Hong Kong's Securities And Futures Commission: Market Misconduct Tribunal Finds China AU’s Former CEO And Related Persons Culpable Of Market Manipulation

The Market Misconduct Tribunal (MMT) has found that Ms Samantha Keung Wai Fun, former CEO of China AU Group Holdings Limited (China AU), her friend Ms Wu Hsiu Jung and a business partner Mr Chen Kuo Chen, engaged in market misconduct by false trading in the shares of China AU following proceedings brought by the Securities and Futures Commission (SFC) (Note 1).

In August 2009, China AU launched a share placement to raise approximately $135,500,000 to finance a potential Mainland property acquisition needed for the setting up of a beauty professional training institute, but only managed to raise $38,300,000. The company subsequently issued convertible bonds to raise up to $114,000,000 additional funding for the same property acquisition. 

The SFC alleged that when China AU carried out its fundraising between August 2009 and April 2010, Wu and Chen used a total of 14 securities trading accounts, opened in their respective names and other related persons’ names, to buy and sell a substantial amount of shares in China AU in order to make the fundraising exercise more attractive to investors.

The SFC also alleged that Keung funded the trading in China AU shares by Wu and Chen. 

The MMT was satisfied that Wu and Chen must have known that it was a virtual certainty that the manner in which they traded would have the effect of creating a false and misleading active trading in the shares of China AU, and thereby creating a false or misleading appearance of the market for the shares and their price.      

The MMT further determined that Keung was the person who had overall direction of the scheme giving rise to the market misconduct and that Wu and Chan actively and knowingly assisted her in the scheme.

Notes:

1. China AU was listed on the Growth Enterprise Market (GEM) of the Stock Exchange of Hong Kong Limited on 19 February 2002 under the name of Blu Spa Holdings Limited. Its name changed to China AU on 4 January 2010. Since then, it has changed its name twice and is currently known as SkyNet Group Limited.
2. False trading is contrary to section 274(1) of the Securities and Futures Ordinance.
3. Both Wu and Chen have never been interviewed by the SFC.  Wu, on medical grounds, repeatedly refused to attend an interview with the SFC.  Chen is a Taiwan resident and does not reside in Hong Kong.
4. The MMT’s report is available on its website (www.mmt.gov.hk).