make recommendations for correction, the complaint details how these recommendations were not fully adopted or were disputed by Upright. Crucially, Upright failed to certify its compliance with the undertakings by the agreed-upon deadline (May 2, 2023) and, as of the filing of the current complaint, had still not done so. This failure to follow through on mandated corrective actions points to a significant gap in the enforcement of the settlement terms.  

The lack of immediate, severe consequences for the initial violations may have contributed to this perceived failure of accountability. While the 2021 Order involved a cease-and-desist and censure, the current complaint seeks more substantial remedies, including permanent injunctions, disgorgement of ill-gotten gains (approximately $100,000 in advisory fees from over-concentrated assets plus interest), and civil money penalties. The necessity of a second major enforcement action for largely the same conduct raises questions about the efficacy of the initial penalties in deterring a determined or reckless actor.  

The role of the Board of Trustees, which is meant to be a key internal accountability mechanism, was also allegedly compromised. Defendants are accused of failing to provide the Board with necessary information to evaluate Upright’s advisory contract and even misleading them about past securities law violations and the 2021 Order. If the Board itself is kept in the dark or misled, its ability to hold the investment adviser accountable is severely hampered. The allegation that an auditor was hired without the required majority vote of independent directors further undermines the Board’s oversight role.  

This case reflects a broader concern within systems influenced by neoliberal capitalism: that corporate entities, particularly smaller ones, might view penalties or settlements as a “cost of doing business” rather than a fundamental impetus for reform, especially if executive liability is not a strong or immediate threat. The focus of the current complaint is on the corporate entity (Upright) and its principal (Chiueh), but the broader question of ensuring that regulatory actions lead to real changes in behavior and protect the investing public remains critical. When accountability measures don’t prevent recidivism, public trust in the integrity of financial markets and regulatory bodies is eroded.

Pathways for Reform & Consumer Advocacy

The alleged repeat misconduct by Upright Financial Corp. and David Yow Shang Chiueh, despite prior SEC intervention, underscores the need for stronger mechanisms to prevent such harm to investors. While the SEC’s current action seeks penalties and injunctions, broader reforms could help fortify the system against similar abuses. This situation also highlights the importance of robust consumer advocacy in the financial sector.  

Drawing from the patterns of failure suggested by the legal document, plausible pathways for reform include:

  1. Strengthened Regulatory Enforcement and Penalties for Recidivism:
    • Increased Penalties for Repeat Offenders: The fact that Upright and Chiueh allegedly continued their misconduct after the 2021 SEC Order suggests that the initial repercussions were not a sufficient deterrent. Stiffer, escalating penalties, including higher monetary fines and longer or permanent industry bars for individuals involved in repeat violations, could be more effective. The current complaint seeks permanent injunctions, which is a step in this direction.  
    • Mandatory Admission of Wrongdoing in Certain Cases: While many settlements involve no admission or denial of findings, for repeat offenses or particularly egregious conduct, requiring an admission of wrongdoing could have a greater deterrent effect and provide a clearer record for future actions or investor claims.  
    • More Robust Oversight of Undertakings: The alleged failure of Upright to fully implement the ICC’s recommendations and to certify compliance with the 2021 Order’s undertakings points to a need for more active and stringent monitoring by regulatory bodies of compliance with settlement terms. This could include shorter check-in periods, independent verification of implemented changes, and swift penalties for non-compliance with undertakings.  
  2. Enhanced Corporate Governance and Board Accountability:
    • Empowering Independent Directors: The allegations that the Board was not provided with adequate information and was misled by Chiueh highlight vulnerabilities in board oversight. Reforms could focus on ensuring independent directors have direct access to compliance information, independent legal counsel if needed, and clearer mandates and protections to challenge management effectively. The failure to secure a proper board vote for the auditor selection is another critical governance lapse.  
    • Transparency in Adviser-Board Communications: Regulations could require more standardized and verifiable reporting from investment advisers to fund boards, particularly concerning compliance matters, regulatory communications (like the 2019 Deficiency Letter ), and the details supporting contract renewals.  
  3. Increased Transparency for Investors:
    • Clearer Disclosure of Regulatory History: While information is publicly available, making an adviser’s or fund’s history of regulatory sanctions more prominent and easily understandable in investor materials could help consumers make more informed decisions.
    • Standardized Reporting of Concentration Risks: The alleged manipulation of industry classifications suggests a need for more standardized and verifiable methods of reporting fund concentrations to prevent “cherry picking” and ensure investors accurately understand the risks.  
  4. Whistleblower Protections and Incentives:
    • While not explicitly detailed as a factor in this case, generally strengthening whistleblower programs can help bring misconduct to light earlier. Ensuring robust protections against retaliation and offering meaningful financial incentives can encourage individuals with knowledge of wrongdoing to come forward.
  5. Role of Consumer Advocacy Groups:
    • Investor Education: Advocacy groups can play a crucial role in educating retail investors about how to scrutinize fund documents, understand investment policies like concentration limits, and identify red flags in adviser conduct.
    • Policy Advocacy: Such groups can lobby for stronger investor protection laws and regulations, using cases like this to illustrate systemic weaknesses.
    • Support for Aggrieved Investors: While this SEC action aims to recover some losses, consumer groups can also guide investors on potential avenues for private litigation or arbitration where appropriate.  

