A few weeks ago, Weizhen Tang sent investors in his Oversea Chinese Fund a stunning letter.
"I am asking for your forgiveness," Mr. Tang wrote. "I destroyed a lot of people's dreams and goals, all I want is a chance to make it up to you."
The letter came as the Ontario Securities Commission suspended Oversea and launched an investigation into allegations of fraud. In court filings, the OSC alleged Mr. Tang raised about $60-million (U.S.) from investors and most of the money is gone. According to the OSC's allegations, Mr. Tang inflated returns, fabricated some financial statements and used money from new investors to pay redemptions to existing investors.
He declined comment and his lawyer said he is co-operating with the commission.
"I can assure you that my client is co-operating fully with the regulator and that to date there have been no charges of fraud laid against my client. As you can appreciate, while the investigation is pending my client is unable to comment further at this time."
The allegations have rattled Toronto's Chinese community where Mr. Tang is considered by many to be an investment guru. Chinese-language websites have been buzzing with the scandal and Mr. Tang has weighed in to counter angry comments by some investors. "Please let me have some time," he wrote. "Let me have the last chance."
Mr. Tang "has been deeply involved in the community," said Sheldon Lin, a professor at the University of Toronto who is also involved with the Canadian-Chinese Finance Association. Prof. Lin did not invest with Mr. Tang and said he had been leery about Oversea.
"We stayed away from that group," he said.
The OSC allegations are quite a come-down for Mr. Tang, who bills himself on his website as a Chinese Warren Buffett and a "financial genius."
According to the site, Mr. Tang was born in China's Hunan province and came to the United States and then Canada in the early 1990s. He earned a graduate degree in biotechnology from the University of Waterloo and worked in various research facilities before turning to investing in 1995.
Mr. Tang said he started out investing in mutual funds on behalf of friends and family. He soon turned to more exotic products, including foreign exchange futures, hedge funds and derivatives. He launched Oversea in 2001, according to the OSC.
Prof. Lin and others said Mr. Tang catered mainly to recent immigrants from China, and joined a number of high-profile community groups, including a Canada Hunan society.
On the website, Mr. Tang said his investment strategy could generate returns of 1 per cent each week. He even referred to himself as the "King of 1 per cent" and he wrote a book titled How the Buffett Way Took Me to Wealth.
To attract investors, Mr. Tang held regular seminars, charging up to $200 a ticket. His largest event was an annual North American Chinese Fortune Forum Toronto Summit that featured guest speakers from the Chinese embassy and several Canadian banks, businesses and investment funds.
One of the speakers during this year's forum, held in January, was Daniel Xu, an economics professor at the University of Western Ontario. Prof. Xu also wrote the preface to Mr. Tang's book and he was an investor in Oversea.
In an interview, Prof. Xu said he spoke about global economic issues during the forum and never touted Mr. Tang's funds. When he received the letter from Mr. Tang, Prof Xu said he felt "very sorry and angry."
He met Mr. Tang through a friend and began investing in Ovesea four years ago. He regularly checked the performance of his portfolio through the Oversea website and "every day I saw the number going up."
Now Prof. Xu, along with others across Canada and in the U.S., is scrambling to find out what happened to his money.
In his letter, Mr. Tang said he started running into trouble in 2007 and lost $10-million "in a few stocks." The OSC alleges he lost roughly $15-million that year and told investors he had made "significant profits."
Mr. Tang said he managed to turn things around in 2008, earning large returns that continued into 2009. He said in the month of January, 2009, he earned a five-fold profit.
Letter excerpt
A translation of part of a letter Mr. Tang sent his clients last month:
"Feb. 27, 2009 is a nightmare day for me. I am asking for your forgiveness.
I am richly experienced in the trading field. My original plan was to gather a large amount of money so earning more profits become easier. I didn't follow the traditional way of doing it, took too many shortcuts, and that's why my plan failed.
1) I didn't take any of the money personally.
2) I have the confidence to return all of your damages and the profits I promised you in the past. I was wrong in the methods I took, not in my theory. If I could do it over again, I would succeed. In the past short while, I borrowed my friend's money to invest for her and in 15 days I made more than $2-million of which I took $1-million to pay off my investors.
In about a year, I could return all of your money. In the next two months, you should see I posses the ability to do so. I destroyed a lot of people's dream and goals, all I want is a chance to make it up to you."
Paul Waldie