This is a tale of unexplained millions from China, questionable lending practices, all-cash purchases of homes in the Greater Toronto Area, possible mortgage fraud, and many outings to the local casino. The allegations are outrageous, and, if proven, are an indictment of the integrity of our financial system.
A Quick Primer On Civil Litigation
Before we dive in, for those not familiar with the Ontario legal system, here is a brief rundown: in the world of civil litigation, the vast majority of disputes do not see the inside of a courtroom. When a claim is filed there is a process called “discovery” whereby the parties are examined under oath, documents are continuously exchanged, and expert reports are exchanged. The point of this process is to ensure that each side has a decent understanding of the strengths and weaknesses of their position and their opponent’s. The idea is to prevent any surprises should the matter reach the inside of a courtroom. In most situations, a settlement is usually reached once everyone’s cards are placed out on the table.
Litigation is expensive in Ontario and the losing side is often responsible for paying a portion of the winner’s legal fees, in addition to their own. Thus, one needs to think very carefully of the prospects of success before pushing a matter forward. Furthermore, judges and juries can sometimes make findings one may not expect. Litigation is expensive and risky.
If the parties are unable to agree, the matter will make its way through the court system and all decisions, intermediate steps and the final decision, will be made a public record. If there are some unsavoury facts or “dirty laundry” so to speak, the whole world will become aware of them. This case is one of them.
The Curious Case of Wang v. Kesarwani
The story begins in 2010 when Ms. Wang and her then husband Mr. Zhang immigrated to Canada from China under the immigrant investor program. Upon arrival, they founded the Yi Hao Investment Company (“YH Investments”) which supposedly was involved in development projects. They arrived with at least six million dollars. How this large sum of money was obtained and how it was brought into Canada is an open question that the court could not answer. The court was further unable to figure out how they sustained themselves in Canada, where neither of them had any employment or businesses, apart from Mr. Zhang’s gambling habit and YH-Investments land development projects.
Ms. Wang and her corporation, YH Investments, brought a claim against several individuals alleging they conspired to commit three mortgage frauds and further claimed that her former lawyer was negligent. It must be stressed, however, that this decision only addressed some procedural steps and did not rule on the merits of the case; however, the court was gracious enough to provide us with an eye-opening factual background.
The details of the transactions are dizzying, baffling and downright outrageous. The court reviewed the affidavit and cross-examination evidence of 16 witnesses. There were too many inconsistencies in the witnesses’ evidence to count, and some witnesses had alternative versions of their own accounts. There were countless attacks on the credibility, reliability and honesty of the witnesses. In the words of the court, “large portions of the evidence have the quality of pulp fiction”. In layperson’s terms, it was an utter s***show.
Here’s The Short Story
In the interest of brevity, here is a synopsis of what may have transpired:
In 2011, the Wang-Zhang family purchased a house in Richmond Hill for $1,225,000 in cash with no financing. They separated shortly thereafter but remained business partners.
In 2011, YH Investments purchased a property in Richmond Hill for $900,000 in cash with no financing. The property was split into two lots and new homes were constructed on each lot. Again, there was no explanation as to how this development was paid for.
Also, in 2011, YH Investments purchased another property in Richmond Hill for $1,050,000 in cash with no financing. The existing bungalow was demolished and a new two story was built. Again, there was no explanation as to how this development was paid for.
In 2012, Ms. Wang and Mr. Zhang purchased a home in Thornhill for $3,500,000 with $1,200,000 down payment and a $2,300,000 mortgage with the Bank of Montreal. Keep in mind that neither were employed at the time.
In 2015, a $900,000 mortgage was arranged for one of the Richmond Hill properties owned by YH Investments. In order to obtain this mortgage from CIBC, Mr. Zhang’s ownership in YH Investment was transferred to another party, Ms. Ding, who is a real-estate agent. CIBC paid the monies to Ms. Ding and she subsequently forwarded it to Mr. Zhang. The court described this as a “very suspicious transaction” (the word “suspicious” appeared multiple times in this case).
In 2016, Ms. Ding acted as the real-estate agent in the sale of one of YH Investments’ Richmond Hill properties. The property was sold for $1.8 million and YH Investments took a third mortgage in the amount of $270,000. After closing, this third mortgage was written off and discharged. In the words of the court: “One malign interpretation of the facts is that Mr. Zhang, aided by Ms. Ding, who would have been interested in earning a commission on the sale, conspired with the purchaser to pull off an ‘Oklahoma’ in which the purchase price is overstated to obtain financing for the transaction.” In other words, possible mortgage fraud.
