'Inner circle' spills the beans in penny stock trial

It did not disappoint. By the time the second tranche wrapped up in November, intriguing tales of betrayal and jealousy, and aspirations of empire building had been told.

At the centre of the drama are John Soh Chee Wen and Quah Su-Ling, who are on trial for their alleged roles in orchestrating the meteoric surge in the price of three penny stock counters: Blumont Group, Asiasons Capital (now called Attilan Group), and LionGold Corp. When their share prices crashed in early October 2013, some $8 billion in combined market value was destroyed.

Ken Tai Chee Ming, a former abettor-turned-prosecution witness, kicked off the second tranche of the trial by recounting how Soh and Quah performed their “market rolling” activities for shares in Blumont, Asiasons and LionGold (collectively known as BAL).

Tai recounted how Soh and Quah performed ‘market rolling’ activities for BAL shares

Tai was a commissioned dealer at AmFraser Securities (now known as KGI Securities Singapore) in 2010 when he was first introduced to Soh and Quah. Within two years, he became “a lot more involved” in the duo’s market operations, and was considered part of the “inner circle” of traders that Soh entrusted with more responsibilities.

Tai, now a trader at Algo Capital, testified that Quah had told him the volume traded in the market for LionGold and Asiasons shares was self-created. He recalled that, in another instance, Quah had revealed that “all the accounts belong to John”.

Tai testifi ed that Quah (pictured) told him the volume traded for LionGold and Asiasons shares was self-created

Tai described the “operations centre” in LionGold’s office where the market operations were coordinated. He moved into this meeting room with Soh and Quah in October 2012. He was also present for the move to an office space one floor below LionGold’s office. Here, together with Dick Gwee Yow Pin, they continued their operations out of the “Dubai” room.

“Dick Gwee was very experienced at playing the market and I began to treat him as a mentor after a while,” Tai said in his conditioned statement.

For example, Tai said Gwee reprimanded him for completing market rolling operations on Asiasons within the first hour of trading. Gwee told him that it would look suspicious if there was no market activity after that, Tai recounted.

“He gave me various pointers on how to conduct ‘market operations’, such as how to move the share price up or down, how to avoid trading with ‘aliens’ [third parties trading in the counters], and how to defend the share price of a counter from margin calls,” Tai added.

Gwee had also instructed Tai to destroy the anonymous, unregistered “bangla” phones held by the inner circle after the Commercial Affairs Department (CAD) began its investigations. Tai did so by running the phones over with his car before throwing them into the sea at East Coast Park.

Manipulating the market

According to Tai, Soh had also instructed him to push down the price of Asiasons shares on Sept 12, 2013 — the eve of the deal to acquire Black Elk. This was to allow the seller, US-based hedge fund Platinum Partners, to get more Asiasons shares.

Tai also recounted how Soh had sought to “shake out” Tony Li Hua, who had obtained a block of Asiasons shares as collateral when Soh failed to pay off a loan after the tenure expired. Soh had also impersonated then Blumont chairman Neo Kim Hock in dealing with financial institutions, according to testimony by Tai.

Tai had initially felt a sense of indebtedness and gratitude to Soh for providing him with a job during his difficult times, among other things. This led to Tai being willing to take the rap for Soh. Tai admitted to lying to the authorities — in a statutory declaration for arbitration and in interviews with CAD — in order to save Soh.

When Tai saw Peter Chen, LionGold’s former director of business and corporate development, crying and looking distraught at CAD, he also informed Soh, and questioned whether Chen had confessed to the authorities. It was then, Tai said, that Soh told him he had spoken to Chen to change his statement.

However, a series of incidents led Tai to change his mind about Soh.

In the last quarter of 2014, Tai was sued in Malaysia by the group of Malaysians who had opened accounts with Interactive Brokers (IB). They alleged that Tai had opened the accounts without their authorisation.

Tai later found out that Soh was the one behind the suit. Soh also did not keep his promise of underwriting the personal monies held by IB, an American online brokerage firm, for losses incurred by the accountholders.

Tai later revealed that it was Gwee who had advised him to confess to CAD.

Tai also learnt how Soh had unfriended Gwee, who had taken the bullet for Soh after the Mid-Continental scandal. Gwee was among the parties who once threatened to sue The Edge Singapore for publishing the story “Hunting for the truth” (Issue 641, Sept 1, 2014).

