Singapore (Oct 7): The trial of the alleged masterminds behind the 2013 penny stock crash resumed this week, with prosecution witness Ken Tai Chee Ming of Algo Capital spilling the beans on those in the inner circle of John Soh Chee Wen and Quah Su-Ling: Dick Gwee Yow Pin, Henry Tjoa and Gabriel Gan Tse Ming.
Tai’s conditioned statement reads like a soap opera, with tales of divided loyalty and betrayal. In his statement, and while on the stand answering the prosecution’s questions, Tai pointed the finger at other figures in the stockbroking industry who were connected to or abetted Soh and Quah in their alleged market manipulation activities.
For example, Tai said, Roger Tan, chief executive of Voyage Research, formerly known as SIAS Research, had introduced him to Quah while he was a broker at AmFraser. Tan would also later provide Tai with proxy accounts for Soh and Quah’s schemes, including an account belonging to Vincent Chia, chairman of Transcorp Holdings.
Leroy Lau Chee Heong, a former trader with DMG, was also identified as one of the people Soh and Quah used for their market manipulation scheme. However, Tai was not happy with the deal that Lau got, and asked why they needed someone like Lau when they had to buy him out at two bids higher than when Lau went in.
Tai also said Tan Chin Hock, a market operator, had an arrangement with Soh and Quah to “cross” their “headcount” to support their market rolling operations for Blumont Group, Asiasons Capital (now called Attilan Group) and LionGold Corp — the three stocks allegedly manipulated by Soh and Quah.
Soh’s longtime friend of more than 20 years, Ong Bak Chye, was also identified by Tai as the trading representative of Joseph Gutnick, chairman of Merlin Diamonds, the company Innopac Holdings tried to acquire via a share swap. Ong was also the trading representative of Peter Chen Hing Woon, LionGold’s former director of business and corporate development. “As far as I remember, it was Soh who instructed [Gutnick] to open an account with Ong,” said Tai. “Subsequently, I heard Soh placing orders with Ong to buy Innopac [shares].”
Wong Xue Yu, a broker with AmFraser, was identified by Tai as someone he saw at the LionGold office very often after the October 2013 penny stock crash. Wong, according to Tai, was often close to tears as he told Tai that his losses amounted to nearly $28 million, mostly under the proxy accounts that were held in the names of his family and friends. Other brokers such as Lincoln Lee from Kim Eng and a “Jordan” from DMG were also identified.
Tai also remembered an “Andy” from Lim & Tan Securities, whom Quah later helped to get a job at Sino Construction (now known as MMP Resources). Earlier in the trial proceedings, Andy Lee Chee Wee, a former broker at Lim & Tan Securities, had been called to the stand.
Tai also laid out how Soh and Quah coordinated their market operations from LionGold’s meeting room. “Although [Soh] and [Quah] had no official role at LionGold, no one in the company ever questioned why they were there,” he said in his conditioned statement. He also documented when Soh and Quah moved operations to the “Dubai Room”, one floor down from LionGold’s office.
Tai recalled Soh’s being happy about LionGold’s inclusion in the MSCI small cap index. Soh declared that he had found the formula to get a counter to be an index stock, which would then attract the attention of fund managers. According to Tai, Soh said companies did not need strong fundamentals, only trading volume and market capitalisation. This led to VanEck Vectors Junior Gold Miners ETF’s buying a stake in LionGold.
Turning on the inner circle
Tai also recounted incidents that he said shook his trust in Soh, made him feel snubbed by Soh and “disgusted” with him. Tai had initially agreed to take the rap for Soh and Quah, and lied to the Commercial Affairs Department (CAD) when he was interviewed in 2014 in the wake of the October 2013 crash.
Tai claimed he had felt a sense of indebtedness and gratitude to Soh and Quah for helping him out during a difficult period in his life. Specifically, Tai landed a job at DMG after he left Maybank Kim Eng under unhappy circumstances. After DMG, Tai was offered a job at ITE Electric, one of the companies with links to Soh. Tai noted in his conditioned statement that Gwee had remarked that Tai was the first trader Soh and Quah allowed to observe how they operated.
