Over $154M tied to detained Chinese-Canadian oligarch invested in GTA real estate – Global News

A drab, bluish-green glass office tower just north of Toronto, 50 Minthorn Blvd. is unassuming save for a “Bank of China” sign that sits atop the eight-storey building.

But inside, on the first and second floors, is the footprint of companies tied to one of China’s most high-flying oligarchs, Xiao Jianhua. Beijing security agents whisked the Chinese-Canadian billionaire from the Four Seasons Hotel in Hong Kong in a wheelchair five years ago. He hasn’t been heard from since.

A Global News investigation has found the companies, Unexus Group and WinnerMax Capital, are at the centre of a Byzantine network of corporations connected to Xiao’s family, including his wife and brother-in-law, which have invested over $154 million in real estate across the Greater Toronto Area since 2015. Some of the group’s personal properties include a nearly $4-million luxury condo at the Shangri-La Hotel, and a 17,000-square-foot, chateau-style mansion once featured in Toronto Life.

The multi-million-dollar condo and townhouse projects being developed by these companies occupy some of the most sought-after land in southern Ontario, which could be valued at over $1 billion according to sources, land title searches, court documents, and reviews of sales and development plans. One project even involved a $4.3-million piece of land in Georgina, Ont., that is now the headquarters for the York Regional Police marine unit, on the shores of Lake Simcoe.

Xiao, who was born in China but holds Canadian and Antiguan passports, handled business transactions and investments of China’s ruling class including President Xi Jinping, according to multiple media reports. He founded his umbrella of companies, the Tomorrow Group, in the early 2000s with his wife, Zhou Hongwen (also spelled Zhou Guangwen). Zhou, along with her sister Zhou Liwen, are listed as the directors of WinnerMax. This Toronto-based company was first incorporated in March 2017, less than two months after Xiao’s detention.

READ MORE: Mystery surrounds Chinese-born Canadian billionaire reportedly seized by China police

The Tomorrow Group controlled interests in state-dominated industries, including banking, insurance, coal, real estate and even rare-earth mineral extraction, and helped Xiao build a fortune estimated at roughly $5.8 billion.

Xiao’s story exemplified China’s excessive world of finance, where wealthy tycoons use political connections to build sprawling empires. His close connections to President Xi Jinping, marriage to a Mongolian beauty queen, and luxurious lifestyle made him a magnetic figure before and after his detainment made headlines around the world.

His whereabouts are currently unknown. Ottawa would not confirm to Global News reporters whether Xiao has ever received consular visits, or if he is even alive. Some media reports have speculated he is under indefinite house arrest in Shanghai.

Following Xiao’s abduction, Beijing authorities accused him of laundering corruption proceeds in foreign markets as well as “bribery and stock manipulation.” In an October 2020 statement, China’s Banking and Insurance Regulatory Commission labelled Tomorrow Group among China’s “illegal financial groups” that were involved in “financial crimes.”

But other factors may have precipitated his downfall. Documents obtained by Global News through an access to information request show Canada’s government has mulled the possibility that Xiao’s kidnapping relates directly to factional battles in the upper echelons of the Chinese Communist Party.

“Should Xiao possess direct knowledge of shady business deals involving Xi’s political foes, his arrest would send a chilling message,” said a February 2017 report by Minxin Pei, a Chinese-American political-science professor, distributed among Canadian consular officials.

“It is easy to envision Xiao singing like a canary in one of the detention centres run by the party’s anti-corruption investigators.”

Global News could not reach Xiao or his family for comment. But in 2014, Xiao issued a statement denying reports that his empire bloomed from connections with China’s ruling families. Xiao said he prospered by following the lessons of legendary U.S. investor Warren Buffett.

While there have been few reports over the years about his upcoming trial, Xiao’s hope for a fair judicial process is slight. Chinese courts had a conviction rate of 99.9 per cent, according to the latest government statistics.

But beyond the general allegations against Xiao’s companies, which haven’t been proven in court, it’s difficult to determine exactly how much money authorities believe Tomorrow Group obtained, where it went, or how it was returned.

The Chinese Embassy in Canada did not respond to detailed questions for this story.

Where did Xiao’s money go?

As early as 2008, Xiao’s family was setting up a financial foothold in Canada. Xiao’s brother-in-law, Fan Yanfeng, established the China Resource Allocation Corp., which listed his director’s address at a condo in southern Ontario’s winery region, Niagara-on-the-Lake. But it wasn’t until 2015 that Xiao’s family began snapping up development sites across southern Ontario.

