SINGAPORE — A former finance director of Singapore-listed New Silkroutes Group was sentenced to 12 weeks in prison on Sept 16 after pleading guilty to manipulating its share prices to allow its shares to be used as consideration for corporate deals.
According to sentencing documents, William Teo Thiam Chuan, 55, played a "critical" role in the market-rigging scheme, which the prosecution alleged was masterminded by Goh Jin Hian, former chief executive of the investment holding firm.
On Sept 16, Teo pleaded guilty to six charges under the Securities and Futures Act for abetment by conspiracy over false trading and market-rigging transactions. Another 25 charges were taken into consideration.
Goh, 55, the son of former prime minister Goh Chok Tong, Teo, Kelvyn Oo Cheong Kwan, the group's former chief corporate officer, and Huang Yiwen, the sole director of GTC Group, a commercial market maker that New Silkroutes had engaged, were handed in September 2023 a total of 132 charges related to false trading offences. The pre-trial conference for Goh, Huang and Oo is scheduled for Sept 26.
According to the prosecution, the four men carried out a "sophisticated, well-coordinated and effective" scheme between Feb 26, 2018, and Aug 27, 2018, to artificially push up the share price of New Silkroutes, "effectively (allowing the company) to use its shares as currency for corporate deals and acquisitions".
The scheme was devised as "a quick and convenient way" to facilitate the company's expansion by acquiring other companies and to raise capital through the issuance of new shares, the prosecution added.
New Silkroutes was initially in the businesses of oil trading, and electronic and IT product distribution. In December 2016, it decided to move into healthcare and acquired several clinics and medical supply firms the following year. These acquisitions were paid for through the issuance of company shares.
But its efforts to acquire companies and raise capital through private placements were hindered by its weakening share price in 2017.
From January 2017 to May 2017, its shares traded between 70 cents and 90 cents, before dropping to between 40 cents and 50 cents in June 2017. By November 2017, they had hit a low of 28.5 cents.
On Nov 29, 2017, New Silkroutes applied to halt the trading of its shares. Trading was suspended on Dec 4, 2017, and the suspension was lifted only after the market closed on Feb 25, 2018.
While its stock trading was suspended, the firm agreed to several corporate transactions involving the potential issuance of new company shares as consideration.
On Feb 21, 2018, it announced a proposed placement of 11.4 million new shares at a price of 44 cents per share to an external investor, Dr Andrew Chua Soon Kian, to raise $5 million. This placement was completed in March 2018.
That same month, New Silkroutes announced a memorandum of understanding (MOU) with a Mr Shen Yuyun to acquire two medical supply companies in Shanghai. The company planned to issue new shares at 50 cents a piece to complete the acquisition for $65 million.
It also announced an MOU with Haitong International Securities, where Haitong would subscribe to a convertible bond of $5 million issued by New Silkroutes, with a maturity date of two years from the date of issue. The convertible bond would pay interest of 5 per cent per annum.
One reason for propping up the stock price was to bolster investor confidence to complete the corporate transactions and to allow for future share placements based on an attractive share price, the prosecution said.
"There were concerns that Haitong might not exercise its option if the share price continued on its downward trend, or that Shen Yuyun might ask for a greater premium if the share price fell below a certain level," the prosecution added.
According to court papers, Goh asked Teo on Feb 4, 2018, to find a market maker to support the share price, and GTC was hired between Feb 21, 2018, and Feb 26, 2018, to artificially push up the price from 28.5 cents to a target price of 50 cents. The use of GTC also created an additional layer - by adding a separate market player - which would make it harder to detect the scheme, the prosecution said.
Legitimate market making does not include price manipulation to push up the share price and set the closing price.
To push up the share price, the four men used different trading accounts to buy its shares to mark the close, or to push up and set the day's closing price. They also bought at price levels several bids higher than the last traded price, the prosecution said.
Teo abused his position by using the company's share buyback accounts, which he had been authorised to control, to place orders and execute trades to push up its share price.
"While not the mastermind (which was Goh), Teo played an important role in the scheme," the prosecution said, pointing out that Teo was the main liaison between New Silkroutes and Huang.
"It was Teo who coordinated with Huang, reminding him of the price targets GTC had to hit, and giving instructions on the purchase of New Silkroutes securities."
The scale of the market rigging was significant, with "great distortion" caused to the market for New Silkroutes' securities. On the 31 days, which form the subject matter of Teo's proceeded charges, the alleged trades and orders executed by Teo, Huang and Goh accounted for 28.78 per cent of the total market volume, taking buy trades only.
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This article was first published in The Straits Times. Permission required for reproduction.