The system of neoliberal capitalism sometimes creates pressures for profit that can override ethical duties. Therefore, regulatory frameworks and consumer advocacy must be particularly vigilant and robust to counteract these pressures and ensure that fiduciaries like Upright and Chiueh are held truly accountable, not just by the letter of a settlement, but by a fundamental shift in behavior that prioritizes investor protection.

Legal Minimalism: Doing Just Enough to Stay Plausibly Legal

The conduct of Upright Financial Corp. and David Yow Shang Chiueh, as outlined in the SEC complaint, offers a compelling illustration of what can be termed “legal minimalism.” This is a behavior pattern often observed in entities operating within neoliberal capitalist systems, where the focus shifts from adhering to the spirit and intent of laws and regulations to merely navigating their technical requirements—or appearing to do so—often pushing boundaries to the limit. Compliance becomes less a moral or ethical baseline and more a calculated risk management exercise, or even a branding effort.

A key instance is the defendants’ approach to the Fund’s Concentration Policy. After being sanctioned in the 2021 Order for violating the 25% industry concentration limit, their subsequent actions don’t suggest a wholehearted embrace of this fundamental policy. Instead, they allegedly continued to violate it, first by over-concentrating in a single company (Company A) and then in the semiconductor industry as a whole. This wasn’t just a minor, accidental breach; the over-concentration in Company A was significant and prolonged.  

Their handling of industry classifications further hints at this minimalist, if not evasive, approach. The Independent Compliance Consultant (ICC) specifically warned against using multiple classification providers to “cherry pick” classifications to stay in compliance or increase exposure to a security. Yet, Chiueh, after stating the Fund used Yahoo Finance as its source, had allegedly used a different, non-Yahoo Finance classification (“IC Design”) for Company A during the period of over-concentration. This suggests an attempt to find a technical justification, however flimsy, for their investment decisions, rather than genuinely adhering to the principle of diversification that the Concentration Policy embodies. The SEC alleges that using Yahoo Finance consistently would have shown the Fund exceeding the 25% semiconductor industry limit until at least June 23, 2024.  

Another example is Chiueh’s alleged misrepresentation in SEC filings (the June 2022 and January 2023 SAIs) that the Fund’s Concentration Policy limit was 50%, when the actual fundamental policy, unchanged by shareholder vote, remained 25%. This wasn’t an attempt to change the policy through proper channels (which would require a shareholder vote ), but rather an attempt to portray the policy differently in official documents. It’s a move that complies with the form of filing an SAI, but fundamentally misrepresents the substance of the Fund’s governing rules.  

