By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Clients of a Bahamian bank and trust company are suing for more than $1.75 million in damages related to a Chinese real estate investment, in which it allegedly played a “liaison” role.
Two Bahamas-domiciled companies, Taupita Investments and Segue Corporation, are alleging they are the victims of a multi-million dollar fraud unwittingly introduced to them by EFG Bank & Trust (Bahamas).
The two corporate investors, via a lawsuit filed in the southern New York courts on December 10, 2014, are suing the investment promoter, Benny Ping Wing Leung, and his company, First Toronto Realty, amid claims they have never recovered their investment principal or interest.
EFG is not named as a defendant in the case, and there is no suggestion that it has done anything wrong in relation to the matter. It has sided with Taupita and Segue in their battle to recover their funds.
This, though, is the second December 2014 court battle that EFG Bank & Trust (Bahamas) has featured in. Tribune Business revealed on Monday how it was being sued in the Supreme Court by three investors over the “total loss” of their collective $8.7 million investment in a fund, while also alleging that it misled the Securities Commission.
EFG denied all those allegations, and pledged to defend that action “vigorously”. There is no connection between the two lawsuits.
But, while it is effectively ‘on the good side’ in the New York action, and the claims in both cases have not been proven, there are similarities between the two.
Namely, that clients of EFG Bank & Trust (Bahamas) allegedly accessed - via the bank - investment opportunities promoted by some of its other clients and account holders, only for these to ultimately end in controversy.
The New York documents, obtained by Tribune Business, allege that Leung and his company, Cathexis Ltd, in late 2009 introduced EFG Bank & Trust (Bahamas) to a proposed investment in a 36-storey office/retail development in the Chinese city of Ningbo.
EFG “invited Leung to its Bahamian office to present his investment opportunity” in early 2010, where he allegedly claimed that his family owned 100 per cent of the project, called Titan Tower, through a web of holding companies.
The Bahamian companies’ lawsuit alleged that Leung told EFG his net worth was greater than $100 million, and that the project already had $60 million in financing.
The investment opportunity, the documents alleged, had arisen because Leung claimed one of his friends - an initial investor - was selling his interest for $4 million, “thus creating an opportunity for potential investors such as EFG account holders”.
“Leung advised that construction of the project was well underway, but the $4 million investment was needed to maintain the capital and take the project to completion,” Taupita and Segue alleged.
“Thus he pitched that $4 million in total was needed from potential investors to maintain the necessary funding for the project.”
Leung claimed that Titan Tower had a $120 million valuation, producing a purported report by CB Richard Ellis (CBRE) to support this figure. And he was said to have promised that investors would rank ahead of his family in the creditors queue.
“Upon completion of his presentation, EFG conveyed all the representations and material provided by Leung to its clients, including Segue, as potential investors in the project,” the lawsuit alleged.
Based on Leung’s representations, Segue and the company that Taupita inherited its Titan Tower ‘interest’ from invested $3.75 million of the $4 million sought.
Segue and Taupita’s ‘predecessor’ then invested $250,000 and $1.5 million, respectively, in promissory notes issued by Leung-related entities and carrying 15 per cent interest.
Leung allegedly promised to repay the principal within two years, with interest to be paid in April 2011 and 2012.
The note payments were allegedly guaranteed by a company called Sirius Asia V Partners, a company that had an account - and was also a client - of EFG Bank & Trust (Bahamas). Sirius is alleged to be controlled by Leung and First Toronto.
“Investor funds totalling $3.75 million, representing the aggregate principal amount paid by the investors, were deposited into an account Cathexis held with EFG, who had agreed to act as banker to each of the investors who held accounts with EFG, including Segue and Taupita’s predecessor in interest,” the lawsuit alleged.
“From this account, EFG then transferred the funds to, among others, First Toronto and Sirius Asia V Partners.......
“Leung represented that these funds would be invested into the project. Upon information and belief, at all material times, Leung had access to these accounts and directed where the funds were sent. In its role as banker, EFG was to act as liaison between Leung and the investors.”
However, Segue and Taupita alleged that unknown to themselves and EFG Bank & Trust (Bahamas), the Titan Tower’s construction was completed in December 2010.
And the initial interest payment was not made on April 2011, with Leung blaming the delay on the wait for Chinese government building permits, occupancy and fire safety certificates.
While the first interest payment was made “four months late, and in three instalments” by August 2011, the second payment and return of all investor principal did not occur by April 2012.
The investors were told, through EFG Bank & Trust (Bahamas), that more building permit issues were causing the delay.
Leung allegedly extended the payment date to December 2012 and faced “numerous inquiries” from EFG Bank & Trust (Bahamas), only to then do “a complete reversal” and demand an extra $5 million from investors to obtain a building permit.
The investors, via EFG Bank & Trust (Bahamas), declined to pay, and Leung steadily reduced his demands to $1.5 million, then $1 million and $500,000 - while providing no documents to justify his position.
Leung then travelled to the Bahamas in November 2013, where he met with investors at EFG Bank & Trust (Bahamas) in a meeting that produced no satisfactory answers.
The final extended deadline for repayment, December 31, 2013, was again misses, and Taupita and Segue are alleging they have lost “their entire investment” plus interest.
Then, on September 8, 2014, the Bahamian companies alleged that the “circle of fraud” was completed with Leung alleging that a ‘third party’ had paid the money he was seeking.
As a result, the two companies now ranked below this ‘payor’, plus contractors, banks and the Chinese companies in the creditors’ queue, implying that it was “unlikely” Segue and Taupita would “ever receive payment”.
Comments
GrassRoot 9 years, 2 months ago
just follow the trail of commissions. Of course EFG was instrumental in facilitating the investment. I bet they got paid on the successful introduction. So I would not jump to the conclusion that EFG is on the good side here. seems the heat is turned up on EFG, consequences from a lax management style over the past few years.
banker 9 years, 2 months ago
So where are the Bahamian regulators in all of this? Where were they for Warren Davis, Gibraltar, Calendonia, Benchmark, Alliance, Dominion Securities .... the list goes on? Are the regulators just a fee collection agency? A paper tiger?
We have had SMART Fund frauds, pump and dump, Nicholas Battoo shenanigans. One would think that the regulators would stop being slack and do their jobs after the first couple of fiascos.
Time for Wendy Craigg and Hillary Deveaux to resign.
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