More than $1 billion of investors' money has likely been lost in syndicated mortgage investments in Ontario, according to a Toronto real estate lawyer.
On Monday CBC News reported that more than 120 Chinese investors in the Greater Toronto Area were set to lose nearly $9 million in these kinds of investments, but David Franklin says that's just the tip of the iceberg.
"This is the smallest one I've ever seen for these type of deals," said Franklin, after reviewing the contracts with Black Bear Homes.
In Franklin's opinion the investment deals are fraudulent, and based on court documents he's seen, he says investor losses amount to "way over a billion dollars that's happened in this marketplace, in Ontario."
Investors in syndicated mortgages with Black Bear Homes were led to provide a mortgage for more than the investment properties were worth. They were also given their interest payments back from their own capital until the money ran out.
Syndicated mortgages can be legitimate, legal investments where a borrower finds more than one private lender to invest money in a property instead of going to the bank.
'This is the smallest one I've ever seen for these type of deals ... It's way over a billion dollars that's happened in this marketplace, in Ontario.' - David Franklin, Toronto real estate lawyer
But Franklin says there are several companies selling syndicated mortgages like those for Black Bear projects. CBC News has learned that at least one of those companies has been shut down by the Financial Services Commission of Ontario (FSCO).
Tier 1 Mortgage Corporation was issued a cease and desist compliance order by FSCO in October 2016. Since then a trustee has been appointed to protect the interests of syndicated mortgage investors in 16 Tier 1 real estate development projects.
Dominic Ha solicited mortgages for company shut down by FSCO
Some of the people who invested in syndicated mortgages with Black Bear Homes also invested in projects with Tier 1, a CBC News investigation has found.
Dominic Ha, the registered mortgage broker who solicited investors for Black Bear projects, did the same work for Tier 1.
"The first Tier 1, Dominic Ha and his wife go to my home, give me few pages to sign," said Guan Bai Long, who said he invested $30,000 from his retirement savings plan in a Tier 1 syndicated mortgage.
Guan told CBC News he then invested another $150,000 in two other projects with Black Bear Homes through Ha. For those two he took out a line of credit.
All of Guan's principal investments were supposed to be paid back to him more than two years ago. He was planning to use the money to send his children to university, but now Guan says he's had to take out more loans for their tuition — while still working to pay off his line of credit.
Ha started soliciting investors for syndicated mortgages in 2011, according to a Chinese television interview he gave on WowTV, promoting the investments in 2015.
At the time, the mortgage agent said he'd done 23 projects spanning from houses to condominiums and retirement housing.
Ha declined a request for an interview.
CBC News later received a statement from Ha's lawyer that read: "He has clearly informed and disclosed to each investor all the information that both the law and the mortgage broker require him to disclose." It also said that "there are strict rules and regulations in law regarding the practice in the private mortgage investment market, and Mr. Ha has followed them thoroughly."
'It was high commissions that made this work'
"I call this 'commission-itis," said Franklin. "The disease of mortgage brokers putting their clients in deals for the huge commission.… It was high commissions that made this work."
According to the Black Bear Homes contracts that Guan and other investors signed, Ha received 10 per cent of the funds for each syndicated mortgage he solicited for "mortgage orientation, referral, management and consulting fees."
"I put all the money there because Dominic every time guarantee it's very safe investment," said Raymond Wong, who invested $80,000 in three Black Bear projects. "I'm always think myself, why I'm so stupid, right? I trust people like that?"
Wong works with Ha's wife and has known her for more than 20 years. She introduced Wong to her husband and then Wong attended one of the syndicated mortgage seminars.
After examining Black Bear's syndicated mortgage contracts, ledgers and the investors' stories, Bill Vasiliou, a certified fraud examiner, told CBC News that he believes "this is open fraud."
Vasiliou said the Black Bear projects were "peanuts" compared with similar syndicated mortgage investments he's seen.
"These are just small ones," said Vasiliou. In his opinion, "These people learned from Tier 1 and they created their own venue for it."
Coming tomorrow: Experts tell CBC News why they think Ontario's mortgage regulator is partially to blame for millions lost by syndicated mortgage investors.