Hong Kong’s SFC initiates criminal proceedings into market manipulation of shares of Ching Lee Holdings Limited

Maria Nikolova

The criminal proceedings target five individuals who allegedly conspired to carry out false trading in the shares of Ching Lee Holdings Limited.

Hong Kong’s Securities and Futures Commission (SFC) today announces the launch of criminal proceedings against five individuals for conspiring to carry out false trading in the shares of Ching Lee Holdings Limited (Ching Lee).

The regulator has referred the case to the Department of Justice which has the authority to prosecute offences under the SFO in the District Court and the Court of First Instance. The maximum penalty for market manipulation is imprisonment of 10 years and a fine of $10 million.

The SFC alleges that between 29 March 2016 and 7 September 2016, the five defendants – Ms Sit Yi Ki, Ms Lam Wing Ki, Mr Tam Cheuk Hang, Mr Simon Suen Man and Mr Ho Ming Hin – conspired to create a false or misleading appearance of active market in respect of the Ching Lee shares, contrary to sections 295 and 303 of the SFO and section 159A of the Crimes Ordinance.

Three defendants – Sit, Lam and Tam – appeared today at the Eastern Magistracy. No plea was taken and the case was adjourned to 24 September 2020.

The Court granted each of the three defendants court bail of $10,000. They are not allowed to leave Hong Kong.

The SFC has also commenced proceedings under section 213 of the SFO against the defendants and various local and overseas individuals of the alleged market manipulation. These proceedings were initiated on July 11, 2019 when the SFC applied for urgent interim injunctions, with a view to ensuring that there are sufficient assets to meet the restoration orders that the court may make for the benefit of affected counterparties to the impugned transactions involving Ching Lee shares.

On August 26, 2019, Deputy High Court Judge Liu ordered that the interim injunctions granted to the SFC on July 15, 2019 be continued, freezing assets of up to $124.9 million held by 15 local and overseas entities. This represents the combined profit made by them and their nominees in their alleged manipulation activities involving Ching Lee shares. The injunctions against several overseas entities cover their assets worldwide.

The SFC alleged that the manipulative scheme was planned and commenced before Ching Lee’s listing on 29 March 2016, and lasted for more than five months, resulting in the artificial inflation of the share price and turnover of Ching Lee shares between 29 March 2016 and 6 September 2016 and the collapse of the Ching Lee’s share price by 90% on 7 September 2016.

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