Securities and Futures Commission v. An Unknown Person or Persons Purporting To Carry on a Securities and/or Futures Trading Business Known As Broadspan Securities and Using the Website Www.Broadspansecurities.Com and Others

Case No.HCA 2511/2014[2021] HKCFI 1444

Court

High Court CFI

Date12 May 2021

Judge—

Case Document

100%Judiciary

HCA 2511/2014
HCA 2512/2014
HCA 2513/2014

[2021] HKCFI 1444

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2511 OF 2014

________________________

BETWEEN

	SECURITIES AND FUTURES COMMISSION	Plaintiff
	and
	An unknown person or persons purporting to carry on a securities and/or futures trading business known as BROADSPAN SECURITIES and using the website www.broadspansecurities.com	1^st Defendant
	TIMEPRIME LIMITED	2^nd Defendant
	LYNWIN LIMITED	3^rd Defendant
	RESMART LIMITED	4^th Defendant

________________________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION 2512 OF 2014

________________________

BETWEEN

	SECURITIES AND FUTURES COMMISSION	Plaintiff
	and
	An unknown person or persons purporting to carry on a securities and/or futures trading business known as SHEPHERDS HILL PARTNERS, HONG KONG and using the website www.shepherdshillhk.com	1^st Defendant
	FIELDMARK CORPORATION LIMITED (Company No. 2010793)	2^nd Defendant
	DH CORPORATION LIMITED	3^rd Defendant

________________________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION 2513 OF 2014

________________________

BETWEEN

	SECURITIES AND FUTURES COMMISSION	Plaintiff
	and
	An unknown person or persons purporting to carry on a future trading business known as RICH FUTURES (HK) LIMITED and using the website www.richfutureshk.com	1^st Defendant
	SMD PARTNERSHIP LIMITED	2^nd Defendant

________________________

(Heard together)

Before: Deputy High Court Judge Maurellet SC in Chambers

Date of Hearing: 12 May 2021

Date of Judgment: 12 May 2021

________________________

J U D G M E N T

________________________

Introduction

1.There are before me three summonses all dated 3 December 2020, taken out by the Securities and Futures Commission (the “SFC”) against various defendants in three separate High Court Actions, namely 2511 of 2014, 2512 of 2014 and 2513 of 2014 (the “High Court Actions”). These three summonses (the “Summonses”) seek judgment to be entered in default of a defence having been filed pursuant to Order 19, rule 7 of the rules of the High Court and the inherent jurisdiction of the court.

2.The Summonses were fixed to be heard at the same time for the reason that there are very many similarities between them. The 1st defendant (collectively the “1st Defendants”) in each of those High Court Actions is effectively, or rather was effectively, an entity or unknown person which purported to carry on trading of a securities business through a website, which was respectively, www.broadspansecurities.com, www.shepherdshillhk.com and www.richfutureshk.com.

3.The other defendants in each of those actions are companies incorporated in Hong Kong, which effectively allowed each of the 1st Defendants in those actions to be able to engage in the wrongdoing which I explain in more detail below. I shall refer to these defendants as the Corporate Defendants (together with the 1st Defendants, “the Defendants”).

4.I will also append to these reasons all three statements of claim as well as the orders which I have made today which are substantially in the form prepared in draft and which had been submitted earlier. I will therefore not set out in great detail the exact way in which each of these 1st Defendants had operated or the exact contents of their websites as these are already set out fully in those statements of claim.

5.It is sufficient to say that those operators operated in a way, if bluntly put, so as to cheat investors’ money. After the SFC had commenced these High Court Actions, none of the Defendants sought to defend the proceedings and this ultimately led to a number of orders being made by various Judges or Masters for substituted service, including that by way of advertisement in a local newspaper. The precise details do not matter, but I will explain in more detail below the principles by which the court operates when considering whether it is satisfied that a plaintiff has taken sufficient steps to bring the matter to the attention of the defendants.

Boiler Room Fraud

6.Mr Simon Westbrook, SC, leading Mr Norman Nip for the SFC, described the fraud perpetrated by all of these defendants as a “boiler room fraud” in his skeleton. This is a term which was used and explained by Ng J in SFC v An unknown person or persons purporting to carry on a securities and/or futures trading business known as Cardell Ltd and/or Cardell Co Ltd & Ors [2019] 1 HKLRD 702 (“Cardell”).

