There wasn’t much new information in the news last week about the fraud charges against Gary Ng; former President of PI Financial. The charges of fraud over $5,000 and money laundering relate to IIROC’s findings in November 2020 that Mr Ng’s 2018 cash purchase of IP was made with the proceeds of loans which he obtained by falsifying the documents showing the guarantee of the loans.

And, despite detailed reports from IIROC and PriceWaterhouseCoopers, there are still huge gaps in our understanding of how it all happened and the broader impacts it could have on the market and economy. . The only revelation that Globe and MailGreg McArthur’s apparently been able to get out of the RCMP’s Integrated Marketplace Enforcement Team (IMET) is that the companies that now own PI; RCM Capital of Vancouver and HIG Capital of Miami are the same two companies that were the alleged victims of Ng’s fraud.

deep dive searches of Ontario court registries found no information on criminal charges against Ng or related civil charges against commercial lender Bridging Finance Inc. The Globe and Mail reports these charges based on a statement made by the RCMP.

Apart from The globe, which has been talked about everywhere, Ng and Bridging have received very little coverage in the mainstream press, and almost none in the mainstream financial press. The Bloomberg BNN article about the fraud charges consists of a replay clip of Andrew Bell that appears to have been produced in November 2021, shortly after IIROC’s findings were released.

Bell seemed perplexed as to how the young prodigy, who had been on BNN a few times since his $100 million IP purchase, could be charged by IIROC with obtaining and laundering $172 million through fraud. . The station couldn’t be bothered to produce a new segment about the fraud accusations, and air the old telegram the idea that Ng is old news, and it’s time to move on.

But around the time Ng was aggressively buying Canadian financial institutions, he was featured on BNN and emerged as a living representation of the opportunity presented by this great meritocracy. He was cheerful and polite, with a winning smile and some polite nonsense about how full-service brokers had to compete with big banks in offering personalized solutions to clients, etc., etc.

His website (still available here) is a shameless self-presentation with the kind of inspirational garbage that’s usually churned out by your standard LinkedIN/Instagram, a self-proclaimed “entrepreneur,” and a dodgy military service claim for good measure. .

But when someone shows up with $100 million in cash to buy a full-service brokerage firm, no one cares if they cringe.

The timeline of events in the IIROC findings that led to Ng losing his securities license in November 2020 begins in November 2018, when Ng borrowed $80 million from “Lender One.” As collateral, Ng pledged the securities in a personal securities account he held at his own securities company, Chippingham Financial. The account had an approximate market value of $27 million.

Around the same time, Ng borrowed $20 million from “Lender Two,” in the same accounts. He then used the proceeds from the $100 million loan to buy PI Financial from his employees, who owned it at the time, became the company’s president and began appearing on television.

Manifesting $100 million in loans from $27 million in securities is a shrewd feat of entrepreneurship, but it’s pedestrian compared to the fact that the $27 million in securities didn’t even exist.

Ng had doctored screenshots of client accounts that held securities worth $20 million to make it look like they were his own accounts, and pledged those accounts as collateral for the two loans . With the alleged help of another Chippingham (and later PI) executive, Donald Metcalfe, Ng kept the charade going by emailing updated “account statements” to lenders on request. The statements showed fluctuations in the value of the securities between $20 million and $27 million, as one would expect from a live account.

A full-service brokerage firm like PI, with $4.5 billion in assets under management and access to the base layer of Canadian financial markets, could surely generate enough revenue for its sole proprietor to make payments on those $100 million in loans, giving a borrower the chance to close out the loan before anyone finds out they invented the collateral. But anyone who expected the young Mr. Ng to quit when he was in the lead simply does not understand the aggressive attitude an entrepreneur must have if he is to rise to the occasion.

Ng spent the next few months in a complicated scheme with Bridging Finance that saw him borrow an estimated additional $52 million from the commercial lender and use part of it to buy a 50% stake in Bridging itself. The documents produced by Bridging’s ongoing receivership are the best window a civilian has into all of this, and Diving will have a lot more on Bridging in an upcoming post, so stay tuned.

Here in this article it’s July 2019, and lender two emails Gary Ng asking if he can explain why a search of Manitoba’s Personal Property Security Act (PPSA) records shows the same two securities accounts that Gary Ng pledged against the $20 million they lent him to buy PI pledged to another lender?

Whoops ! Must be a mistake, said Ng. You see…when all these Chippingham accounts were moved to PI, the account numbers were…uh…they’re not the same anymore…and that promise is…uh…let’s deal with that!

Ng sent a set of newly doctored account statements to lender two who presumably thought everything seemed to be getting better and better as they started lending to him another one $20 million to buy the aforementioned 50% stake in Bridging, against collateral from “his other account,” a PI trading account with a market value of $90.5 million.

The account actually contained $8.6 million and did not belong to Ng, who presumably doctored the sums in the account as well this time, not just the names. According to IIROC, he continued to email these falsified statements to Lender One and Lender Two on a monthly basis, with neither finding a problem with anything.

“Carol, could you please go into the records and get proof of Ng warranty and the Lindbergh baby?”

The lenders are not forensic accountants, but they presumably employ due diligence teams, which presumably received monthly updates on these collateral accounts from Ng and Metcalfe without any complaints. A real account with a changed name is an easy to maintain fake. As long as the true owner of the account does not liquidate or have bad luck, a crook an entrepreneur can simply keep changing the name on the real account statement to his every month.

But an account with doctored totals requires a lot of maintenance. Ng and Metcalf could not have simply changed an account’s total of $8.6 million to $90.5 million, because the value of the individual securities in the account would not have added up. Changing line items or share totals would have added up at first, but wholesale changes that kept the “count” consistent from month to month in a way that could fool even scrutiny the most basic of one month versus the next is more work than we could reasonably expect from Ng, so the amount of due diligence performed on the tens of millions these companies have invested in Ng is something that interests us.

But whatever Ng and Metcalfe concocted as evidence of collateral was good enough for lender two, who backed Ng’s purchase of half of Bridging which, as we mentioned, is a related mess that we’ll cover soon. Ng got pretty quiet in February 2020 when Bridging suspended buyouts. His name then emerged in July 2020, when PI Financial was acquired from the Ng group of companies by HIG Capital and RCM Capital Management, on terms that were not disclosed.

The Globe and Mail the story on the fraud charges against Ng identifies HIG Capital and RCM Capital as lender one and lender two mentioned in the IIROC report, and the PricewaterhouseCoopers receivership reports in the Bridging case confirm that RMC and HIG made the loans that allowed Ng to be ‘all cash’ the purchase of PI Financial, which they would later buy out from Ng on undisclosed terms, six months before he was charged with fraud last January.

RMC Capital in particular played an aggressive role in the latter stages of Bridging’s demise, having found itself in an incredibly leveraged position following revelations in February 2020 that Ng’s collateral was not what it was. ‘he said. We’ve gone through the material and are ready to lay it all out in a linear narrative, so keep it locked Diving.

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Information on this story was found via The Globe and Mail, BNN Bloomberg and the other sources mentioned. The author has no security or affiliation related to this organization. The opinions expressed herein are solely those of the author. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author holds no license.