Hong Kong's Securities and Futures Commission has secured the first criminal conviction of securities fraud via illegal short selling, involving an illicit profit of over HK$600,000.
Christine Yeung Tak-sum, an unemployed retail trader, was convicted by the Eastern Magistrates' Court yesterday after she pleaded guilty to her crime. Yeung was remanded in custody pending sentencing next month.
The case - the first related to illegal short selling under section 300 of the Securities and Futures Ordinance - came from a ramp-and-dump investigation, in which the SFC found Yeung had engaged in a fraudulent scheme.
In 2020, Yeung gave 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 in another brokerage firm, when in fact she did not. Misled by Yeung, the broker permitted her to sell the shares in Aurum before the shares were transferred.
After the naked short-selling, Yeung bought back the same number of shares at a lower price to cover her short-sold positions on the same day, which brought her an illicit profit of about HK$602,600.
Aurum Pacific, once carrying a stock code 8148, changed its name to Wuxi Life International (8148) in July 2023.
The SFC also reminds brokerages and other intermediaries that they are obliged to implement and maintain appropriate measures to comply with the short selling requirements and to remain cautious about potential offences by clients.
Under section 300 of the SFO, an individual who violates it may face fines of up to HK$1 million and imprisonment of up to three years.
Meanwhile, another ramp-and-dump case for criminal prosecution at the District Court began yesterday in proceedings brought by the SFC involving a highly sophisticated ramp-and-dump syndicate. The two defendants, Stevens Yip Chi-fai and So Lung-ying, were granted bail of HK$500,000 and HK$50,000 respectively but they need to surrender all travel documents and are not allowed to leave Hong Kong.
