Answers finally for investors burnt by the saga in 2013?

Investors caught by the 2013 penny stock crash may finally get the answers they have been waiting for.

With trial dates expected to be announced shortly, Singapore's High Court could soon hear arguments about "wash trading", forced selling and who held the control over almost 200 trading accounts as it gets set to try the three individuals implicated in the saga.

The historic trial - prosecutors have described the investigations as Singapore's largest securities fraud probe - will take place on a scale rarely seen in market-related cases.

The defendants are looking at more than 370 charges altogether: Malaysian businessman John Soh Chee Wen faces 189 charges, former Ipco International chief executive Quah Su-Ling faces 178 and former interim Ipco CEO Goh Hin Calm faces six. Those charges relate to allegations that they manipulated the stocks of Blumont Group, Asiasons Capital (now called Attilan Group) and LionGold Corp (collectively known as BAL). Those counters climbed more than 800 per cent in a span of nine months before crashing on Oct 4, 2013, sparking a rout of penny stocks on the Singapore Exchange.

According to court documents from recent committal hearings, prosecutors have lined up 67 witnesses and intend to prove that the defendants controlled 189 trading accounts held by 59 corporate and individual account holders in 20 financial institutions (FIs). The State will seek to show that Soh and Quah allegedly instructed numerous trading representatives to trade BAL shares between those accounts, creating artificial liquidity and driving up share prices in a practice known as wash trading.

Prosecutors plan to argue that the defendants used the allegedly false market for the BAL shares to dishonestly obtain credit from Goldman Sachs International and Interactive Brokers (IB), which was used to purchase more BAL shares to further manipulate the stocks.

The prosecution will also aim to show that Soh was involved in the management of the BAL companies despite a law that prohibits him from doing so as an undischarged bankrupt.

Lawyers for the trio have reserved their defence for the trial, but posed several questions to the prosecution witnesses on their evidence during the committal hearing that took place from May 30 to June 1.

Senior Counsel N Sreenivasan of Straits Law Practice, who represents Soh, questioned the assumptions used by an expert witness, Michael Aitken, whose analysis was used by the prosecution to allege wash trading.

Mr Sreenivasan also questioned if a query by the Singapore Exchange to Blumont on Oct 1 could have caused panic in the stock market, leading to large sell-offs in the days that followed. Prof Aitken said that in his experience, price movements caused by such queries should stabilise within a matter of hours or even minutes.

The defence sought to clarify whether FIs would have known that trades were being made on instructions from Soh and Quah without the account holders' explicit permission. Representatives from Saxo Bank, UBS, Goldman Sachs and IB said at the committal hearing that the FIs monitored trades without a direct relationship with the account holders.

The FIs' role in the crash could also come under the spotlight. The prosecution has sought to paint them as victims of a false market created by Soh and Quah; the defence questioned whether forced selling by the firms could have depressed share prices and caused the crash.

A Goldman Sachs representative said at the committal hearing that while his firm's margin call based on the BAL companies' fundamentals was issued before the crash, liquidation only commenced from Oct 9. Another witness, investigations officer Sheryl Tan from the Singapore Police Force's Commercial Affairs Department, gave evidence that IB was the only FI that force-sold any shares in the lead-up to the crash, selling 220,000 LionGold and 550,000 Blumont shares on Oct 4.

Beyond the trial, prosecutors also revealed in earlier bail hearings for Soh that investigators are looking into allegations that Soh was also involved in the management of ISR Capital and helped to manipulate that company's stock while he was on police bail and before he was arrested. ISR Capital was not mentioned during the committal hearing. The Business Times understands that matters related to the ISR Capital case are currently being treated as a separate investigation.

Leila Lai

08 June 2018