Singapore’s largest market manipulation case linked to John Soh and the crash of three penny stocks in 2013 is nearing a close. We relive the saga
The trial of John Soh Chee Wen which was linked to the October 2013 penny stock crash has to be one for the books. The case has been described as the largest share manipulation scheme ever on the local market as some $8 billion in value was destroyed.
Many shareholders got burnt in the process, undermining investor confidence and dampening interest in the market, especially the once-bustling mining sector which the Singapore Exchange (SGX) at one point tried to promote. New brooms and tougher rules were also introduced.
The trial of the alleged mastermind Soh and co-conspirator Quah Su-Ling began on March 2019 and ended on June 30. It was one of the longest cases heard by Singapore’s High Court. Quah is out on bail but Soh, her romantic partner, has been held in remand since Nov 25, 2016. The verdict is likely to be passed in the next few months.
Blumont Group, Asiasons Capital (since delisted) and LionGold (renamed Shen Yao Holdings) are the three stocks at the epicentre of the crash. However, directors and executives of up to a dozen or so listed companies were linked as well. A whole parade of witnesses — 96 in total — were called to the stand. They ranged from police officers, remisiers, trading representatives, compliance officials, well-lawyered senior banking executives and even a former on-off girlfriend of Soh and
her personal assistant.
Just before the crash on Oct 1, 2013, Blumont, Asiasons and LionGold (collectively known as BAL) were trading at 3,112%, 1,514% and 464% of their fair value estimate, according to expert witness John MH Ellison.
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The big surge in share prices took place in the last few months before the crash but as the prosecution puts it, the active manipulation began sometime in 2012. However, a few individuals involved one way or another in the whole operation were already visible in the Singapore corporate scene several years before 2012.
For example, as far back as 2006, Richard Chan, described as Soh’s “blue-eyed boy” for his track record of bringing in a steady stream of investment deals, had just assumed control of Strike Engineering, which would later be renamed Magnus Energy. Chan, who would later be one of the prosecution witnesses at the trial, explained to The Edge Singapore in Issue
222 (June 26, 2006) how he wanted to lead the company into coal mining and gas exploration. “We will not stop at one. It’s viable to do three to four at a time,” he said then.
The court was told how Soh, who used to sell shampoo and T-shirts had climbed up the business and political hierarchy in Malaysia through his tenacity, daring nature and network building. Quah, who came from an old-money Penang family, also had a knack of winning people over to her side of the argument. Prior to the BAL saga, the duo had already joined hands in an earlier corporate tussle.
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Laying the groundwork
Evidently, the duo spent several years laying the various pieces in place, installing their trusted associates into various directorships and recruiting a network of brokers before they began pumping up the share prices of BAL via dozens of trading accounts they controlled mainly by proxy.
The alleged manipulation took place in tandem with the drumming up of interest in the stocks. In particular, LionGold, formerly called Think Environmental, went on an acquisition binge in 2011 and 2013, buying stakes in various gold mines using its shares of increasing value.
Errol Smart, LionGold’s then chief operating officer, made no bones about its ambitions. “We have created a template. We have the cookie-cutter now. We know how to do it,” said Smart in Issue 515 (March 19, 2012).
Peter Chen, the company’s then director of business and corporate development, also fronted the company. In Issue 475 (June 6, 2011) Chen, who used to provide legal services for Soh, explained how LionGold was focused on operating small-scale “artisanal” mines in a cost-effective way, without incurring the huge upfront costs in extensive exploration, geological studies and investment in mining infrastructure.
The strategy was further elaborated by LionGold’s then CEO Nicholas Ng in Issue 565 (March 11, 2013). Ng, the former CEO of DMG Securities, explained that LionGold was on the hunt for undervalued junior mining firms which would need an extra push to help them move into production. Ng claimed that LionGold’s acquisition team was checking out five to 10 prospective targets daily. The idea was to buy two to three companies a year, with each deal amounting to $50–100 million.
On the surface, LionGold did seem to have solid backing. Its biggest shareholder, which had an 8.5% stake, was Asiasons, a Malaysia-based private equity firm co-founded by Mohammad Azlan Hashim, the former chairman of the Kuala Lumpur Stock Exchange and national carmaker Proton. Mohammad Wira Dani Abdul Daim, son of former Malaysian finance minister Daim Zainuddin, was the next biggest investor with 6.4%.
