A Malaysian businessman and his partner have been charged with orchestrating the single biggest fraud in the history of Singapore’s stock exchange, which wiped out S$8bn in value and triggered a lasting loss of investor confidence.
Soh Chee Wen, also known as John Soh, faced charges in a Singapore court on Friday in relation to an alleged fraud in which three publicly listed stocks soared in valuation by up to 800 per cent over nine months before plunging in value in two days of frenzied trading in October 2013.
Authorities in Singapore blame the so-called penny stocks crash for a slump in share trading volume on SGX in the first half of 2014 and a wider loss of confidence in Singapore’s financial markets.
Singapore is Southeast Asia’s biggest stock exchange by market capitalisation but has struggled to attract new equities listings in recent years.
Teo Guan Siew, deputy public prosecutor, told the court: “It is the most serious market manipulation and cheating in Singapore’s history. This was an elaborate scheme to manipulate the shares of three listed companies.”
Mr Soh was charged alongside Quah Su-Ling, his girlfriend and also a Malaysian national. Goh Hin Calm, an alleged accomplice, also faces charges for aiding the couple in creating a “false appearance with respect to the market” for shares in the three companies, according to Singapore authorities.
The alleged fraud involved the use of more than 180 trading accounts to carry out “manipulative trades”, according to a joint statement by Singapore’s attorney-general’s chambers, the Monetary Authority of Singapore and the police.
Mr Son and Ms Quah are accused of using the trading accounts to create “an illusion of liquidity and demand” for shares in Blumont, a natural resources investment company, Asiasons, an alternative investment business, and LionGold, a gold miner, according to the joint statement.
The couple are also accused of conspiring to cheat Goldman Sachs and Interactive Brokers, the US electronic brokerage firm, into extending more than S$170m in margin financing to their accounts.
Tan Chee Meng, Mr Soh’s counsel, said his client intended to contest the charges. Mr Goh’s lawyer declined to comment.
The penny stocks crash sparked Singapore’s most complex fraud investigation, trawling more than 2m emails and half a million trade orders as well as thousands of financial statements.
SGX sought to restore confidence with a minimum trading price rule, set at S$0.20, which was intended to curb speculation in penny stocks.
The exchange also plans to spin off its regulatory functions into a separate unit with its own board in an effort to reduce the perception of a conflict of interest between its policing and commercial roles.
Eugene Tan, associate professor of law at Singapore Management University, said: “The penny stocks crash was a body blow to Singapore’s aspirations to be Asia’s leading and trusted equities market.
“Confidence once lost is hard to regain, and SGX is still paying the price years on.”
The average traded value of securities on SGX was flat year-on-year at S$1.1bn, in the exchange’s last financial year ending in June.
SGX attracted just one IPO over S$150m last year, along with a dozen smaller ones, but its fortunes have revived somewhat in 2016 with the trading debuts of Frasers Logistics & Industrials Trust and Manulife US Real Estate Investment Trust.
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