In 2017, Ms. Wang purchased a home in Vaughan for $2.6 million. She then mortgaged the property for $2.6 million to Royal Bank. For those who do not have a calculator handy, the loan to value is 100%.
There were further convoluted real-estate deals, suspicious mortgage transactions and side deals that one could only shake their head at in disbelief. There were further allegations of theft, forged signatures and fraud.
There are allegations that one of the real-estate lawyers involved in the transactions was professionally negligent, improperly handled mortgage transactions, and breached his fiduciary duty.
Throughout all of this, Mr. Zhang was a high stakes gambler who lost hundreds of thousands, if not millions of dollars. There are allegations of a visit to an illegal casino; meetings with loan sharks; and other seedy conduct. However, we need not delve further into this aspect of the story.
The Defendants alleged that Mr. Zhang was a criminal who somehow got his money out of China and became a money launderer in Canada. The court did not make finding on this point but stated: “it is unknown how Ms. Wang and Mr. Zhang acquired their considerable wealth or how they got it out of China for investments in Canada.”
Keeping an open mind, perhaps this was all one big misunderstanding and the millions that originated from China were legally obtained and legally transferred into Canada by Ms. Wang and Mr. Zhang. During Ms. Wang’s cross examination, she was asked questions about the source of her wealth and her business dealings in China. Ms. Wang’s lawyer instructed her not to answer any of these questions.
Case Raises Uncomfortable Questions About Canadian Real Estate
Reading this decision, it is fair to infer that the court was bewildered and uncomfortable with the allegations, conduct and transactions that were before it. In a sense, the court was asking one rhetorical question: how on earth did all this take place without any government body, financial institution, real-estate agent or real-estate lawyer throwing a penalty flag?
This case raises many uncomfortable questions. How could all this activity take place without any intervention by our financial regulatory bodies? Has the CRA conducted any investigation as to where all this “unexplained” money came from, and whether all taxes were paid throughout these various transactions? Were any money laundering red flags raised at the banks that facilitated these mortgages? How does someone without a job obtain a mortgage for $2,300,000? How does one obtain a mortgage at 100% loan-to-value from a federally regulated lender? But most importantly, has Canada become so complacent that we are willing to air our dirty laundry and questionable conduct in full view of the public without fear of any consequence?
I’ll let you draw your own conclusions.
Full 20-page court file: Wang v. Kesarwani.
Like this post? Like us on Facebook for the next one in your feed.
We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.
Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.
The bigger question is how the hell does $6 million get out of China, when capital controls are suppose to limit the export to US$50k per person? That would involve quite a bit of help from Canadian banks, unless they’re being secured with the assets still in China.
Xi was allowing capital flight similar to other regimes however the exercise failed and all he got nothing in return. Now that he has solidified his power he is bringing it back to pay for his expansion and end the embarrassment. It is all over.
We have seen the crackdown on business having to sell off oversea assets and bring the money back home. What do you think happens at the individual owner level? Does Xi and the party have the leverage over these people to force them to sell off overseas assets to bring money back or do you think the whole point of the money being here was to escape the wrath of the POC?
Blue, your continuous attempts to paint the Xi regime as corrupt, incompetent, and criminal often get quite ludicrous, downright humorous.
Xi is obviously running a government which is on substantially firmer moral and legal grounds than is the American Trump government.
I haven’t gotten the same impression from Blue’s words.
I read it as identifying what happened and how it is being stopped.
If I’m not mistaken, Xi ran an anti corruption platform?
Not to defend Trump, but can you please define what you mean by moral and legal grounds?
PRC moral and legal check list –
– Social credit score combined with facial recognition technology in muslim minority area of Xinjian – CHECK
– Coming soon to the rest of the country – CHECK
– Pre trial public confessions – CHECK
– Mass censoring – CHECK
– Allowed to rip off foreign investors – CHECK
– Debt trap diplomacy – CHECK but somewhat debatable
– Local governments cooking the books – CHECK though you can somewhat call Ontario out for this too
– Potential for Xi to rule for life – CHECK
– Discrimination against foreign companies – CHECK
I just found out Canada is immoral because we are considering blocking acquisitions by SOEs – Well at least according to a Chinese official anyway. So really confused what the standard is today.
I think Justin needs to take a nap. Lol…
I have never slighted Xi, I admire the long term planning and vision of the Chinese government. What I am stating is merely what is happening. MBS did it in Saud. Putin has done it. Get over yourself.
