Penny scandal: Brokers lost S$350m; ex-IPCO exec to serve 3 years in prison

THE 2013 penny stock crash has pummeled the brokerages used by the alleged perpetrators with more than S$350 million of unpaid losses, Singapore prosecutors said on Wednesday at the hearing of the first of three defendants.

The prosecution painted the accused, Goh Hin Calm, as a "seed funder and finance manager" who helped co-defendants John Soh Chee Wen and Quah Su-Ling to control a web of 189 trading accounts that were used to drive up the share prices of Asiasons Capital, Blumont Group and LionGold Corp in 2013. Asiasons is now called Attilan Group.

Goh, in a white, long-sleeved shirt and without displaying any outward emotion, pleaded guilty to two charges of abetment. Justice See Kee Oon sentenced Goh, a former interim chief executive of IPCO International, on Wednesday to three years in prison.

Goh faced a maximum penalty of S$250,000 in fines and seven years in prison for each charge.

Deputy Public Prosecutor Nicholas Tan sought two concurrent three-year prison terms - one for each charge - arguing that it would set a deterrent, and reflected the harm caused by Goh's actions and the extent to which he knew what he was doing.

Goh's lawyer, Adrian Wee of Characterist LLC, sought leniency on the basis of Goh's remorse, and the fact that Goh had only a limited role in the alleged scheme. This is also Goh's first offence.

Goh's guilty plea sets him up as a possible witness for the prosecution in the coming trial for Soh, a Malaysian businessman, and Quah, who was CEO of IPCO before Goh. IPCO has since been renamed Renaissance United.

The losses faced by the brokerages, which include Phillip Securities, RBC, Goldman Sachs, Interactive Brokers and Saxo Bank, represented unpaid amounts as at April 2018, the prosecution said. Those stemmed from amounts owed as a result of financing backed by Asiasons, Blumont and LionGold shares and extended to the accounts that Soh and Quah allegedly controlled, and from contra losses after the prices of those stocks collapsed in October 2013.

The prosecution alleged that Goh and his wife helped Soh and Quah to set up 10 personal trading accounts at five different brokerages between 2008 and 2011, then ceded control of those accounts to Soh and Quah. Goh was further accused of helping to facilitate the creation of another seven personal trading accounts by four individuals and 11 corporate accounts.

Those accounts, as part of the 189 accounts that the prosecution said were controlled by Soh and Quah, were allegedly used to trade shares of Asiasons, Blumont and LionGold, the three counters at the heart of the 2013 crash.

The prosecution's statement of facts alleged that Soh and Quah would get others to open trading accounts, whether personal or corporate, and then authorise Soh or Quah to make trades using those accounts.

Those accounts were used to rapidly trade a significant volume of shares in Asiasons, Blumont and LionGold shares between themselves on contra, the prosecution alleged. Contra refers to the practice in which trades are reversed - and profits and losses realised - before they have to be settled.

Goh managed a pool of funds to help Soh and Quah pay off contra losses on their various controlled accounts, the prosecution said. He also helped to keep track of the shareholdings held under the various accounts. Spreadsheets that he maintained while carrying out those tasks were used by the prosecution as evidence of the controlled accounts.

In all, the prosecution is alleging that the controlled accounts were held by 60 individuals and companies; and at 20 financial institutions, including local and foreign brokerages, as well as international banks.

At one time, Goh's spreadsheet suggested that Soh and Quah's controlled accounts held about 36.5 per cent of Asiasons shares, 15.3 per cent of Blumont's shares, and 54.1 per cent of LionGold shares, the prosecution alleged.

The prosecution alleged that the controlled accounts were behind 88 per cent of the total traded volume of Asiasons shares between Aug 1, 2012 and Oct 3, 2013; 60 per cent of the total traded volume of Blumont shares between Jan 2, 2013 and Oct 3, 2013; and 90 per cent of the total traded volume of LionGold shares between Aug 1, 2012 and Oct 3, 2013.

The "wash trading" between controlled accounts helped to create an artificial picture of liquidity and demand for the three stocks, and drove up the prices for those counters by multiples over the bulk of a year, prosecutors said. The inflated shares were then used by Soh and Quah as collateral to obtain financing, the statement of claims stated.

On Oct 4, 2013, however, the prices of those shares collapsed, fueling a sell-off in penny stocks on the Singapore Exchange. The probe into the circumstances of that crash has been described by authorities as the largest securities fraud investigation in Singapore's history. Goh's hearing is the first to come out of those investigations. The joint trial for Soh and Quah is currently scheduled for March 25.