Regulator receives $4.8 million penalty payment from fraudstersBy The IJ Staff | February 25 2019 09:30AM
The British Columbia Securities Commission has announced that it has received $4.8 million in administrative penalties from two former B.C. residents who defrauded hundreds of investors in a Ponzi scheme.
All investors reimbursed
The payment comes after a court-appointed receiver distributed about $6.5 million to 464 people who lost money by investing in Bossteam E-Commerce Inc. Every investor with a validated claim was reimbursed for their total losses, plus 5 per cent interest.
The administrative penalty payments came from funds that remained after investors were reimbursed. The BCSC received a $3.1 million payment from the receiver this week, following a $1.7 million payment in July.
The funds mostly came from two bank accounts controlled by Bossteam co-founders Yan Zhu (a.k.a. Rachel Zhu) and Guan Qiang Zhang. The BCSC froze the accounts during its investigation.
Described itself as an online advertising business
Bossteam described itself as an online advertising business, revolving around a website where advertisers could post links to their own webpages. The BCSC panel found that Zhu, Zhang and Bossteam created the false impression that members and well-known businesses were paying to advertise on its website.
A BCSC panel found in 2015 that Zhu and Zhang committed fraud, illegally distributed securities, withheld information from BCSC investigators, and instructed employees and investors to do the same. After imposing an administrative penalty of $14 million, the assets from the frozen accounts – along with $123,000 from the sale of land owned by Zhu – were transferred to the receiver for distribution.
Zhu, who was living in Burnaby as of 2017, and Zhang, who was deported to China in 2012, are permanently banned from various activities in the capital markets, including trading in securities (with limited exceptions), purchasing securities or exchange contracts, being a registrant or promoter, or engaging in investor relations.