A Burnaby woman and some of her family members are being sued for allegedly defrauding a Vancouver businesswoman of $260,000 through a “sham” consulting company for getting around currency controls in the People’s Republic of China.
In a notice of civil claim filed in B.C. Supreme Court, Sarah Wu says she was introduced to Burnaby resident Weihua Xiao in December 2019 by a mutual acquaintance who knew Wu was looking to exchange and transfer the equivalent of about $20,000 out of China.
China limits the export of currency to $50,000 US per year, and Wu says Xiao told her she knew about “several loopholes” to get around those limits.
Wu says Xiao told her she would have to transfer her funds to bank accounts controlled either by Xiao, her parents-in-law or others at their behest, and the funds would then be paid to her in Canadian or U.S. dollars minus Xiao’s fee.
Wu claims Xiao told her there was “no risk of loss” and Xiao agreed to be personally liable for the repayment of Wu’s funds in full.
After two successful transactions involving smaller sums in December 2019 and October 2020, however, Wu says she transferred another 1,340,000 Chinese Renminbi (currently worth about $264,000) in October 2020 and Xiao failed to repay her.
Wu says Xiao then disavowed the deal.
Wu is now suing for the Canadian equivalent of the Chinese funds, an injunction to prevent Xiao and her family members from selling off assets before the lawsuit is settled, punitive damages and a number of orders against Xiao and her family.
“Ms. Xiao’s consulting business was a sham and was, in fact, a scheme whereby clients, including Ms. Wu, were directed by Ms. Xiao to trust their funds to the defendants, who have subsequently absconded with them,” states the notice of civil claim.
But Xiao and her family are denying any of them ever owed any money to Wu or entered into any contract with her.
“The plaintiff was trying to smuggle (money) out of China and it appears to have been taken or confiscated by an unknown third party or government actor,” states a response to civil claim. “The plaintiff knew the smuggling operation was risky and is improperly trying to hold the defendants liable for her loss.”
Xiao knew of people who could act as middlemen in the “illegal currency smuggling operation,” according to the response to civil claim, and she offered to help Wu by consulting these middlemen and passing on instructions to Wu with the understanding that Xiao would get a “small percentage commission or fee.”
“To the extent that Ms. Xiao had any contractual duties to the plaintiff it was only to assist with (the) illegal currency smuggling operation on a best efforts basis,” states the response.
Two properties – one in Burnaby and one in New Westminster – owned by Xiao and her in-laws are tied up through certificates of pending litigation till the lawsuit is resolved.
They applied to have the certificates cancelled, but B.C. Supreme Court Justice Karen Horsman dismissed their application earlier this month.
None of the claims against Xiao or her family members have been proven in court.