In a recent decision that underscores the seriousness with which Ontario’s securities regulators and courts treat investor fraud, the Ontario Divisional Court dismissed an appeal by Jiubin Feng and CIM International Group Inc. (CIM) from significant sanctions imposed by the Ontario Securities Commission’s Capital Markets Tribunal. The case—Feng v. Ontario Securities Commission, 2025 ONSC 2268—involved allegations of securities fraud relating to the misapplication of funds raised from investors under false pretenses.

This decision is instructive not only for its clear affirmation of the elements of fraud under the Securities Act but also for its firm stance on the proper role of appellate courts in reviewing findings of fact and credibility made by specialized tribunals. For legal practitioners and investors alike, it offers a detailed case study in how courts deal with complex fraud claims involving the misuse of investor funds in real estate development schemes.

Background: The Bayview Creek Project and the Offering

At the heart of the case was a real estate development initiative known as the Bayview Creek Project in Richmond Hill, Ontario. Jiubin Feng, a real estate developer, controlled the project through several corporate entities. He was also the Chairman and CEO of CIM, a company initially engaged in mining but later repurposed by Feng to raise funds for his real estate ventures.

In 2017, CIM announced a $10 million offering to investors, who were told their money would be used exclusively to finance the Bayview Creek Project. CIM planned to issue secured debentures and use the proceeds to lend to Bayview Creek, secured by a mortgage on the project’s land.

Despite these representations, the Ontario Securities Commission’s Capital Markets Tribunal found that Feng and CIM diverted at least $3.39 million of the offering proceeds to unrelated real estate projects or back to CIM itself. By the end of 2018, CIM owed Bayview Creek nearly $7.5 million and defaulted on its interest payment obligations to investors. Many investors in Ontario, Hong Kong, and the UK, suffered substantial losses.

Findings of the Capital Markets Tribunal

The Tribunal issued two key decisions: the Merits Decision (March 2023) and the Sanctions Decision (November 2023). In the Merits Decision, the Tribunal found that the appellants engaged in conduct they knew—or ought to have known—amounted to fraud under section 126.1(1)(b) of the Securities Act. In particular, the Tribunal concluded that investors were intentionally misled about how their funds would be used.

The Sanctions Decision imposed the following penalties:

• $500,000 administrative fines for each appellant
• Disgorgement of $7.63 million, jointly and severally
• Costs of $206,769.34
• A permanent ban from participating in capital markets, with a narrow carve-out for Feng’s personal registered accounts after payment of all monetary sanctions

The Appeal and the Divisional Court’s Response

The appellants appealed both the fraud findings and the severity of the sanctions. Their arguments raised numerous issues, including alleged errors in how the Tribunal assessed the elements of fraud, failure to consider Feng’s limited English proficiency, and an assertion that the sanctions were excessive.

The Divisional Court, in a unanimous decision authored by Justice Corbett (with Justices LeMay and Shore concurring), rejected each of these arguments in turn.

Tribunal Applied the Correct Legal Tests

The Court confirmed that the Tribunal had properly stated and applied the legal tests for both the actus reus and mens rea elements of fraud. The appellants argued that Feng lacked the subjective intent necessary to constitute fraud, pointing to his supposed lack of involvement in the offering and limited English language skills. The Court disagreed.

The Tribunal had found that Feng signed the offering documents and personally told investors in Mandarin that the funds would be used solely for the Bayview Creek Project. There was also evidence that Feng reviewed the records with a Mandarin interpreter and understood their contents. As a result, the Court upheld the Tribunal’s finding that Feng had the requisite knowledge that his conduct could result in investor deprivation.

No Palpable and Overriding Errors

Throughout the decision, the Court emphasized the deference owed to specialized tribunals in matters of fact and credibility. Citing the Supreme Court of Canada’s guidance in Housen v. Nikolaisen and Vavilov, the Court made clear that it would not reweigh evidence or substitute its own conclusions for those reasonably drawn by the Tribunal.