7.A boiler room fraud is a common securities fraud in which the fraudsters purport to operate as a licenced securities or futures broker and offer to people via their websites, through emails and/or cold calls, to trade in securities or futures contracts, which are fake in the sense that the securities or futures contracts which the victims have purportedly purchased and paid for are never executed on any recognised exchange.

8.It is apparent that for each of these cases, the websites suggested to those who visited them that the 1st Defendants operated some sort of brokerage offering a number of services which allowed its purported clients to invest, and that those who became their clients would be able to either buy or sell securities and also be advised and/or managed, as the case may be.

9.It would appear that for some of these websites, a fictitious address in Hong Kong was provided together with a phone number or, rather, what appeared to be an office phone number.

10.This led to a number of individuals and/or entities to remit funds to the Corporate Defendants, believing that the 1st Defendants were operating a legitimate business. Those who were induced to deposit funds or remit funds to such accounts did so as a result of persons who were claiming to be the staff representing various entities whose businesses were said to involve advising upon or executing security transactions.

11.At the end of 2014, to prevent disposing or dealing with or diminishing the values of monies, which were believed to hold funds which had been remitted under false pretences as set out above, the SFC obtained an injunction to restrain each of the 1st Defendants in these High Court Actions from holding themselves out as carrying a securities business in Hong Kong in relation to regulated activities as defined in the Securities & Futures Ordinance (“SFO”) or otherwise hold themselves out by circulating, distributing or otherwise disseminating an advertisement via their websites that they were prepared to carry on the said specified regulated activities.

12.The SFC’s case against the 1st Defendants is that by reason of the matters set out in their statement of claim the 1st Defendants have each:

(1)  Contravened section 109(1) of the SFO by issuing an advertisement in which, to its knowledge, it held itself out as being prepared to carry on the activities of advising on securities and/or advising on futures contracts and/or advising on corporate finance and/or asset management, which are regulated activities under the SFO, whilst unlicensed and unregistered;

(2)  Contravened section 114(1)(b) of the SFO by holding itself out as carrying on business and regulated activities in Hong Kong, including, inter alia, dealing in securities and/or futures contracts whilst unlicensed, unregistered and unauthorised;

(3)  Contravened section 300(1) of the SFO in transactions involving securities and/or futures contract by employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive or would operate as a fraud or deception.

13.Insofar as the SFC’s case against the Corporate Defendants is concerned, it is said that by receiving the funds obtained by the 1st Defendants, which was in contravention of the SFO for the reasons set out above, they have aided, abetted or otherwise assisted, counselled or procured or conspired with the 1st Defendants in those stated contraventions, or alternatively, directly or indirectly have been in any way knowingly involved in the 1st Defendants’ contraventions of sections 109(1) and 114(1)(b) of the SFO.

14.In any event and in the alternative, by allowing their bank accounts to be used to receive the aforesaid monies to facilitate the 1st Defendants’ fraudulent or deceptive conduct, the Corporate Defendants have contravened section 300(1) of the SFO by aiding, abetting or conspiring with the 1st Defendants and/or other persons unknown purporting to operate various securities and/or futures trading businesses.

15.In the premises, the SFC seeks the following orders against the Defendants:

1.  Declarations that each of the 1st Defendants is a person within s. 213(1)(a)(i)(A) of the SFO, in that, it has contravened the relevant provisions of the SFO viz ss. 109(1), 114(1)(b) and 300(1).

2.  Declarations that the Corporate Defendants are persons within s. 213(1)(a)(ii) or (iv) or (v) of the SFO by having aided, abetted or otherwise assisted, counselled or procured or conspired in the 1^st Defendants’ contraventions and/or by directly or indirectly having been in any way knowingly involved in, or a party to the 1^st Defendants’ contraventions.

3.  A declaration that the Corporate Defendants are persons within s. 213(1)(a)(i)(A) or s. 213(1)(a)(ii), (iv) or (v) of the SFO in that they have contravened s. 300(1) of the SFO and/or have directly or indirectly been in any way knowingly involved in, or a party to the contraventions of s. 300(1) of the SFO.

