A British Columbia entrepreneur is facing accusations he defrauded investors in a real estate development project by failing to reveal that the land had been foreclosed and returned to its original owner for non-payment of the mortgage.
The British Columbia Securities Commission alleged Alfredo Miguel "Michael" Yong sold shares to B.C. residents in his Inverlake Property Investment Corp., telling them each share represented the cost of an acre of farm land in the development project located in Alberta's Rocky View district outside of Calgary.
The BCSC said investors committed to pay a total of $6.24-million for the shares, which they were told equalled the purchase price of the land. However, the BCSC alleged Mr. Yong actually paid just $3.2-million for the land and misled investors about the real cost.
"Therefore, investors paid almost double the actual purchase price of the Inverlake land," the regulator alleged in a statement Thursday.
The commission alleged Mr. Yong did not tell investors he had stopped making mortgage payments on the property under a vendor take-back mortgage provided by the seller. The land was foreclosed in January 2014 and the property returned to the original owner.
"BCSC staff contends that by inflating the share purchase price and not telling the investors about the foreclosure of the Inverlake land, Yong perpetrated a fraud," the BCSC said.
The project was shut down after investors had met the initial requirement to pay for half the value of their shares, but had not yet been required to pay for the second half.
The BCSC said investors have lost the entire amount they provided. The project involved 160 acres of farm land, which Mr. Yong had pledged to purchase, develop and sell at a profit.
Mr. Yong is also accused of improperly selling $949,650 worth of shares to investors who did not qualify to invest under prospectus exemption rules for accredited investors.
The regulator also accused Mr. Yong of separately selling $1.1-million of shares in an Alberta development known as Wheatland Business Park Ltd. in 2008 to investors who did not qualify for prospectus exemptions. The 80-acre parcel of land was part of the larger Wheatland Industrial Park near Calgary.
The BCSC alleged Mr. Yong illegally distributed the shares in Wheatland Business Park to investors without filing a prospectus.