Piecing together dozens of land title searches and court documents, Global News has found at least six companies connected to Xiao, his wife and her family.

The structure of the companies is like a Russian Doll: Close to the centre is HZC Capital — described in legal documents as a Canadian real estate “investment vehicle for funds from China.” HZC, in turn, owns Xiao’s family’s public-facing development companies. One of them was Lalu Canada, which later became Unexus. Sources who worked for these companies say private capital companies run by Xiao’s family and their partners make the major investment decisions.

Experts say the way these companies are set up, and some of their transactions in Canada, raise many flags, and questions about whether funds earned from Xiao’s empire in China are being funnelled into Toronto properties.

Money flowing into real estate from outside Canada has become a pressing issue for all levels of government. While there’s nothing illegal about outside investment in Canadian homes, there are strict laws around transferring funds into Canada.

The companies all list 50 Minthorn Blvd. as their business address, on either the first or second floors. And corporate documents for Unexus Group and HZC Capital list Fan Yanfeng, Xiao’s brother-in-law, as a director. WinnerMax Capital, which is tied to these companies financially and through shared corporate registration addresses at 50 Minthorn, is run by Xiao’s wife, Zhou Hongwen, and her sister Zhou Liwen, who is married to Fan, documents show.

A source with direct knowledge of these financial companies said WinnerMax Capital, the company run by Xiao’s wife and her sister, funded some of the land purchases made by Unexus Group, Lalu Canada, and HZC Capital.

“Monies were being advanced by WinnerMax on some of the acquisitions,” said the source, whom Global News has granted anonymity for fear of speaking out. “We used to call it the money from the second floor.”

“They were the purse strings and controlling mind of Lalu, absolutely.”

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Global News’ deep dive into the Xiao family’s real-estate investments offer a window into the kinds of sizzling global money that help fuel skyrocketing home prices: luxury personal properties in the Toronto area, a profitable $73.5-million flip of a land parcel in Vaughan, and condo developments across the city.

An analysis by Global News of property searches, condo unit pre-sales data, completed land sales and development plans, shows that eight of these projects, once completed, could be valued well above $1 billion.

READ MORE: As Canada’s home prices soared during COVID-19, real-estate money laundering audits fell 64%

In Scarborough, a suburban sprawl on Toronto’s eastern edge, Unexus has sold out 385 luxury condo units in “The Borough,” a pre-construction two-tower development. The project’s most affordable dwelling, according to the developer’s public sales data, was a miniature 299-square-foot apartment, sold for $843 per square foot. The sales data, from several years ago, indicates a steep price increase in the area, where an 800-square-foot condo can now sell for about $1 million.

Just north of Toronto in Richmond Hill, WinnerMax Capital — the private investment company of Xiao’s wife and sister-in-law — is building a “limited collection” of 56 luxury townhomes with Unexus. The construction site was purchased in 2017 for $31 million in cash by Lalu Canada, according to a land title search.

Marketing materials from WinnerMax Capital show each designer home in the “intimate enclave” will come with multi-coloured brick and cedar accent exteriors, and offer from 3,000 to 4,000 square feet of modern living. The buyer registration website doesn’t list sale prices. But similar homes nearby market for $1.4 million or more.

But the crown jewel for Unexus could be an assembly of lots at 650 Bay St. in downtown Toronto, a prime development site in the city’s financial district that could yield a luxury condo tower of about 40 floors, according to the company’s marketing plans. If 650 Bay is marketed according to plans — with condos in the area selling for more than $1,200-per square foot — the development could be worth over $500 million, a comparison of luxury condo towers in the area suggests.

Meanwhile, Lalu’s plans for a waterfront development proposal on Lake Simcoe — where the company also worked with York Regional Police to develop a marine building — appear to have stalled in 2018 after facing resistance from local residents.

Xiao’s family members and related companies have not responded to repeated requests for an interview. Directors of WinnerMax Capital and Unexus have not responded to a detailed list of questions both emailed and delivered in-person.

The phone number listed on Unexus’ website is out of service, and in recent weeks the company has moved into the 14th-floor offices of 251 Consumers Dr., a Toronto office complex where WinnerMax Capital is located on the 11th floor.

‘National significance’

Financial crime experts and political observers say the case raises questions about how Winnermax was able to secure its funding in Canada as China imposes a capital export limit of US$50,000 per year on every citizen. If the transfers don’t follow legal and transparent methods, it raises questions about money laundering.

Matt McGuire, a Toronto-based anti-money-laundering expert, said with all these “red flags,” Canadian authorities should be “eager” to look into these companies.

