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Chinese Madoff probed over fund fraud in Canada

(Xinhua)
Updated: 2009-04-16 13:48

OTTAWA -- The sudden fall of a Toronto fund manager, who bills himself as "the Chinese Warren Buffett" but actually turns out to be "the Chinese Bernard Madoff", prompted Canadian financial advisers to warn new Chinese immigrants not to be lured by the promise of super high returns in making an investment.

The Ontario Securities Commission (OSC), Canada's main stock-market regulator, is investigating Weizhen Tang, who ran Weizhen Tang Corp and Oversea Chinese Fund Ltd Partnership, over the allegations that he defrauded tens of millions US dollars of his clients in Canada and the United States. 

Weizhen Tang speaks during an interview at his office April 8, 2009. [worldjournal.com]

Tang's clients, who are mainly new immigrants from the Chinese mainland, were reportedly divided into two opposing groups when the 50-year-old man, who has made a promise of "one-percent-weekly returns," first admitted his company had no assets to pay requested redemptions over a month ago.

According to the court filings by the OSC, more than 200 investors have invested over US$60 million into Tang's hedge fund.

One group of clients filed complaints to the OSC, which immediately placed an all-cease-trading order to Tang. However, the other group signed a letter to the OSC and asked it to stop the cease-trading order, in the hope that Tang will be able to stage a comeback to repay their money.

Tang, however, insisted his investment setback was a reasonable reflection of the current tumbled market. And he denied that he guaranteed the one-percent weekly returns in client contracts whatsoever.

"The one-percent weekly returns are the ideal goals I have set, " Tang told Xinhua in Chinese in a recent interview.

Related readings:  More Madoff assets seized  Feds seize Madoff's mansion, yacht

"I don't think it's about me being overconfident, but rather, the fact that I'm the only capable investor for doing so in the Chinese community," he said.

Two of his clients were also present in the interview but did not want to be named.

"We thought he is so trustworthy that we gave him the money even without adequate knowledge of the financial market," one client said.

"I take the gamble and pay the loss. No gamble, no hope," said the other.

However, Ziyang Shen, a certified financial planner serving the Toronto Chinese Community for eight years, said new immigrant investors have to do their homework before making any investment.

"You have to have enough investment knowledge and understand how much risk you can take," Shen told Xinhua.

For middle-class investors, their expected returns are about eight to ten percent annually, he said, "higher returns sometimes mean higher risk."

"An investor should always ask for a monthly, quarterly, semi-annual or at least an annual report about their money status no matter how high the returns are," he said.

Asad Khan, another Toronto financial adviser, said Tang's self-portrait as "the Chinese Warren Buffett" and "the king of one-percent weekly returns" is an "oxymoron."

"Warren Buffett's style is always going for long and steady win, something of low risk," Khan said. "However, Tang's one-percent weekly returns mean more than 50 percent increase annually. The double-digit return is typically high risk investment."

Khan, who is of Pakistani origin, said that new immigrants, not particularly Chinese, tend to have deeper trust in members from their own ethnic group.

"Unfortunately, sometimes such trust has been abused and led to the investment fraud such as the case of Salim Damji. He conned 4, 000 members of Toronto's tight-knit Ismaili community," he said.

Damji pleaded guilty to fraud in 2002 and was sentenced to seven and a half years in prison. The victims are still suing the Bank of Montreal for its loose supervision on Damji's extraordinary deposits from the scam.

The Damji's scam was among the largest in Canadian history. Investors were told that they were being given first priority since they were the members of the community and relatives of Damji. They gave the scam artist their life savings to invest into a tooth-whitening product that Damji was never authorized in doing anything.