Ex-IPCO CEO Quah, LionGold employee Chen, others ordered to pay $17.488 mil
Bankrupt former IPCO International CEO Quah Su-Ling and
LionGold Corp’s director of business and corporate development Peter Chen are
among eight parties that have been ordered to pay $17.488 million to the defendants
in a lawsuit initiated four years ago. And, the details of the legal tangle,
which has not been widely discussed, provide an interesting backstory to the
penny stock crash of October 2013 that sparked Singapore’s biggest securities
fraud investigation.
The Edge
The Edge
Comments
Chan Chao Peh, The Edge
23 August 2016
Bankrupt former IPCO International CEO Quah Su-Ling and LionGold Corp’s director of business and corporate development Peter Chen are among eight parties that have been ordered to pay $17.488 million to the defendants in a lawsuit initiated four years ago. And, the details of the legal tangle, which has not been widely discussed, provide an interesting backstory to the penny stock crash of October 2013 that sparked Singapore’s biggest securities fraud investigation.
The eight parties comprise five companies and three individuals. The individuals are Quah, Chen and a Chinese national named Ge Lei. The five companies are Neptune Capital Group, a British Virgin Islands-incorporated entity that has been linked to Neo Kim Hock, the former chairman of Blumont Group; another BVI company called Powerlite Ventures, a wholly-owned unit of Blumont; two other BVI companies called Infinite Results Holding Corp and Skyline Agents; and a Singapore-incorporated company called China Data System Investments, whose director, Wong Chin Yong, is also currently managing director and CEO of Innopac Holdings.
In 2010, Sunmax Global Capital Fund 1 and its managing director Tony Li began lending money to the plaintiffs, for which they were provided with collateral comprising shares in a number of public-listed companies. These included millions of shares in LionGold, Innopac, ITE Electric Co and Asiasons Capital (which has since been renamed Attilan Group).
On July 29, 2012, the plaintiffs initiated legal action, claiming breach of various agreements on the part of Sunmax and Li, as well as wrongful transfer of the shares provided as collateral. On the same day, the plaintiffs applied for an injunction to stop Sunmax and Li from disposing of shares that were valued at $68.4 million, based on their closing prices on July 27, 2012.
On July 30, 2012, Judge Judith Prakash ordered that the shares not be sold without the court’s permission. On Aug 2, 2012, following negotiations between the plaintiffs and the defendants, Li and Sunmax agreed they would not sell the shares unless they had written permission from Quah or as allowed by the court.
However, the plaintiffs did not ultimately see their lawsuit through. They failed to meet deadlines for the exchange of affidavits of evidence-in-chief, and postponed hearing dates a number of times. On June 5, 2014, the plaintiffs were told to be ready for trial by June 12, 2014, or their claims would be struck out. On June 13, 2014, their claims were struck out. An inquiry then commenced into the damages sustained by the defendants as a result of being prevented from selling the shares in 2012.
According to Judge Prakash’s 45-page judgment, dated July 28, even before they filed their defence, the defendants had filed an application, referred to as Summons No 5031, to lift the restrictions on their ability to sell the shares they held. But the plaintiffs strenuously resisted, leading to a number of affidavits being filed by both sides. A hearing was held on Nov 16, 2012, but “arguments could not be completed and the hearing was adjourned”.
Then, on March 1, 2013, the plaintiffs issued seven cashier’s orders to pay various amounts owed to Sunmax. The plaintiffs simultaneously applied for a mandatory injunction to compel Sunmax to return some of the shares it held since the indebtedness had been discharged. On March 11, 2013, Judge Prakash ordered the return of shares held by Sunmax, except for eight million LionGold shares.
In May 2013, lawyers for Li proposed that the remaining shares held by Sunmax and those held by Li be sold and proceeds placed in an interest-bearing account pending the disposal of Summons No 5031. The plaintiffs, however, did not accept this proposal.
Summons No 5031 was heard again on July 22, 2013 and Aug 6, 2013, even as share prices of Asiasons and LionGold as well as Blumont were beginning to rise more quickly. The matter was then adjourned for decision. Initially, the date for decision was fixed for Sept 10, 2013, just as the share prices of Asiasons and LionGold were reaching their zenith. Unfortunately, the date for decision was subsequently changed to Oct 14, 2013, several days after the stocks cratered on Oct 4, 2013.
On Sept 10, 2013, the defendants proposed to the plaintiffs that Li be allowed to sell 5.2 million Asiasons shares, as there had been a “change of circumstances” in the stock market. With the price of Asiasons spiking, Li wanted to sell the shares he held and pay the proceeds into court in order to mitigate the risks of a falling market. However, the plaintiffs did not respond to the proposal.
On Sept 18, 2013, Li filed a summons asking for liberty to sell the Asiasons shares. Although an urgent date was requested, the application could only be heard on Oct 7, 2013. Tragically, by that time, shares of Asiasons had collapsed to 10 cents, and those of LionGold had tanked to 16 cents.
On Oct 7, 2013, Judge Prakash granted Li permission to sell the Asiasons shares he held, on the basis that the proceeds from the sale be paid into court pending the outcome of Summons No 5031. On Oct 14, 2013, Judge Prakash granted the defendants’ application in Summons No 5031.
Now, almost three years after the crash, the plaintiffs in the lawsuit are facing another tough break. They are being made to pay significant damages to the defendants for losses suffered from not being able to sell their shares in LionGold and Asiasons before they crashed.
In the case of LionGold, Judge Prakash decided that the loss suffered should be measured from July 30, 2012, the day the court ordered that the defendants not sell their shares, to Oct 14, 2013, the day the court allowed them to deal in the shares. On that basis, Sunmax was awarded $9.032 million for the eight million shares it held and Li $5.87 million for 5.2 million shares.
As for Li’s shares in Asiasons, Judge Prakash decided that the loss should be calculated from July 30, 2012, the day the court ordered that the defendants not sell their shares, to Oct 7, 2013, the day that Li was granted permission to sell the Asiasons shares. On that basis, Li was awarded damages of $2.586 million for the six million shares he held.
Adding up those figures, the plaintiffs are now on the hook for $17.488 million.