Decision in brief: Feng, Enforcement Proceeding, Merits, March 15, 2023
CIM International Group Inc. and Jiubin Feng raised $10 million from investors to develop a real estate project that Feng controlled (the Bayview Creek Project). In this enforcement proceeding, OSC staff said that CIM and Feng committed securities fraud by using $3.39 million of investors’ funds for purposes other than the real estate project. They should not have done that, and they caused investors to suffer significant losses. Feng said that the way he used the investor funds was consistent with how he understood the funds were intended to be used.
Just before the hearing started, CIM and Feng asked the Tribunal to adjourn (delay) the hearing for two or three weeks. CIM and Feng wanted the adjournment so that they could talk to OSC staff about a possible settlement. Staff said that the hearing should not be adjourned because there was no reasonable chance of a settlement.
The Tribunal decided that there was not a reasonable chance of settlement. Someone who asks to adjourn a hearing has to show that there are exceptional circumstances that would justify an adjournment. CIM and Feng were unable to do that.
The hearing went ahead, and the Tribunal decided that CIM and Feng committed fraud. A significant portion of the funds were used for purposes unrelated to the Bayview Creek Project. This was so, even though the documents explaining and promoting the investments and CIM and Feng said to investors that the funds would be used only for the Bayview Creek Project.
As a result of this decision, the Tribunal will hold a hearing to decide what sanctions and costs should be ordered against CIM and Feng because of their conduct.