Soh hearing reveals what led to fiasco
SGX, other financial institutions partly to blame for penny stock crash, says star witness
SINGAPORE: Although Malaysian businessman John Soh Chee Wen and his alleged conspirators in the 2013 Singapore penny stock crash will face trial, their committal hearing has revealed problematic factors that might have contributed to the fiasco.
Soh faces 189 charges before the Singapore High Court, while former IPCO International chief executive officer (CEO) Quah Su Ling is facing 178 and former IPCO interim CEO Goh Hin Calm faced six charges.
They are accused of manipulating three penny stocks – Blumont Group, Asiasons Capital (since then renamed Attilan) and LionGold KUCHING: Sarawak Consolidated Industries Bhd (SCIB) is pushing to boost the sales of its industrialised building system (IBS) products for housing projects in the state.
The precast concrete IBS components are increasingly sought after for infrastructure, commercial and industrial-related projects.
According to chairman Tan Sri Hamid Bugo, SCIB has geared itself to produce IBS components for many housing projects implemented by both government and private sector in Sarawak.
“We have secured small contracts (to supply to housing projects) and hope to contribute more. This is a new area which is expected to grow rapidly in the coming years and would like it to become a core business for the company,” he told StarBiz after the company’s AGM recently.
Hamid pointed out that SCIB had supplied foundation piles for housing projects and was currently working to extend the supply to include IBS flooring, panel walls and other products. SCIB is the sole spun pile and IBS hollow core and panel walls manufacturer in Sarawak and Sabah. The company is also the largest precast concrete pipe manufacturer in East Malaysia.
It owns and operates three factories in Kuching with a combined capacity of 350,000 tonnes a year. Hamid said SCIB was awarded contracts to supply IBS products worth RM3.5mil to 13 dilapidated schools for their reconstruction and extension projects early this year. It has recently secured a RM6.5mil contract for the supply of IBS components to the Sarawak General Hospital’s extension project.
Last year, SCIB supplied similar IBS components such as concrete beams, columns and floor slabs to nine schools across Sarawak for similar reconstruction and extension Corp – back in 2013.
The meteoric surge in prices of these three stocks came to a spectacular halt in October that year, then crashed, vapourising S$8bil (RM23.6bil) worth of market value.
The defence built a case that several firms including Goldman Sachs, Interactive Brokers (IB) and Saxo Bank decision to force sell these stocks contributed to the crash.
On the last morning of the three day-hearing, star witness Ken Tai Chee Ming testified that the stock crash was to a degree the fault of Singapore Stock Exchange (SGX) and other financial institutions.
Ken Tai, CEO of Singapore-based financial advisory firm Algo Capital Group Ltd, admitted to facilitating trading for Soh and Quah through using foreign incorporated companies: Algo Capital Ltd in the Marshall Islands, Algo Capital Group Limited in the British Virgin Islands and KT Securities in Seychelles.
He said several Singapore Stock Exchange (SGX) announcement and queries between Oct 1 and 6 2013 spooked investors, causing downward impact on the price.
He added that together with various investments houses and financial institutions force selling the stocks, the downward impact became a catastrophic fall.
On Friday, Oct 4, 2013, Blumont, Asiasons and LionGold stocks were suspended from trading after experiencing falls of 40% to 60%.
By Sunday, the trading suspensions were lifted but the prices continued to plummet, and were down to 94%, 96%, and 87% respectively by Oct 8, compared to the day before the crash.
Ken Tai gave an example of how the force “sell” call by IB was triggered by a trading machine, which was easily triggered by a margin call. Interactive Brokers director Mary Ng Chi Ling testified that if a customer account fell under margin deficit, that would trigger a situation where IB has the right to liquidate the position with no need for a margin call.
Documents also shows that on Oct 6, IB raised margin requirement to 100%, up from 50% for Blumont; 27% for Asiasons; and 34% for LionGold. This meant any one with margin had to top up their shares or face force selling.
Although Ng admitted IB did force sell in the first week of October, she would not confirm if that added to downward pressure.
Central to the prosecution’s case were allegations that the accused had brokers churn stocks – excessive trading in a client’s account to generate commissions – as part of a scheme to wash the stocks and artificially ram up prices.
Wash trading, which means the trading of stocks between the same parties, is illegal in Singapore.
Expert witness Professor Michael James Aitken ran algorithms that found wash trading of Blumont stock went as high as 45% of total trading volume, Asiasons as high as 68% in June 2013, while Lion Gold wash trading went as high as 78% in March 2013.