AmFraser suing former client over trading debts
Brokerage seeks $1.89m repayment over losses from share meltdown
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Brokerage seeks $1.89m repayment over losses from share meltdown
Grace Leong
10 April 2014
Local brokerage AmFraser Securities is suing a former client for $1.89 million in trading debts run up in last October’s penny stock crash.
AmFraser, which reportedly faced potential losses of up to RM120 million (S$46.6 million) after the crash, is seeking the funds from building firm executive Goh Cheng Yu.
But the brokerage has hit a roadblock in action it has initiated against five other clients who owe it about $4 million.
The legal moves, which could be the first of many from local brokerages, come amid a sweeping investigation just launched by the authorities into the scandal.
The shares of Asiasons Capital, LionGold Corp and Blumont Group rocketed to record levels last year before going into a tailspin, losing more than 90 per cent of value in a matter of days.
The crash wiped out about $8 billion in stock market value.
AmFraser is demanding that Mr Goh repays $1.89 million in trading losses racked up during the share meltdown.
Singapore Exchange filings show that Mr Goh is assistant project manager of Wee Hur Development, a wholly owned unit of construction group Wee Hur Holdings, in which his family is prominent.
Mr Goh said in court papers that he was not liable for the losses because the shares in Blumont, Asiasons and the International Healthway Corp - a firm not involved in the meltdown - were bought under his AmFraser trading account on Oct 2, 2013, “without his instruction, authorisation or knowledge”.
He said the investments were allegedly made by Mr Heng Gim Teoh, an AmFraser trading representative.
Mr Goh claims Mr Heng admitted that he had not been authorised to carry out the investments and that he had increased Mr Goh’s trading account limit without his clearance.
Mr Goh contends that AmFraser has “no basis to make any claim against him and that the brokerage failed to establish proper procedures to supervise Mr Heng”.
AmFraser said in its court filings that Mr Heng is not an employee and was paid based on transactions conducted on behalf of his clients, including Mr Goh.
AmFraser’s other legal move seems to have hit a roadblock in the form of court action taken by another party.
AmFraser is trying to recover about $4 million from five clients, including Blumont executive chairman Neo Kim Hock and Ms Quah Su Ling, chief executive of Ipco International, which owns 6.6 per cent of Blumont.
Mr Neo and Ipco International are helping the Commercial Affairs Department and the Monetary Authority of Singapore with their investigation into the share crash.
The other three targeted by AmFraser are Mr Tan Boon Kiat, a director of investment holding company JK Yaming International, Mr Lee Chai Huat and Mr Kuan Ah Ming.
Court papers filed by AmFraser last month said the five had engaged the brokerage to open trading accounts and provide dealing services.
“Due to various dealings made by (Interactive Brokers) on behalf of the (five), they are indebted to (AmFraser),” AmFraser said.
The broker alleges the five struck a deal last December to repay the $4 million but they had breached the agreement.
AmFraser’s move to recover the money has stalled as the five customers are among eight people being pursued by Interactive Brokers for $79 million in trading losses from the meltdown.
Interactive, a global broking giant, had won a court order to freeze their assets.
AmFraser tried to get the High Court to vary this order but withdrew the action after Interactive’s case went into arbitration.
The likely outcome is that AmFraser’s action will be on hold until arbitration is completed.