When investigators started probing the 2013 penny stock crash, alleged mastermind John Soh Chee Wen told his longtime friend Dick Gwee Yow Pin that he had thought of different “strategies” for different scenarios.
For example, if Soh was charged, but not Gwee, or, if both of them would be charged, Soh would have different ways to deal with the authorities. Gwee, who has known Soh since 1984 and shared plenty of ups and downs, asked Soh for details. “He just laughed,” Gwee told the court.
Gwee is the latest prosecution witness to take the stand in the long-running trial of Soh and his co-accused Quah Su-Ling. The duo allegedly masterminded a massive share manipulation operation of Blumont, Asiasons Capital (since delisted) and LionGold (renamed Shen Yao Holdings), also collectively known as BAL. When these three counters crashed suddenly on Oct 4, 2013, some $8 billion in market value was destroyed.
Over the course of the trial, the court was told how the different brokers and individuals scrambled to react and deal with the fallout. For the most part, brokers who allegedly traded for Soh tried to get him to make good for the trading losses.
However, their problems took on a more serious turn when the Commercial Affairs Department (CAD) started investigating. Gwee recalls how Ken Tai, one of the brokers, told Gwee and Soh he would “shoulder everything” from the probe.
When Soh and Gwee were left alone after Tai went out for a smoke, Soh remarked to Gwee privately that Tai did not have sufficient credentials to shoulder the responsibility. “John then smiled and said that it would be better perhaps if it were myself, Dick Gwee, or Leroy,” said Gwee, referring to Leroy Lau Chee Heong, another broker involved.
Gwee told the court he reacted to Soh’s suggestion by smiling, and then he walked away. “What did you understand from the remark?” asked deputy public prosecutor (DPP) Jiang Ke Yue. “He (Soh) might have wanted me to take up the responsibility,” replied Gwee.
“Then why did you smile and walk away?” asked Jiang. “My answer just now was that I smiled, I shook my head, and I walked away,” repeated Gwee.
‘Buay koyok’
Gwee had earlier told the court that he initially thought Soh was trying to buay koyok (sell snake oil) when he was promoting the BAL shares. However, Gwee soon changed his mind, and started trading BAL shares too. Gwee explained that there were a few reasons why.
First, he was confident that Soh was a changed person, eager to rebuild his credibility in the stock market and put behind his “pump and dump” reputation from the 1990s.
Gwee also observed how the BAL companies were indeed making a series of acquisitions while Soh was actively promoting those stocks and that the share prices were moving up amid wider investors’ interest. At one point, Soh showed Gwee LionGold’s shareholder list and leading US asset manager BlackRock was in it too.
Last but not least, based on Gwee’s observation of the activities inside LionGold’s office, used by brokers such as Tai, Gabriel Gan and Henry Tjoa, he concluded that whenever there were open positions, in order to prevent contra losses, the brokers would get the prices “to be on the uptrend”. Gwee told the court: “I felt that I should follow the tide. Or a similar way of saying that is, to follow the momentum.”
Gwee also agreed to Soh’s request in the second half of 2013 to help “roll” the BAL shares. The share manipulation was allegedly done by the individuals buying and selling BAL shares mainly to one another within the network of dozens of trading accounts allegedly controlled by them. Instead of paying for the shares, they would try to pass the shares to other accounts just before payment due, to avoid paying for the shares.
However, there were times losses were incurred for certain trades and then a petty cash stash maintained by Goh Hin Calm, described as the treasurer of the operation, would be tapped to make good those losses.
Gwee told the court how on one occasion, Soh said he would be travelling to negotiate deals, and had passed him a piece of paper with phone numbers to brokers and the quantity to be rolled. He did as Soh told him to, and found that he did not need to introduce himself. The brokers who picked up the phones, whose names Gwee did not know, were expecting his call too.
“So the fact that they were expecting someone to call, right, what were your thoughts about this? Who could have told them to expect your call?” asked Jiang. “John,” replied Gwee. DPP Jiang also asked Gwee who thought those trades belonged to. “They could have belonged to the client themselves, or they could have belonged to John. But I can’t say who they belonged to, because I was not sure,” he replied.
‘Sifu’
Gwee told the court one reason why Soh wanted to rope him was because he had more than three decades of experience trading shares. Various other witnesses also told the court how Gwee was coordinating the trading and giving instructions on what and when to trade. In addition, the court was also told how Gwee was “mentoring” the various brokers on trading tactics such as “layering”.
Gwee denied this. He said Tai at that time was already for years a high-profile figure in the stock market who had worked with various major brokerages. Tjoa, Gwee said, was known to have “the largest, if not one of the largest” client base in Singapore.
Gan, meanwhile, was a regular guest commentator on the Chinese media, both radio and papers. “So they are considered very senior stockbrokers. Given their very deep experience in the stockbroking industry, I believe that they would know what is layering,” said Gwee.
