A regulatory hearing panel in British Columbia has permanently banned and ordered almost $3.3 million in penalties and disgorgement against a woman who defrauded investors in a scheme that promised returns from offering various services to Chinese students.
Earlier this year, a hearing panel of the B.C. Securities Commission (BCSC) found that Meiyun Zhang breached securities rules when, between 2014 and 2016, she raised $3.2 million from investors with the promise of high monthly returns to be generated by servicing foreign students — by exchanging foreign currency for students from China, helping them immigrate to Canada, and providing loans to them to help them secure visas.
While investors got some money back from the scheme, the panel found that Zhang misappropriated much of the funds to pay her personal bills, gamble in casinos and repay personal loans.
The panel found that arrangements between Zhang and her investors amounted to investment contracts — as their verbal agreements included investment terms and promised returns — and concluded that these contracts violated securities law.
On Wednesday, the panel handed down its sanctions in the case. It permanently banned Zhang from the investment market and ordered her to pay a $2.5-million penalty and almost $800,000 in disgorgement.
According to the panel’s decision, BCSC staff sought a $3-million penalty in the case. However, the panel said the recommended penalty was “on the high side” relative to similar past cases, even though her misconduct was serious.
“Zhang’s conduct took place over a long time. Her conduct was deliberate. We concluded in our liability findings that Zhang was predatory towards the investors. Zhang befriended those investors, recruited them to her scheme and then misled them about what she was doing with the funds the investors entrusted to her,” the decision said.
The panel noted that Zhang “showed a complete disregard for compliance with applicable laws and for markets that are honest and fair.”
In addition to financial losses, the panel said the investors in the case also reported “depression or anxiety and suicidal thoughts” as a result.
“The investors reported convincingly that they variously experienced deferred retirements, severe and ongoing changes in health and secondary financial impacts such as the need to sell properties or cover interest expenses,” the decision read.