Yellowknife theatre closes as RCMP make arrest in business-loan fraud investigation

A Yellowknife movie theatre and virtual reality gaming business has closed, whileRCMP have arrested one person in connection with a fraud investigation involving the company.

Last week, Northern Sky Films Inc. made a post on Facebook saying it was shutting its doors after a "bad guy"used the company to take out a large bank loan and enriched himself with that money.

Then on Tuesday, the RCMP announced that a person who was involved with Northern Sky had allegedly misappropriated money from loans from the Business Development Bank of Canada (BDC).

Police allegethat $250,000 in loans were taken out to support Northern Sky, but that the money was"funnelled into a personal account before being further dispersed."

That money never went to developing Northern Sky, sayRCMP, and responsibility for repaying the loans was put onto another business partner.

RCMP spokesperson Cpl. Matt Halstead said police aren't naming the suspect as the charges of fraud over $5,000 and laundering the proceeds of crime have yet to be laid.

The arrest comes a few months after Northern Sky claimed in court documents thatthe company, its sole director Shengtang Wang (also known as Tony) and the BDC are all the victims of fraud perpetrated by Northern Sky's former director, Liang Chen, and Chen's business, C.L. Pacific Immigration Consulting Ltd.

The allegations haven't been proven in court.

Wang said the BDC is suing his company, and he's on the hook to pay back a loan that he didn't even know about.

"After BDC told me [Northern Sky] owes BDC a lot of money, I cannot see any hope in the future [of the company]," he said.

BDC sues Northern Sky

Last November, the BDC filed a statement of claim in the Supreme Court of the Northwest Territories. Northern Sky, along with Chen and Pacific Consulting, are named as defendants.

The BDC claims that in 2018, the bank agreed to give Northern Sky a $250,000 loan, andtosecure the loan against Northern Sky's property.

The bank says Northern Sky defaulted under the terms of the loan, and that the company, Pacific Consulting and Chen now owe the BDC more than $269,000.

Northern Sky denies the BDC's allegations, and wants to be excluded from the bank'slawsuit.

In its statement of defence, Northern Sky says Chen took out the loan, purportedly on Northern Sky's behalf, before Wang joined the company in April 2019.

Northern Sky says that Wang didn't know about the loan or the security agreement, and that neither he nor Northern Sky saw any money from it.

Wang says he only became aware of the loan when BDC demanded payment in April 2021.

"Northern Sky was simply a vehicle by which Mr. Chen unjustly enriched himself," reads Northern Sky's statement of defence.

"Mr. Wang is an innocent stranger to all this and has reported the matter to the RCMP."

Northern Sky says it's suffered "irreparable harm." Wang says the business can't be sold until the loan matter has been resolved.

Northern Sky is asking the court to dismiss the BDC's claims against the company.

Chen didn't respond to CBC's phone calls or Facebook message. The BDC declined to comment as the case is still before the courts.

Wang sought Chen's help with immigration

Beyond his business venture, Wang worked with Chen to immigrate to Canada.

Northern Sky's statement of defence says that in 2015, Wang was looking to immigrate from China to Canada, and applied to the business stream of the N.W.T.'s nominee program. In 2017, he went to Chen's Pacific Consulting for help with the immigration process.

Northern Sky says that in February 2017, Chen incorporated Northern Sky and appointed himself as the sole director. Wang was listed as the sole shareholder. Chen told Wang that setting up Northern Sky would gain Wang entry into the nominee program.

Wang was accepted into that program in January 2019, and arrived in Canada and became the sole director of Northern Sky on April 8, 2019.

Wang said he gained his permanent resident status early this year.

Wang previously sued Chen

This isn't Wang's first legal dustup with Chen.

In 2020, CBC News reported thatWang sued Chen and Pacific Consulting, claiming Chen never returned a $50,000 "investment deposit" related to Wang's immigration process, and that Chen owed him another $75,000 for breaching a currency exchange contract.

Chen filed a counterclaim, accusing Wang of slander and of breaching business contracts, amounting to more than $1.7 million.