Hong Kong SFC & HKEX Take Enforcement Actions Against Listed-Mobile Gaming Company FingerTango & ex-Directors for Misconduct in Problematic Investments & Loans Resulting in More than $84 Million Losses (HKD 660 Million) Including Using HKD 450 Million Shortly after IPO in 2018 to Invest in Fund Without Knowledge of Board, Invested HKD 250 Million in Loan Notes Issued by a Small Private Company & Suffered Loss of HKD 258.75 Million after Default in 2019, Provided Over HKD 500 Million Loans to 15 Borrowers & Suffered HKD 424 Million Loss in 2020 & 2021
18th January 2025 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) & Hong Kong Stock Exchange (HKEX) have took enforcement actions against listed-mobile gaming company FingerTango & ex-directors for misconduct in problematic investments & loans resulting in more than $84 million losses (HKD 660 million) including using HKD 450 million shortly after IPO in 2018 to invest in a fund without knowledge of board, invested HKD 250 million in loan notes issued by a small private company & suffered loss of HKD 258.75 million after default in 2019, and provided over HKD 500 million loans to 15 borrowers & suffered HKD 424 million loss in 2020 & 2021. Hong Kong SFC (16/1/25): “The Securities and Futures Commission (SFC) and The Stock Exchange of Hong Kong Limited (Exchange) have joined hands in an enforcement action that resulted in the Exchange’s disciplinary actions against Mainboard-listed FingerTango Inc. (FingerTango) and its eight former directors for misconduct and breach of their duties towards the company and its subsidiaries (Notes 1 to 3). In parallel, the SFC is also seeking disqualification and compensation orders from the Court of First Instance (CFI) for the same alleged misconduct (Note 4). The investigations centred on the directors’ misconduct in relation to problematic investments and loans to external parties. Notably, a substantial portion of the loans went into default, resulting in FingerTango and its subsidiaries suffering losses of over $660 million. SFC’s legal action – Against this backdrop, the SFC commenced its legal action in the CFI in October 2023 seeking various court orders, including disqualification and compensation orders, against FingerTango and its eight former directors. At the time of listing, all then directors, including independent non-executive directors, resolved to adopt a policy that would allow certain investment decisions to bypass board approval. Shortly after its listing in July 2018, FingerTango used proceeds from its initial public offering to invest $450 million in a fund without the knowledge of the board. FingerTango partially redeemed the fund in December 2019, and immediately invested another $250 million in loan notes issued by a small-scale private company (2019 Loan Notes). It transpired that FingerTango suffered a loss of $258.75 million, including accrued interest, from a default on the 2019 Loan Notes (Note 5). Subsequently, the SFC discovered that between May 2020 and March 2021, FingerTango and two of its subsidiaries entered into 20 loan agreements with 15 borrowers, for loans totalling over $500 million (2020-21 Loans). FingerTango subsequently suffered an impairment loss of approximately $424 million with over 80% of the 2020-21 Loans in default. In the light of this discovery, in November 2024, the SFC expanded the scope of the misconduct in its legal action to include the 2020-21 Loans and, in particular, former directors’ failure to carry out proper procedures and due diligence before entering into the loans. In addition, the SFC named the two subsidiaries of FingerTango as respondents in the legal proceedings (Note 6). The SFC alleges that the losses resulting from the 2019 Loan Notes and 2020-21 Loans were attributable to breaches of the duties by former directors of FingerTango, Liu Jie, Wang, Liu Zhangxi, Zhu, Guo and/or Yao, rendering them liable to compensate the company and its subsidiaries for the incurred losses … … In a joint statement issued in July 2023 with the Accounting and Financial Reporting Council, the SFC reiterated the importance of proper conduct in the financial activities of listed corporations, particularly when it comes to granting loans. It emphasised that the board of directors, including audit committees, should be mindful of their duties to prevent the loss or misuse of listed corporations’ assets (Note 7). The 11 respondents named in the SFC’s legal proceedings are: (i) FingerTango; (ii) Mr Liu Jie , former chairman, chief executive officer and executive director (ED); (iii) Mr Wang Zaicheng, former ED and joint company secretary; (iv) Mr Liu Zhanxi, former ED and chief financial officer; (v) Mr Zhu Yanbin, former ED and chief operating officer; (vi) Mr Wu Junjie, former ED and vice president; (vii)-(ix) Mr Guo Jingdou, Ms Yao Minru and Mr Du Geyang, former independent non-executive directors; (x) & (xi) FT Entertainment Limited and Shanghai Youmin Networks Technology Limited, subsidiaries of FingerTango.”
