$500M Alleged Mortgage Fraud Case in B.C. Collapses Over Legal Technicality After 5-Year Probe

A sweeping investigation into one of British Columbia’s most elaborate mortgage fraud schemes — involving over $500 million in financing arranged through falsified documents — has quietly ended without charges due to a legal “technicality.”

Documents obtained through a CBC freedom of information request reveal that the Canada Revenue Agency (CRA) spent five years investigating Jay Kanth Chaudhary, an unlicensed “shadow broker,” and more than two dozen licensed real estate professionals who helped him arrange hundreds of mortgages for unqualified buyers using fake tax and bank records.

The CRA believed Chaudhary failed to report nearly $3 million in business income and taxes between 2012 and 2018. Despite recommending criminal charges, the Public Prosecution Service of Canada declined to proceed in 2023.

“All is not lost,” wrote CRA investigator Aaron Altrows in a letter to B.C.'s Financial Services Agency (BCFSA), “as I did refer this case to the civil side of CRA, where assessments were completed.”

While BCFSA has levied fines and revoked licences, no criminal charges have been laid against Chaudhary or his associates — a network of real estate agents and brokers who are alleged to have paid and received tens of thousands of dollars in referral fees for fraudulent mortgage applications.

The reasons behind the "technicality" that voided criminal prosecution remain undisclosed, and both the RCMP and Vancouver Police declined to pursue the case, calling the violations “primarily regulatory in nature.”

The scale of Chaudhary’s operations shocked investigators. One memo described 30 individuals allegedly tied to the network, many of whom used Chaudhary’s services to falsify their own income to qualify for mortgages. One agent declared a negative income of $459, only to buy a home a year later using fake documents.

Chaudhary, who was stripped of his mortgage broker licence in 2008, defended his actions during testimony at the Cullen Commission on money laundering in 2021. He claimed his work helped people buy homes without harming lenders — and suggested the need for such services is driven by systemic gaps in the housing market.

“In reality, I don’t think it can be prevented,” he told the commission. “The demand comes from people who want a house and do not fit in the traditional guidelines.”

Despite the lack of criminal charges, regulatory officials say they’ve learned valuable lessons — but critics argue that until criminal enforcement catches up, real estate fraud in B.C. may continue unchecked.