Hong Kong Court Sentenced Retail Trader Christine Yeung Tak Sum to 18 Months Jail for Securities Fraud with Illegal Short-Selling & Generated $77,000 in Profit, Provided Settlement Instruction Form to Broker Aristo Securities Showing Non-Existent 15 Million Shares of Hong Kong-Listed Aurum Pacific China Group in Another Brokerage Which Then Allowed Her to Illegally Short-Sell Aurum Shares & Bought Back the Shares on the Same Day
20th March 2024 | Hong Kong
A Hong Kong court has sentenced a retail trader (Christine Yeung Tak Sum) to 18 months jail for securities fraud with illegal short-selling and generated $77,000 (HKD 602,600) in profit, by providing settlement instruction form to broker Aristo Securities showing non-existent 15 million shares of Hong Kong-listed Aurum Pacific China Group in another brokerage which then allowed her to illegally short-sell Aurum shares & bought back the shares on the same day. Hong Kong Securities & Futures Commission (SFC): “The Eastern Magistrates’ Court today sentenced Ms Christine Yeung Tak Sum, a retail trader, to 18 months of imprisonment following her conviction for securities fraud involving illegal short selling in a prosecution brought by the Securities and Futures Commission (SFC) (Note 1). This is the first case where an individual was convicted for the offence of employing a fraudulent or deceptive scheme with intent to defraud in transactions involving securities under section 300 of the Securities and Futures Ordinance in the context of illegal short selling. In sentencing, Magistrate Mr Jeffrey Sze Cho Yiu remarked on the serious nature of the offence, the premeditation in the commission of the offence and a significant amount of illicit profits involved. The Magistrate concluded that taking into account these factors and the importance of upholding Hong Kong’s status as an international financial centre, a strong deterrent message must be sent to the public by imposing an immediate custodial sentence on the wrongdoer.” Note 1 – Please refer to SFC’s press releases dated 7 November 2023 and 27 February 2024 for details. Hong Kong SFC’s Executive Director of Enforcement, Mr Christopher Wilson: “We welcome the court’s decision. This case stemmed from a complex ramp-and-dump investigation in which we discovered suspected securities fraud by way of illegal short selling immediately before the collapse of the share price. The outcome of this case sends a clear and strong warning to market participants that the SFC has zero tolerance for market misconduct. We will redouble our efforts to root out market misconduct in order to safeguard market integrity and maintain a level playing field for Hong Kong.” More info below:
“ Hong Kong Court Sentenced Retail Trader Christine Yeung Tak Sum to 18 Months Jail for Securities Fraud with Illegal Short-Selling & Generated $77,000 in Profit, Provided Settlement Instruction Form to Broker Aristo Securities Showing Non-Existent 15 Million Shares of Hong Kong-Listed Aurum Pacific China Group in Another Brokerage Which Then Allowed Her to Illegally Short-Sell Aurum Shares & Bought Back the Shares on the Same Day “
Hong Kong Court Convicts Retail Trader of Securities Fraud with Illegal Short-Selling & Generated $77,000 in Profit, Provided Settlement Instruction Form to Broker Aristo Securities Showing Non-Existent 15 Million Shares of Hong Kong-Listed Aurum Pacific China Group in Another Brokerage Which Then Allowed Her to Illegally Short-Sell Aurum Shares & Bought Back the Shares on the Same Day
1st March 2024 – A Hong Kong court has convicted a retail trader (Christine Yeung Tak Sum) of securities fraud with illegal short-selling and generated $77,000 (HKD 602,600) in profit, by providing settlement instruction form to broker Aristo Securities showing non-existent 15 million shares of Hong Kong-listed Aurum Pacific China Group in another brokerage which then allowed her to illegally short-sell Aurum shares & bought back the shares on the same day. Hong Kong Securities & Futures Commission (SFC): “The Eastern Magistrates’ Court today convicted Ms Christine Yeung Tak Sum, an unemployed retail trader, after she pleaded guilty to securities fraud involving illegal short selling in proceedings brought by the Securities and Futures Commission (SFC). The conviction of Yeung of a charge of employing a fraudulent scheme with intent to defraud in transaction involving securities under section 300 of the Securities and Futures Ordinance (SFO) in the context of illegal short selling is first-of-its-kind. This case