Penny scandal: Trial of alleged masterminds begins

SINGAPORE prosecutors opened the trial for Malaysian businessman John Soh Chee Wen and former Ipco International chief executive Quah Su-Ling on Monday, accusing the pair of masterminding a massive stock manipulation scheme that collapsed in the penny stock crash of October 2013.

Describing the case as the "most serious case of stock market manipulation in Singapore", the prosecution told the Court that Soh and Quah drove up the share prices of Blumont Group, Asiasons Capital and LionGold Corp – known collectively as BAL – in the year leading up to the crash. They did so by "wash trading" shares of the three stocks within a secret web of 189 trading accounts held in the names of 60 individuals and companies, the prosecution said. Asiasons is now known as Attilan Group.

Those controlled accounts were behind 60 per cent of Blumont trades; 88 per cent of the trades in Asiasons shares; and 90 per cent of LionGold trades during the periods investigated, the prosecution said. Using BAL shares as collateral, the pair also obtained hundreds of millions of dollars of financing from financial institutions, prosecutors alleged.

"The appearance as to the market and price for BAL shares that was created by the accused persons was so utterly false that when the music eventually stopped and the bubble burst on Oct 4, 2013, the share prices of all three companies collapsed, each falling spectacularly by between 82 per cent and 94 per cent in just two days," the prosecution said in its opening address.

Soh and Quah each face 178 charges related to creating false markets, conspiring to deceive the financial institutions where the trading accounts were opened, and cheating financial institutions to obtain margin financing. Soh faces an additional three charges related to being concerned with the management of the BAL companies without permission as an undischarged bankrupt; and a further eight charges related to witness tampering, bringing his total to 189 charges. Soh and Quah pleaded not guilty to the charges on Monday.

A third accused, former IPCO interim CEO Goh Hin Calm, pleaded guilty last week to two charges related to aiding the scheme and was sentenced to three years in prison. At Goh's hearing, the prosecution said that brokerages had S$350 million of unpaid losses as at April 2018 that stemmed from financing backed by BAL shares.

The first tranche of the joint trial before Justice Hoo Sheau Peng goes into May for a total of about 24 days of hearings, with the second tranche of 52 days from August to November reserved.

The seven-strong prosecution, led by Deputy Public Prosecutor Peter Koy, has lined up 26 witnesses for the first part of the trial. Those witnesses include various brokerage representatives; former analyst Ken Tai; former remisier Gabriel Gan; former LionGold executive Peter Chen Hing Woon; and Adeline Cheng Jo-Ee, a former romantic partner of Soh.

Among the key pieces of evidence that the prosecution will present to court is a spreadsheet that the prosecution said was maintained by Goh to keep track of the allegedly controlled accounts.

The prosecution will also refer to telecommunication data that it said shows repeated communications between Soh and trading representatives operating controlled acounts. The prosecution said that Soh did not have any trading accounts under his name with those representatives, and the high volume communications – more than 40,000 times over the relevant periods by Soh and Quah – suggested that those communications were not "coincidence or mere casual conversation".

Soh is represented by senior counsel N Sreenivasan of K&L Gates Straits Law, and Quah by Philip Fong of Eversheds Harry Elias.

Tay Peck Gek, Kenneth Lim

25 March 2019