SINGAPORE (May 16): Brokerage firm KGI Securities had filed Suspicious Transaction Reports (STRs) for three of 20 trading accounts allegedly manipulated by the masterminds behind the 2013 penny stocks crash, the court heard on Thursday.

During examination-in-chief by Deputy Public Prosecutor David Koh, KGI Securities’ Head of Risk, Tan Seow Kiat, said three third-party cheques had been issued as cash collateral for trading accounts belonging to Ooi Cheu Kok, Nelson Fernandez, and Lim Kuan Yew in AmFraser Securities as it was known, prior to a takeover by KGI in 2015.

However, the source of the cheques were from accounts belonging to former IPCO International CEO Quah Su-Ling, who is one of the accused persons in the trial, Soh Key Chai and Neo Kim Hock respectively.

Quah, and John Soh Chee Wen, with whom she is alleged to have been in a relationship, are accused of the manipulation of three stocks -- Blumont Group, Asiasons Capital (now known as Attilan Group) and LionGold Corp – back in 2013, leading to the crash. Soh faces 189 charges of stock manipulation, cheating and witness tampering and has been on remand since November 2016. Quah faces 178 charges of stock manipulation and cheating.

The third-party cheques in question, issued on three separate dates in January and February 2013, were subjected to due diligence checks to establish a relationship between the issuers and the receivers, said Tan.

“Were you able to establish a relationship between the third-parties and the account holders?” asked Koh. “No we were not, and in accordance with policies and procedures, we filed STRs for those accounts,” Tan answered.

However, under cross-examination by Senior Counsel N. Sreenivasan, Tan revealed that all three STRs were only filed on March 14, 2013. Pressed as to why they were filed only several weeks after the cheques were processed, Tan was unable to comment as it was not within his purview to comment, nor was he a part of the compliance function which filed the STRs.

He also revealed that when he was hired as credit manager on October 16, 2013, the task given to him was to review the policies and risk frameworks of AmFraser.

“Shortly after I joined, the immediate task given to me was to very quickly review the policies and risk frameworks. The firm was under a lot of audit pressure from the Singapore Exchange, AmFraser head office, and the Monetary Authority of Singapore, and for almost a year I was busy handling the policies and framework,” he said. He added that the increased pressure from the auditors and regulators was due to the crash, and that the brokerage had taken a very serious view of the lack of controls and risk frameworks that could have allowed the crash to happen.

Tan remained relatively calm even under repeated questioning by the defence and when Quah’s lawyer, Philip Fong said, “It’s good to see you again”, Tan replied, “I’m not too sure about that”, eliciting laughter from the court.

Hearing resumes on Friday before Justice Hoo Sheau Peng.

2013 Penny Stock Crash

John Soh Chee Wen is the alleged mastermind behind the penny stock crash of 2013, which prosecutors have called “the most audacious, extensive and injurious market manipulation scheme ever in Singapore”.

Together with his alleged co-conspirator and girlfriend Quah Su-Ling, Soh and his associates are alleged to have been behind the massive rise and sudden collapse of shares in Blumont Group, LionGold Corp and Asiasons Capital (now Attilan Group), which wiped out some $8 billion in market value.

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