2013 penny stock crash has made at least half a dozen people bankrupt

Singapore

HENRY Tjoa was Phillip Securities' star remisier with S$2.3 million generated in commission income in 2013. But the self-employed broker was hit by the penny stock crash in October that year when his clients could not pay up for their trading losses totalling over S$12 million.

Mr Tjoa declared himself a bankrupt, losing not only his trading representative licence as a result of being insolvent but also his remisier position.

This was what the High Court heard in the first tranche of the long-running trial of John Soh Chee Wen, 59, and Quah Su-Ling, 55. The Malaysians are accused of orchestrating a secret web of 189 accounts belonging to 60 individuals and companies in August 2012 to October 2013, with the aim of artificially inflating the prices of Blumont Group, Asiasons Capital (now Attilan Group) and LionGold Corp, collectively known as BAL.

The spotlight of the saga has been on the protagonists and financial institutions that suffered over S$350 million in losses, but not much ink has been spilled on how the crash has bankrupted at least half a dozen others such as Mr Tjoa.

Goh Chiu Goik, assistant general manager of Phillip Securities, testified in May that 17 of Mr Tjoa's clients had outstanding trading losses of more than S$12 million as at March 2018.

These 17 individual and institutional clients had 32 accounts which were said to be used by the two accused to conduct unauthorised trades in the manipulation scheme.

Ms Goh said Phillip Securities used the S$1.35 million from Mr Tjoa's brokerage commissions that it had retained to offset against his clients' losses.

Mr Tjoa - also known as Husein alias Tjoa Sang Hi - quit Phillip Securities in early 2017 as he declared himself bankrupt, Ms Goh testified.

A bankruptcy search by The Business Times shows that Mr Tjoa applied for his own bankruptcy in March 2017 on a debt of S$14.2 million, and he was declared bankrupt the following month.

Ms Goh revealed that apart from Mr Tjoa, eight individuals had also been adjudged bankrupts, including Catalist-listed Magnus Energy Group's former managing director Lim Kuan Yew, mainboard-listed Blumont's ex-director James Hong Gee Ho and ex-chairman Neo Kim Hock and LionGold's former executive Peter Chen Hing Woon.

Their accounts were allegedly used by Soh and Quah.

Lim & Tan (L&T) Securities ex-remisier Andy Lee Chee Wee was another trading representative who got burnt in the penny stock rout that saw S$8 billion wiped out in market value in just days in early October 2013.

He resigned in February 2014 after 14 years with the brokerage house but is still paying off the S$1.8 million losses incurred in the accounts he handled and allegedly controlled by Quah.

"My income fell considerably after the crash, and whatever income generated went towards settling the outstanding losses . . . L&T allowed me to pay either S$1,000 or S$2,000 a month. This was later reduced to S$500 per month. I am still paying L&T S$500 a month now," Mr Lee said when he was on the stand in late April.

Mr Lee who is now unemployed had also lost about S$300,000 in his own investment in Blumont. He put money in the counter having been persuaded by Soh in a sales pitch that Blumont would be the next mining giant Rio Tinto.

The court also heard that a former remisier with OCBC Securities Ng Kit Kiat had to bear the S$300,000 losses in a trading account allegedly involved in the manipulation scheme because he was "fully liable for the loss" as the remisier handling the account.

He quit his job of almost 20 years before he completed testimony in this trial as the first prosecution witness.

So far, 12 prosecution witnesses - mostly trading representatives and officers from financial institutions - have taken the stand in the first 20 days of the trial.

When hearing resumes on Monday after a four-month hiatus, the prosecution will call more witnesses including Mr Tjoa.