Former adviser to Leung Chun-ying accused of conspiring to defraud market regulator and cheating firm out of HK$30 million

Jasmine Siu

An ex-adviser to a former leader of Hong Kong was on Tuesday accused of conspiring with his financial officer to defraud the market regulator.

Barry Cheung Chun-yuen, 61, was also accused of cheating a firm out of HK$30 million in an attempt to seek quick funding to keep his commodities futures market afloat, before the authorities shut down the platform in May 2013.

The allegations emerged as prosecutor John Reading SC opened his case against the former executive councillor and chairman of the now-defunct Hong Kong Mercantile Exchange (HKMEx).

Cheung has denied one count of conspiracy to defraud – jointly charged with the trading platform’s former chief financial officer, Jacky Choi Tat-ying, 50 – and another count of fraud.

Prosecutors alleged the duo conspired between May 2012 and May 2013 to hide the exchange’s true financial position and mislead the Securities and Futures Commission into letting it keep its authorisation to provide automated trading services in Hong Kong.

Cheung was further accused of cheating a company called Sinomax Finance out of HK$30 million for the benefit of New Effort Holdings, a British Virgin Islands-based firm wholly owned by Cheung, who was the majority shareholder in the exchange.

Cheung previously worked as an adviser to Leung Chun-ying, who was Hong Kong chief executive from 2012 to 2017.

The District Court heard the commission had authorised the platform on the condition it would have sufficient financial resources to properly perform its functions and uphold obligations to disclose information relating to its business and operations.

But Cheung and Choi, according to Reading, used various means to knowingly conceal the HKMEx’s deteriorating financial position, “in flagrant disregard of the conditions”.

The alleged scheme involved inflating the HKMEx’s cash position by recording the cash balance before making substantial withdrawals or depositing funds at the last minute – only for the cheques to be withdrawn almost immediately after the financial report.

Reading said HKMEx’s “habitual falsities ended in one staggering instance across April and May 2013” when it fabricated an injection of US$30 million and its supporting documents, with a clear inferable intent to deceive the commission.

HKMEx was also accused of providing “blatantly false explanations” when its true financial position fell far below acceptable levels, without ever correcting the information.

“Had the SFC been aware of those matters as they arose, it would have followed up with the HKMEx,” Reading said. “Where the SFC had reason to believe that the provision of such information was not inadvertent, it would have considered withdrawing the authorisation at a much earlier stage.”

The court heard that HKMEx had attempted to seek short-term funding to rectify its financial position, which had deteriorated by May 2011, shortly after it obtained authorisation on April 26.

But, Reading said, Cheung concealed key information in deceiving Sinomax’s then manager, Ng Hoi-shuen, to extend a loan of HK$30 million.

The court heard Cheung did not dispute the alleged misleading financial reports were made, or that the loan agreement was executed on April 17, 2013.

Choi was expected to testify against Cheung.

The trial continues on Wednesday before District Judge Amanda Woodcock.

This article Former adviser to Leung Chun-ying accused of conspiring to defraud market regulator and cheating firm out of HK$30 million first appeared on South China Morning Post

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