4.  Declarations that the Defendants are persons within s. 213(2)(b) of the SFO in that they have been, or it appears that they have been, knowingly, involved in the said contraventions of the SFO.

5.  Injunctions against each of the 1^st Defendants pursuant to s.213(1)(a) of the SFO from restraining or prohibiting them whether by itself, its directors, servants, employees, agents or otherwise from:

(1)  holding itself out as carrying on a business in relation to the regulated activities under the SFO, whilst unlicensed and unauthorised contrary to s. 114(1)(b) of the SFO.

(2)  issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the in websites, in which the 1^st Defendants hold themselves out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered, contrary to s. 109(1) of the SFO.

(3)  employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception in transactions involving securities and/or futures contracts.

(4)  suspending all internet websites within its power or control, promoting or advertising the carrying out of the regulated activities under the SFO, including, but not limited to the website.

6.  An injunction against the Corporate Defendants from disposing of or otherwise dealing with any of the funds in the SPL Accounts pursuant to s. 213(1)(a) of the SFO.

7.  A restitutionary order requiring the Defendants to restore the victims listed who had entered into transactions as a result of the Defendants’ conduct to the position which they were in before the transactions were entered into, to the extent possible, pursuant to s. 213(2)(b) of the SFO.

8.  An order for the appointment of administrators and consequential directions pursuant to s. 213(2)(d) of the SFO.

Relevance of Default Judgment and Relevant Considerations

16.First of all, there is the important issue that these matters have not been tried, but rather, the SFC has gone ahead to apply for default judgment instead. This is to be contrasted with Cardell which bears many similarities with the present case but which had been tried before Ng J).

17.Order 19, rule 7 Rules of the High Court provides as follows:

7.  Default of defence: other claims (O.19, r. 7)

(1)  Where the plaintiff makes against a defendant or defendants a claim of a description not mentioned in rules 2 to 5, then, if the defendant or all the defendants (where there is more than one) fails or fail to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these rules for service of the defence, apply to the Court for judgment, and on the hearing of the application the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim.

(2)  Where the plaintiff makes such a claim as is mentioned in paragraph (1) against more than one defendant, then, if one of the defendants makes default as mentioned in that paragraph, the plaintiff may –

(a)  if his claim against the defendant in default is severable from his claim against the other defendants, apply under that paragraph for judgment against that defendant, and proceed with the action against the other defendants; or

(b)  set down the action for judgment against the defendant at the time when the action is set down for trial, or is set down for judgment, against the other defendants.

(3)  An application under paragraph (1) must be by summons.

18.The principles applicable in such applications are well-settled and have recently been conveniently summarised by Coleman J in Cheung Sai Lon v Cheung Sai Ha & Ors [2020] HKCFI 2551, where he stated as follows:

“29. As stated, the present application is made under Order 19 rule 7(1), because it in parts seeks declaratory relief. The principles applicable on such applications are well-settled.

30. In such an application, the Court cannot receive any evidence, but must consider whether to give judgment according to the pleadings alone. The statement of claim must show a proper case for the order the applicant seeks to obtain, and the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim only, and only if the pleaded facts give rise to the relief sought.

31. However, the power to give such default judgment is discretionary. In the exercise of that discretion, it is to be recognized that it is not the normal practice of the Court to make a declaration without trial. This is not a legal or inflexible rule, but rather a rule of practice, which need not be followed when the plaintiff has a genuine need for declaratory relief and justice would not be done if such relief were denied.

32. Even on what might appear to be straightforward applications, the Court does not act as a ‘rubber-stamp’ merely because of the uncontested nature of the application. In each case, it is necessary to consider whether the declaratory relief is properly made out on the pleading, and whether it is appropriate in the overall exercise of discretion for such relief to be granted without a trial.

33. In the exercise of the discretion, the Court will consider all relevant factors, including whether the plaintiff has established a strong and obvious case for proprietary relief on the face of its pleading, and where the claim is proprietary, whether there would be any prejudice to the plaintiff’s property and rights. The importance of a claim to proprietary relief arises because of the distinction from a merely personal claim. An order for payment, without more, would only put a plaintiff in the position of an unsecured judgment creditor. But a declaration of a proprietary interest will secure that interest.”

