Alleged fraudster has $60 million of assets frozen

Edward (Xiao Hua) Gong is expected to appear in a Toronto court next week.

Media can now reveal that a Canadian businessman, alleged to have had unlawfully benefited from criminal activity in China, has had $60 million worth of New Zealand assets frozen.

Edward (Xiao Hua) Gong does not live in New Zealand or run a business here but a joint investigation by NZ Police with Canadian and Chinese authorities led to criminal charges being laid late last year.

Mr Gong is expected to appear in a Toronto court next week, a spokeswoman from the Ontario Securities Commission said.

The charges laid by Canadian authorities relate to the fraudulent sale of hundreds of millions of dollars of securities in two companies, O24 Pharma and Canada National TV, to Chinese citizens.

In a judgment handed down today, Justice Mathew Downs said the public is entitled to know that the High Court has restrained Mr Gong’s assets and the reasons for the restraints.

Media applications from NZ Herald, Stuff and NBR were opposed by Mr Gong’s legal team, which includes former solicitor general Mike Heron, QC, and Marc Corlett, QC.

The original freezing order was granted by Justice Paul Davison in March last year. The judge had said there were reasonable grounds to believe Mr Gong had unlawfully benefited from significant criminal activity in China, and referred allegations of a “pyramid-style fraud in China in the order of $202 million.”

He also referred to the alleged transfer of $77m to Mr Gong’s New Zealand bank accounts.

While Mr Gong had argued publicity in New Zealand would compromise the fairness of his Canadian criminal trial, the judge thought otherwise.

Justice Downs says a criminal trial in New Zealand is unlikely given Mr Gong’s prosecution in Canada and it would be strange if the New Zealand courts continued to suppress information overseas courts had not. Mr Gong does not have name suppression in Canada or China.

The judge said that while previous decisions on the file will be made available to media, substantial affidavit evidence on the file would not be. This was because that material was detailed and extensive and reportage would be one-sided.


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21 Comments & Questions

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Perhaps Mr Gong could return to China for justice. They have a pretty mean version from all accounts.

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Hear! Hear!

Except of course the lily white bleeding heart judicial system in Canada, Australia and NZ does not allow for forcible extradition of said criminals back to China for proper justice to be administrated.

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It's now coming out. All the hot money that came in while JK and BE were at the healm. Such lax laws, and open arms to hot foreign money, it was a money launderers playground.

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No point NZ taking credit for something for which NZ is a little minnow when it comes to money laundering - try Canada and Australia. Or even London, Singapore and Switzerland.

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Well there you go then. As you said under our type of justice systems, he really doesn't have much to worry about does he?
I suppose these type of crims have always been around, but since China has done what the rest of the world aspires to do, chase the American lifestyle, I wonder if this type of criminal activity is more prevalent in the China of today, than it was in the past.

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Not a resident here... does not run a business here... just popped in and deposited ~$70m in some bank accounts.

Suggest someone ask the banks what their due diligence was here. They are supposed to be raising concerns around money laundering activities under the idea of 'know your client'. Were any questions asked about how his wealth was obtained? Would have thought he should have been subject to enhanced due diligence from the banks accepting these funds.

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Great questions. Or are NZ banks maybe just the same as Aussie banks.... all care no responsibility.

Maybe the RBNZ or FMA want to respond to this.

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Banks are used for laundering money; most trails leading to tax havens.

Its very cheap and hypocritical of them to suggest bitcoin and digital currency is being used for the same purpose mainly.

Yeah right! Just another story attempting to stuck down the banks competition. What a completely crooked medium of exchange has turned out to be!!!

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The fma will just read from the legislation which was written by bankers for bankers aided and abetted by senior employees of the mbie with 1 year of experience in an unrelated field.

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Agreed and when we have a client, whom I went to school with and who has dealt with us for 20 years, sells 300k of shares, I have to ask them "what are you going to do with the money?". What this achieves isn't immediately clear to me.

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You should know better by now, Brent. It’s one rule for the big boys (in everything in the finance industry) and another for everyone else. Heck, who can forget the FMA dancing around egg-shells when investigating the Clear Grain disclosures around when Weldon sold his NZX shares.

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Just because you've known them for X number of years doesn't mean their intentions are any more honest Brent, where do you draw the line? You of all should be aware you can document your relationship with the client to back up any nature/purpose too.

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I guess you are right but I think the bar should be higher ...say $2m before you need to get aml involved...the thing is since I started in this business in 1984 we have only had one incidence of a criminal trying to deal with us...a local heroin dealer in about 1989and I told him we don't take cash

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A criminal that you know about. I'll bet the lawyers who did the conveyancing for the farmers who bought their farm with $300k in cash didn't think they were dodgy either. It was the bank who flagged the cash deposits with the FIU that discovered it was the proceeds of weed cultivation.

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Simple answer.
The powers that be in this country only care about one thing.... how much money you've got. If you've got plenty you get free rein. ie Kim Dot Com.

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Highly interested in what assets (securities, cash accounts) are frozen and who are the custodians or facilitators of the said transactions.

With $77m of assets this is not chump change and is significantly higher than the average balance that even the private banks deal with over here.

The banks have not done anything illegal, he's not convicted of fraud and even if he is the banks didn't know it. Where there some red flags? Who knows, probably not....ignorance is bliss when someone is investing $77m and you're getting a tidy commission.

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The fx margin on 77m...us$ to kiwi...even at 20 bps that's a big number

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Based on the herald article it would seem this was discovered after a money changer’s transactions were flagged by their trading bank to the FIU based on the size/structure of the transactions calling them "complex or unusually large" and received outside of their risk assessment “at short notice, exceeded the maximum remittance transaction limit and objectively suspicious”. So sounds like the Act is working, and SAR’s flagged with the FIU are being looked at.

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Actually nothing in the Herald article points to the banks informing on the transactions. It reports that $53m was transfered between April 2015 and May 2016, so if the banks had spoken up one assumes something more could have been done sooner.

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Guess we will find out when the money changer is prosecuted and the suppression ends. Im curious as well, could very well have been an investigation of the money changer's accounts based on information from the Canadian authorities.

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In the words of the Hon Phil Twyford.........it's yet another *Chinese sounding name*.

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