One of the world's largest overseas investment brokers for Chinese nationals has been caught up in a $26m (€22m) fraud involving a US scheme.
Delsk Group, which styles itself as the leading "channel between Asia and the world" and has a Dublin office, has raised some €60m from Chinese investors to build nursing homes in Ireland.
Delsk was hired to recruit Chinese investors for a US fund to build a cancer therapy centre in California. But the business duo who set up the US scheme, Charles Liu and his wife Xin Wang, have now been accused of "corporate looting" by America's powerful Securities and Exchange Commission (SEC).
"Instead of developing and managing a proton cancer therapy centre in California, Charles Liu funnelled over $20m of investor money to himself, his wife Xin Wang, and marketing firms associated with them," court documents state. One of the marketing companies used by Liu to recruit investors was Delsk Group.
Liu signed an agreement with Delsk's Hong Kong branch to pay it $75,000 per successful investor. Delsk received $1,387,500 and recruited 37 investors. Each Chinese investor made a $500,000 capital contribution and paid $45,000 in administrative fees.
A total of $12m was paid by Liu to three firms, including Delsk, for their role in recruiting investors to the failed Californian scheme.
There is no suggestion that Delsk had any knowledge of Liu's intentions and Delsk said it "has committed to compensate its 37 investors for any loss incurred".
Court documents reveal that Delsk raised concerns with Liu about the fund in September 2015. Delsk formally requested that Liu suspend promotional activities for the project.
Delsk urged Liu to explain "the status of the capital of all investors (in which account their funds are deposited, and whether the funds have been embezzled or misappropriated)".
An investor prospectus claimed the planned Californian cancer treatment facility would create 4,500 jobs and have an economic impact of $728m per year. But court filings state: "Despite significant investment, nearly no construction on the proton therapy centre has taken place.
"Instead, Liu burned through the millions left after payments to himself, Wang, and the marketers on half-hearted attempts to convey the illusion of progress."
Registered in Hong Kong, Delsk now has offices in Ireland, Portugal, Spain, Cyprus, Greece, Thailand, Vietnam, Korea, and six across China.
Hong Kong Delsk, the arm of Delsk Group embroiled in the US fraud case, is listed as a consultant to Delsk's new Irish €100m JWP ICAV Fund that targets wealthy overseas investors.
That fund is authorised by the Irish Naturalisation and Immigration Service - the Department of Justice unit that operates the Immigrant Investor Programme (IIP).
Chinese investors have dominated applications to Ireland's IIP scheme which is open to non-EEA nationals who commit to an approved investment in Ireland, requiring a minimum investment of €1m over three years. The Department of Justice is currently reviewing Ireland's IIP scheme.
Sunday Indo Business