In Issue 985 (May 24), Soh told the court he was the “architect” for LionGold, helping to woo investors, check out the acquisitions and promote the company, albeit without an executive role nor a formal agreement with key shareholders to reward him for his efforts because it would be “crass” if these had to be stated in black and white. “Isn’t it a bit naïve to just put in so much time and effort, actually dedicate two, three, four years to this, on the pious hope that people who make money will behave like gentlemen?” asked N Sreenivasan, Soh’s lawyer.
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“But that’s what makes us,” said Soh. “That’s what makes me a compelling salesman. I believe in what I’m talking about, I believe in what I’m selling. There will always be people who don’t come true to form, so be it. But the ones who do come through more than make up for the ones who don’t. That has always guided me through my life. I’ve had reasons to regret many times, but c’est la vie,” said Soh.
Soh also claimed that Neo Kim Hock, Blumont’s then-executive chairman, had asked him to help Blumont after seeing what Soh was able to accomplish for LionGold. However, the crash happened before Soh could even begin.
The crash and the aftermath
The crash of Oct 4, 2013, was described in some detail in Issue 596 (Oct 14, 2013). Share prices of the BAL counters, which had enjoyed heady gains in the preceding months, started plummeting on heavy volume on that fateful day.
Less than an hour into trading, the SGX suspended trading in the BAL counters, citing the need to safeguard investors who may not be fully aware of what was actually happening in these companies. By that time, the combined market value of the BAL counters had more than halved to $4.1 billion from $9.3 billion the previous day. To be precise, shares of Blumont, Asiasons and LionGold were down 56.4%, 61.5% and 42.1%.
In reply to SGX’s queries on the reasons behind the crash in share prices, all three identified UOB Kay Hian’s trading curbs on their stocks as a potential cause. The BAL counters were among at least 18 stocks named as designated securities. Asiasons also attributed to “false rumours” of an investigation by the Monetary Authority of Singapore (MAS).
However, many investors and traders in the market did not believe these explanations. Several of them pointed out that UOB Kay Hian’s trading curbs had already been in place for a number of days before the crash.
Issue 597 (Oct 21, 2013) noted how remisiers and securities houses were still tallying up their losses a week later after the crash. One account that stood out was by Robert Huray, then CEO of DMG & Partners, a brokerage with several remisiers and dealers who were lateractively linked to Soh.
Huray claimed that the contra losses incurred by the clients were manageable and within expectations. “There will be no significant impact on DMG’s business, operations and financials.We have always reviewed our daily positions and net exposures, not only to these three designated counters but also to other counters”. In March 2015, RHB, which already held 51% of DMG, acquired the remaining stake from Deutsche Asia Pacific.
Hunting for the truth
Issue 620 (Apr 7, 2014) reported how the investigation by the Commercial Affairs Department (CAD) had widened and that a “Malaysian syndicate” was reportedly behind the episode.
Five months later, Soh’s role as the ringleader — and his modus operandi — was first reported in The Edge Singapore in Issue 641 (Sept 1, 2014). However, Soh’s only direct link to the BAL stocks, according to those quoted, was that he carried business cards identifying himself as “adviser” to LionGold’s chairman, Nik Ibrahim Kamil. “He [had] been called up many times for questioning by CAD,” a former associate said. At that time, Soh’s passports had been impounded and he was out on police bail.
Soh was mentioned publicly for the first time by prosecutors as the possible mastermind in January 2016, when he applied to have his passport back so that he could go back to Ma- laysia to visit his mother. The application was not approved and on November 25 that year, Soh was arrested and charged the following day. Ever since then, he has been in remand.
Meanwhile, Quah, his alleged co-conspirator, was allowed bail of $4 million. There was a third accused, Goh Hin Calm, described as the “treasurer” of the operation. Just before the trial started in March 2019, Goh pleaded guilty and became a witness for the prosecution instead. In total, Soh and Quah faced 188 and 177 charges respectively.
The actions of others
During the course of the trial, the defence, led by Sreenivasan, took pains to show how other individuals and organisations were responsible for the drastic movements in BAL share prices.
For example, Quah and James Hong, then executive director of Blumont, both had share financing accounts with Goldman Sachs’ private banking unit. The court was told how another Goldman Sachs client was busy selling BAL shares just when the bank’s risk management department started to worry that BAL shares, held as collateral for Quah and Hong, were perceived as overvalued.
