the WFOE standing timber model. Many of the WFOE purchased
plantation transactions were conducted through Suppliers
controlled by the appellant and his management team. Plantation
rights certificates were lacking for most of the purchased plantations. The trial judge concluded that “like the BVI standing
timber, the majority of the WFOE purchased plantations were
never actually owned by [SFC] and had no value”: at para. 562.
(c) The wood log trading cash gap fraud
 The third fraud found by the trial judge was in wood log
trading activities. From 2005 to 2010, revenue from wood log trading
ranged from 15 per cent to 25 per cent of SFC’s total consolidated
revenues, and a smaller percentage of SFC’s consolidated profits.
Under SFC’s wood log trading model, an SFC BVI subsidiary
would purchase logs from a Supplier outside of the PRC and pay
for the logs using a letter of credit guaranteed by SFC. It would
then resell the logs to a customer. However, typically only about
70 per cent of the wood log sales accounts receivable were paid in
cash by the customer. The remaining 30 per cent was directed to
BVI standing timber Suppliers, which had the effect of diverting
“new” money into the BVI standing timber model.
 The diversion of 30 per cent of the wood-log-trading
receivables to BVI standing timber Suppliers, for assets the trial
judge determined did not really exist, created a “cash gap” —
$239.8 million more was paid out to purchase wood logs than was
received on their sale. And, after the Muddy Waters Report, substantial amounts of accounts receivable associated with the wood
log trading business were not paid — the customers vanished.
Many of SFC’s wood log customers were found not to have been
at arm’s-length from the appellant.
 The trial judge found “the preponderance of probabilities,
having regard to all of the evidence, is that the wood log cash gap
was a fraud orchestrated by [the appellant] with the assistance of
[his management team] at [the appellant’s] direction”: at para. 633.
(d) The wood log deposit fraud
 The fourth fraud found by the trial judge arose from the
practice of placing deposits for the purchase of the logs. The
appellant caused SFC subsidiaries to enter into wood log trading
agreements requiring payment of substantial unsecured “deposits”
and “advance payments” for the purchase of logs, which exceeded
the value of any logs actually delivered. After the Muddy Waters
Report, log deliveries ceased and, with one exception, none of the
deposits or advance payments were repaid, resulting in a loss of