Hsu was able to gain the trust of investors by his dress, by his warm and personable manner, by his educational credentials, by being quoted in trade magazines, and by the long list of business under his name, but had a record of changing addresses and leaving disappointed investors behind. Starting in 1989, Hsu raised $1 million from investors to launch a latex glove business. Some of these partners invested their life savings or mortgaged their homes, and some sued Hsu when it appeared their money was lost. In 1990, Hsu, then living in Foster City, California, declared a bankruptcy, stating that he was practically destitute, with no job, no income, and few possessions other than an SUV and a ring. That same year, he was also divorced as well as allegedly kidnapped by San Francisco Triad society gang leader Raymond Kwok Chow. In 1991, California authorities brought fraud charges against him, describing his operation as a Ponzi scheme. Specifically, authorities claimed Hsu had not engaged in any legitimate business activity, but instead was using funds from later investors to pay returns to earlier ones. In February 1992 Hsu plead no contest to one count of grand theft and agreed to serve up to three years in prison and pay a $10,000 fine. Hsu subsequently failed to appear at the sentencing hearing and a warrant was issued for his arrest.
Hsu fled to Hong Kong and lived there from 1992 to 1996 while working in the garment industry. He started at least two companies there, both with vague charters. Aided by what others described as a magnetic personality, he prospered for a while, living in a luxury building. However the companies were dissolved in 1997 and 1998, and by 1998 Hong Kong courts had declared Hsu once again bankrupt. He would not emerge from this Hong Kong bankruptcy until 2006.