Gwee was then shown Tai’s conditioned statement, where Tai said he recognised how very experienced Gwee was at “playing the market” and “I (Tai) began to treat him as a mentor after a while”.
Tai also said Gwee gave him various pointers, such as how to move the share price up and down, how to avoid trading with “aliens” (people outside their known circle) and how to defend the share price of a counter from margin calls.”
Gwee denied saying all these. He also denied Tai ever called him “sifu” (teacher) or “godfather”, which was what Gan overheard. “He probably learned quite a lot from Dick ... This is my assumption, I have no proof,” said Gan.
In any case, Gwee was able to show a solid understanding of the dynamics of share trading. For example, another reason why he actively traded BAL shares was because he has good visibility of where the prices are heading because of the open positions the brokers involved had.
When asked by DPP Jiang how did he know those brokers had open positions, Gwee said he was making an informed guess using the counterparty codes sent by his own broker for trades that were done.
Gwee was able to whittle down a list of familiar counterparties with brokerages such as Phillip Securities, where Tjoa was a remisier, and Interactive Brokers and Saxo, where Tai managed trading accounts at both entities, and guessed that they were still rolling. Both Gan and Lau were with DMG but Gwee said he’s also able to tell them apart.
“Based on my instinct, if the quantity was large, then I would think it would be Leroy,” said Gwee. “And if it were a smaller quantity, I would think that it is Gabriel because I know that he was doing something refreshing. That’s because his line is not as big as Leroy’s.”
Hong Kong tycoon
The trading operations did not always go according to the way everybody wanted. Throughout the trial, the court was told how disputes and tensions arose among the individuals allegedly involved. For example, there was a morning meeting Gwee had over at Tai’s office at Manhattan House which made Gwee leave in a huff.
As part of the alleged share manipulation scheme, other individuals involved in the scheme had put up their sell positions, and Tai was presumably tasked to be the one picking up those shares that day.
Tai, instead of letting other non-related buyers come in and meet some of those sell orders throughout the day, had chosen to snap up all the shares in the sell queue moments after trading started. “It’s very easy, just let me ‘eat’,” said Tai.
Gwee said he was annoyed because Tai, by doing this, would make it very obvious that it was a coordinated trade. When Gwee met Tai, it was just 9.30am — not long after the market started trading — and there Tai was, holding on to a golf club and “behaving like a Hong Kong tycoon”. He called Tai “lazy” and left.
‘Siao liao’
The tempo of activities increased in the lead up to the crash on Oct 4, 2013. The court was told earlier that while BAL share prices have surged, they’ve started to attract short selling too, including a client of Goldman Sachs.
Brokers such as Gan were told by Gwee to “defend” the share price; Soh asked one Adeline Cheng, whom he was romantically involved, to keep buying the shares which were already at lofty levels — which she did despite misgivings.
Gwee then told the court how a few days before the crash, he got a “shock” seeing around 40 people at LionGold’s office, listening to Soh extolling them to buy the BAL shares and practically guaranteeing that the share prices would go up more.
After Soh’s presentation, Gwee — together with a few of the closely involved brokers, including Tai, Gan, Lau and Tjoa — gathered at the smoking area. They talked about how “the boss” was “very daring”, and also he had “siao liao” (Hokkien for gone crazy).
In the days after the crash happened, Gwee saw a queue of people at LionGold’s office waiting to talk to Soh. He said: “From their conversations, I heard that they were all seeking to recover contra losses.”
While Gwee was willing to tell the court what he had seen and heard at LionGold’s office, there was something DPP Jiang is taking issue with. “However, the prosecution’s case is that, and I put it to you, you are downplaying your own role in Mr John Soh’s trading activities in BAL,” said the DPP. “Disagree,” Gwee replied.
Did Gwee coordinate trades with Tai and Gan?
N Sreenivasan, who is defending John Soh, suggested that Dick Gwee, apparently with Soh’s backing, was very actively trading for his own profit.
The court was presented with an audio recording between brokers Gabriel Gan and Henry Tjoa which mentioned Gwee “needs the boss to guarantee his three bids” when he trades.
The court was also told earlier how Gwee would tell certain brokers to remove buy queues so that he could buy at a lower price, or, he would make them buy from him at higher prices.
The court was also showed specific records of trades where unusually large orders placed by Gwee would be met in a matter of seconds by other brokers such as Ken Tai or Gabriel Gan.
In the three-week period to Sept 11, 2013, Gwee had accumulated 12.1 million Asiasons shares worth nearly $12 million. Sreenivasan, showing the trading records, pointed out that a few days later, Gwee would then be able to find a buyer within moments after putting up a sell order for an unusually large tranche of 500,000 shares. “As you said, it’s very hard. For you, it’s easy because you’ve got Ken Tai doing it for you. Agree?” he asked. “I cannot be certain, but there exists such a possibility,” said Gwee.