In Issue 970 (Feb 8) Sreenivasan reportedly spent days crossing the bank’s representative, Jason Moo, questioning the quality of Goldman’s due diligence process for onboarding new clients. “You see, I’m trying to find out whether is it just the colour of money that counts or the quality of clients that count,” said Sreenivasan.
What had actually led to the crash, argued Sreenivasan, was not the action of his clients but the selling off of BAL shares by Goldman. The court was told how on Sept 27, 2013, with BAL share prices hitting new highs, Goldman decided it was no longer “comfortable” lending to Quah and Hong, with whom it had already extended loans of up to $69.36 million and $73.23 million respectively.
On Oct 2, 2013, a day after SGX had asked Blumont to justify its share price, Goldman decided it needed to be “in a position to start selling the BAL shares if the account holders were not able to find alternative financing to
repay the loans”.
When Quah and Hong could not meet the three-hour repayment deadline, Goldman started selling the shares held as collateral in their accounts, triggering the crash.
Generals or rogue traders?
Among the 96 witnesses was one Dick Gwee Yow Pin, who had known Soh for nearly four decades and gone through thick and thin as colleagues and friends. Gwee told the court how he initially thought Soh was “selling snake oil” the way he promoted BAL stocks before becoming an active trader of BAL shares himself. When CAD investigators closed in, Gwee told the court Soh tried to get him to shoulder the blame. “I smiled, I shook my head and I walked away,” said Gwee when deputy public prosecutor (DPP) Jiang Ke Yue asked how he responded. (Issue 977, March 29)
Old friends aside, brokers and trading representatives made up the bulk of the witnesses testifying against Soh and Quah. They told the court how they were given trading orders and helped Soh and Quah find new “lines” so that the big volume contra trades with minimal cash settlement could be executed. Following the crash, each had also tried to force Soh to make good his promises that he would repay their losses — to no avail.
Several notable ones included Ken Tai Chee Ming, Leroy Lau Chee Heong, Henry Tjoa Sang Hi, Wong Xue Yu and Gabriel Gan Tze Wee. The court was told how when selling pressure mounted, Soh would rally them around the flag to help defend the share prices, calling them his “generals”.
When Soh took the stand, he hit back at the allegations. In Issue 985 (May 21), he rubbished the testimonies of the brokers as their accounts of what went on during the share manipulation were “practical impossibilities.”
Soh called them “rogue traders” because they had “admitted [to] their cooperation and alliance” and told the same narrative which he believed was created after realising Soh was on CAD’s radar.
Soh also claimed that many trades done by Tai, Gan and Tjoa between July 2012 and October 2013 when the alleged manipulation took place, were not authorised by him. “I want to show that these trades have nothing to do with me and the scale of which they did would have overwhelmed the market,” said Soh.
“I have no idea why in the world the rogues want to fix me,” he went on to say. “Now, we see the extent and the scale of their activities, the devices they use — it is totally brazen,” he said when shown a series of trades that had been made across different platforms.
Lover told to catch a falling knife
Aside from the tales of betrayal and lies, the trial was also peppered with instances of human drama. As reported in Issue 967 (Jan 18), former relationship manager Adeline Cheng Jo-Ee, called Soh her “saviour” after he stepped in to soothe an angry client of hers, who happened to be Neo of Blumont.
In February 2013, Soh told Cheng he would give her $3 million in cash to buy a property in the Mohamed Sultan Road area, which was where LionGold’s office was located and where Soh had spent a lot of his time. “‘I was a little bit taken aback because the relationship was young, but it was becoming intimate. And then I said, ‘For what?’ And he said, ‘For us’,”recalled Cheng.
Soh’s testimony to the court wasn’t as romantic. He claimed she stole a watch which was of much sentimental value from him and often “pestered” him for stock tips so she could build her own billion-dollar portfolio. She also got annoyed when she saw him talking to others about BAL shares. “I am your girlfriend, why you never take care of me?” she reportedly said.
And then there was Quah. Their relationship had started smoothly enough after Cheng helped Quah get out of a bind over the settlement of some trades. They called each other “sis” until each realised they were in competition for Soh’s affections. That’s when the disparaging remarks and name-calling started.
In any case, things did not end well for Cheng. When the three penny stocks, which had already gained significantly, came under selling pressure, Cheng claimed it was Soh who urged her to buy more instead. She said she hesitated but listened to him anyway, in the end losing some $10 million in the crash. “It dawned on me how foolish I was and it became very painful. The person I love and trust had asked me to catch a falling knife,” said Cheng.
Cover image of John Soh: Bloomberg
