OAKLAND — An FBI investigation into a suspected spy for China appears to have widely broadened, according to recently filed court records that detail a related federal probe into the purchases of multimillion-dollar hotels in San Francisco, Oakland, Dixon and Napa.

In September, Hayward resident Xuehua “Edward” Peng, 56, was arrested and charged with a federal violation of ferrying classified information to Chinese officials using so-called dead drops in Northern California and Georgia. Now, federal prosecutors have revealed Peng was implicated in a real estate scheme in which his sister purchased nearly $20 million worth of Bay Area properties with money wired from China.

In partially-redacted search warrant returns filed last week, the FBI named Peng as a “silent partner” in the fraudulent real estate venture allegedly run by his sister. Acting as a “straw buyer,” the sister — a Mill Valley resident whose name has been redacted in the documents — used money that originated in China to pay for four properties between 2013 and 2015, authorities said, ending up with ownership interests ranging from 30 to 100 percent.

An FBI agent accused Peng’s sister of purchasing, through different business entities, the single-room occupancy Shree Ganeshai Hotel in San Francisco for $1.7 million in January 2013; the Red Lion Hotel in Oakland for $10.35 million in January 2013; the Country 17 Inn Hotel in Dixon, California for $5.28 million in January 2015; and a Napa property with a vineyard and house licensed to serve as a bed and breakfast for $2.28 million in November 2015.

The documents claim Peng’s sister repeatedly drew on the U.S. accounts — including those supposedly owned by other people — for both personal and real estate transactions and sometimes did not repay the money, leading authorities to believe she was acting as a straw buyer. She is accused of misrepresenting the transactions to lenders and tax authorities.

Peng had a small ownership interest in one of the corporate entities, according to the federal filings, and insinuated that he was a partner in the venture during several recorded conversations with both his sister and another unidentified woman recorded by the FBI, according to a recent affidavit.

The cash fueling the venture flowed from various Chinese individuals to U.S. accounts in amounts just under $50,000, seemingly to evade Chinese currency controls, authorities said.

People who sent money did not necessarily receive ownership interests in the properties. For example, one Chinese citizen opened an American bank account in 2012 that received 23 wire transfers over the years. Those funds helped to purchase the Shree Ganeshai Hotel, the Red Lion Hotel and the Country Inn Hotel — but only in the latter case did the account owner receive a 10 percent ownership share, authorities said.

And although Peng’s sister cited herself as the personal guarantor of the properties to lenders for refinancing, she did not list the properties on tax returns, authorities said.

Mill Valley resident Penny Ching is listed under various titles for the properties’ purchasing entities in public records over the years. Records bearing that name show Ching has lived in Mill Valley since 2002 with her husband, a game design consultant who has worked at Sony Interactive Entertainment America, matching descriptors for the affidavit.

The duo also purchased a Brentwood home in 2009 and a house on San Francisco’s Cabrillo Street in 1999. They did not respond to requests for comment.

Peng reportedly owned 3 percent of Morning Sun Capital, the purchasing entity of the Shree Ganeshai Hotel, and listed the owning entity of the Red Lion Hotel as his own business address.

Authorities also traced Peng’s involvement in the scheme back to conversations in which he appears to reference the properties. In one March 2018 exchange, monitored and transcribed by the FBI, Peng and his sister appear to discuss the holdings together in reference to their tax filings.

Related Articles Bay Area man charged with spying for China And in an April 2019 conversation with an unidentified woman, Peng insinuated that he was an ownership partner of the Red Lion Hotel and the actual buyer wanted to force them out, authorities said.

“You know those people in China. That is why a joint venture, when we talk about it, that is, there are interests conflicts, conflicts … they wanted to kick us out,” Peng said, according to the transcript.

Peng’s sister has not been charged with any crimes. Peng remains in custody on no bail after his arrest on suspicion of spying in September.

The Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California and the Counterintelligence and Export Control Section of the Department of Justice, National Security Division, will prosecute Peng’s case.