Two men fined for defrauding CPF Board with fake cross-trades to 'withdraw' funds

SINGAPORE: In order to withdraw money from his Central Provident Fund (CPF) Ordinary Account, a man manipulated a scheme meant for the investment of CPF savings and got his close friend to help him get the cash out through artificial cross-trades.

Samuel Chen Zhihao, 37, was fined S$7,000 on Wednesday (Jun 30) for his crimes. His friend Raymond Wong Tuck Wai, 38, was fined S$5,000 for helping him in the illegal scheme by buying shares from him at Chen's loss and handing Chen the profits in cash.

They each pleaded guilty to two charges under the Central Provident Fund Act of defrauding the CPF board into allowing unauthorised withdrawals, with another two charges taken into consideration.

The court heard that Chen came up with the scheme and approached Wong for his help. Wong agreed as they were good friends.

Chen's plan was to use the CPF Investment Scheme, which provides CPF members with the option to invest their savings in financial instruments such as insurance products, unit trusts, fixed deposits, bonds and shares.

The aim of the scheme is to allow members to invest their CPF savings, while ensuring a long-term objective of financial security is met. Proceeds from the sales of shares bought with funds from a member's CPF Ordinary Account are required to be returned to the member's Ordinary Account.

Between Sep 1, 2017 and Jan 8, 2019, Chen used his CPF Ordinary Account money under the scheme to cross-trade with Wong in four securities listed on the Singapore Stock Exchange.

These were: RH Petrogas, Sunvic Chemical Holdings, CFM Holdings and Santak Holdings. Chen would determine the prices and volume of each trade, and text Wong the details.

He would first identify shares with low trading volume and sell them to Wong for an artificially low price. Chen would later buy the shares back at an artificially high price within a short amount of time, so that he consistently incurred losses while Wong made a profit.

Wong would transfer the profits back to Chen in cash and retain a small portion as his benefit from participating in the scheme. In total, the pair executed 101 cross-trades in the four securities. 

As Chen's trades were funded with his CPF Ordinary Account, his losses to Wong and Wong's subsequent transfers back to him were in effect a withdrawal of the funds from Chen's CPF account, said Deputy Public Prosecutor Jordon Li.

In total, Chen "withdrew" S$32,860 of the funds from his CPF Ordinary Account. Court documents did not specify how the crimes were uncovered, but the Commercial Affairs Department eventually investigated the case and seized their devices.

The prosecutor Mr Li sought a fine of S$7,000 for Chen and S$6,000 for Wong. He also sought an order for Chen to refund the unauthorised withdrawals to his CPF account. Chen has since made the first two repayments under the direction of the CPF Board.

Mr Li said the primary harm is suffered by Chen, "as it is his long-term financial security that was affected by the withdrawals". There was no evidence that the scheme led to any market impact, he added.

The duo has demonstrated remorse, cooperating in investigations and admitting readily to the offences, he said.

For each charge of defrauding the CPF Board in a scheme that resulted in unauthorised withdrawal of funds, the men could have been jailed up to six months, fined up to S$5,000.