An Ontario court has rejected a real estate developer’s appeal of enforcement rulings by the Capital Markets Tribunal, which found that it defrauded investors.
In 2023, the tribunal ordered $8.8 million in sanctions (penalties, disgorgement and costs) against Jiumin Feng and the company he controlled, CIM International Group Inc., (along with market bans) after finding that they violated securities law when they raised $10 million from investors, ostensibly to finance a real estate development, but diverted $3.4 million of that to other purposes.
According to the Ontario Superior Court of Justice’s decision, Feng and CIM appealed the tribunal’s rulings arguing, among other things, that it had erred in applying the legal tests for determining whether fraud took place, improperly evaluated evidence and erred in finding that investors’ money was diverted.
On sanctions, they argued that the penalties imposed were excessive, that the tribunal erred in ordering $7.6 million in disgorgement and that it failed to consider mitigating factors, among other things.
The court sided with the tribunal. “No error in principle and no palpable and overriding error of fact has been shown by the appellants,” the court said in dismissing the appeal.
“The findings of fraud against Feng and CIM were fully justified on the basis of the tribunal’s factual findings, which were available on the record before the tribunal,” the court said.
On sanctions, the court also upheld the tribunal’s ruling, saying that there was no basis to interfere with its decision.
While the court noted that “it would have been helpful” if the tribunal had specifically addressed certain mitigating factors in its sanctions decision, these factors were not material in the context of the case, it concluded.
“This was fraud, not technical non-compliance,” it said, in rejecting the appeal on sanctions.
“As found by the tribunal, the appellants engaged in fraud, and the losses suffered by investors as a result of the fraud are substantial. Defrauding investors and thereby causing serious loss is egregious conduct and deserves serious sanctions,” the court said.
“The finding that this fraud was not at the most egregious end of the scale of egregious frauds does not undercut the appropriateness of the sanctions imposed,” it noted.