The interactions with the Board of Trustees regarding the advisory contract renewal also fit this pattern. Investment Company Act Section 15(c) requires the investment adviser to furnish information reasonably necessary for the board to evaluate the contract terms. Chiueh allegedly provided minimal information (fund performance) while falsely stating in an SAI that a comprehensive list of factors (akin to the Gartenberg factors, which guide such evaluations) had been discussed and considered by the Board. This meets the superficial requirement of holding a meeting and getting an approval, but not the substantive requirement of an informed evaluation based on complete information.  

Even the engagement with the ICC, mandated by the 2021 Order, appears to have been met with a minimalist approach. Upright allegedly disputed recommendations and failed to certify compliance with the undertakings. They went through the motion of hiring the ICC but didn’t fully embrace the corrective process.  

In late-stage capitalism, the complexity of regulations can sometimes be exploited by those who are adept at finding loopholes or satisfying technicalities without fulfilling the underlying protective intent. The alleged actions here—delaying compliance, using debatable classifications, misrepresenting information in filings, and providing incomplete information to the Board—all point to a strategy of doing just enough to create an appearance of engagement or partial compliance, while fundamentally continuing practices that benefited the adviser at the potential expense and risk of the Fund’s investors. This is the dangerous edge of legal minimalism, where the law is seen not as a guide to fair practice, but as a set of obstacles to be navigated with minimal actual concession.

How Capitalism Exploits Delay: The Strategic Use of Time

The case against Upright Financial Corp. and David Yow Shang Chiueh provides a clear example of how delay—whether through slow compliance, deferred action, or procedural holdups—can be strategically, if not intentionally, beneficial for entities engaged in misconduct within capitalist systems, often to the detriment of investors or the public.

The most significant instance of delay highlighted in the SEC complaint is the defendants’ prolonged failure to bring the Upright Growth Fund’s portfolio into compliance with its 25% Concentration Policy after the November 2021 SEC Order. The Order found they had violated this policy between July 2017 and June 2020. Despite agreeing to cease and desist, they allegedly continued to over-concentrate the Fund, primarily in “Company A,” until they began significant sales only in June 2023, nearly 19 months after the 2021 Order.  

This delay had several consequences that could be viewed as beneficial to Upright, at least in the short term, while harming the Fund:

  1. Continued Advisory Fee Generation on Non-Compliant Assets: For the entire period the Fund remained over-concentrated in violation of its policy, Upright continued to collect advisory fees based on the total assets under management. The SEC specifically notes that Upright charged approximately $100,169 in advisory fees on assets that exceeded the 25% Concentration Policy limit during the Relevant Period. Every day, week, or month that compliance was delayed was another period during which these fees accrued.  
  2. Avoidance of Immediate Realization of Losses (at a Potentially Better Price): While ultimately the delayed sale of Company A stock resulted in greater losses for the Fund (approximately $1.6 million more than if sales had begun promptly after the 2021 Order ), delaying the sales also meant deferring the realization of any loss. In some corporate contexts, particularly if managers hope for a market rebound or are reluctant to admit a poor investment choice, delay can be a way to avoid immediate negative performance figures. In this specific case, however, the market for Company A moved against them significantly during the delay.  
  3. Time to Potentially Obscure or Justify Non-Compliance: The delay provided time for other actions, such as Chiueh allegedly misstating the concentration policy as 50% in SEC filings in June 2022 and January 2023. This attempt to retroactively present a more permissive policy could be seen as an effort made possible by the passage of time and continued non-compliance.  

The failure to adhere to the undertakings of the 2021 Order also demonstrates strategic use of time. Upright was required to retain an Independent Compliance Consultant (ICC), adopt recommendations, and certify compliance.  

