British Columbia

Lawsuits allege Vancouver tech company a Ponzi scheme and sham

A once high-flying Vancouver-based tech company with ties to China has been accused of being a Ponzi scheme that has bilked investors and employees alike, in one of several lawsuits recently filed in B.C. courts.

Employees say Istuary Innovation Labs has closed its Vancouver HQ and owes them 4 months of wages

Yian 'Ethan' Sun, head of Istuary Innovation Labs Ltd., seen here in a company promotional video. (Youtube)

A once high-flying Vancouver-based tech company with ties to China has been accused of being a Ponzi scheme that has bilked investors and employees alike, in one of several lawsuits recently filed in B.C. courts.

Some employees also allege Istuary Innovation Labs Ltd.— with 400 workers in North America and 1100 in China — has closed its Vancouver office, owing them four months of wages. 

Istuary and its husband and wife owners, Yian "Ethan" Sun and Yulan "Amy" Hu, are now being sued by former workers, contractors and investors, in six civil and small claims actions, most launched in August.

One lawsuit by former investor Joe Carangi alleges Sun and Hu used investors' money to instead purchase real estate in Metro Vancouver and to "pay and maintain their personal lifestyles."

The lawsuit names two Coquitlam properties owned by the couple.

'Istuary used as sham'

Carangi's civil claim alleges, "Istuary was used as a sham…by Sun and Hu to defraud and misappropriate" his investment.

In another lawsuit, three other investors — Bo Jia, Weining Zhong and Kaibin Li — also allege their money, "has been used to pay the down payments, mortgages and other indebtedness…in respect of the defendant's…property."

All the investors claim in their lawsuits that they were told they would receive returns five times what they put into the company within two years.

Carangi alleges in his civil action that he invested $138,000. The other three investors allege they entered into contracts that should have paid them a total of over $4 million.

A statement of defence from Istuary has yet to be filed in those two cases.

In four years, Vancouver-based Istuary Innovation Labs expanded to more than two dozen cities around the world, including several in China. (YouTube)

On top of these lawsuits, Istuary is being sued by two former contractors for failing to pay money owed.

Istuary has filed legal responses in those two cases, promising to repay one contractor in two installments starting in December — but claims it never had an agreement with the second contractor. 

Ex-worker sues for wages

Annette Zi Yu Ma, a former employee trying to recover unpaid wages in small claims court, alleges Istuary "is a Ponzi scheme" — a scam that takes money from new investors to pay off old investors, while promising high rates of return with little risk.

Istuary and its owners Sun and Hu have not filed a response to that allegation.

The couple didn't respond to CBC News requests for an interview, made through their Vancouver lawyer.

On its website, Istuary claims to be "Canada's largest technology incubation platform."

The company was started in 2013 in Vancouver, with the stated goal of linking high tech start-up companies in Canada with potential customers in China.

But in addition to its legal woes, Istuary appears to have financial woes as well.

'I do feel betrayed'

Two employees not involved in lawsuits say they started receiving emails from Istuary management this summer, claiming the company's assets were being frozen in order to help it acquire "a publicly-listed company in China."

Now the employees say they haven't been paid since June.

Istuary Innovation labs Ltd. once occupied a full floor in this downtown Vancouver office building that employees now say sits empty. (Don Marce/CBC)

They say they were promised bonuses if they delayed their salaries — but the money never came.

They allege company officials advised them to go on employment insurance.

"I do feel betrayed that a company that was giving us so many promises, and they were showing so much potential, (then) they just crumbled like that," says former start-up liaison Elaine Li, 31.

Like Li, another former Istuary employee is scrambling financially.

"I feel cheated actually," says Manivannan Gajendran, 31. "I don't have any place to go to now."

Posed with high-profile politicians

It's a major fall from grace for the company.

Ethan Sun often posed with Canadian leaders during Canada-China trade trips.

Istuary Innovation Lab Ltd. president Yian 'Ethan' Sun posing in China with Prime Minister Justin Trudeau during a recent trade trip. (Istuary promotional video)

The company's YouTube videos show Sun standing alongside former prime minister Stephen Harper, current Prime Minister Justin Trudeau and ex-premier Christy Clark.

Just last month, Istuary was granted special status under Ottawa's Start-up business class program, making it one of the country's few "designated business incubators." 

The company also appeared to have the support of HQ Vancouver, under former president Yuen Pau Woo.

HQ Vancouver was established by the federal and provincial governments and the Business Council of British Columbia to encourage international firms to establish North American head offices in B.C.

But Woo, now an Independent senator, is distancing himself from Istuary.

'Skeptical'

"After some initial meetings with Istuary, I became increasingly skeptical about their business model," wrote Woo in an email to CBC News.

"I decided to significantly reduce HQ Vancouver's engagement with Istuary … I have had no contact with Istuary since my appointment to the Senate." 

Former employee Elaine Li says the photos of her former boss posing with Canadian leaders, gave her a false sense of security.

"When I saw those pictures I thought it was a promising company, it has support from government … I was under the impression that we were doing well."

Li says many employees stayed on with the company through the summer, unpaid, because they were offered cash incentives if they waited for their delayed salaries. But the salaries never came.

Now she's hoping the Canadian government — specifically the Employment Standards Branch — will help Istuary's former employees get the wages they allege they're owed.

As for the lawsuits now facing Istuary and its owners Ethan Sun and Amy Hu, none of the allegations has been proven in court.

About the Author

Eric Rankin

Investigative journalist

Eric Rankin is an award-winning CBC reporter. His honours include the 2018 Canadian Screen Award for Best Local Reportage, the 2017 and 2015 RTDNA awards for Best In-depth/Investigative Reporting, and the 2009 Jack Webster award for Best News Reporting.