Xu used WCM777 Ponzi funds to buy mum a house
Last we checked in, the WCM777 Receiver’s Third Interim Report detailed that in February of 2014, $1 million in stolen Ponzi funds was transferred to Phil Ming Xu’s sister.
This was done under the guise of Xu’s company ToPacfic, who on paper were purchasing garments.
Trouble is, Xu transferred the million odd dollars back in February 2014. As of October his sister’s company, Mana Fashion, still had the garments in storage.
Despite paying for the goods, WCM777 had done nothing to acquire them.
Sound fishy? You bet.
The garments in question were purchased by Xu’s sister over 2011 to 2013. Despite initially not co-operating with the WCM777 Receiver, Xu’s sister eventually handed over the goods.
After acquiring them, the Receiver then promptly sold the garment collection to a wholesaler for $295,000. Money that will at a later date be eventually returned to WCM777 investors.
In the meantime, what of the $1 million Xu transferred to his sister? Where did that money go?
According to a December 12th filing by the WCM777 Receiver,
Following the $1 million check to MaNa Fashion, written and deposited on February 28, 2014, on or around March 13, 2014, MaNa Fashion initiated a wire transfer of $730,000 to Olympus Escrow Corporation (“Escrow”), apparently to fund the purchase of real property located at 6812 Sultana Ave., San Gabriel, CA 91775 with a purchase price of $730,000.
This wire transfer was made with the same funds obtained from ToPacific on February 28, 2014.
The buyer of the Property, Xiaomei Deng (“Deng”), is the mother of Xu and Wang, as discovered in documents produced in response to my subpoena of Escrow and as confirmed by their counsel.
$270,000 for the actual garments and $730,000 on a new house for mother? Oh dear.
As indicated in a grant deed issued on March 13, 2014, title to the Property was transferred to Deng through this purchase.
Obviously Xu couldn’t just buy his mother a house with WCM777 funds, so the elaborate ruse to launder the money through his sister was hatched.
A detailed review of Deng’s account statement reveals that it had a balance of approximately $1,000 prior to the funding provided by MaNa Fashion, and at the end of March, 2014 (following the purchase of the 19 Property), the account had an ending balance.of approximately $670.
As shown on the March 2014 statement, all other deposits during this period totaled only $40,540.95.
Thus, the vast majority, if not all, of the funds used to purchase the Property are directly traceable to the funds from ToPacific.
So what happens now?
Based on the nature and timing of the purported sale of garments to ToPacific (which occurred on February 28, 2014, less than a month before the filing of this action), the fact that the garments never left MaNa Fashion’s control, and the subsequent transfer of $730,000 to Deng to fund the purchase of the Property, I believe the purported sale of garments to MaNa Fashion was nothing more than a sham to funnel money out of the Receivership Entities to purchase the Property in Deng’s name.
As such, the Receiver has requested that the Californian Western Division District Court to
enter an Order immediately freezing the Property and prohibiting any sale, transfer or encumbrance of the Property.
The Receiver believes this is necessary, because there’s a high chance
that the Property may be sold, transferred or otherwise encumbered, and the derived proceeds dissipated overseas or elsewhere to avoid disgorgement.
Whether or not Xu’s mother and/or sister are currently living in the house is unclear.
Either way, yesterday the court granted the Receiver request. That means that sometime early next year, the property Xu bought for his mother is going to be auctioned off.
No word yet on the other million Xu transferred to his sister’s other companies, JJ Sparkles and Yuanhao.