Weizhen Tang told his investors they deserved to be rich and only he could make them so. Even now, after he lost all their money and was charged with running one of the country’s largest Ponzi schemes, his disciples still want him to keep trading. They believe it’s the only way they’ll get their $30 million back
When Air Canada flight 88 from Shanghai arrived an hour late at Pearson airport last January 13, a group of officers from the Toronto Police fraud squad were waiting to meet it. They were there to apprehend Weizhen Tang, a 51-year-old native of China who had lived in Toronto since the early 1990s. Tang was accused of perpetrating one of the largest investment frauds in Canadian history: a Ponzi scheme involving up to 200 victims in Toronto, the United States and China. Two weeks earlier, he had agreed to surrender to authorities at Pearson, but he never arrived, prompting police to issue a warrant for his arrest. They feared he’d stay in China to evade prosecution.
As the passengers of flight 88 watched from their seats, the officers entered the aircraft and made their way through the cabin. This time, Tang was on board. They handcuffed him, escorted him into a police cruiser, and drove to 51 Division. As the car pulled up, Tang stared forlornly out the window at the media horde gathered to document his capture. Wrapped from the neck down in a dark coat and scarf, his eyes peering from behind wire-rimmed glasses, he looked small and vulnerable. Inside the station, he was stripped and searched.
High-profile fraud arrests are rare in Canada, but it’s not because we have a shortage of fraudsters. This country has a reputation for being soft on corporate crime, a problem often attributed to the dysfunctional and divided patchwork of regulatory bodies that oversee Bay Street and the traders and investment gurus who earn their fortunes there. In fact, Canada is the only G20 nation without a centralized national securities regulator, but Jim Flaherty’s on the case. Last May, Canada’s finance minister unveiled legislation to replace the 13 independent provincial and territorial agencies now charged with policing the country’s financial markets with a single organization akin to the American SEC. The Supreme Court is expected to rule on the constitutionality of the new so-called Securities Act early next year.
Tang’s improbable rise and public fall is a particularly egregious illustration of our flawed system. More than four years before his arrest, the Ontario Securities Commission was concerned about Tang’s activities but did little to stop him. In those years, his investors lost as much as $30 million.
In 2008, at the height of the worst financial crisis since the Great Depression, word circulated within Toronto’s Chinese community about Weizhen Tang’s extraordinary investment returns. As portfolios of even the best money managers plummeted, Tang seemed to defy gravity, soaring above the carnage like a wire-fu acrobat in a martial arts film. During a year in which New York’s benchmark S&P 500 Index dropped almost 40 per cent, Tang’s Oversea Chinese Fund reported results that were an astonishing 80 points better.
The Chinese media referred to Tang as the “Chinese Warren Buffett”—a sobriquet he encouraged through references to the legendary investor in his 2006 autobiography, How the Buffett Way Took Me to Wealth. The book is both a self-reverential hagiography and an instruction manual for aspiring investors, and it established Tang as a financial guru—a five-foot-two Mandarin-speaking amalgam of Suze Orman and Tony Robbins. Tang wrote articles for on-line news sites and investor message boards, addressed university students and businessmen during a speaking tour in China in the fall of 2006, and organized seminars and charity events in Toronto attended by VIPs and such politicians as Olivia Chow and Michael Chan. These included an annual Chinese Lunar New Year’s gala, and the North American Chinese Wealth Summit—a lavish $230-a-plate investment seminar and dinner at the Metro Toronto Convention Centre in January 2009, which attracted dignitaries from the Chinese consulate and speakers from major Canadian banks and universities, including the CIBC senior vice-president John C. Pattison.
To Tang’s followers, many of whom were immigrants from mainland China with little understanding of financial markets, his message spoke to the difficulties of succeeding in the West. In an article on Tang’s Web site entitled “How Can Chinese Become Rich?” Tang wrote, “[The Chinese] work too hard, and they work too much—yet, at least in terms of wealth, they have very, very little to show for it… Us Chinese must learn to depend on each other, in particular, the common resources of other Chinese who have something to offer.”
It seems that Tang is a chronic liar who has illusion of his reality. Unfortunately, his “too good to be true” pitches had won many naive investors over until….
November 20, 2010 at 6:22 pm | by Jessie