  • The ICC’s Preliminary Report in June 2022 pointed out the ongoing concentration and recommended corrective action.  
  • Upright responded in July 2022, stating an intent to engage counsel to determine steps, and in August 2022 proposed engaging counsel by November 2022 to conduct a proxy vote —actions that further extended the timeline rather than immediate portfolio adjustment.  
  • The deadline to complete undertakings was extended to May 2, 2023, and even then, Upright allegedly failed to certify compliance, and had still not done so by the time of the current complaint (April 2025, based on document filing date). This prolonged period of non-certification represents a significant delay in fulfilling regulatory requirements.  

In broader capitalist systems, corporations can sometimes benefit from the slow pace of regulatory enforcement or legal proceedings. Appeals, procedural hurdles, or simply the time it takes for understaffed regulators to build a new case can allow harmful practices to continue, generating profits in the interim. While the SEC did act with a Deficiency Letter in 2019 and an Order in 2021, the alleged continuation of the core misconduct for nearly two more years demonstrates how the “time value” of non-compliance can be exploited, effectively diminishing the immediate impact of regulatory sanctions and prolonging the period of improper benefit.  

The Language of Legitimacy: How Courts Frame Harm

While the provided SEC complaint is an accusatory document initiating legal proceedings rather than a court judgment, the language used within it—and the language it anticipates would be scrutinized in court—offers insight into how potentially severe harms are framed within a legal and regulatory context. Neoliberal systems often rely on precise, sometimes technocratic or seemingly neutral language, which can, at times, appear to downplay the human impact or ethical severity of corporate misconduct.

In this complaint, the SEC uses strong terms like “fraudulent scheme,” “breached their fiduciary duties,” “lied,” and “continued their fraud unabated”. This is direct and not inherently neutralizing. However, the core of the violations often revolves around deviations from highly specific rules and policies, which, while legally critical, can sound technical to a layperson.  

Consider the central “Concentration Policy” violation: investing “more than 25% of its total assets in one industry”. Legally, this is a fundamental breach. The harm is quantified in financial losses—approximately $1.6 million directly from delayed sales, and $100,169 in improperly earned advisory fees. These are significant sums, but the legal framing focuses on the deviation from policy and the quantifiable financial impact.  

Where the language of legitimacy might subtly operate is in how such rule-breaking is contextualized within the broader market. For instance, the discussion around the sale of Company A stock includes the assessment that “The Fund’s sales of Company A stock did not have a material impact on the price per share of Company A on these 17 trading days” and “It is reasonable to assume that Defendants selling Company A stock at the Average Rate would have no price impact in November 2021 since it had no price impact when Defendants sold Company A stock at the Average Rate between June 28, 2023, and September 29, 2023”. This language is important for establishing the reasonableness of the SEC’s calculation of avoidable losses. It’s factual and analytical. However, by focusing on “material impact” on share price (a common financial term), the discourse remains within a market-logic framework. The harm is real, but its description is couched in terms of market mechanics.  

The defendants’ own alleged attempts at linguistic framing are also illustrative. Chiueh’s alleged false statement in SEC filings that the Concentration Policy was 50% instead of 25% is an attempt to use the form of official disclosure to legitimize non-compliant behavior. Similarly, his alleged misrepresentations to the Board that the ICC’s findings were “mistaken” or that violations were “resolved” are efforts to reframe reality using language to diminish culpability.  

The complaint details violations of numerous specific sections of the Securities Act, Exchange Act, Advisers Act, and Investment Company Act, citing precise code sections like “15 U.S.C. § 77q(a)(1)”. This is essential for legal precision and due process. However, to the average American adult, this citation-heavy, statute-focused language, while legally necessary, can make the core issues of broken trust and investor harm seem abstract or removed from everyday understanding.  

In a courtroom setting, defense arguments often employ language to frame actions as “reasonable under the circumstances,” or argue that damages were “not materially significant” in the grand scheme of market movements, or that actions were mere “technical violations” without broader fraudulent intent. While this SEC complaint argues strongly against such interpretations, it operates within a legal system where the framing and interpretation of “harm” are subject to these linguistic and conceptual negotiations. Neoliberal systems often favor such technocratic and legalistic framing because it can move the discussion away from simpler ethical questions (like “Was this right or wrong?”) towards more complex, and arguable, legal interpretations, potentially obscuring the severity of ethical breaches for those outside the specialized discourse.