19.For the reasons explained in the various affirmations of service and the various orders for substituted service which had been made by the Courts, I am fully satisfied that the SFC has taken all reasonable steps to bring the matter to the attention of all the Defendants in these proceedings.

20.Given the injunctive orders which had already been obtained by the SFC, it is in my view, and on these facts unthinkable that these proceedings would not have been brought to the attention of all of the Defendants. The obvious inference is that these various Defendants have acted in a dishonest and most probably criminal manner, such that they would not want to come out and be identified. It seems to me there is force in the submissions made on behalf of the SFC that the rationale behind substituted service is to bring the matter to the attention of the defendants by any given mode of service which is within the realm of reasonable practical ability (see the observations of To J in Melco Crown Gaming (Macau) Ltd v Wong Yam Tak [2014] 3 HKLRD 267).

The relevant statutory framework

Securities and Futures Ordinance (Cap./Instrument No.: 571) (Version date: 29.11.2020)

102.  Interpretation of Part IV

(1)  In this Part, unless the context otherwise requires—

advertisement (廣告) includes every form of advertising, whether made orally or produced mechanically, electronically, magnetically, optically, manually or by any other means;

approved person (核准人士)—

(a)  in relation to a collective investment scheme, means an individual approved by the Commission under section 104(3); (Amended 8 of 2011 s. 2)

(aa)  in relation to a structured product, means an individual approved by the Commission under section 104A(3); or (Added 8 of 2011 s. 2)

(b)  in relation to the issue of an advertisement, invitation or document, means an individual approved by the Commission under section 105(3);

document (文件) means any publication (including a newspaper, magazine or journal, a poster or notice, a circular, brochure, pamphlet or handbill, or a prospectus)—

(a)  directed at, or the contents of which are likely to be accessed or read (whether concurrently or otherwise) by, the public; and

(b)  whether produced mechanically, electronically, magnetically, optically, manually or by any other means;

exempted body (獲豁免團體) means a body specified in Part 3 of Schedule 4;

invitation (邀請) includes an offer and an invitation, whether made orally or produced mechanically, electronically, magnetically, optically, manually or by any other means;

issue (發出), in relation to any material (including any advertisement, invitation or document), includes publishing, circulating, distributing or otherwise disseminating the material or the contents thereof, whether—

(a)  by any visit in person;

(b)  in a newspaper, magazine, journal or other publication;

(c)  by the display of posters or notices;

(d)  by means of circulars, brochures, pamphlets or handbills;

(e)  by an exhibition of photographs or cinematograph films;

(f)  by way of sound or television broadcasting;

(g)  by any information system or other electronic device; or

(h)  by any other means, whether mechanically, electronically, magnetically, optically, manually or by any other medium, or by way of production or transmission of light, image or sound or any other medium,

and also includes causing or authorizing the material to be issued;

relevant authority (監管當局), in relation to a place outside Hong Kong, means an authority which the Monetary Authority is satisfied is a recognized banking supervisory authority of that place;

representative (代表)—

(a)  in relation to a licensed corporation, means an individual—

(i)  who is licensed as a licensed representative for a regulated activity; and

(ii)  who carries on that regulated activity for the licensed corporation as a licensed corporation to which he is accredited; or

(b)  in relation to a registered institution, means an individual—

(i)  whose name is entered in the register maintained by the Monetary Authority under section 20 of the Banking Ordinance (Cap. 155) as that of a person engaged by the registered institution in respect of a regulated activity; and

(ii)  who carries on that regulated activity for the registered institution; (Amended 8 of 2011 s. 2)

securities (證券) has the same meaning as that given by the definition of securities in section 1 of Part 1 of Schedule 1 except that it does not include structured products that are securities only because of paragraph (g) of that definition. (Added 8 of 2011 s. 2)

109.  Offence to issue advertisements relating to carrying on of regulated activities, etc.

(1)  Subject to subsections (3) to (6), a person commits an offence if he issues, or has in his possession for the purposes of issue—

(a)  an advertisement in which to his knowledge—

(i)  a person holds himself out as being prepared to carry on Type 4, Type 5, Type 6 or Type 9 regulated activity; and

(ii)  the person is not licensed or registered for such regulated activity as required under this Ordinance; or

(b)  any document which to his knowledge contains such advertisement.

