Investment regulator accuses Gary Ng of fraud

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Former owner of Vancouver-based investment bank PI Financial Corp. is charged with fraud after he allegedly falsified documents and created fake brokerage accounts to borrow around $ 172 million, part of which he used to buy PI Financial.

Gary Ng, co-founder of Winnipeg-based broker Chippingham Financial Group Ltd., acquired PI Financial for $ 100 million in 2018 through a personal holding company. He funded the deal entirely in cash with a pair of loans – valued at $ 80 million and $ 20 million – which were supposed to be secured against assets he claimed to hold in his own investment accounts. . He borrowed an additional $ 72 million in 2019 and 2020 for separate deals.

According to a statement of allegations filed by the Investment Industry Regulatory Authority ahead of a disciplinary hearing, Mr. Ng significantly inflated his net worth to deceive three lenders: an unnamed US “investment firm”, a ” unnamed Canadian asset management company; and an unnamed Canadian private enterprise.

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He changed documents to put his name on corporate client accounts he did not own and created other fake accounts and account balances, which were used as collateral for loans, according to IIROC . Mr. Ng’s business associate, Donald Metcalfe, contributed to the ruse, IIROC alleges.

At one point, Mr. Ng emailed an account balance to a lender who claimed to show $ 90 million in marketable securities. In fact, there was only $ 4 in the account, according to IIROC.

“Sir. Ng and Metcalfe perpetrated a fraudulent scheme by tricking lenders into granting them millions of dollars in loans based on forged and fictitious documents purported to prove that significant financial assets are collateral when they were not. true, ”IIROC said in the Allegation Statement.

When reached by phone, Mr. Ng declined to comment. The Globe was unable to reach Mr. Metcalfe for comment.

The IIROC hearing against Messrs. Ng and Metcalfe are scheduled to debut in January. Both men face fines of up to $ 5 million per violation and a permanent ban from participating in the Canadian securities market, among other potential penalties. The claims have not been proven.

PI Financial, a mid-sized investment bank with over 300 employees, is no longer owned by Mr. Ng. In July, the company announced that its ownership was transferred to a joint venture controlled by HIG Capital and RCM Capital Management. The company gave no explanation for the sale at the time.

IIROC claims that PI Financial reported the fraudulent behavior of Mr. Ng and Mr. Metcalfe after becoming aware of it at the end of January 2020.

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“We identified an unusual match during an unrelated document request,” PI Financial said in a statement regarding the allegations.

« [We] immediately alerted our regulators and cooperated with IIROC in its investigation. None of the alleged faults were related to the company’s capital or accounts receivable, and throughout this period we have served our clients as usual – there has been no impact on our operations, ”said the society.

Mr. Ng and Mr. Metcalfe, who were chairman and vice chairman of PI Financial respectively, resigned from the company in February. Both have since failed to attend scheduled interviews with IIROC and face further charges of failure to cooperate with investigators.

Over the past few years, Mr. Ng, 36, had presented himself to investors and the media as a financial prodigy. As IIROC puts it: “[he] introduced himself to others as an extremely successful businessman who created enormous personal wealth through highly successful investments in technology, real estate and manufacturing in Canada and China.

Mr. Ng co-founded Chippingham Financial in Winnipeg in 2012. In 2018, he began acquiring other financial services companies through his holding company, Ng Group, including Rothenberg Capital Management Inc. and PI Financial.

During its investigation, IIROC found no evidence that PI Financial clients suffered losses as a result of the alleged fraud.

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“There has been no suggestion that PI has violated its procedures, however, in light of the issues raised in this investigation, we have undertaken a review of our internal controls,” PI said in a statement. “This review concluded that the controls and governance of IP were and are not weak. We continue to cooperate with regulators in this area. “

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