The parties being sued by Interactive Brokers are (according to this website):
Malaysian nationals:
- Neo Kim Hock
- Peter Chen Hing Woon
- Tan Boon Kiat
- Quah Su-Ling
- Lee Chai Huat
- Kuan Ah Ming
- Sun Spirit Group Ltd
- Neptune Capital Group Ltd.
- Asiasons Capital
- Blumont Group
- LionGold Corp
- Innopac Holdings
From an article in Business Times (Singapore) written today by Grace Leong, more news regarding the answer by Quah Su-Ling and the rebuttal by Interactive Brokers (emphasis mine):
IPCO International chief executive Quah Su-Ling, who is among eight clients sued in High Court over $79 million in losses sustained by Interactive Brokers (IB) in the wake of the penny stock crash, has alleged the US online brokerage was involved in a "commission-generating scheme".
According to court documents inspected by The Business Times, Ms Quah, who is seeking to unfreeze nearly $15 million in assets belonging to her and her company Sun Spirit Group, said she does not recall signing the broker's account-opening documents or completing any forms.
The large-volume trades in the shares of Asiasons Capital, Blumont Group and LionGold Corp from her account and that of Sun Spirit's happened because Ken Tai, owner of Algo Capital and her financial advisor, had exceeded his authority over the accounts, she said.
She was rebutting allegations that she may have been involved in an "intricate pump-and-dump scheme to artificially generate trading volume" in the stock trio and to drive up their share prices before they crashed and wiped out over $8 billion in value.
In arbitration proceedings against her, the British Virgin Islands-incorporated Sun Spirit and eight other individuals and entities to recover $79 million in unpaid margin loans, Interactive Brokers flagged "suspicious trading activities through the defendants' accounts" made by Algo Capital. A hearing in relation to the freezing order was held last Friday.BT understands that judgment was reserved.
The broker alleged: "The unusual trading pattern employed by (Algo), which involved buying and selling the same stock in the same account on the same day at the same price, or closing out a large amount of shares in the morning, then repurchasing those shares in smaller lots throughout the day at set intervals, ... (gave) the market the appearance that the stocks were more heavily traded than they were.
"For instance, Algo often traded substantial portions of the volume of total daily trades in LionGold shares and even exceeded 80 per cent of the total trading volume on certain days. Similarly, for Asiasons shares, Algo's trading volume was as much as 67 per cent on some days."
But Ms Quah, in her affidavit, said Mr Tai had purportedly told her that it was the broker that had "placed pressure on him to maintain his high-volume trading".
"Despite the fact that Ken Tai had been trading large volumes of shares in the companies for an entire year (from August 2012 to October 2013), Interactive Brokers did not see fit to flag or exercise its rights to suspend or freeze Sun Spirit's or my accounts in light of what they now allege as 'suspicious activity'."
Between October 2012 and last Oct 4, the broker allegedly made commissions amounting to $776,152 on trades done in her account, and $177,981 on Sun Spirit's account, she said.
She also claimed the broker may have violated the Securities and Futures Act by offering margin-trading services to Singapore residents in respect of SGX-listed stocks without the requisite licence from the Monetary Authority of Singapore (MAS), and was in breach of its own internal policy.
But Interactive Brokers, represented by Senior Counsel Harpreet Singh of Cavenagh Law, said Ms Quah has not produced any credible evidence to support her claims.
Nor has she explained why Mr Tai would "gratuitously implicate" himself by admitting he was in a commission-generating scheme to defraud the defendants, it said in court documents.
IB said it is "completely unaffiliated with the advisers and/or customers who trade on its platform and in no way manages or supervises customer trading or offers any input in the trading".
"It is highly improbable that a sophisticated and experienced businesswoman and investor would be so trusting of Mr Tai. ... The more plausible explanation is the defendants, all of whom were interrelated and had connections with (LionGold, Asiasons and Blumont), were fully aware of Mr Tai's actions."
In challenging Ms Quah's claims as to why she did not disclose her relationship with the other defendants, the broker said she must be "intimately aware that most brokerages would impose higher-margin requirements on customers who disclose they are insiders of a stock they are trading, or that they hold a large position in that stock, either individually or acting in concert with others."
"If there was anyone trying to circumvent the need to obtain a licence from the MAS, it would be Ms Quah and Ipco, who had incorporated Sun Spirit on the other side of the world, and then used it for investment in the (three companies') shares through its account with Interactive Brokers."
On why Ms Quah and Sun Spirit could have been involved in such unusual trading activities and yet suffered huge losses, the broker said: "They may have expected their scheme to continue to be successful, or believe that they could have sold off their positions for large gains before the share prices collapsed, but had simply waited too long."
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