'Mastermind' held over penny stocks ramp-and-dump scam

At least eight people, including a suspected ringleader of a sophisticated syndicate operating ramp-and-dump schemes, have been arrested, the Securities and Futures Commission said yesterday.

In a joint operation with the Independent Commission Against Corruption, the SFC said the syndicate scheme was conducted through a complex cross-shareholding network of Hong Kong-listed companies involving illicit gains of HK$191 million.

The alleged ringleader is Stevens Yip Chi-fai, who was caught at the airport when he tried to escape, according to sources.

Yip was known for actively investing in penny stocks for a long time and more than 10 companies that Yip invested in tumbled in 2017 while they were also among David Webb's "The Enigma Network: 50 stocks not to own" announced at the time.

Other arrestees are also key members of the syndicate including a listed company chairperson and three responsible officers of two brokers who allegedly received bribes for providing assistance in the share placements to facilitate the scheme, the statement said.

A ramp-and-dump scheme is a form of market manipulation where fraudsters use various means to "ramp" up the share price of a listed company and then lure investors, especially via social media platforms, to buy the shares which they "dump" at an artificially high price.

The chairperson was said to be Hao Wen Holdings' (8019) Annie Tsui, who entered the position in 2016 when she was only 31.

Listed in Growth Enterprise Market in 2001, Hao Wen is primarily engaged in the money lending, processing, and trading of electronic parts and the provision of beauty treatment services business, according to the filing.

The joint operation has also searched offices of other penny stocks, including restaurant operator CBK Holdings (8428), local media reported.

Meanwhile, Wan Cheng Metal Packaging (8291) said in a filing yesterday it was informed by one of its directors that a regulatory authority attended its Hong Kong head office on Tuesday but was unable to find the management of the company.

One of the brokers was said to be Suncorp Securities under SunCorp Technologies (1063), which assisted in Hao Wen and Wan Cheng's share placements in recent years.

The SFC did not reveal the suspects but said the search involved the stocks of six Hong Kong-listed companies for suspected ramp-and-dump schemes and other market misconducts.

In September, SFC charged 13 suspects for such schemes in a joint operation with the local police.

SFC has zero tolerance of the active participation of shareholders and senior executives of listed companies, as well as SFC-licensed individuals, in these manipulative schemes because of the harm of their misconduct to the interests of minority shareholders and the reputation of Hong Kong's financial markets," said Christopher Wilson,the SFC's executive director of enforcement.