Agency closes five-year file on 'shadow broker' who earned millions through falsified loan applications and tax records
A five-year investigation by the Canada Revenue Agency (CRA) into an alleged $500 million mortgage fraud involving an unregistered BC “shadow broker” ended without criminal charges last year due to a “technicality,” newly obtained documents show.
Internal documents obtained by CBC through a freedom of information request reveal the BC Financial Services Authority (BCFSA) made multiple attempts to involve law enforcement in investigating Jay Kanth Chaudhary, a so-called “shadow broker” who orchestrated hundreds of mortgage deals using doctored documents and the help of licensed agents and brokers.
“Unfortunately, due to a technicality, the Public Prosecution Service of Canada has decided not to lay charges for this investigation,” CRA senior investigator Aaron Altrows wrote in an email to the BC Financial Services Authority (BCFSA).
Altrows noted the case had been referred to the CRA's civil division for assessments, adding, “This was an excellent referral and very much appreciated to come from your agency. Please continue to send us referrals in the future.”
The documents expose the inner workings of a half-decade-long investigation into Chaudhary and a network of more than two dozen real estate professionals who helped him arrange $500 million in financing for unqualified borrowers using falsified tax and banking records.
Though the CRA pursued Chaudhary for failing to remit nearly $1 million in taxes and collected damning evidence – including false and genuine tax documents, faked income reports, and details on referral fees – no criminal charges were ever filed.
The “technicality” that led to the collapse of potential charges remains unspecified in the documents. The Public Prosecution Service of Canada declined to comment on whether it had considered or was pursuing the case.
Regulatory sanctions
BCFSA director of investigations Raheel Humayun described the scope of Chaudhary’s activities as “staggering,” noting the number of licensed professionals who breached ethical codes by participating in the scheme. Yet, aside from license suspensions, cancellations, and fines capped at $75,000, no criminal penalties have been levied against any individuals involved.
The lack of criminal accountability did not stem from inaction. BCFSA records show numerous efforts to escalate the case.
A BCFSA case note from that date describes meetings with both Vancouver Police Department’s financial crime unit and RCMP officials. The agency aimed to determine whether law enforcement would take interest in pursuing Chaudhary criminally.
Although the RCMP revisited the file years later—after the case gained public attention and Chaudhary testified before BC’s Cullen Commission on money laundering—the agency ultimately did not proceed. A 2023 memo from Humayun to inspectors at the Federal and Serious Organized Crime Unit referenced “potentially criminal activity” discovered through regulatory investigations.
“The names, DOBs and basic allegations against ... these 30 possibly associated individuals are contained within an appendix to the letter,” the memo stated. “Our office is available to provide further details, including the evidence or reports in our possession.”
Still, no action followed. In a public statement, Vancouver police noted the allegations were “primarily regulatory in nature,” making BCFSA the more appropriate authority. The RCMP refused to confirm or deny any investigation or individuals involved.
CRA pursuit
CRA’s interest began in mid-2019. In an email sent by BCFSA investigator Doug Brecknell to CRA Criminal Investigations, Brecknell laid out suspicions that licensees had underreported or misrepresented their income to tax authorities.
“Both false and believed to be genuine tax documents for the real estate licensees were obtained,” Brecknell wrote. “A review of tax documents ... indicates that it would be unlikely that the real estate licensees' reported income would be sufficient to afford the mortgage payments being made.”
The CRA subsequently secured a warrant to seize documents already in possession of the mortgage broker registrar. These included records from Chaudhary and Shane Christopher Ballard, a former licensed broker who admitted to facilitating 165 mortgage applications for Chaudhary.
According to the search warrant, CRA investigators believed that from 2009 to 2019, Chaudhary earned $5,283,347 in client fees and $642,344 in referral fees.
Between 2012 and 2018, it is alleged he failed to report:
- $2,967,915 in net business income
- $798,505 in unremitted income tax
- $163,033 in unremitted GST/HST
- $23,623 in unremitted Canada Pension Plan contributions
One case described in the warrant involved a businessman who paid Chaudhary nearly $5,000, equivalent to one percent of the mortgage principal, to secure a home loan for his son using fraudulent tax documents. Ballard, who submitted the application to CMLS Financial, paid Chaudhary $1,250 for the referral.
Between 2015 and 2018, Ballard allegedly paid Chaudhary $282,900 in cash as referral fees for mortgage files.
Earlier in 2024, Ballard, who now works as a home inspector, was permanently banned from the mortgage brokering industry and fined $50,000.
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Many licensed real estate agents who referred clients to Chaudhary also used his services themselves. In one case, an agent was stripped of her license after admitting to using fake financial statements to buy a house in 2017, despite declaring a negative income of $459 the year before.
The regulator has since taken disciplinary action against several individuals within what it called the “extensive web” surrounding the shadow broker.
Chaudhary’s defense
Chaudhary was licensed briefly from 2007 to 2008 but was suspended following an earlier investigation that uncovered falsified documents. During his testimony at the Cullen Commission in February 2021, he claimed he was meeting the needs of borrowers shut out by traditional lenders.
“In reality, I don't think it can be prevented,” he said. “Because there always will be a need for individuals like us and what we did, and because the demand itself is there. The demand comes from the borrowers themselves. The demand comes from people who want a house and do not fit in the traditional guidelines.”
Chaudhary claimed none of his clients defaulted, no lender suffered losses, and the booming B.C. housing market kept demand high.
At the time, his lawyer said the CRA investigation was in the “charge approval” stage. The undefined technical issue that halted the charges appears to have arisen between his testimony and the CRA's decision in 2024.
Once the CRA dropped the criminal probe, it returned the files to BCFSA.
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