213.  Injunctions and other orders

(1)  Where—

(a)  a person has—

(i)  contravened—

(A)  any of the relevant provisions;

(B)  any notice or requirement given or made under or pursuant to any of the relevant provisions;

(C)  any of the terms and conditions of any licence or registration under this Ordinance; or

(D)  any other condition imposed under or pursuant to any provision of this Ordinance;

(ii)  aided, abetted, or otherwise assisted, counselled or procured a person to commit any such contravention;

(iii)  induced, whether by threats, promises or otherwise, a person to commit any such contravention;

(iv)  directly or indirectly been in any way knowingly involved in, or a party to, any such contravention; or

(v)  attempted, or conspired with others, to commit any such contravention; or

(b)  it appears, whether or not during the course or as a result of the exercise of any power under Part VIII, to the Commission that any of the matters referred to in paragraph (a)(i) to (v) has occurred, is occurring or may occur,

the Court of First Instance, on the application of the Commission, may, subject to subsection (4), make one or more of the orders specified in subsection (2).

(2)  The orders specified for the purposes of subsection (1) are—

(a)  an order restraining or prohibiting the occurrence or the continued occurrence of any of the matters referred to in subsection (1)(a)(i) to (v);

(b)  where a person has been, or it appears that a person has been, is or may become, involved in any of the matters referred to in subsection (1)(a)(i) to (v), whether knowingly or otherwise, an order requiring the person to take such steps as the Court of First Instance may direct, including steps to restore the parties to any transaction to the position in which they were before the transaction was entered into;

(c)  an order restraining or prohibiting a person from acquiring, disposing of, or otherwise dealing in, any property specified in the order;

(d)  an order appointing a person to administer the property of another person;

(e)  an order declaring a contract relating to any securities, structured product, futures contract, leveraged foreign exchange contract, or an interest in any securities, structured product, futures contract, leveraged foreign exchange contract or collective investment scheme to be void or voidable to the extent specified in the order; (Amended 8 of 2011 s. 10)

(f)  for the purpose of securing compliance with any other order made under this section, an order directing a person to do or refrain from doing any act specified in the order;

(g)  any ancillary order which the Court of First Instance considers necessary in consequence of the making of any of the orders referred to in paragraphs (a) to (f).

(3)  The Commission shall—

(a)  before making an application pursuant to subsection (1) for an order affecting any person that is an exchange participant or a clearing participant, use its best endeavours to inform the recognized exchange company or the recognized clearing house (as the case may be) of the proposed application by notice in writing; and

(b)  where before the making of the application it has not informed the recognized exchange company or the recognized clearing house (as the case may be) of the proposed application by notice in writing, forthwith after the making of the application inform the recognized exchange company or the recognized clearing house (as the case may be) thereof by notice in writing.

(3A)  If the contravention involved in a case is a contravention by an open-ended fund company or a director, an investment manager, a custodian or a sub-custodian of an open-ended fund company, the Court of First Instance may also, on the application of the Commission, make any of the orders specified in subsection (3C). (Added 16 of 2016 s. 12)

(3B)  The power under subsection (3A) may be exercised whether or not the Commission also applies for an order specified in subsection (2). (Added 16 of 2016 s. 12)

(3C)  The orders specified for the purposes of subsection (3A) are—

(a)  for an open-ended fund company without sub-funds—

(i)  an order removing a director of the company;

(ii)  an order removing an investment manager of the company;

(iii)  an order removing a custodian of the company;

(iv)  an order removing a sub-custodian of the company;

(v)  an order requiring a part of the investments of the company to be realized and the funds remaining after the discharge of the liabilities (if any) of the company attributable to the part to be distributed to shareholders of the company in accordance with the OFC rules;

(vi)  an order requiring all of the investments of the company to be realized and the funds remaining after the discharge of the liabilities (if any) of the company to be distributed to shareholders of the company in accordance with the OFC rules;

(vii)  an order requiring the company to be wound up under the OFC rules; and

(viii)  any ancillary order that the Court of First Instance considers necessary as a result of the making of any of the orders referred to in subparagraphs (i), (ii), (iii), (iv), (v), (vi) and (vii); and