This Is the System Working as Intended

The case of Upright Financial Corp. and David Yow Shang Chiueh, while detailing clear allegations of rule-breaking and fraud, can also be viewed through a more critical lens: as an example not of a system failing, but of a system producing predictable outcomes when profit incentives are structurally prioritized over investor protection and ethical conduct. From this perspective, the alleged misconduct isn’t an aberration but rather a reflection of pressures and opportunities inherent in aspects of neoliberal capitalism.

Consider the core issue: the alleged persistent violation of the Fund’s 25% Concentration Policy, even after SEC sanctions. Why would an investment adviser allegedly take such risks?  

  • Profit Maximization Incentive: Advisory fees are typically based on assets under management. By keeping the Fund heavily concentrated, potentially in assets they believed (perhaps wrongly, as it turned out with Company A’s price decline ) might perform well or were simpler to manage, Upright ensured a certain level of assets. The SEC explicitly states Upright collected approximately $100,169 in advisory fees on assets exceeding the 25% limit. In a system where the primary success metric for an advisory firm is often growth in AUM and revenue, the temptation to bend rules that might constrain these metrics can be strong. The system rewards asset growth.  
  • Regulatory Cost-Benefit Analysis (Implicit or Explicit): While the SEC did act, the initial 2021 Order involved a settlement without admission of wrongdoing and undertakings that were allegedly not fully met. If penalties for initial infractions are perceived as manageable “costs of doing business,” and the potential profits from non-compliance are higher, some actors might make a rational (from a purely financial standpoint) decision to continue the misconduct. The system of fines and settlements, if not severe enough or if lacking individual accountability for key decision-makers, may not fundamentally alter behavior. It can become part of the operational calculation.  
  • Weaknesses in Oversight Mechanisms: The alleged ability of Chiueh to mislead the Board of Trustees, operate without their fully informed consent on critical matters like the advisory contract renewal, and even hire an auditor without a proper Board vote, points to vulnerabilities in internal governance. In many corporate structures, especially smaller ones where an individual like Chiueh holds multiple key roles (CEO, portfolio manager, Board chairman, CCO at times ), true independent oversight can be challenging. The system allows for such concentration of power, which can then be exploited.  
  • Information Asymmetry: The investment adviser inherently has more information than retail investors and often more than the part-time independent directors of a mutual fund board. This asymmetry can be exploited, as alleged in this case through misleading filings and incomplete disclosures. A system that relies heavily on disclosure assumes that all parties can and will act effectively on that disclosure, which is not always the case.  

The SEC’s pursuit of this case is an example of the system attempting to correct egregious behavior. However, the fact that the behavior was allegedly repeated after initial sanctions suggests that the underlying incentive structures and power dynamics that enabled the initial misconduct remained largely unchanged. The pursuit of profit is the engine of capitalism; when regulations and enforcement are not sufficiently robust or swift, or when the personal consequences for decision-makers are not severe enough, outcomes like those alleged against Upright are not surprising. They are, in a sense, a feature, not a bug, of a system where the drive for financial gain can sometimes outweigh fiduciary responsibility, unless very strong guardrails and consequences are consistently applied. This case serves as a microcosm of how that prioritization can manifest, leading to harm for those the system is purportedly designed to protect.

Conclusion

The legal battle waged by the Securities and Exchange Commission against Upright Financial Corp. and its principal, David Yow Shang Chiueh, paints a disturbing picture of alleged deception and disregard for fundamental investor protections. At its heart, this case is about more than just violations of arcane financial regulations; it’s about the tangible human and societal cost that ensues when those entrusted with managing other people’s money purportedly prioritize their own enrichment and convenience over their fiduciary duties. Retail investors, the “average American adults” seeking to build a secure future through mutual fund investments, were allegedly exposed to heightened risks and suffered concrete financial losses, amounting to approximately $1.6 million from ill-timed asset sales alone, all while the adviser purportedly collected fees on improperly managed assets.  

