The Ontario Securities Commission is probing an alleged US$60-million Ponzi scheme in which a man nicknamed the "Chinese Warren Buffett" is alleged to have paid purported profits by raising money from fresh investments.
The regulator alleges Weizhen Tang was the "operating mind" of the scheme that had promised to pay investors weekly profits of 1% through investments in stocks, options, futures, and mutual funds through stock markets in the United States, China and Hong Kong.
Among the allegations contained in documents filed by the OSC to obtain a freeze on Tang's Oversea Chinese Fund LP, the commission said that "on the evidence presently available it would appear that almost all of the funds have been dissipated."
In an affidavit filed with the Ontario Superior Court of Justice in Toronto, senior OSC investigator Jeffrey Thomson says Mr. Tang admitted to regulators that he lost US$15-million last year, which he did not report to investors, all of which made minimum investments of US$150,000.
The documents further allege that one investor was provided a "fabricated" statement indicating a balance of more than US$1-million, which was in reality "an estimate of what was promised to this investor for his investment in Oversea."
Hugh Lissaman, Mr. Tang's lawyer, said his client "is co-operating fully" with regulators and to date there have been no charges of fraud laid.
"My understanding is that the OSC has issued various cease-trade orders and that an investigation is pending," said Mr. Lissaman in an e-mail.
Mr. Thomson, the OSC investigator, said in his affidavit that during a March 12 interview at the commission's offices Mr. Tang "stated that the balances set out in account statements ... are the amounts promised by Oversea, not the true balances."
According to the documents, the OSC investigation began in February, but the commission began receiving word of complaints from clients this month that they were unable to get their money out of the fund.
A hearing at the Ontario Securities Commission is set for April 1 in Toronto.
In a separate matter, the OSC will hold a hearing June 5 to consider imposing sanctions on Andrew Keith Lech, who was sentenced to six years in prison after pleading guilty in 2007 to operating "a Ponzi scheme of enormous proportions."
"In short, Lech admitted to having accepted millions of dollars from investors on the basis of a promise he would invest it on their behalf, guarantee the return of the capital and provide extremely high rates of return," the OSC said in an amended statement of allegations made public Thursday.
The regulator is seeking a stock trading ban and other possible sanctions including prohibiting Lech from acting as an officer or director of a public company or fund manager.
A forensic audit showed that more than 95% of the nearly $46-million in Canadian and U.S. funds Lech accepted from investors between 2001 and 2003 was never invested.