stemmed from a ramp-and-dump investigation during which the SFC discovered that Yeung had engaged in a fraudulent scheme to commit the offence (Notes 1 & 2). Yeung was remanded in custody pending sentencing on 20 March 2024. The Court heard that, on 28 May 2020, Yeung submitted a settlement instruction form to her broker Aristo Securities Limited purporting to show that she had 15 million shares in Hong Kong-listed Aurum Pacific (China) Group Limited (Aurum) in another brokerage firm, when in fact she did not. The broker, being misled, allowed Yeung to sell the shares in Aurum before the purported transfer of shares was settled. Yeung did not hold any of Aurum shares at the time she submitted the settlement instruction form and when she sold the shares. After illegal short-selling Aurum shares, she proceeded to buy back the same quantity of shares at a lower price to cover her short-sold positions within the same day. As a result, she obtained an illicit profit of about $602,600.” More info below:
Hong Kong Court Convicts Retail Trader of Securities Fraud with Illegal Short-Selling & Generated $77,000 in Profit, Provided Settlement Instruction Form to Broker Aristo Securities Showing Non-Existent 15 Million Shares of Hong Kong-Listed Aurum Pacific China Group in Another Brokerage Which Then Allowed Her to Illegally Short-Sell Aurum Shares & Bought Back the Shares on the Same Day
27th February 2024 – The Eastern Magistrates’ Court today convicted Ms Christine Yeung Tak Sum, an unemployed retail trader, after she pleaded guilty to securities fraud involving illegal short selling in proceedings brought by the Securities and Futures Commission (SFC).
The conviction of Yeung of a charge of employing a fraudulent scheme with intent to defraud in transaction involving securities under section 300 of the Securities and Futures Ordinance (SFO) in the context of illegal short selling is first-of-its-kind. This case stemmed from a ramp-and-dump investigation during which the SFC discovered that Yeung had engaged in a fraudulent scheme to commit the offence (Notes 1 & 2). Yeung was remanded in custody pending sentencing on 20 March 2024.
The Court heard that, on 28 May 2020, Yeung submitted a settlement instruction form to her broker Aristo Securities Limited purporting to show that she had 15 million shares in Hong Kong-listed Aurum Pacific (China) Group Limited (Aurum) in another brokerage firm, when in fact she did not. The broker, being misled, allowed Yeung to sell the shares in Aurum before the purported transfer of shares was settled.
Yeung did not hold any of Aurum shares at the time she submitted the settlement instruction form and when she sold the shares. After illegal short-selling Aurum shares, she proceeded to buy back the same quantity of shares at a lower price to cover her short-sold positions within the same day. As a result, she obtained an illicit profit of about $602,600.
The SFC reminds intermediaries of their obligation to implement and maintain appropriate measures to comply with the short selling requirements and to be mindful of red flags indicating illegal short selling by its clients (Notes 3 & 4).
Notes:
- Under section 300 of the SFO, it is an offence to engage in any act, practice or course of business which is fraudulent or deceptive in a transaction involving securities. A person committing an offence under section 300 of the SFO is liable on summary conviction to a fine of $1 million and to imprisonment for three years.
- Please see the SFC’s press release dated 7 November 2023.
- These include sections 170 to 172 of the SFO, the Securities and Futures (Short Selling and Securities Borrowing and Lending (Miscellaneous)) Rules and the Guidance Note on Short Selling Reporting and Stock Lending Record Keeping Requirements.
- Red flags for illegal short selling include:
-
- Newly onboarded clients or clients with poor settlement records who request to sell large amounts of shares without first depositing the shares to the broker; and
- Retail clients who indicate that he/she will settle the sell transaction by transferring stocks from another broker via settlement instructions, but cannot provide a credible reason for not executing the sell transaction directly through the other broker.
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Once the aforesaid red flags are detected, brokers should take reasonable steps to ensure its clients are in possession of the stocks before executing clients’ trade orders.
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