This legal saga is not an isolated incident but rather a clear illustration of deeper, systemic failures in how modern economies often protect corporate interests, sometimes at the expense of community and individual well-being. The alleged brazen continuation of misconduct even after a formal SEC settlement speaks volumes about the perceived weaknesses in enforcement and the audacity of those who might view regulatory actions as mere obstacles to be navigated rather than fundamental calls for reform. The alleged manipulation of investment policies, the sidelining of board oversight, and the misleading of investors are symptomatic of a financial culture where the pursuit of profit can eclipse ethical obligations. This case forces us to confront uncomfortable questions about the adequacy of current safeguards and the true cost of corporate accountability when it fails to genuinely deter wrongdoing, leaving ordinary investors to foot the bill.  

Frivolous or Serious Lawsuit?

The lawsuit initiated by the Securities and Exchange Commission against David Yow Shang Chiueh and Upright Financial Corp. appears to be a serious and substantial legal action, firmly grounded in detailed allegations of repeated violations of federal securities laws and breaches of fiduciary duty. The harm alleged is well-documented within the complaint, reflecting a meaningful legal grievance rather than a frivolous claim.

Several factors underscore the seriousness of this lawsuit:

  1. Specific, Quantifiable Harm: The complaint meticulously details financial losses to the Upright Growth Fund and its investors, estimated at approximately $1.6 million due to the delayed selling of over-concentrated assets, and identifies around $100,000 in advisory fees allegedly collected by Upright on these improperly managed assets. This isn’t vague or speculative harm; it’s presented with concrete figures and calculations.  
  2. Pattern of Repeated Misconduct: A core element of the SEC’s case is the allegation that the defendants continued their fraudulent conduct after a prior SEC order in November 2021 that addressed similar violations. Recidivism is a significant factor that regulators and courts typically view with severity.  
  3. Violation of Fundamental Policies: The alleged primary breach involves the Fund’s Concentration Policy (not investing more than 25% of assets in one industry), which is described as a “fundamental policy” established in the Fund’s registration statement since its inception and unchangeable without shareholder vote. Violating such a core, disclosed rule is a serious matter in investment management.  
  4. Multiple Alleged Violations of Law: The complaint lists numerous alleged violations across several key securities statutes, including the Securities Act, the Exchange Act, the Advisers Act, and the Investment Company Act. This indicates a broad range of alleged non-compliance.  
  5. Allegations of Deception and Obstruction: The claims include that Chiueh lied in public filings with the SEC, withheld crucial information from the Fund’s Board of Trustees, and misled the Board regarding the nature of the violations and compliance efforts. These allegations point towards an intent to deceive and obstruct proper oversight.  
  6. Failure to Adhere to Prior Order’s Undertakings: The complaint states that Upright failed to certify its compliance with the undertakings from the 2021 Order, including implementing recommendations from an Independent Compliance Consultant. This disregard for the terms of a previous settlement is a serious concern.  

Given these detailed allegations, backed by specific timelines, financial figures, and references to prior regulatory actions and communications (such as the 2019 Deficiency Letter and the ICC reports ), the lawsuit reflects a significant regulatory enforcement action aimed at addressing substantial alleged corporate misconduct and protecting investors. It is far from frivolous and highlights meaningful legal grievances concerning corporate accountability and adherence to securities laws. Even in a system where legal standards allow for challenges to systemic imbalances, the depth and nature of the claims here suggest a substantive case warranting thorough legal scrutiny.  

SEC vs UPRIGHT FINANCIAL CORPDownload

The SEC has a press release about this scandal: https://www.sec.gov/newsroom/press-releases/2025-55

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