The District Court today sentenced two masterminds to imprisonment and their wives to community service, after convictions for securities fraud involving the shares of four Hong Kong-listed companies (Notes 1 and 2).
The Department of Justice prosecuted two married couples who were friends at the material time, after an Securities and Futures Commission (SFC) investigation revealed their involvement in ramp-and-dump schemes promoted on social media. Acting on information from “WeChat teachers”, the defendants engaged in naked short selling for profit making. The SFC uncovered evidence of fraudulent activities and referred the case to the Police for a joint operation.
Mr Li King Hong and Mr Lam Hin Fai were sentenced to 24 months and 22 months in prison, and their wives, Ms Chan Ngai See and Ms Betty Hui Pui Yan, were ordered to serve 180 hours and 120 hours of community services respectively.
The Court heard that between June and September 2020, Li, a former SFC-licensed representative (Note 3), and Lam, acting as the masterminds, directed their wives, Chan and Hui, to deceive an account executive at CVP Securities Limited (CVP) on nine occasions (Note 4). Chan, Lam and Hui falsely represented ownership of shares in four Hong Kong-listed companies with the intent to defraud, inducing CVP to place selling orders. The three sold shares at inflated price when they did not own them. Following a subsequent decline in share price, they repurchased the shares at lower prices to close their short positions, thereby obtaining illicit profits.
The defendants were found to have engaged in naked short selling, earning $3.3 million in profits while exposing CVP to significant risk of losses and undermining the integrity of the securities market.
The SFC’s Executive Director of Enforcement, Mr Michael Duignan, stated: “We welcome the Court’s decision. The successful outcome of this case demonstrates the effectiveness of our close collaboration with the Police in tackling financial crime to protect the integrity of our securities market.”
Notes:
- The four Hong Kong listed stocks are (i) NOIZ Group Limited (formerly known as Merdeka Financial Group Limited, stock code: 08163), (ii) National Investment Fund Limited (stock code: 01227), (iii) Contel Technology Company Limited (stock code: 01912) and (iv) Sino Prosper (Group) Holdings Limited (stock code: 00766).
- Please see the SFC’s press releases dated 23 June 2023, 18 August 2023 and 12 September 2024 for details.
- Li was licensed to carry out Type 2 (dealing in futures contracts) regulated activity under the Securities and Futures Ordinance (SFO). At the material time, he was accredited to Core Pacific-Yamaichi Futures (H.K.) Limited until 15 January 2021. Li is currently not accredited to any licensed corporation.
- CVP was a corporation licensed under the SFO to carry on Type 1 (dealing in securities) and Type 2 (dealing in futures contracts) regulated activities during the material time. Its licences were revoked on 26 November 2024 and 28 October 2022 respectively.
