Like many members of Vancouver’s Chinese-Canadian community, Weihua Xiao still has assets in China.
Sometimes, she needs to move them from country to country.
The Burnaby, B.C., woman swore as much in an affidavit recently after finding herself on the receiving end of a lawsuit filed by someone who claims they’re owed money Xiao promised to help transfer out of China in defiance of strict currency restrictions.
Xiao claims she’s the victim — pointing the finger instead at another Lower Mainland resident who is at the centre of a tangle of civil claims related to what appears to be a failed money exchange and customers seeking millions in debts.
In her affidavit, Weihua Xiao claims she “feels terrible” for advising the woman suing her that money transfers were “completely safe.”
“I used to toss words around like ‘guaranteed’ and ‘put your mind at ease’ when sending text messages,” Xiao writes.
“In reality, her money was never safe.”
A ‘small commission’ for acting as ‘agent’
China limits the export of currency to $50,000 US per year, setting up a market for exchanges in other countries in which operators help people move their fortunes out of China for a fee.
Sarah Wu, the woman suing Xiao, claimed she transferred 1.34 million Chinese renminbi — or yuan — to bank accounts Xiao controlled in China in October 2020 on the understanding she would receive $260,000 in Canada in return.
Xiao has denied the allegations, accusing Wu of holding her liable for money she tried to “smuggle out of China and which appears to have been taken or confiscated by an unknown third party or government actor.”
In an affidavit, she claimed she “never set up a formal money exchange business” but instead collected a “small commission” by acting as an “agent” between friends and a woman who regularly transferred money out of China for others — Xu Dong Liu.
Xiao claimed Liu told her Wu’s money remained in a currency exchange bank account that was frozen by Hong Kong law enforcement and that Liu and her business partners had encountered some “problems” with their transfers.
The CBC has found at least eight lawsuits filed against Xu Dong Liu and her husband, Jiahua Dong, for losses of up to US $1 million through breached exchange agreements.
The most recent was filed in August by a “homemaker” who claims she contracted with the couple to transfer $500,000 from China to Canada in 2019 and never received her money.
Last month, a B.C. Supreme Court judge ordered Liu and Dong to pay $641,981.81 to another claimant to make up for a mixture of principal and interest on a “loan” made in 2019.
And in another case, the numbered company behind a restaurant claimed to have reached a deal with Liu and Dong to “borrow” $500,000 from China to pay employees after running short on cash due to the pandemic.
The notice of claim accuses Liu and Dong of breaching an agreement to pay back $215,000 of the cash and then going “incommunicado.”
‘Please don’t damage my shop’
Several of the lawsuits name Dong’s Richmond-based company — Jingdinglai Holding, which is registered as a money services business with Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC).
The business appears to have collapsed. The phone number goes straight to an automated reply with no chance of leaving a message. An unlit neon sign signalling a currency exchange hangs above a ‘For Lease’ notice in the window of the unit listed as the business address, a storefront in a busy strip mall.
A woman who works next door told a CBC reporter a stream of people have come looking for the owners. She said she has seen people break into tears on the sidewalk.
A mall manager confirmed that the windows of the unit have been broken in recent months.
The unit’s owner has posted signs in Chinese, saying the tenant has moved out: “I’m the landlord. I’m also a victim. Please don’t damage my shop. Thank you.”
Documents filed in one court application accuse Liu and Dong of “evading service.”
Liu and Dong have not filed responses to some of the claims, but in reply to two, Liu denied any wrongdoing.
The lawyer who represented her did not return a call from CBC. According to court documents, he has withdrawn as her lawyer in relation to one of the claims — for US $1 million.
‘All sorts of potential problems’
Former RCMP deputy commissioner Peter German authored a 2018 report on money laundering in B.C. which included a call for greater regulation of the money services industry.
“I suspect the reason you see it in civil courts rather than criminal courts is because the police either don’t have the resources or the time to deal with these things,” he said.
German said hard-working, honest people can find their options limited when trying to move their assets out of a country like China.
“They want to get the money out, they’re looking for somebody in the shadow world to do it for them and the next thing you know they get defrauded,” he said.
“So it leads to all sorts of potential problems. And then the civil courts are being asked to deal with it.”
In an email, FINTRAC said registration as a money services business does not “indicate an endorsement or licensing of the business,” only the fulfilment of a legal requirement to register with the federal government.
The agency says privacy laws prevent the disclosure of any information about Jingdinglai Holding.
German said registration with FINTRAC means only that the agency is aware of a company’s existence, but does not guarantee enforcement or heightened scrutiny.
None of the claims against Xiao, Liu or Dong have been proven in court.
Xiao’s lawyer, Russell Robertson, says his client is confident that the truth of the matter will ultimately come out in court. He said one thing she knows for sure is that she didn’t receive any money.
“She is, in a sense, a victim too,” he told the CBC.
“She put her own trust in the people that she was dealing with…. And it didn’t work out.”