“ Hong Kong SFC & HKEX Take Enforcement Actions Against Listed-Mobile Gaming Company FingerTango & ex-Directors for Misconduct in Problematic Investments & Loans Resulting in More than $84 Million Losses (HKD 660 Million) Including Using HKD 450 Million Shortly after IPO in 2018 to Invest in Fund Without Knowledge of Board, Invested HKD 250 Million in Loan Notes Issued by a Small Private Company & Suffered Loss of HKD 258.75 Million after Default in 2019, Provided Over HKD 500 Million Loans to 15 Borrowers & Suffered HKD 424 Million Loss in 2020 & 2021 “
Notes:
- The Stock Exchange of Hong Kong Limited is a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited.
- The Exchange issued a press release in relation to its disciplinary actions against FingerTango and its former directors on 16 January 2025.
- FingerTango’s shares have been listed on the Exchange since 12 July 2018. FingerTango and its subsidiaries are principally engaged in the mobile game operation and publishing business in the Mainland.
- The legal proceedings were commenced under section 214 of the Securities and Futures Ordinance (SFO). Under section 214 of the SFO, the court may, among other things, make orders to disqualify a person from being a director or being involved, directly or indirectly, in the management of any corporation for a period of up to 15 years, if the person is found to be wholly or partly responsible for the corporation’s affairs having been conducted in a manner, amongst other conduct, involving defalcation, fraud, misfeasance or other misconduct towards the corporation or its members. The court may also make any other order it considers appropriate.
- For further details, please refer to the SFC’s press release dated 6 October 2023. Subsequent to the commencement of the legal proceedings, FingerTango disclosed in its Interim Report 2024 that, as of 30 June 2024, the issuer of the loan notes repaid the principal amount of approximately RMB11,000,000. As a result, the company suffered loss and damages in the amount of HK$239 million plus interest.
- The 11 respondents named in the SFC’s legal proceedings are: (i) FingerTango; (ii) Mr Liu Jie , former chairman, chief executive officer and executive director (ED); (iii) Mr Wang Zaicheng, former ED and joint company secretary; (iv) Mr Liu Zhanxi, former ED and chief financial officer; (v) Mr Zhu Yanbin, former ED and chief operating officer; (vi) Mr Wu Junjie, former ED and vice president; (vii)-(ix) Mr Guo Jingdou, Ms Yao Minru and Mr Du Geyang, former independent non-executive directors; (x) & (xi) FT Entertainment Limited and Shanghai Youmin Networks Technology Limited, subsidiaries of FingerTango.
- Please see the joint statement issued by the SFC and the Accounting and Financial Reporting Council on 13 July 2023 to combat misconduct in relation to loans, advances, prepayments and similar arrangements made by listed companies.
Hong Kong SFC & HKEX Take Enforcement Actions Against Listed-Mobile Gaming Company FingerTango & ex-Directors for Misconduct in Problematic Investments & Loans Resulting in More than $84 Million Losses (HKD 660 Million) Including Using HKD 450 Million Shortly after IPO in 2018 to Invest in Fund Without Knowledge of Board, Invested HKD 250 Million in Loan Notes Issued by a Small Private Company & Suffered Loss of HKD 258.75 Million after Default in 2019, Provided Over HKD 500 Million Loans to 15 Borrowers & Suffered HKD 424 Million Loss in 2020 & 2021
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