SINGAPORE (May 20): As the trial of the alleged masterminds of the 2013 penny stock crash enters its fourth week, witnesses have admitted to lying in their statements to the police, confessed to ignorance and “imprudent” actions and agreed with suggestions that perhaps the regulators themselves may have caused the crash.
On May 13, a representative from Lim & Tan Securities admitted that “on hindsight”, restrictions imposed by the Singapore Exchange on Blumont Group, Asiasons Capital (now Attilan Group) and LionGold Group — collectively known as BAL stocks — could have caused the crash.
Esther Seet, the brokerage’s executive director, agreed with senior counsel N Sreenivasan that an SGX designation — which was imposed on the BAL stocks on Oct 6, 2013 — would cause severe downward pressure on their price. “Logically, any imposition of trading restrictions would definitely affect the market, because a restriction is quite negative,” she said.
Trading of the BAL shares was first suspended on Friday, Oct 4, 2013 amid plunging prices. On Sunday, Oct 6, BAL shares were declared by SGX as “designated securities”. When SGX lifted the suspension on Monday, Oct 7, the prices of Blumont and Asiasons shares plunged further, by as much as nearly 90%.
Sreenivasan, who is defeding John Soh Chee Wen, asked Seet: “So, the designations, plus downward pressures, plus herd mentality, would that cause the crash?”
“I can’t say it would cause a crash,” Seet replied.
“[But] in this case, it did,” Sreenivasan shot back.
“Yes, on hindsight, it did,” admitted Seet.
Prior to that, Seet had denied all knowledge of manipulation in trading accounts linked to the crash. The accounts were under the charge of former remisier Andy Lee Chee Wee. Seet said Lim & Tan would have taken action immediately had it known about the involvement of third parties, referring to Soh and Quah Su-Ling, the co-accused, in the chain of events.
Lee, the prosecution’s third witness, had on May 6, 2019 testified that he made up stories to conceal the roles of Quah and Alice Ang Cheau Hoon, a remisier at UOB Kay Hian, in those accounts. Lee said he was afraid that the details of his involvement would be revealed as well. He admitted that he took trading instructions from Quah and Ang without obtaining proper authorisation to do so.
Seet explained that while the firm conducted rigorous “Know Your Client” and related due diligence, the checks may have failed, if indeed Lee took orders from unauthorised third parties.
As more evidence comes to light on how the BAL shares crashed so spectacularly, the spotlight may now turn to the efficacy of the policies meant to prevent that from happening in the first place.
Indeed, with evidence given by several witnesses from the broking houses and banks, questions need to be asked as to where the gaps in compliance were, and what impact they had on the crash that occureed.
On May 14, it was revealed by Hafeez Ahmad Choudry, chief risk officer of Crédit -lndustriel et Commercial, that the same person had acted as a donor and donee (giver and receiver) of the powers of attorney for a corporate bank account in CIC that was used to trade in BAL shares — something Hafeez admitted was imprudent.
That person turned out to be Soh’s former romantic partner, Adeline Cheng Jo-Ee, who had full control over the account, opened under the name of a British Virgin Islands-registered entity, Carlos Place Investment. Cheng was also both the authorised signatory of Carlos Place and the representative of its appointed external asset manager, Alethia Asset Management.
When Tan Seow Kiat, KGI Securities’ head of risk, took the stand on May 16, it was revealed that Suspicious Transaction Reports for some of the implicated trading accounts held in KGI were not filed until some months after the transactions occurred.
Those transactions involved third-party cheques issued to three accounts as cash collateral. KGI, after conducting due diligence, could not establish the relationship between the account holders and the persons who issued the cheques.
One of the cheques, issued from the account of Quah and Tan Boon Kiat, a known associate of Quah’s, was for an account belonging to one Ooi Cheu Kok. Upon repeated questioning by Sreenivasan, KGI’s Tan could not pinpoint why the delay happened, justifiably because he was not in charge of compliance in the firm.
When cross-examined by Sreenivasan, Tan also similarly admitted that the confusion arising from SGX’s designation of BAL shares had badly affected market liquidity, resulting in downward pressure on share prices.
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