Soh made Tai promises, such as underwriting his personal monies of about $2 million that were being withheld by Interactive Brokers (IB). Soh also promised to pay Tai’s legal fees and fines, and even take care of his family if the latter went to jail.
In return, Tai would update Soh after his CAD interviews and also inform him if any of the brokers or “inner circle” had “cracked” and turned prosecution witness. For instance, Tai told Soh he spotted Chen, the former LionGold executive, crying and looking distraught at the CAD office. Soh then informed Tai that he had told Chen to change his statement.
However, a series of six lawsuits that were then filed in Malaysia by the Malaysian account holders in Saxo Bank and IB made Tai lose his trust in Soh. Initially, Soh had claimed that he did not have any control over the account holders. However, when Tai’s lawyer spoke to the lawyer serving the lawsuits, he discovered that Soh was the one behind them.
Soh had also done other things that made Tai think twice about his loyalty to him. For instance, despite his animosity towards Lau, when Tai heard how Soh had caused Lau to lose $32 million, he felt disgusted.
Furthermore, Gwee had told Tai of his experience in taking the fall for Soh. In 2002, Gwee was convicted of manipulating shares in Mid-Continent Equipment Group, an oil industry equipment supplier.
According to Tai, Gwee told him it was not worth taking the rap for Soh over the penny stock crash. “Because after [Gwee] was released from prison, [Soh] didn’t treat him like a friend, meaning that even when he saw him on the street, [Soh] took him as transparent,” said Tai.
Tai also recounted how Chee, then chairman of Sino Construction, told him that Soh had a habit of making scapegoats of people involved in his schemes, causing them to go bankrupt.
However, Soh apparently tried to keep some of them loyal by “drip-feeding” them. That did not really work on Tai, though. “[Soh] was paying me a small amount, less than $3,000 a month, during the duration when IB withheld the money,” said Tai, who added that even those payments were not regular.
Chee also told Tai that the sale of Sino Construction to Edward Lee Ewe Ming had apparently resulted in $40 million being transferred to Quah’s mother’s account. This also upset Tai, who saw how Soh chose not to help the traders and brokers who had suffered losses during the crash. “I feel disgusted that my own boss gave instructions to finish off his own friends,” said Tai.
Fat-finger trades
On Oct 3, Soh’s defence counsel N Sreenivasan kicked off the cross-examination of Tai, grilling him about trades done through his Algo Capital account held at IB and Saxo. It was then revealed that Tai had lied to CAD and the prosecution about the trades done through those accounts, saying that they were accidental, or “fat finger” trades.
It was further revealed that Tai had lied to cover up for Tan, formerly of Voyage Research, and the proxy accounts that were provided by Tan. Tai lied so as not to get Tan involved. The two men share a personal connection: Tai’s godfather is Tan’s father.
Sreenivasan grilled Tai about the $40 million that was supposedly moved to Quah’s mother’s account, asking him whether he was even sure that such a transaction took place. Tai retorted that Edward Lee’s stake was near the general offer level of 30%, and also that he did not buy that bloc of shares from the open market.
Sreenivasan then accused Tai of lying to the prosecution and the court by not telling the whole truth to CAD as well as to the deputy public prosecutor. Tai replied that he lied as he did not want to incriminate himself further, as he had no immunity from the Attorney-General’s Chambers. “If you look at the things I did for [Soh], I think I’ll go to jail longer than Goh Hin Calm,” said Tai. Goh, described as the “treasurer” of the share manipulation operation, was charged together with Soh and Quah, but had pleaded guilty just before the trial started.
Tai said he was unaware why Goh was charged, while he himself was not, when asked by the defence lawyer. He also said he was unaware of the margin call by Goldman Sachs on Quah on Oct 1, 2013. (The share prices of Blumont, Asiasons and LionGold crashed in the following days.)
Tai said he was aware of a query from the Singapore Exchange about Blumont’s unusual price movements, but that he did not expect the query to be so detrimental to the share price. He also noted that it was easy to fulfil large orders on Oct 3, 2013, when he was instructed to support the share price, with the market filling 10 “buy” orders of one million shares quickly.
The trial continues with the cross-examination of Tai.