“After Dick was released from prison, [Soh] didn’t treat him like a friend, meaning even if he saw [Gwee] on the street, Soh would treat him as transparent,” said Tai.

“In fact, Dick Gwee advised me to strike a deal with CAD and come clean,” he added. “The thing he emphasised was to get a good deal from CAD before I turned... But until this day, there is no deal between me, CAD and AGC (Attorney-General’s Chambers).”

Tai said this was why he found it awkward working with CAD in its investigations. “[Now,] I turn and stab him in the back by disclosing all his crimes,” he said.

“If [Soh] had told me he was the one who orchestrated the lawsuits, I might have remained loyal. But he lied to me.” In a cross-examination by Soh’s lawyer, senior counsel N Sreenivasan of K&L Gates Straits Law, Tai had admitted to market manipulation for his own gain. However, Tai later said he only confessed to make Sreenivasan “happy” after a protracted and frustrating back-and-forth questioning.

Tai’s cross-examination has been put on hold until the next tranche so the defence counsels have time to go through some data.

Love triangle

The second tranche of the trial reached its climax with prosecution witness Ivy Tan Ai Bee, the former personal assistant to Adeline Cheng Jo-Ee, taking the stand.

Tan admitted she was more than just a personal assistant to Cheng Jo-Ee

Tan recounted how Cheng, the former romantic partner of Soh, would talk about her unhappiness over being in “a love triangle with Soh and Quah”.

Employed at Cheng’s asset management company, Alethia Asset Management (AAM), Tan said her suspicions were aroused when she saw that the company had only four clients. Three Malaysians — Idris Bin Abdullah, Oei Cheu Kok and Neo Kim Hock — owned the four British Virgin Islands-registered companies that were their clients.

Tan was given the authority to place orders in the trading accounts of these companies, as well as that of Alethia Elite, a company owned by Cheng’s father. However, she soon realised that trades under these accounts were only made in Blumont, LionGold, Asiasons and Inno-Pacific Holdings (now Innopac Holdings).

Tan also recounted an incident when Soh called the office looking for Cheng. She noted that throughout her time in the company, none of the other clients had ever called the office or given her instructions to place orders.

Tan testified that this also aroused her suspicions. She explained that Soh’s instruction was “not a simple buy or sell order”, and that she believed it was “actually a market manipulation”. She added that she believed Soh and Quah were in fact the ones instructing trade orders in the accounts.

The court heard that Cheng had aspired to hit $1 billion in assets under management. The defence counsels then brought up details of a plot allegedly hatched by Cheng to get pregnant with Soh’s baby in order to achieve her business goal.

Sreenivasan put it to Tan that Cheng wanted to have a relationship with Soh so that he could introduce new clients to her. And Tan had encouraged Cheng to “get her hooks into Soh”, the defence lawyer suggested.

Tan would later admit under cross-examination that she was more than just a personal assistant. She would pass it off as being part of a small company where employees needed to do everything.

There were questions about why Tan’s name was on AAM’s Capital Market Services licence instead of Cheng’s. Tan explained that Cheng also had difficulty obtaining her representative licences due to some court cases. She recounted that these had to do with some unpaid parking tickets and a court case with Cheng’s neighbour.

When asked by Sreenivasan why she agreed that her name be on the CMS licence when she was hired to just be a personal assistant, Tan said she thought she should help Cheng since she had joined the company and Cheng was “nice”.

Hostile witness

The second tranche of the trial also saw its first hostile witness take the stand. A hostile witness is one who deviates from prior statements made to law enforcement officers and gives evidence favouring the accused persons.

Joe Tiong Sing Fatt, a former broker at Phillip Securities, took the stand and kept answering questions with “I can’t remember” and “I’m not sure”. Tiong’s unwillingness to answer questions despite being faced with evidence led the prosecution to apply to cross-examine Tiong, as well as impeach his credibility as witness. Justice Hoo Sheau Peng approved the prosecution’s application to cross-examine Tiong but will rule on the impeachment application at the end of the trial.

Tiong, a former broker at Phillip Securities, was the first hostile witness

Tiong made a number of contradictory statements on when he met Soh and Quah, and on the number of times he had interacted with them. When confronted with the inconsistency of his statements given to CAD and in court, Tiong claimed he may have missed out details in the statement due to “undue stress”, which “may have affected” his memory.

