24 Jun Suit over alleged Ponzi scheme that financed Bellevue real estate can proceed, judge rules
Overruling objections about the court’s jurisdiction, a judge has allowed the case against two Bellevue residents who allegedly led a cultlike Ponzi scheme in China for more than a decade to proceed.
The suit alleges Bellevue residents Jialin “Kathy” Niu and Troy McBride financed their extensive local property portfolio with money defrauded from thousands of would-be investors, who took classes at Niu and McBride’s Golden Sun Finance Education in dozens of cities across China.
The company “brainwashed” students, plaintiffs allege, to borrow from each other and from family to invest in shell companies controlled by Niu. The companies maintained the illusion of fantastic returns by using new students’ investments to pay dividends.
The eight plaintiffs, most of whom are Chinese citizens, said they poured $18 million into the companies, believing they were investing in real estate investment trusts that would soon be taken public in the United States. In reality, they allege, their money went directly to Niu’s pocket, where it bankrolled Niu and McBride’s property transactions here — including the acquisition of a major chunk of prime commercial real estate in downtown Bellevue.
Defendants Niu and McBride had asked the court to dismiss the case, arguing it had no jurisdiction in the case because all of the alleged fraud occurred in China.
“The purchase of real estate is not a fraudulent act. And the alleged fraud that occurred in China is not connected to the purchase of real estate here,” argued Niu and McBride’s attorney, Teruyuki Olsen of Bellevue firm Oseran Hahn, in a hearing last week.
King County Superior Court judge Kristin Richardson rejected that logic in a ruling Tuesday.
“Given that defendants claim to know nothing of fraud and to have never been involved in the companies in which funds were invested,” Richardson wrote, “their position militates against a claim that most of what they need to defend the case is in China.”
Niu and McBride continued to defraud students when they were in King County, said plaintiffs’ attorney Angus Ni, of Seattle-based AFN Law, pointing to text message exchanges he said showed Golden Sun was still conducting classes in 2017. Niu and McBride left China in 2015 after an investigation into Golden Sun by China’s Economic Crimes Bureau was closed, according to McBride.
Richardson also granted plaintiffs’ request to prevent Niu from disposing of her American property portfolio — including homes in Bellevue, Medina, Mercer Island and Newcastle purchased for a combined $32.8 million.
Niu, they argued, could be expected to borrow against or sell the properties to prevent plaintiffs from recouping damages.
“Every entity they have in China is completely bankrupt,” Ni argued at the hearing. “That’s why they want you to kick this case to China. This was conceived from the very beginning so they could … slice plaintiffs’ every argument.”
When students attempted to sue one of the Chinese shell companies, it turned out not to own any recoverable assets, according to translations of Chinese court rulings plaintiffs submitted to the court.
Niu has already proved she’s acting in bad faith, plaintiffs argued. Two weeks after the case was filed, she transferred the deeds of two of the mansions to her name alone. Plaintiffs argued she likely did that to borrow against their worth, pointing out she’s already leveraged one of the Medina mansions for more than half its value, according to a screengrab from the website of a hard-money lender.
Richardson ruled that “given their history,” there was a risk “of the defendants selling or refinancing their property or properties and absconding with the profits, rendering them judgment-proof.”
The case saw Niu make a substantial about-face last week.
In a sworn declaration, Niu initially claimed not to have anything to do with the Chinese shell companies. She recanted that declaration after plaintiffs presented the court with Chinese business filings listing Niu, her family and her associates among the companies’ executives.