“Whenever you put in an order, either Ken Tai handles all of it, or Ken Tai takes what he can, and if there is any left over to be mopped up, Gabriel comes in. Agreed? Prearranged, Mr Gwee,” said Sreenivasan. “I cannot remember,” said Gwee.
“No, no, you’ve got to be very careful. Mr Gwee, this is not the type of thing you forget if you’re doing large trades in coordination with somebody else. Tell us the truth, Mr Gwee. Were you trading, coordinating with Ken Tai?” pressed Sreenivasan. “I cannot remember,” said Gwee.
“Mr Gwee, I’m putting it to you that you were coordinating with Ken Tai for all these trades, and you are trying not to lie, but saying you can’t remember itself is a lie, Mr Gwee. You can remember. You were coordinating. Agree or disagree?” “Disagree,” replied Gwee.
Soh and Gwee talked of donating trading profits
The court heard how Dick Gwee had trading accounts opened using the names of British Virgin Islands-incorporated entities like ISR Equity, which used an account at Lim & Tan to trade in the BAL shares.
Gwee told the CAD he set up this company for “charity purposes”. He told the court how John Soh and himself talked about “social responsibility” and that he wanted to donate some of his trading profits.
Soh’s lawyer N Sreenivasan tried asking Gwee how much money did ISR Equity donate to charity. “It’s a BVI company, it can’t be pouring soup into bowls. It can only give money, right, how much?” asked Sreenivasan. “Not much, and that is because ISR Equity did not have much cash,” said Gwee.
“So how much, Mr Gwee? Don’t be shy,” pressed Sreenivasan. “A few thousand dollars,” said Gwee.
When asked, Gwee denied he made $30 million from trading BAL shares. He told the court he had a “good till cancel” standing order at Lim & Tan to buy BAL shares. As a result, after the crash happened, the GTC, which was still in effect, ended up with a lot more BAL shares than intended.
Gwee said he transferred around $20 million from elsewhere to top up the $10 million he already had in the account, paying around $30 million in total to pick up all the shares. “And until today, they were all paper losses,” he said.
The court was also told that besides Gwee, his wife Joyce Foo, his younger brother Eugene and Eugene’s daughter Eileen were all actively trading too, and the extended family apparently made millions in trading profit. Sreenivasan, citing records gone through by the CAD, told the court that Gwee’s niece, Eileen, then 24 years old, made a total of $685,888.72 in her year-long trading activities, including $102,688.90 on Sept 17, 2013, alone.
When asked by Justice Hoo Sheau Peng if the amount was actual gain, the answer was yes. “Yes, your Honour. I think it is recovered value, because she answers, ‘I banked it into my POSB account’.”
Turning to Gwee, Sreenivasan said: “I do apologise if I’m disturbing you with questions about your family, but unfortunately that’s where we are”.
Quah kept tabs on love rival Cheng with frequent visits to LionGold office
At the cross examination by Quah Su-Ling’s counsel Philip Fong, Gwee said he suspected Quah was in a relationship with Soh, given how Quah took good care of him, bringing him tonics and stuff.
Fong also got Gwee to agree that Adeline Cheng was vying for Soh’s “love and attention”. For example, at Gwee’s mother’s wake, where Soh was in attendance, Cheng showed up in an attire showing “half ball”.
As such, Fong tried to get Gwee to agree that a reason Quah was often at LionGold’s office was because she wanted to keep an eye on Soh, and another on Cheng, the rival. “I don’t object to this,” said Gwee.
Referring to how Quah was seen giving trading instructions, Fong also got Gwee to acknowledge that as the then CEO of IPCO International, Quah could be trading more than just her personal accounts. “She could have been giving orders to her own brokers for her own personal accounts or corporate accounts. Correct?” asked Fong. “Yes,” said Gwee.
Fong, referring to the accounts Quah had with Tai over at Saxo Bank and Interactive Brokers, got Gwee to agree that there wasn’t anything wrong with Quah giving Tai trading instructions.
On the other hand, citing Tai’s testimony, Gwee himself had been giving Tai trading instructions. “Did you have any accounts opened with Ken Tai in IB or Saxo?” asked Fong. “No,” said Gwee.
Fong also got Gwee to agree that broker Gabriel Gan likes to “show off” and “tell all kinds of stories”. The court was told earlier by Gan that Gwee called for a particular meeting with the brokers to warn that they should avoid wash trades as that was what got Gwee convicted for the Mid-Continental case back in 2001.
However, Fong, drawing on his own experience defending Gwee at the Mid-Con trial back then, got Gwee to confirm that he wasn’t convicted for wash trading, but for conspiring to manipulate the Mid-Con shares by buying up the free float of shares over a period of a few days after Mid-Con was listed, knowing that the placees of the IPO would not be selling their shares.
Since Gwee didn’t go to jail for wash trading, he couldn’t have warned the brokers about wash trading of the BAL shares. “Is what Mr Gan saying here about you telling them that you went to jail previously for wash trade true?” asked Fong. “Not true,” said Gwee.
ENDS