“I guess I’ve never taken a statement like this before, and the stress must have gotten to me,” he said.

The prosecution also uncovered the fact that Tiong had been executing discretionary trades in his clients’ accounts — a practice that is illegal for stockbrokers. Tiong had executed discretionary trades in four accounts. These accounts belonged to Lucas Low Min Liat and Keegan Gerald Kari, as well as two other individuals only identified in court as “Ludovic” and “Prem”.

Tiong’s involvement in the market manipulation scheme was also revealed in court, with his name appearing in an email between Quah and Goh Hin Calm about contra losses. Goh has been described as the “treasurer” in the market manipulation scheme and has been sentenced to three years’ jail. He has also been named as a prosecution witness and is expected to be called to the stand later in the trial.

Goh was the ‘treasurer’ of the alleged masterminds of the 2013 penny stock crash

An examination of Goh’s spreadsheet also revealed that the name “Joe, Phillip Securities” appeared in a row recording Low’s contra losses. Asked if this was in reference to him, Tiong said that it “could be”, but added that there were other Joes in Phillip Securities. He was then shown a row that recorded the contra losses of Kari, which bore the name “Joe Tiong” in the same row. To press home the point, deputy public prosecutor Nicholas Tan asked if there were other Joe Tiongs in Phillip Securities.

“No,” Tiong replied.

The prosecution also grilled Tiong about Dongshan Group, where he was formerly a director. Tiong claimed that Soh gave him the job as he was Singaporean and not a bankrupt. However, it was later revealed that he had incurred a debt of $360,000 with Phillip Securities for the accounts of Chong Kwan Lian and Ooi Kwee Seah.

These accounts were allegedly controlled by Soh and Quah. Tiong said he was considering declaring bankruptcy as he could not pay off his debt.

The prosecution later revealed that Dongshan was a play on the Chinese phrase dong shan zai qi, which is a metaphor for “to make a comeback”. “Soh was planning to use Dongshan as a means of coming back after the crash of BAL shares,” DPP Tan said.

The defence counsels’ cross-examination of Tiong was comparatively brief, and mostly centred around the other possible reasons for the crash. Tiong agreed with Sreenivasan that the queries and announcements by the Securities Investors Associations of Singapore and the Singapore Exchange could be part of the cause.

Later, under cross-examination by Quah’s lawyer Philip Fong, managing director of Eversheds Harry Elias, Tiong said three reasons could have contributed to the crash.

He cited the reasons as the BAL shares being made designated securities, some broking houses not allowing them to be traded on margin, and a rumour he heard that some broking houses were shorting the stocks.

However, in a re-examination of Tiong by the prosecution, he admitted it was “hearsay” that some broking houses did not allow the counters to be traded on margin.

Procedural lapses

In the first tranche of the trial, witnesses had already revealed lapses in the processes of broking houses, including a lack of due diligence checks on their customers.

For instance, the first prosecution witness to take the stand, former OCBC Securities remisier, Jack Ng Kit Kiat, gave statements about how Quah introduced people to open trading accounts with him, and gave trading instructions for those accounts.

Ng described how he would send trade confirmations to Quah, who would eventually introduce Soh to him as her colleague “Peter Chew”. Ng later discovered “Peter Chew” was Soh when he chased Quah for the outstanding contra losses after the crash.

Ng, along with other former remisiers — Alex Chew Keng Chiow, Angelia Poon Mei Choo, Ong Kah Chye, and Andy Lee Chee Wee — all admitted to conducting trades for Quah and Soh without third-party authorisation from their accountholders. The remisiers were driven by the commission earned from the trading activity that Quah and Soh did on those accounts. All had also admitted to initially lying to CAD before coming clean in subsequent statements.

Poon was among the remisiers who admitted to conducting trades for Quah and Soh without third-party authorisation from their accountholders

Representatives from financial institutions also took the stand, and attempted to pass off the lapses in know-your-customers checks as failures by the brokers to carry out proper procedures.

While most of the broking houses did not follow up on the lapses, some started investigating their brokers only after receiving requests for account information from CAD.

The next chapter in the penny stock trial will begin on Jan 2, with witnesses such as Soh’s ex-lover Cheng as well as former “inner circle” traders Henry Tjoa and Leroy Lau expected to take the stand.