A West Vancouver woman has admitted to fraudulently raising at least $30 million from investors as part of a Ponzi scheme.
Virginia Tan made the admission as part of a settlement agreement with the B.C. Securities Commission, announced Wednesday.
According to securities commission documents, Tan ran a business under the name Letan Investments Management. For several years prior to 2011, Tan raised money from investors for short-term high-interest loans and paid interest to the investors. After 2011, Tan stopped using the money raised for loans, but still issued promissory notes to investors saying the money would be used for “short-term financing.” But instead, Tan now paid interest with money given to her from new investors – a classic Ponzi arrangement.
Between 2011 and 2015, Tan raised at least $30 million through the Ponzi scheme, without actually investing that money in real business, according to the securities commission. By late 2015, Tan was unable to raise enough new money to pay the existing investors and stopped making interest payments.
Many investors “suffered substantial losses as a result of their investment with Tan,” according to the securities commission.
Doug Muir, director of enforcement for the B.C. Securities Commission, said Ponzi schemes often use social groups to lure in investors. “Often, friends or family can be used to bring in other people. They give the scheme a sense of legitimacy.”
Sometimes those running such schemes start with a legitimate business but then get in over their heads and “it morphs into a fraudulent scheme,” he said. In other cases, there is never any intention of investing in a legitimate way.
Among the terms of the settlement with the securities commission, Tan has been permanently banned from dealing in securities or promoting any activities connected to the stock market. She has also agreed to pay $3 million to BCSC. Whether the commission will ever collect is an open question.
In the spring of 2016, a number of investors filed lawsuits against Tan and her husband, Patrick Tan, in an attempt to recoup some of their losses. The Tans were forced to file for bankruptcy.
Distribution of their assets is now being handled by the bankruptcy trustee Boale, Wood and Co. According to a report published on the bankruptcy trustee’s website, 177 investors are owed more than $40 million.
Tan and her husband owned a number of properties in both Alberta and the Lower Mainland, including their West Vancouver home at 955 Greenwood Dr. and a residence at 410 29th St. in North Vancouver. But many of those properties are heavily mortgaged, according to the same report.
According to lawsuits filed in B.C. Supreme Court, before Tan was forced into bankruptcy, one retired heavy-duty mechanic from the Lower Mainland claimed Tan owed him close to $1 million. A Vancouver couple claimed Tan owed them $500,000.
John McEown of Boale, Wood and Co. said it’s too early to tell how much creditors might get back. “It could take years.”
