Three individuals were sentenced to up to six years and eight months in jail for manipulating shares of Ching Lee Holding, the Hong Kong High Court ruled on Monday, marking the city’s toughest crackdown yet on a pump and dump scheme.
Sit Yi-ki, Lam Wing-ki, and Tam Cheuk-hang were sentenced to between four years four months and six years eight months in jail, with the latter being the heaviest sentence ever imposed for such a criminal offence. They were found guilty in a landmark prosecution brought by the Securities and Futures Commission (SFC) in May.
The manipulation scheme is “a sophisticated and intricate conspiracy”, which has caused losses to genuine market participants and damage to Hong Kong’s reputation as a global financial centre, Douglas Yau Tak Hong, deputy judge of the Court of First Instance of the High Court, said during the sentencing.
“A fair and efficient stock market is the prerequisite for maintaining our competitiveness in the region.”
The maintenance of market order is of “paramount importance” for the people of Hong Kong, Yau said, while adding that the public should not be impacted by the trickle-down effects into the financial system, following such failures.
This landmark trial marks the first time an SFC prosecution has been heard before a High Court jury, and the severity of these sentences reflects a significant milestone in the SFC’s efforts to combat market manipulation, the prosecutor said.
“It has sent a very strong and clear market message that we will not tolerate any form of similar wrongdoings,” Christopher Wilson, the executive director of enforcement at SFC, said in the statement.
The sentenced trio manipulated trading in shares of Ching Lee Holdings, an investment holding company, primarily involved in construction, consultancy and project-management services listed on Hong Kong’s secondary GEM board.
The trading manipulation scheme, which was planned and commenced before Ching Lee’s initial public offering (IPO) on March 29, 2016, lasted for over five months. The conspirators boosted turnover of the shares by conducting manipulative transactions among 156 securities accounts under their control, the judge said.
The manipulative activities inflated Ching Lee’s share price by as much as 2,000 per cent from the IPO price to HK$5.71 in August 2016, before the stock nosedived 90 per cent on September 7, 2016. The scheme is estimated to have netted illicit profits of more than HK$124 million (US$15.9 million).
Nelson Ho Ming Hin and Simon Suen Man, two other individuals allegedly involved in the market manipulation case, are wanted by authorities and are still at large.
Hong Kong’s market regulator has been stepping up scrutiny against market misconduct. Segantii Capital Management, one of the largest hedge funds in Asia, is currently under investigation for alleged insider trading in the shares of Hong Kong-listed Esprit Holdings in 2017.
The next hearing for Segantii is due in October, and the accused could face a jail sentence of up to seven years, if found guilty.
“The SFC is determined to root out all forms of market misconduct to protect investors and to uphold the integrity of Hong Kong’s securities markets,” SFC’s Wilson said.
