Class action lawsuit over $30M Ponzi scheme certified in B.C. court
Virginia Tan has admitted to running the scam; suit alleges her husband and son were involved
A B.C. judge has certified a class action lawsuit filed against a West Vancouver woman who ran a $30-million Ponzi scheme — allegedly with the help of her husband and son.
North Vancouver's Jastram Properties Ltd. claims it lost more that $4.8 million in investments in Virginia Tan's fraud, according to a judgment from B.C. Supreme Court.
Justice Joyce DeWitt-Van Oosten certified the claim as a class action on Tuesday, writing that at least 165 investors could be included in the suit.
"I am satisfied that if the facts stated by JPL are true, the pleadings disclose causes of action in fraud, fraudulent conversion and fraudulent conspiracy," the judge wrote.
Two years ago, Tan admitted to the B.C. Securities Commission that she'd fraudulently raised at least $30 million from investors between 2011 and 2015. She agreed to a $3-million penalty, but as of November 2018, had yet to pay.
Her husband, Patrick, and their adult son, Marcus, allegedly helped her raise the money. Jastram's suit says they repeated her lies about a non-existent investment opportunity and hid what was really happening.
Six related companies are also named as defendants in the suit.
A 'very safe' investment
The class action alleges the elder Tans diverted the ill-gotten money to their son, and used it to purchase homes and other assets in his name or in the name of corporations he directed. That included six properties in Surrey, 24 in Fort St. John and one on the Sunshine Coast, according to the judge's decision.
Jastram's director, Lale Doetsch, filed an affidavit saying she met Virginia Tam during a dinner at the Hollyburn Country Club in the summer of 2012.
" Virginia Tan explained to me that she was providing bridge financing and she only lent money to people she knew who mainly operated businesses that were waiting to get paid for government jobs they had done," the affidavit says.
"She said she had virtually no clients who defaulted and because of that the investments were very safe."
Altogether, Jastram invested $6.6 million with the Tans but only received $1.8 million in returns, the suit says.
According to her settlement agreement with the BCSC, Tan took the money in exchange for promissory notes, pledging to repay the investments within time frames ranging from one month to two years, at annualized rates of between 16 and 21 per cent.
When the terms in those notes expired, many of the targets renewed their investments in exchange for new promissory notes.
"Since Tan earned no business income, she made interest and principal payments to investors with funds raised from other investors," the agreement says. "Tan also co-mingled a relatively small amount of her personal funds with investor funds in her bank accounts, and used these accounts to make payments to investors."
By late 2015, she was out of money, and could no longer make the phoney interest payments.
Jastram hired a forensic accounting firm last year to look into the Tans' operations, and their researchers found the scheme was "characteristic of and consistent with both the formal definition as well as an authoritative description of a Ponzi Scheme," the judgment says.
Virginia and Patrick Tan were forced into bankruptcy in 2016. They are the subject of multiple other lawsuits, some of which may be joined into the class action.
The allegations in the suit have not been proven in court.