Fraud trial of Barry Cheung opens

The trial of Barry Cheung Chun-yuen, a former executive councillor and one-time chairman of the Hong Kong Mercantile Exchange opened in the District Court yesterday.

Cheung, 61, has pleaded not guilty to conspiracy to defraud - a count he faces jointly with the commodities trading platform's former chief financial officer, Jacky Choi Tat-ying, 50 - and fraud amounting to HK$30 million.

Choi has pleaded guilty and become a prosecution witness against Cheung.

Cheung's defense counsel, Eric Kwok Tung-ming SC, asked Justice Amanda Woodcock to allow his client to sit behind his lawyers, but that was rejected. So Cheung has to stay in the defendant box.

The prosecution claims Cheung and Choi conspired together between May 2012 and May 2013 to defraud the Securities and Futures Commission. They allegedly concealed or failed to disclose material information in relation to the financial position of the exchange to the SFC and allowed false or misleading information to go to the commission.

That meant the SFC did not withdraw the authorization it had granted to the exchange to provide automated trading services in Hong Kong.

The fraud count that Cheung faces involves Sinomax Finance and HK$30 million that went to his company, New Effort Holdings.

The prosecution claimed Cheung had ultimate control of the exchange and also played an important role in the automated trading services agreement as he had been chairman and the executive director of the exchange since 2008. All the checks and telegraphic transfer orders were signed by him.

The SFC authorized automated trading services on April 26, 2011, but the exchange's financial condition worsened the following month.

That led to the SFC instructing the exchange to explain its financial condition every week.

By the end of 2012, the SFC had requested the exchange to handle its capital issue.

Cheung allegedly concealed the exchange's financial status by such means as producing what proved to be seven dishonored checks, misrepresentation, by using misleading financial statements and providing an account balance from before the money was transferred.

The case was revealed after the SFC withdrew the authorization and then found a false document the exchange submitted.

The prosecution also said that when Cheung was raising short-term money for the exchange he falsely told Sinomax Finance that the entire shareholding in New Effort Holdings had not been pledged to any other person or entity as security.

The trial continues today, with the prosecution set to start calling witnesses.