Dreams of Immigrant Investors Collapse : Crime: $1.7-million commodities scheme that promised easy wealth is under federal investigation.

Chinese immigrants who allegedly were bilked out of their life savings in an illegal Pasadena commodities pool said Wednesday they were skeptical when David Tsao, the operator of the pool, promised them instant cash.

But the investors, many of whom had come to the San Gabriel Valley from China in the last few years, believed that taking a risk in order to make big bucks was a part of the American dream.

About 100 of them pumped $1.7 million into Tsao’s East Ocean International Inc. in February and March, hoping that playing the commodities market would enable them to fulfill dreams of living a comfortable life, buying cars and homes and maybe starting their own businesses.

But their hopes were dashed on March 18, when U.S. authorities discovered that East Ocean--headquartered in San Francisco, with its only Southern California office in Pasadena--had no commodities trading license and froze the company’s and Tsao’s assets.

Tsao, 42, of Belvedere in the Bay Area, was running a classic Ponzi scheme, in which money from new investors is used to pay off previous ones, said Richard Symonds, regional counsel for the Commodity Futures Trading Commission. Such an arrangement usually collapses without a constant stream of new investors.

Tsao could not be reached for comment Wednesday.

Such schemes are being used increasingly to prey on immigrant communities, where residents may be more vulnerable to promises of instant wealth, Symonds said.

Tsao is being investigated by the FBI and the San Francisco district attorney’s office, Symonds said. Neither office could be reached for comment Wednesday.

In 1989, Tsao was indicted in Taiwan for defrauding investors in a similar operation, said Bruce Linhu, a spokesman for the Coordination Council for North American Affairs in Los Angeles, Taiwan’s de facto consulate.

Many investors also were promised jobs in the company, but were told they had to invest at least $10,000 in order to stay employed. One such investor-employee was Zhang Wen Wei, who quit a minimum-wage job in Riverside to work for Tsao.

Tsao “described himself as a hen that lays gold eggs every day,� said Zhang, 34, who gave Tsao $17,500 he had saved from waiting tables in Chinese restaurants and other jobs. “Everybody wants to be rich. I wanted to make more money by easy means.�

Symonds said Tsao deposited the bulk of the investment money in his personal bank accounts. In addition to raising $1.7 million in Southern California, Tsao collected an unspecified amount from East Ocean investors in San Francisco. A federal judge will appoint a trustee to manage Tsao’s assets, which total between $2 million and $2.5 million, Symonds said.

At a press conference Wednesday, about 30 angry and disillusioned investors said they feared they would recoup little, if any, of the thousands of dollars they had saved since arriving in this country.

“I am stupid, very stupid,� said Holly Chen, 32, who gave Tsao $50,000--her savings from seven years of secretarial work, baby-sitting and other jobs in the United States. “It’s not very easy to get this money. I lived a very basic life.