And about as narcissistic as Trump, if that is even possible.
JT, you’ve said some stupid things here, but you just topped them with that one. There has never been a communist dictatorship to stand on any sort of moral ground whatsoever. Such a thing does not exist.
@Justin Thyme – Hahaha China has firmer moral grounds than the Trump government?? Explain Sino Forest then. Chinese dudes start a Canadian shell company in Vancouver claiming they own X amount of timber…and then when people actually look at their cooked books, they realize, nope, no timber, all fudged numbers…whoops sorry investors! Classic pump-n-dump scheme. Classic China.
You can stop defending your corrupt China countrymen now. It just looks childish and sad. Accept the reality that they play by different imaginary rules and they’re sketchy. Heck, just the fact that Chinese shrimp producers individually inject their shrimp with some clear gelatinous ooze (which they claim is safe) just to increase the weight of their catch is beyond violation of any food health codes. Whenever I hear the word China, I raise one eyebrow, and so should you.
Furthermore, I once worked for a Chinese businesswoman who ran an entire business out of her house based on cash under the table. She was also an accountant. She obviously didn’t declare any income on her taxes. Ironic? Classic China.
And that’s not being racist. That’s making observations based on FACTS and ACTUAL EVENTS. The Canadian government is so scared to call them out on it because they would damage international relations because they love their illicit Chinese money in all the forms that it pads their bank accounts.
Having said that, while there is a lot of bad sh!t that comes out of China, there’s also a lot of good sh!t. However, that does not give China a free pass to do their corrupt activity at other’s expenses. Canadian Real Estate being one of them. The Chinese are covert operators. They’re passive aggressive. They do things on the down-low by learning the rules and then finding ways to bend or break those rules, undetected, without ruffling too many feathers. Like fudging timber numbers, injecting gelatinous goo into shrimp, laundering real estate money, building mysterious new islands in the South China Sea and declaring it their territory, or running a cash-only business from their basement without declaring income to Canada Revenue. Again, the good things that come out of China should not excuse the bad things. China needs to play by the same rules as everyone else. Race is not the issue. Cultural norms on corruption and ethics are.
Individual capital controls only apply to individuals. Chinese corporations are not under such stringent regulations. If they had a legitimate business back in China, or were linked to one, there are many options for bringing the money into a legitimate Canadian business. I do not read anything in this that indicates the money was from individuals, and not between corporations.
Honestly, I’m thinking the exact same thing. The RE purchases during the later years were probably refinanced due to the booming RE market. It’s the initial purchases that raises the big question and how exactly they got the $6M out of China. One possible solution may have been through cryptocurrencies, which were not well known at the time and transactions were possible.
This article is painful to read. Please leave the legalese to actual lawyers, journalists just sound stupid when they use the terms.
I thought I recognized the name. Joey Evans is Joey Guacamole, he *is* a lawyer.
Good Twitter account to follow as well.
I hope to see a lot more from Joey, he’s even better in long format.
While this case does bring up “uncomfortable” questions, it’s most likely unique. I find it hard to believe banks won’t led most people a dime, but are handing out 100% LTVs to other people on a regular basis.
Unique? This has been going on for years. The system is broken and corrupt and it’s the average citizen who fought to scrape enough money together to get into this inflated market that will be holding the bag when the bottom eventually falls out. Canada escaped the last crash, but they won’t escape the next one. The force of greed is so strong that people choose to ignore the signs.
Sammy, regular people don’t pay for loans under the table. I know of many people who have paid to mortgage brokers who worked with local branches in Scotia Bank, and TD to obtain mortgages that they should have never gotten based on their income. The typical fee ranges from $1000 – $5000 that gets shared between the broker and the mortgage underwriters and the branch managers.
“Canadian real estate is different because we have strict lending standards, and you can only get a mortgage with a steady income.”
I guess this proves that wrong. What other false statements does the industry want to throw at us?
Density. It’s density, maaaan. Incomes are a stupid way to measure housing. haha.
Thought this was an exaggeration, turns out they’re leaving out a lot of good stuff from the actual court file. Some gems.
“What’s the most you gave to him at any one time?”
“2.5 million, I think”
“paying $20,000 interest on his pawning of an expensive watch”
“the collateral security was provided for Ms. Wang’s niece. The truth of the matter is that Ms. Wang
and Ms. Al are not relatives, and Ms. Wang has no nieces.”
and my personal favorite:
“The above description of the factual background reveals that the Plaintiffs either have a strong prima facie case of being the victims of several frauds and forgeries or that the Defendants have a strong prima facie defence that the Plaintiffs are the victims of their own greed and or stupidity.”
