Jail for man who cheated Bank of East Asia into issuing him S$3 million loan in market manipulation scheme
SINGAPORE: A man was jailed eight months on Monday (Feb 7) for deceiving the Bank of East Asia into giving him a S$3 million loan under a share financing facility, which he was later unable to pay back.
The deception by Joel Aloysius Choy Kwok Shing, 37, was part of a larger scheme to manipulate the share price of SGX-listed Skyone, which came to light in 2013 after Skyone's shares fell drastically by 90 per cent in a day.
The scheme was allegedly masterminded by Choy's childhood friend and co-accused, Justin Goh Hanshi. According to the prosecution, Goh directed trading representatives to use proxy trading accounts belonging to family, friends and clients to buy and sell Skyone shares in order to maintain and push up their price.
At the time of his offence, Choy had no knowledge of the market manipulation scheme, according to court documents.
Choy is the first to plead guilty out of four co-accused allegedly involved in the scheme. He admitted to one count of cheating the Bank of East Asia. Another count of cheating Maybank over a S$650,000 loan was taken into consideration for sentencing.
FAVOUR FOR A FRIEND
The court heard that in November 2012, Goh asked Choy to apply for a share financing facility with the Bank of East Asia to obtain loans that he wanted to use for personal trading. Choy agreed as a favour.
Under the agreement between the two men, Choy opened the share financing facility in his own name and then handed over full and effective control of the account and all transactions to Goh. Choy did not receive any commission or financial benefit for this, said the prosecution.
Share financing facilities are secured by securities. Account holders can use the loans disbursed under the facility to buy more securities that can be pledged with the bank as collateral for the loans.
Acting on Goh's instructions, Choy signed a sale and purchase agreement in November 2012 which falsely stated that he had purchased 6 million Skyone shares for a total of S$1.86 million.
In fact, Choy had made no such payment. Despite this, an off-market transfer of the Skyone shares to Choy's Central Depository (CDP) account was made a few days later, allegedly arranged by Goh.
Later that month, based on information Choy gave a Bank of East Asia relationship manager about owning 6 million Skyone shares, he was offered a share financing facility of S$3 million.
By obtaining the share financing facility in his own name, Choy made false representations to the Bank of East Asia that he had effective control over the account and was the beneficial owner of the account and the pledged shares, according to court documents.
In December 2012, Choy pledged 3 million of Skyone's shares as collateral for the share financing facility, allegedly at Goh's instruction.
The Bank of East Asia then disbursed the S$3 million loan to the share financing account. Choy handed control of the account to Goh, who used a significant amount to purchase Skyone shares on Dec 31, 2012 and Jul 10, 2013, intending to manipulate share prices.
These trades were done without Choy's involvement and were directed by Goh alone, the prosecution said.
On Oct 28, 2013, Skyone's shares opened at S$0.46 and fell drastically, reaching S$0.043 at about 10.50am. This was a 90 per cent drop from the opening price.
The plunge in share price triggered a margin call by the Bank of East Asia, as the value of Skyone's shares pledged in Choy's account was no longer sufficient to cover the loans disbursed.
Choy was unable to repay the loan, and an outstanding sum of about S$475,000 was still owed to the Bank of East Asia as of January 2014.
LOW CULPABILITY, SEVERE HARM
Describing Choy's case as one of low culpability but severe harm, deputy public prosecutor Suhas Malhotra asked for a jail term of nine months.
Culpability was low as Choy was not aware of the underlying market manipulation scheme, said Mr Malhotra, adding that his role was limited to opening the account and giving control of it to Goh without due diligence or supervision.
The prosecutor said both banks suffered high financial losses as a result of Choy's actions and added that such offences undermine confidence in the financial system.
Taken together with the fact that the loans obtained in the deception were used to perpetrate a market manipulation scheme, these considerations meant that Choy's offences caused severe harm, said Mr Malhotra.
In mitigation, defence counsel Josephine Chee of Rajah & Tann argued that her client should be seen as a victim in his own right, who had misplaced his trust in Goh. The two men were childhood friends, she said.
Ms Chee, who sought a jail term of not more than four months, said that Choy's actions were not motivated by personal greed and had not brought him financial benefit.
She also highlighted that he had not disputed liability for the bank loans, and that he had sold his matrimonial home and declared bankruptcy in order to repay the debt.
In sentencing, the judge said Choy was "naive" for handing control of his trading accounts over to Goh and giving him carte blanche, adding that Choy should have acted more cautiously given the large amounts of money involved.