Charge in Convoy probe

Top News | Phoenix Un 17 May 2019

Roy Cho Kwai-chee, the alleged mastermind in Hong Kong's largest financial investigation in decades, was charged yesterday with conspiracy to defraud Convoy Global Holdings and the Hong Kong Stock Exchange.

Cho was escorted by police to the Eastern Magistrates' Courts to face his charge yesterday.

He was reporting to the Independent Commission Against Corruption to extend his bail when he was charged.

Cho had applied to immigrate to Australia with his wife and four children, but was rejected. He needed to file an appeal before Tuesday and needed to be in Australia, the court heard.

Principal magistrate Peter Law Tak-chuen granted Cho HK$200,000 bail and allowed him to leave Hong Kong from Sunday to Tuesday. But he would need to pay another HK$500,000, which could only be returned upon his return and checking in with the ICAC.

The ICAC said former director Cho, 55, was charged with one count of conspiracy to defraud the stock exchange and the board of directors, shareholders and investors of listed company Convoy by causing its subsidiary to acquire an investment firm he controlled for more than HK$89 million.

The ICAC mounted a joint operation with the Securities and Futures Commission in December 2017 following complaints.

The ICAC said Cho acted as a de facto or shadow director and substantial shareholder of Convoy, owning 50 percent of shares and exerting significant influence over its operation.

In April 2016 Cho suggested to Convoy the acquisition of True Surplus International Investment, in which he held a 55 percent stake.

Five months later, Cho, with other Convoy senior executives, caused subsidiary Convoy Collateral to buy True Surplus at a cost of HK$89 million.

The charge alleges that between April 1, 2016, and December 7, 2017, Cho conspired with two others - believed to be suspended executive director Christie Chan Lai-yee and former executive director Byron Tai Ye-kai - to defraud the bourse and Convoy directors, shareholders and investors by failing to disclose he was a substantial shareholder and de facto or shadow director.

The ICAC also alleged Cho failed to disclose the acquisition of Convoy by Convoy Collateral as a connected transaction to Convoy and the bourse, and caused Convoy Collateral to acquire True Surplus in September 2016 without complying with rules.

The ICAC said as a result Cho received payments of more than HK$57 million from Convoy Collateral, and was relieved from a further capital commitment of around HK$16.2 million in the two investment funds.

The investigation was sparked by David Webb who published a list of 50 stocks to avoid that he called the "Enigma Network" in May 2017. In it were Convoy Global and Town Health, the latter of which was established by Cho.

On December 7, 2017, ICAC officers and the SFC arrested several Convoy directors, and trading in Convoy Global has been suspended since then.

Convoy and subsidiaries CSL Securities and Convoy Collateral also sought a court order in December 2017 to set aside the shares "wrongfully" allotted in a so-called circular financing scheme, which it alleged Cho spearheaded, seeking damages from Cho and 27 others.

In early 2018, a wholly-owned subsidiary filed a writ, saying 13 people, including Cho, manipulated stock prices, resulting in Convoy losing HK$715 million.

Webb said yesterday he believes more action against accomplices is coming.

Law adjourned the hearing yesterday to July 24.

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