China Fund News reporter Qin Wei
Towards the end of the year, the regulatory efforts of the Securities and Futures Commission of Hong Kong ("SFC") continued unabated.
On 16 December, the SFC disclosed that it had joined forces with the Hong Kong Police Force (the "Police"), the Monetary Authority of Singapore (the "Monetary Authority of Singapore") and the Singapore Police Force to take action against an active group suspected of carrying out a "high bulk" (i.e. high shipment) market manipulation scheme in both the Hong Kong Special Administrative Region and Singapore, arresting 10 suspects and freezing 39 bank accounts involving assets of more than HK$75 million.
Thomas Atkinson, executive director of the CSRC's Regulatory Enforcement Department, said combating investment fraud and scams on online platforms, such as social media "singing high bulk" scams, remains a priority for the SFC's enforcement efforts. The SFC will continue to use existing enforcement and regulatory tools and work with other local and overseas law enforcement agencies and regulators.
Recommended stock group becomes "leek garden"
The so-called "singing high bulk goods", that is, scammers artificially push up the stock price of a listed company in different ways, and then induce other investors to pick up the goods at a high point, and they sell for profit.
At a joint press conference held by the Police Force and the Securities and Futures Commission today, Senior Superintendent Cheng Li-chi of the Financial Intelligence and Investigation Division said that since the beginning of this year, the lawbreaker group has used social platforms to spread the word that the price of certain stocks will rise, and after the "leeks" are bought at a high level, they have sold off in large quantities, resulting in a sharp collapse in stock prices. The suspect has been suspected of market manipulation, false trading and other crimes.
Earlier this year, the SFC first discovered that the group was engaged in suspicious trading activities, suspected of certain market misconduct offences, and referred the case to the Hong Kong Police and the Monetary Authority of Singapore for further investigation, taking into account the cross-border elements of the case and the scale of money laundering.
After investigating the three Hong Kong listed companies, the police found that the suspects colluded with the management of the three companies, using securities accounts in the Hong Kong SPECIAL Administrative Region and Singapore, as well as puppet investors to push up stock prices, and then spread "good news" on social media.
The shares of the companies involved rose 2 to 6 times in the short term, and the management of the unscrupulous group and the three listed companies sold at a high level, making a total profit of HK$175 million. Police said the funds were still being traced.
More than 75 million assets were frozen
The cross-border arrest operation, code-named "Operation Wolf Hunting", is the first cross-border action taken by the CSRC to crack down on cross-border "singing high bulk" scams.
On December 15, the Joint Police Force, the Monetary Authority of Singapore and the Singapore Police Force dispatched more than 190 officers to search 33 premises in the Hong Kong Special Administrative Region and Singapore, arresting a total of 10 people, including those believed to be group leaders, henchmen and executives of some Hong Kong listed companies, the SFC said.
At a joint press conference held today, the Police Force and the China Securities and Futures Commission (SFC) revealed that the hong kong sar(s) arrest operations searched the residences of the people involved in the case in Happy Valley, Wan Chai and Po Fu Lam, as well as the offices of Kwun Tong and Tuen Mun, and finally the police arrested 9 people (8 men and 1 woman) on suspicion of "money laundering", including 1 key member of the group, 6 senior executives of Hong Kong listed companies, and 2 puppet company account holders. Singapore Police Force also arrested a woman on suspicion of "fraud".
During the operation, the Hong Kong police froze a total of 39 bank accounts involving HK$48.5 million, and found HK$2 million in cash and some valuables during the search. Singapore froze S$4.4 million (about HK$25 million).
Wei Jianxin stressed that the "singing high bulk" scam is a serious market misconduct crime under the Securities and Futures Ordinance, and the case is particularly serious if the controlling shareholders or senior executives of the listed company actively participate or deliberately turn a blind eye.
Chef god becomes "bookmaker"?
At present, neither the SFC nor the Police Force has disclosed the names of the listed companies involved and the details of the detainees. However, a lot of market news pointed to Hong Kong-listed Longhuang Group (8493. HK) and its former director, Hong Kong celebrity chef Wong Wing Chi.
Longhuang Group operates Cantonese cuisine catering business, including 4 brands of Longhuang, Longxi, Huangxi and Longyan, with a total of 7 stores in the Hong Kong SAR and 1 store in Shanghai and 1 store in Macau. Huang Yongzhi himself is a chef and was once the youngest chef of Lee Yuen Restaurant.
According to public information at the time of Longhuang's listing in 2017, Huang Yongzhi and his brother Huang Yongkang started with the Longhuang brand in 2004, and at the beginning of the listing, Huang Yongzhi and his wife Li Jingnong held a total of 40.2% of the shares. Another Hong Kong-style dim sum brand, Tang Palace, participated in pre-IPO financing, holding a 16.5% stake, although all shares were emptied by the end of 2020.
In June this year, Longhuang Group fell into a "fairy stock" in one day, with its share price plummeting 83% from HK$2.2 to HK$0.38, and its market value evaporated by about HK$250 million in one day. After the stock price changed, Huang Yongzhi also entered and exited the company's management twice.
On July 13, Longhuang Group announced that Huang Yongzhi resigned as executive director and chief executive officer, and Li Jingnong also resigned as executive director and chairman of the board of directors. On August 4, Longhuang Group also said that after communication, Huang Yongzhi agreed to continue to serve as an executive director, but on September 14, the company issued an announcement that it had received a notice from Huang Yongzhi confirming his resignation as a director of the company, and the resignation took effect immediately on the date of the announcement.
Public data from the Hong Kong Stock Exchange shows that between June and August this year, Huang Yongzhi and his wife Li Jingnong also continued to reduce their shares until August 24, when they cleared all their shares.
At present, the shares of Longhuang Group are still in a state of suspension. On November 11, the company announced that it would delay the publication of its third-quarter results and suspend trading.
Edit: Joey
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