Bubble bubble, toil and trouble.
Canada’s economy is all muddled
Fraud and deceit at the highest tier
There is no salvation, only fear
The cancer has spread, tick tock counts the clock
It’s our 2008, and the music has stopped.
There’s never any questions about lending practices when people are making money. It’s when the profits start to disappear, people start pointing fingers. I wonder how many questions about US banking practices were raised in 2006, when Americans couldn’t be richer.
It’s important to note that these allegations aren’t proven about the borrower, but the bank’s conduct is contrary to the prudential standards we hear are being enforced.
“When the tide goes out do you discover who has been swimming naked”
In the beginning the rumour was that the real estate was bought with cash. After reading this I guess it’s pretty apparent that they did use our banks to finance mortgage fraud. The question is which banks are at risk and how much are they into it for. See one, sure to be more hiding in the dark.
The question for me is when Thug Ford becomes our next inept Premier and scraps the foreign buyers tax what will happen in Ontario? Gasoline to a flame?
Foreign buyer tax doesn’t matter. Chinese outflow is now stopped, you can’t get this amount of money out. Now agents want people to think foreign buyers are coming, so locals scramble to buy new property.
If you’re trying to make money, you don’t buy at the top. People with money know that. People with mortgages don’t.
Yup. Just had a report the other day that foreign buying has falling from like 4.5% to 2.5% in the GTA since they started recording. Which was right after the tax was introduced. China taps are off.
What makes you think 2.5% is ‘taps off’? If 2.5% is accurate, it’s probably still a decent marginal demand level to keep the party flowing. Remember that it’s cumulative. Vancouver has been sold at 2-6%/year for the past 15 years. Since much of that is buy and hold, the offshore-owned stock percentage continues to climb. It takes very little marginal demand to keep the prices high.
If the offshore demand became offshore selling, even a few percentage points, then you would have a serious collapse, since local incomes cannot support the market in any way, shape or form.
Been barking this for months… Xi wants his capital back and it is going home at a rapid pace for fear of being locked up under false charges and losing everything. There is a lot of panic amongst the rich.
Xi wants the illegitimately obtained money back. Legitimate money leaving the country for legitimate reasons is still allowed.
China leveraged a lot of debt at low interest rates. That has led to a huge global buying binge, and made the country vulnerable in the event of a mass downturn. Xi’s fear is that China could end up like Japan after 1989. Mass amounts of debt, and heading into a recession. Xi, is forcing many Chinese companies to unwind debt, and pull back from overseas. That will pull a lot of liquidity out of the Canadian real estate market.
It may add some gasoline but remember – the higher prices go above fundamentals, the deeper they dive later.
Foreign investments can’t be considered as fundamentals therefore everything they added will be reversed at some point during the downturn.
Same applies to all improperly allocated funds from local population. By improper allocation I mean funds which were invested in Real Estate without proper risk planning (5% mortgage rate by 2021, ability to sustain at least 10% price correction over the next 5 years), or clear exist strategy defined.
People without jobs are able to secure million of dollars mortgage and people with good jobs have a hard time to pay their bills monthly… or hardly getting by. In what kind of a world are we living in nowadays ? Are we living in a con world ? Is the general population being dumped down about everything ? Cheap money or low interest money has practically distorted the economic systems. We are being con by the government, the financial institutions and everyone around us., making all of us think we spend our way to prosperity.
The saving grace is that it is unravelling. Personally I will be dedicating energies to contact every party at every level to make this a political issue… 2019 and maybe even late 2018 are going to suck for a lot of Canadians and it will take years to rebound.
Well, I suppose you DID have to ‘lift a finger’ to type your reply.
The articles in BD are getting worse. 1 example of criminals to malign foreign investment in RE. i don’t learn anything from this website. just another troll click-bait website. first and last comment i ever write here. good bye. i suggest you all find another place to get your information. this bd is RE porn for amateurs.
Why are you reading and commenting if its such a pile of garbage? Sounds like you’re in for a hard time once this “correction” heats up
Tip of the iceberg, my boy.
This is not your first comment here. It is merely your first comment under your current pseudonym. You have commented previously under the names Zhang, Ketchup Chips, Frank Diesel, and others. Speaking of trolls, showing up under multiple screen names to bash the website and dole out insults while making zero contributions to the discussion sounds pretty trollish to me.
The world has always worked this way. It’s not unique to our time and place. Anyone that has lots of liquid cash or lots of expensive assets can get almost anything they want from banks, when markets appear to be performing really well.
