IIROC, the regulator of Canadian investment dealers, has set in motion proceedings against Gary Ng alleging that he obtained a total of $172m in loans from 3 firms using falsified evidence of collateral. The actual collateral he owned might have amounted to only $1.9m.
Gary Ng famously acquired PI Financial for $100m in 2018 at age 34 and basked in the wunderkind image that created. It turns out the entire amount was financed with a loan, allegedly backed by fake collateral.
The loans were used to acquire and then fund PI Financial, the Vancouver-based brokerage firm. A statement of allegations made public by IIROC points to a rudimentary fraud involving account statements and screen captures where unwitting clients’ names were falsified to show Gary Ng's name. In one instance, an account belonging to Gary Ng with a $4 balance was misrepresented as having $90m. All the brokerage statements were from brokerage firms that Gary himself owned and controlled. The misrepresented brokerage accounts were then pledged as collateral.
The lenders are described as an American investment firm, a Canadian asset management firm and a Canadian private company. Tips welcome!
Gary Ng failed to show up for an "interview" arranged by IIROC in July 2020, which leads me to think that nothing good will come out of this. Don Metcalfe, a former senior executive at Richardson Greenshields and TD Securities is also named as a respondent.
This should not affect PI Financial too much, as no client money was lost and the firm promptly advised regulators when the suspicions first arose in January of this year. Gary Ng resigned from PI in February and the firm was sold in July to RCM Capital Management of Vancouver, with the backing of US private equity giant H.I.G Capital. Gary Ng still appears to own 97% of Montreal-based dealer Rothenberg Capital Management, but I doubt that will last for long. If the allegations are true, Gary Ng likely also faces criminal liability.
Among the firms that will have to initiate swift social distancing protocols away from Gary Ng:
-The illustrious global restructuring advisor Alvarez & Marsal, which acted as the financial advisor on the acquisition of PI:
MNP Corporate Finance:
-The University of Manitoba:
You can read my previous coverage of Gary Ng, starting here. It will be interesting to find out who fell for this scam and how IIROC possibly let the deal pass.