The appellants’ arguments often disagreed with the Tribunal’s assessment of the evidence, particularly the credibility of witnesses like Hui, a key investor who testified that Feng personally misled her. The Court found no basis to overturn the Tribunal’s credibility assessments, which were clearly explained and supported by the record.

Sanctions Were Proportionate

The Court also dismissed the appellants’ challenges to the sanctions, finding that the Tribunal had appropriately considered both aggravating and mitigating factors. While the fraud was not the most egregious case the Tribunal had seen, it was nevertheless serious and involved substantial harm to multiple investors.

Importantly, the Court affirmed the Tribunal’s decision to require payment of financial penalties before allowing Feng limited trading in his registered accounts. It found this condition to be entirely reasonable given the nature of the misconduct and the need for general deterrence.

The Court upheld the $7.63 million disgorgement order, finding that all investor funds were obtained through a fraudulent offering, even if not all were misapplied. The Court emphasized that it was not necessary to prove precise misuse of every dollar; the deceitful method by which the funds were obtained justified full disgorgement, less only what was returned via a private settlement with one investor.

Key Takeaways for Fraud and Securities Litigation in Ontario

This decision provides several important lessons for those involved in securities regulation, enforcement, and litigation in Ontario:

1. Tribunal Findings of Fact Will Be Respected on Appeal

One of the most resounding themes of this case is that appellate courts will not retry a case or reweigh the evidence unless there has been a palpable and overriding error. Those findings generally stand where tribunals make careful and reasoned credibility determinations, even in the face of vigorous disagreement by the losing party.

2. Fraud Does Not Require Profit or Malice

The appellants tried to argue that they did not personally benefit or set out to defraud anyone. The Court was clear: fraud under the Securities Act does not require either of those things. What matters is whether a knowing misrepresentation resulted, or could have resulted, in the deprivation of investor property. Even “indirect” benefits to the fraudster, such as channelling funds to other projects, are sufficient.

3. Offering Documents and Oral Representations Are Both Key

This case also highlights the importance of both written and oral representations in securities offerings. Feng’s promises to investors in Mandarin were just as impactful as the language of the offering documents themselves. When these are inconsistent with the actual use of funds, liability can follow.

4. Disgorgement Orders Will Reflect the Totality of the Misconduct

The Tribunal’s approach to disgorgement—ordering return of all funds raised, less what was independently returned—demonstrates that courts and tribunals may take a broad approach to investor protection. They will look at the entire transaction and the overall deception rather than dissecting each misuse of funds.

5. Misconduct in the Capital Markets Will Attract Serious Sanctions

Finally, the case affirms that fraud involving public investment—even in relatively private, real-estate-driven capital raising—will be met with substantial financial penalties and permanent bans from the capital markets. The Tribunal’s global approach to sanctions (balancing administrative fines, disgorgement, and costs) was affirmed as principled and proportionate.

Navigating Securities Fraud: Lessons from Feng v. Ontario Securities Commission

Feng v. Ontario Securities Commission is a stark reminder of the regulatory and reputational consequences of misleading investors. It also demonstrates the value of having an active and well-resourced securities tribunal capable of identifying and responding to complex fraud in the capital markets.

For legal professionals advising clients in real estate development, investor relations, or securities offerings, the case underscores the importance of transparency, strict adherence to offering terms, and accurate investor communications. When these duties are breached—intentionally or otherwise—the legal consequences can be severe and long-lasting.

Experienced Legal Defence for Securities & Investor Fraud Allegations

If your company is under investigation or facing serious allegations of securities fraud or investor fraud, immediate and experienced legal counsel isn’t just advisable, it’s essential. The regulatory landscape is complex, and your business’s financial and reputational stakes are incredibly high.

At Milosevic & Associates, our dedicated litigation lawyers are adept at dissecting even the most intricate financial disputes, offering clear pathways through challenging circumstances. We pride ourselves on providing highly experienced legal counsel to help you uncover the truth and pursue a just resolution for your company. Let us help you cut through the confusion and guide you towards an innovative, cost-effective strategy. Discover how our proactive approach can benefit your case.

Contact us today at 416-916-1387 or online to schedule a confidential consultation.