Singapore says ‘audacious’ penny stock scheme cheated Goldman

SINGAPORE: The masterminds of Singapore’s “most audacious” market manipulation scheme cheated Goldman Sachs International and Interactive Brokers as part of a plan that resulted in the 2013 penny-stock crash, prosecutors said as a trial began against the two alleged perpetrators.

Malaysian businessman John Soh Chee Wen faces 189 charges while Quah Su-Ling, former CEO of Ipco International, faces 178 charges for orchestrating the fraud, Singapore prosecutors said as the trial began Monday. Soh and Quah, speaking in court, said they planned to plead not guilty.

Among the charges are six for deceiving Goldman and Interactive Brokers to extend margin financing and deliver payment of more than S$232 million (US$172 million) for the purchase of securities, according to a statement from the prosecutors. Goldman Sachs International is a unit of Goldman Sachs Group.

The trial is the culmination of years of investigation into a stock market rout that has been blamed for falling trading volumes in the city.

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The stock-trading irregularities related to Blumont Group, LionGold and Asiasons Capital, which has been renamed Attilan Group, saw the stocks surge by at least 800pc in the nine months before their shares plunged over three days in October 2013. That spurred brokers to clamp down on margin lending and denting trading sentiment.

Singapore meted out its first jail sentence for the penny-stock rout last week, with the prosecutor calling the crash the result of the “most audacious, extensive and injurious market manipulation scheme ever” in the city state.

Goh Hin Calm, who was Ipco interim CEO, was sentenced to 36 months’ imprisonment in a Singapore court. Goh, who earlier pleaded guilty to two of six charges under the Securities and Futures Act, helped two others in perpetuating the scheme, deputy public prosecutor Nicholas Tan said in court then.

The crash wiped S$8 billion off the value of shares of three companies in Oct 2013. For his part, Soh said in a 2016 interview that the crash in the shares of the mining companies was due to a “collection of ad hoc events” triggered by an unexplained phenomenon.

The three companies have said they don’t know what caused the sudden declines. Banks and brokers have sued their clients and others to recover at least US$230 million from the stock rout.

Soh and Quah used accounts held at firms including UOB Kay Hian, AmFraser Securities, Goldman Sachs, Credit Suisse Group, Interactive Brokers and Saxo Bank, prosecutors said. The financial institutions will give evidence that they didn’t know Soh and Quah were instructing trades in the accounts, according to the prosecution.

Goldman and Interactive Brokers were deceived into accepting shares of the three companies as collateral in extending financing, not knowing that the market for those shares was false, according to Monday’s prosecution statement.

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The financing was used for margin trading to manipulate the shares, the prosecutor said, describing the process as a “vicious cycle of deception, cheating, and market manipulation.”

The trial is expected to last at least until November.

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