SINGAPORE (Jan 31): The third tranche in the trial of John Soh Chee Wen and Quah Su-Ling, the alleged masterminds behind the 2013 penny stock crash has been adjourned to after the Lunar New Year. But there was no lack of drama in the final week of proceedings before the break.
First, the hearings for Jan 14 and Jan 15 were cancelled after Soh – who has been held in remand since November 2016 – fell ill. It resumed later than scheduled on Jan 16, after Soh again visited the doctor but was declared fit enough to attend court.
As prosecution witness Ken Tai Chee Ming returned to the stand, he picked up where he left off the week before. Tai repeatedly denied that he had made unauthorised trades in order to “churn” more commissions for himself. However, on Jan 17, he admitted that he had raked in thousands of dollars’ worth of commissions in a single day from the trading of shares in LionGold Corp.
Under cross-examination by Quah’s defence counsel, Philip Fong of Eversheds Harry Elias, Tai was called out on a number of transactions that had occurred from March to April 2012. There were several days over this period when Tai was found to have been responsible for some 80% of the total traded volume for the LionGold counter.
For instance, on Mar 28, 2012, Tai traded 25 million LionGold shares via the Interactive Brokers (IB) and Saxo accounts under his control. For this, Tai pocketed a whopping $8,587.50 worth of commissions, the court heard.
Fong also noted that in November that year, Tai had bought his wife a Patek Philippe watch worth some $20,000. This was an amount that Tai could not have afforded just a year before, when he was working at ITE Electric with a monthly salary of $2,000, the lawyer added. “By November 2012, your living standards had improved tremendously because of the trading activity conducted on the IB and Saxo accounts,” Fong said.
Tai agreed. However, he insisted that these were not “churning trades” done for his own personal benefit.
Tai was once part of the “inner circle” of brokers and remisiers used by Soh and Quah to allegedly manipulate shares in LionGold, Blumont Group and Asiasons Capital (now Attilan Group). This had led to the penny stock crash of October 2013, which wiped out some $8 billion in market value.
‘Churning’ commissions
Fong also asked the former abettor-turned-prosecution witness about a transaction on Sept 11, 2012. On that day, Tai sold 100,000 LionGold shares from an account belonging to Tan Boon Kiat to Lau Siew Loon’s account.
About 40 minutes later, Tai also used Tan’s account to buy another 150,000 shares from Avalon Ventures’ account.
Fong said Tai could have used Lau’s account to buy directly from Avalon’s account. This “extra step” on Tai’s part, Fong argued, was so Tai could earn commissions for himself.
Tai denied this and said that when Soh or Quah called or placed orders, he would just key in the orders using the list of accounts he had. He added that it was not up to him whether to use an extra step or not.
Tai also stressed that operators like Soh and Quah – who he claims were operating LionGold at the time – would need to know who is in the queue and carry out “queue-counting”. “That’s why I say Su-Ling would know who am I going to take from, and who are in the queue,” Tai added.
‘Fabricating stories’
Later, Fong repeatedly tried to pin down inconsistencies and discrepancies in Tai's statement. Following a close examination of the trades conducted, Fong said Tai fabricated a “story of being a market operator” for LionGold in order to manipulate its shares continually throughout the period from 2012 to 2013.
“You have chosen this period from [late March to early April 2012] to make this claim to limit your own culpability as the manipulator of LionGold shares throughout the period from 2012 to 2013,” Fong charged.
“You were churning trades for your own personal benefit, and there was never any so-called ‘market operator’ period. You came up with this story to justify the lack of phone calls between you and Quah,” he added. Tai disagreed.
To press home his point, Fong said Tai had placed 10 orders of LionGold shares on July 30, 2013. However, a search of Tai’s phone records revealed that, on that day, Quah had not called Tai on either her Singapore or Malaysia phone numbers.
In response, Tai suggested that Quah could have used Blackberry Messenger (BBM) to communicate the order instead.
Fong noted that this was Tai’s “fallback position” whenever the telephone records did not show any calls from Soh and Quah corresponding to the trade orders.
On another occasion, Fong said that there had only been two calls from Quah to Tai throughout the day on Aug 3, 2012.
Only one of these calls fell within a five minute window before an entry in the accounts under Tai’s charge in relation to LionGold.
As such, Fong argued, Quah could not have instructed 71 out of the 72 orders or deletes placed that day.
Again, Tai disagreed. He explained that the orders had been carried out as two “algo” orders, meaning orders that were broken up and placed automatically using an algorithm.
Tai added that based on the data shown in court, he believed Quah had given an instruction to him via BBM to place the first order, and that he had called her to report the trades for the first order being done.
Looking at the record of the call, Tai said: “It’s an outgoing call, it’s very obvious that I call her to report trade, it’s only 11 seconds.” He added that he had nothing much to discuss other than to report trades.
On Jan 17, Tan told the court that some three million shares were traded on his account on April 4, 2012, without his knowledge. “When I went home to look at my terminal yesterday, I realised that I only account for 14 million shares of the 17 million that were traded,” he added.
“You keep adding information [to your statement],” Fong countered. “Now you are adding this additional thing that you had control taken away from you. You’re fabricating evidence as you are going along when you are confronted with evidence.”
‘Haunted counters’
Throughout the cross-examination, Fong continued to poke holes in Tai’s statement. The lawyer also asked if Tai had performed trades that were not instructed by Soh or Quah.
Tai had conceded that as market operator for LionGold, his “only job” was to coordinate the rollover of LionGold shares with Henry Tjoa – a fellow broker who was also part of the alleged masterminds’ inner circle.
However, Fong asked why, on certain days, Tai had had left queues in the system even after his last trade with Tjoa. The witness explained that it did not make sense for him to remove the buy and sell queues as it would cause the counter to look “illiquid” without any buyers or sellers.
“If after I finish with Henry, all the roll, I take out everything, what will the queue look like? It looks like – I mean, we call it ‘haunted counters’,” Tai protested. “Meaning that it's blank. You cannot have a blank queue for buy and sell side.” In Chinese, Tai added, they would call it “long men ke zhan”, or Dragon Gate Inn – the name of a popular 1967 wuxia film, which tells the story of how different factions of sword fighters congregate at an inn, only to stumble into surprises and suspense instead.
“You were just taking advantage of the fact that you were in control of the accounts, to buy and sell LionGold shares at your own discretion, to generate commissions to benefit yourself,” Fong retorted.
He pointed out that if Tai was really involved in rollover operations with only Tjoa, then his total trading volume for each period cannot be more than twice of Tjoa’s.
The defence counsel then put forth several instances in which trades under Tai’s accounts were in excess of the amount needed for his market roll with Tjoa.
In one instance, there were over 30 million shares traded by Tai, when he had only rolled over 758,000 shares with Tjoa. Fong suggested that Tai was “churning” the shares to make commission for himself.
However, Tai dismissed this allegation, and pointed out “a flaw in [Fong’s] assumptions”.
Among other things, Tai said that even though he was the operator during the period, another trader named Leroy Lau was also interfering with the rollover operations. Tai also explained that he had to move the price up and down in order to cause Lau to buy at a higher price or sell at a lower price.
As Lau’s positions were “quite substantial”, Tai added that Lau would “rightfully take” hundreds of thousands of dollars from Soh’s pocket.
“As the operator myself, I have to defend that pot as well,” Tai continued.
The trial will resume on Feb 17 when Fong’s cross-examination of Tai continues.