Who is Kesarwani, and exactly what is the claim?
Who is after how much for what?
It would seem that there should be a lot of counter-claims and ‘derived’ claims from mortgage brokers, real estate agents, the buyers. the sellers. banks, lawyers.
When does the Fifth Estate get involved?
Are there any ‘innocent victims’?
For those who follow my story about mortgages renewals for my friends I have an update for you.
Both of my friends decided to renew with major banks instead of HSBC.
– First one will stay with TD and he is now being approved for mortgage rate exception of 3.14% for a 5 years fixed.
– Second one will switch from RBC to Scotia which is also approving 3.14% for a 5 years fixed for him. RBC failed to provide a competitive rate and refused to make exceptions.
Since TD just recently made a major move in Prime Rate increase my friend renewal clarifies this decision a little bit and here are my thoughts:
TD is not trying to take advantage of existing clients who can’t switch to another banks due to B-20. As we can see they are providing extremely competitive rate to their EXISTING clients with great credit history.
Which other reasons left?
1) Fund costs rose due to bond yields growth, This is definitely a factor but it affects all financial institutions and not all of those increased their rates by that much or increase at all yet. BoC rate increases tied to bond market as well and also affect all financial institutions therefore it’s also covered here.
2) Second one (and my favorite) is risk factor. My bet is that TD sees how ugly housing market became and how many risks associated with it therefore they don’t want to touch new borrowers who are trying to enter that crazy market (except those pass extra qualification stress test and pay higher mortgage rate to compensate for the risk). This move will cost them a fortune of lost income but they still did it.
This is a truly major development. No bank would decide to loose money for no reason and TD is one of the most solid banks here so their decision just reinforced it. At the same time they are trying to keep their existing clients and offer them extremely compatible rates.
If I missed some other major reasons feel free to add those in comments.
If ‘YH Investments Company’ is a legitimate company, and Wang and Zang are principles, they do not need any external job to get a mortgage. There are a LOT of business owners who do not have ‘other jobs’ but still get a mortgage.
The mortgage extended on a property AFTER it is bought is based on the appraised value, not on the purchase price. There are many examples of properties bought for below-appraised value, and then the new owners apply for a mortgage based on the appraised value, which could easily be MORE than the purchase price.
The CRA would be involved with personal finances in this case only with respect to capital gains. If these were accounted for, CRA would be happy. ‘Foreign income’ and the CRA interest is, of course, why their lawyer would probably have advised them not to answer questions about it.
The amounts quoted herein are piddling compared to REAL money laundering amounts. It would take hundreds of millions to trigger serious allegations and flags.
This is certainly a curiosity, but it is really low level in the grand scheme of things. I am sure situations like this fall through the cracks all the time. Small-time con artists like these are actually quite numerous. Banks just feed them into random noise, a cost of doing business.
justin thyme is a chinese troll
Blue, is that you?
Yes, he is a Chinese troll. He likes to thump his pale little chest with his miniature hands from behind the safety of his computer screen. Trigger him easily with any mention of a verifiably corrupt China and he’ll pretend he’s got an army behind him LOL. What a sad little Millennial child. Go back to playing Fortnite and Battlefield and eating mommy’s chow mein.
its going to be great to see canadians bail out the banks with their hard earned money while these criminals cash out and go back to china with their millions
Quote from the article regarding Canadians debt and future outlook:
Frances Donald, senior economist at Manulife Asset Management, said by phone from Toronto. “All we know is it’s going to be painful, but how painful isn’t quite clear.”
Within days we have TD and now senior economist at Manulife Asset Management admitting that it’s going to be painful. See how fast rhetoric changes? There is no doubt already that something bad will happen to Canadian RE market. And those are senior economists who are saying that.
Yes, of course economists know sh*t and always wrong (which is true to some extent) but at least the number of well respected institutions joining our side is worth monitoring since the number of buyers and investors joining RE downturn prediction will increase with every such publication.
To all first-time buyers: think carefully before making your purchase, because you are risking to finance someone’s profit for the next 25-30 years of YOUR life.
To all condo investors:
Congrats on winning a jackpot, however unfortunately very few of you will be able to get the prize.
They didn’t mention but same happed in Vancouver in late Jan 2018 when ave. condo price surged to $1.1. Very few were able to cash out and few months later ave. condo price was back to $931k in March 2018.
To be fair condo prices are still growing as of today in Toronto, but with 40% YoY increase the is no doubt the end is near.