Banks, brokerages incurred over $350 million in losses from penny stock crash

SINGAPORE (Mar 20): Banks, brokerages and other financial institutions suffered a total of more than $350 million in unpaid losses in the wake of the October 2013 crash of Blumont Group, LionGold Corp and Asiasons Capital (now known as Attilan Group), according to prosecutors.

Goh Hin Calm, one of the three facing trial for the saga, had pleaded guilty to two charges of creating a false market appearance for shares. He faced six charges, and was eventually sentenced to three years’ imprisonment.

As the former interim CEO of IPCO International, Goh had been described as the “treasurer” for the whole operation masterminded by John Soh and Quah Su-Ling.

According to the statement of facts from the prosecutors, Goh allowed Quah – followed by Soh – to use six brokerage accounts under his name, on top of four other accounts under his wife’s name.

Brokers tending to those accounts were told to take instructions from Quah and Soh, the latter referred to as “Peter Chew”, to trade shares of the penny stocks at the centre of the saga.

According to prosecutors, the amount owed to the financial institutions came about as a result of money lent to the accused.

When the prices crashed, the account holders were unable to repay what was due, causing the value of shares held as collaterals to plunge. Losses were also incurred from contra trading from shares bought just days before the crash, which were not settled in time.

Financial institutions hit by the penny stock crash in 2013 include Goldman Sachs, Interactive Brokers, Saxo, Phillip Securities and RBC. While some of these institutions facilitated trading of shares, others like Goldman Sachs lent money to Quah and her associates such as James Hong and Ng Su Lin.

The ten trading accounts under Goh and his wife Huang Phuet Mui’s name are with OCBC Securities; AmFraser Securities Pte Ltd (now known as KGI Fraser Securities; DMG & Partners Securities (now known as RHB Securities Singapore) and Phillip Securities.

According to prosecutors, Goh allowed Quah and Soh access to these accounts, through which they placed bigger and bigger trades as prices of the three penny stocks began their run-up.

For example, between Jan 2 and Aug 1 on 2012, Blumont’s share price had doubled from 1.9 cents to 4.3 cents.

This growth increased by more than six times over 2013 to 31.5 cents on Jan 2, to 52.5 cents on March 28, and finally to $2.02 on Oct 3 – representing a share price increase of more 540% over a span of just nine months in the same year.

The trial of Soh and Quah will begin on March 25. They face 189 and 178 charges, respectively.