“This is of national significance and you would expect that a national intelligence agency [FINTRAC] would be focused heavily on it,” he said.

The widespread reports and allegations of corruption surrounding Xiao and his wife’s empire, and regulatory actions and investigations against Tomorrow Group, should be more closely scrutinized by Canadian regulators for money-laundering risks, experts said.

Garry Clement, a former director of the RCMP’s proceeds of crime unit, said the structure of these companies, which often use numbered or shell companies, is “indicative” of trying to obscure who the real owners are.

“Information, deemed reliable, highlights that WinnerMax was the catalyst for some major acquisitions in Toronto,” Clement said.

Tomorrow Group’s well-documented financial dealings with elite Chinese officials and Xiao’s prominent dealings in China’s financial, mining and arms company sectors, mean that he and his family could be considered “closely associated” with what is known as “foreign politically exposed persons,” under Canada’s proceeds of crime (money laundering) and terrorist financing act.

International guidelines say a foreign politically exposed person could be a head of state, an elite party official, military leader, president of a state-owned financial institution, or head of a government agency.

FINTRAC, Canada’s anti-money laundering watchdog, requires Canadian businesses to monitor those closely associated with politically exposed clients.

“We’ve seen this time and time again, where folks use their position of influence in their country for their own personal gain, and move [money] to other countries out of reach of their local authorities to make it harder to trace,” said McGuire, who advises companies on regulatory risks.

The Chateau

The investments didn’t only go into commercial real estate. The key directors of these companies also bought properties in the GTA’s most exclusive postal codes. The group even has real estate in British Columbia, with one HZC Capital director listing his address at a $1.6-million home in Coquitlam, a suburb of Vancouver.

Unexus director Fan and his wife, Zhou Liwen, director of Winnermax, personally bought their Markham estate for just over $7 million in 2016, according to a land title search. The compound was built on two bordering lots to accommodate the mansion and adjacent tennis courts, lap pool and recreational quarters.

One online tour of the home from 2013 shows a 25-foot atrium entrance hall, which frames a massive, floating steel and glass stairway. There are dark, chevron-patterned oak floors, a marble-floored ballroom, six bedrooms and 11 bathrooms, an indoor basketball court and theatre, and even an outdoor putting green and Playboy-mansion style swimming grotto on Muskoka-themed grounds that offers plenty of privacy, bordered by tall trees and wrought-iron and stone fences, according to the article.

Property documents show equally notable financial details. In 2019, Fan transferred ownership of the home to Zhou Liwen, for $2. The couple has collectively taken out loans of nearly $14 million against the property, records show.

Meanwhile, in the heart of downtown Toronto, a company called WinnerMax Property Inc., which lists Liwen and Zhou Hongwen as directors, bought a condo on the 62nd floor of the swanky Shangri-La hotel in 2019 for $3.75 million.

Calls for a beneficial ownership registry

With many of the properties tied to Xiao’s family members purchased using numbered or holding companies, financial crime experts say this case highlights the urgent need for a national beneficial ownership registry, a publicly searchable database that would store details about who actually owns and controls private companies.

McGuire said Canada’s lax financial reporting laws make it easier for anyone to buy up property “anonymously” and avoid scrutiny.

“Canada is lagging in terms of its beneficial ownership, and we’ve attracted a really poor reputation worldwide for being a jurisdiction of choice because of the anonymity of our corporations,” he said.

Conservative MP Michael Chong and former diplomat Charles Burton agreed with McGuire’s assessment: that Xiao’s family’s real estate companies and investments raise major anti-money laundering compliance questions.

Chong said he believes the Liberal government has paid little heed to the source of funds imported into Canadian real estate by foreign tycoons and their families.

READ MORE: Hidden ownership loopholes make Canada a ‘pawn in global game of money laundering’

Canada’s reputation as a haven for money laundering has become so bad, according to Chong, that Ottawa has become the butt of criticism from international agencies and the U.S. State Department, which thrusts Canada in the same category as Macau and Afghanistan for its lack of financial regulation.

“A beneficial ownership registry would make it clear who is behind this complex web of companies,” Chong said. “Often, they are holding companies and shell companies and numbered companies, where it’s unclear who the beneficial owner is.”

In the last federal budget, the Trudeau government pledged to create a beneficial registry by 2025, but there have been few updates since.

Burton said Xiao’s family’s financial moves in Toronto should have raised flags in Ottawa, but have instead “fallen through the cracks.”

“The question is, are we dealing with monies that are being laundered through Canadian real estate, which the Canadian government clearly needs to be addressing more effectively?” Burton said.

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