3 arrested over falsifying HK$193 million in deals for 2 Hong Kong listed companies following probe involving anti-corruption agency

Three people have been arrested on suspicion of falsifying HK$193 million (US$25 million) in corporate transactions for two listed companies, following an investigation carried out by Hong Kong’s anti-corruption agency and two other watchdogs.

The Independent Commission Against Corruption arrested the suspects for allegedly using false documents to deceive their principal, an offence under the Prevention of Bribery Ordinance, according to a joint statement issued on Thursday by the agency, the securities watchdog and the Accounting and Financial Reporting Council.

The three agencies raided 16 premises during their operation. The suspects include the executive director of one of the listed companies.

The alleged false transactions were uncovered in previous operations against a syndicate accused of carrying out a ramp-and-dump scheme, a form of market manipulation where fraudsters “ramp” up the share price of a target company, induce investors to buy the shares by offering fabricated tips and then “dump” the stock at its peak.

Management staff at the two listed companies had allegedly conspired with the syndicate to fabricate documents showing deals with a number of companies in Hong Kong and mainland China between May 2018 and December 2021.

They are accused of overstating revenues by HK$83.9 million and falsely claiming HK$109.2 million in assets, which may result in misleading information in interim results or annual reports of the companies, according to the three agencies.

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Christopher Wilson, director of enforcement at the Securities and Futures Commission, said those in charge of listed companies had to ensure financial disclosures were truthful and accurate as this was the bedrock of capital markets.

“The tripartite operation, and the first with the [accounting council], underscores our shared commitment to holding accountable those who abuse that trust and defraud investors,” he said.

The council’s acting CEO Janey Lai Chui-pik said the operation showed its commitment to taking all necessary actions to ensure the integrity and quality of financial reporting and auditing in the city.

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“As the financial markets of the mainland and Hong Kong are interconnected, the cross-border collaboration between regulators on both sides will intensify and is expected to bring about more effective enforcement,” she said.

Ricky Yau Shu-chun, head of operations at the city’s anti-corruption agency, said the body would continue to work with financial regulators to improve corporate governance and professionalism.

Thirteen people were arrested in two separate operations against the ramp-and-dump syndicate in November 2022 and March this year, including its ringleader and other key members, as well as executives at Hong Kong-listed companies and finance professionals.