B.C. vows crackdown after Globe investigation reveals money-laundering scheme

Here is why it is important to choose the right Private Lender:

Through millions of dollars in private lending and mortgages, people connected to the fentanyl trade are parking their illicit gains in the Vancouver-area property market – and using alleged threats, extortion and deception to make sure they get their money back. Kathy Tomlinson and Xiao Xu investigate

It was dirty money – stuffed in the trunk of their Mercedes and behind a seat in their Range Rover. The rest was squirrelled away in a safe and a night table, at a condo they were using.

Small bills – $660,970 in all – covered with traces of deadly fentanyl and other street drugs. Police seized the cash in the spring of 2016, when they arrested Ying Zhang, Zhi Guang Zhang and Wei Zhang, after putting them under surveillance and watching them conduct business in parking lots in and around Vancouver.

They weren't charged with any crimes, despite the evidence that they were peddling opioids that kill people. It's not unusual in B.C. for police to forgo pursuing charges when they find dealers in possession of drug money, but not holding actual drugs. The Zhangs did lose their cash, though, for good: A judge ordered it forfeited to the provincial government as "proceeds of crime."

It's a big headache for any drug trafficker: trying to protect illicit profits from being stolen or confiscated. They can't walk into a bank with bags of cash, because staff would be required to report that to authorities as suspicious. And so the money piles up. Until they find a way to launder it.

A Globe and Mail investigation has discovered that the Zhangs and other local residents associated with drug-related crime are effectively parking their riches in Vancouver-area real estate, where it is rendered clean and secure, without actually owning any of the properties.

Just hours after The Globe's investigation was published, B.C.'s attorney-general responded by calling it "very serious and deeply troubling."

"This story confirms our government's commitment to taking action to crack down on money laundering and criminal activity in B.C.," David Eby said.

The Zhangs and others call themselves privatelenders – issuing millions of dollars in registered mortgages and short-term loans.

Just as a bank does, they grant a loan, then register a land-title charge against the borrower's real estate, equal to the value of the debt, plus interest. The charge, which gives them a stake in the real estate, remains in place until the debt is cleared. If the property is sold, the loan gets paid out from the sale proceeds, in clean money, all seemingly legal.

Except these financiers are unregulated and unlicensed and the loans they grant are in cash, which is likely dirty money derived from drug deals or other crimes. The Zhangs charge interest rates of up to 39.6 per cent, with some private lenders demanding up to 120 per cent. Court records show that one of the Zhangs' associates is among those allegedly charging that extortionate level of interest, which is double the maximum legal rate.

By combing through hundreds of lawsuits, foreclosures and property records, The Globe identified 17 such lenders, who have collectively claimed a $47-million stake, plus interest, in 45 Vancouver-area properties in recent years. The three Zhangs alone laid claim to at least $20.7-million of that, individually or through numbered companies.

Their target customers are wealthy Chinese newcomers or tourists – and their grown children – who've bought property in Canada and who want to use it as leverage to borrow large amounts of cash. Some borrowers appear to use the loans to pay down other debts.

Enter the private lenders, offering quick, easy money – by word of mouth – through social and business circles.

One of the Zhangs' customers was a real-estate developer, based in China, who has a gambling habit. Jia Gui Gao borrowed tens of millions of dollars – more than his B.C. properties were worth – from several private lenders. Then he simply walked away from $58-million worth of empty Vancouver-area mansions and vacant land he owned, leaving it all to his creditors.

When one of the properties sold for $8.7-million in a foreclosure last year, mortgage holders and suspected drug dealers Ying Zhang and Wei Zhang received court-approved payouts totalling $2.18-million.

That money constitutes another source of credit churning through the real-estate market, that financial regulators aren't monitoring. The private lending is also yet another scheme that may well be inflating sale prices, in a city where real-estate speculation has already pushed prices well beyond the reach of middle-class citizens and has ignited a national debate and a raft of responses from policymakers.

Many of the properties The Globe looked at sold, after the privateloans were taken out, for much more than the owners had paid for them. Each time a real-estate investor cashes out like that, it sets the market price higher for all houses in the neighbourhood.

"The borrowers are using their homes as collateral, so I would think there is an incentive to sell your house at a higher price later, speculating on the hot real-estate market, to cover the costs incurred to pay off extremely high interest payments," said Denis Meunier, former deputy director of FinTRAC, the federal agency that analyzes money laundering.

Beyond the Zhangs, such private moneylenders in B.C. include Xun Chuang, who has a record of drug crimes; Vinh-Loc Chung, convicted for carrying a restricted firearm; Xiao Ju Guan, found storing ecstasy and other drugs; Ye Jin Li, convicted on drug charges; and Kwok Chung Tam, a long-time Vancouver lender who's been convicted of drug crimes. Mr. Guan also ran a business wiring cash overseas.

The $47-million in private lending unearthed by The Globe is a just a fraction of the questionable lending: Only debts in dispute or serious default end up in court, generating a paper trail

Some of what can happen with these private lenders:

Some of the people they've pursued over unpaid debts, however, fought back in court – and accused Mr. Jin of a variety of things, including fraud, forgery and coercion. Most were wives whose names were on a property's title but who claimed they knew nothing about loans made to their husbands.

Ru Bing Shen was one of them.

She'd just been divorced and wanted to sell, but couldn't - unless she got the court to remove those claims from the title.

According to Ms. Shen's affidavit, she came home one day, after picking her child up at school, and was confronted by Mr. Jin and four other men "waiting outside, all with shaved heads." She said she told her child to "rush inside." Mr. Jin said he was looking for her husband, "then told me that he would return whenever he wished." She said she feared "what Mr. Jin could do to me or to my family" and didn't feel safe in her home.

Ms. Wei responded in court filings, saying that she and Mr. Jin had given Ms. Shen's husband $405,000 worth of loans, all in cash. She claimed that Ms. Shen had admitted owing the couple money, when they visited her home. The judge sided with Ms. Shen and dismissed the couple's claims against the property.

Hers is not the only case in which Mr. Jin is accused of dragging other people into disputes he has with his borrowers.

Given that the various private lenders stand accused of making threats, trafficking in deadly drugs and laundering money, The Globe asked the RCMP for an interview for this story, but didn't hear back. The Globe also tried to get in touch with the biggest lenders named here, but received no response.

Yes the article is about something happening in BC, but there is ample evidence that similar practices are taking place right here in Montreal.  There is however a way to protect yourself if you are looking for a Private Lender in Montreal. The one thing that all these criminals had in common is that none of them were registered with the Securities commission.

In Quebec the Securities commission is known as the Autorité des marchés financiers (AMF). Although there are a few (and not many) Private Lenders that are registered with the AMF, one of them stands head and shoulders above the rest. TempBridge Inc, through it’s parent company HayesCor RealEstate, is that company. With a combined real estate experience of over 100 years in Montreal, and the right to offer their services as defined by the AMF they are the company to work with if you need a Private Lender. Check them out at www.tempbridge.ca.