(b)  for an open-ended fund company with sub-funds—

(i)  any of the orders specified in paragraph (a)(i), (ii), (iii), (iv), (v), (vi) and (vii);

(ii)  an order requiring the investments made in respect of a part of a sub-fund of the company to be realized and the funds remaining after the discharge of the liabilities (if any) of the company attributable to the part to be distributed to shareholders of the company in accordance with the OFC rules;

(iii)  an order requiring all of the investments made in respect of a sub-fund of the company to be realized and the funds remaining after the discharge of the liabilities (if any) of the company attributable to the sub-fund to be distributed to shareholders of the company in accordance with the OFC rules;

(iv)  an order requiring a sub-fund of the company to be wound up under the OFC rules; and

(v)  any ancillary order that the Court of First Instance considers necessary as a result of the making of any of the orders referred to in subparagraphs (i), (ii), (iii) and (iv). (Added 16 of 2016 s. 12)

(4)  The Court of First Instance shall, before making an order under subsection (1) or (3A), satisfy itself, so far as it can reasonably do so, that it is desirable that the order be made, and that the order will not unfairly prejudice any person. (Amended 16 of 2016 s. 12)

(5)  The Court of First Instance may, before making an order under subsection (1) or (3A), direct that a notice of the application made in respect thereof be given to the persons it considers appropriate, or be published in the manner it considers appropriate, or both. (Amended 16 of 2016 s. 12)

(6)  Where the Court of First Instance considers it desirable to do so, it may grant such interim order as it considers appropriate pending the determination of an application made pursuant to subsection (1) or (3A). (Amended 16 of 2016 s. 12)

(7)  An order may be made under subsection (1) or (3A) whether or not it appears to the Court of First Instance that— (Amended 16 of 2016 s. 12)

(a)  the person against whom the order is made intends to engage again, or to continue to engage, in any of the matters referred to in subsection (1)(a)(i) to (v);

(b)  the person against whom the order is made has previously engaged in any of such matters;

(c)  there is an imminent danger of damage to any person in the event of the order not being made.

(8)  Where the Court of First Instance has power to make an order against a person under subsection (1) or (3A), it may, in addition to or in substitution for such order, make an order requiring the person to pay damages to any other person. (Amended 16 of 2016 s. 12)

(9)  The Court of First Instance may reverse, vary or discharge an order made or granted by it under subsection (1), (3A) or (6) or suspend the operation of the order. (Amended 16 of 2016 s. 12)

(10)  A notice published under subsection (5) is not subsidiary legislation.

(11)  In this section—

sub-fund (子基金)—see section 112R. (Added 16 of 2016 s. 12)

300.  Offence involving fraudulent or deceptive devices, etc. in transactions in securities, futures contracts or leveraged foreign exchange trading

(1)  A person shall not, directly or indirectly, in a transaction involving securities, futures contracts or leveraged foreign exchange trading—

(a)  employ any device, scheme or artifice with intent to defraud or deceive; or

(b)  engage in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

(2)  A person who contravenes subsection (1) commits an offence.

(3)  In this section, a reference to a transaction includes an offer and an invitation (however expressed)

Schedule 5

[ss. 114, 118, 139 & 142 & Sch. 1]

Regulated Activities

(Format changes—E.R. 1 of 2013)

Part 1

The following are regulated activities—

Type 1 : dealing in securities;

Type 2 : dealing in futures contracts;

Type 3 : leveraged foreign exchange trading;

Type 4 : advising on securities;

Type 5 : advising on futures contracts;

Type 6 : advising on corporate finance;

Type 7 : providing automated trading services;

Type 8 : securities margin financing;

Type 9 : asset management; (Amended L.N. 28 of 2011)

Type 10 : providing credit rating services; (Added L.N. 28 of 2011. Amended 6 of 2014 s. 53)

Type 11 : dealing in OTC derivative products or advising on OTC derivative products; (Added 6 of 2014 s. 53)

Type 12 : providing client clearing services for OTC derivative transactions. (Added 6 of 2014 s. 53)

21.Insofar as the expression “to hold out” is concerned and for present purposes, I would respectfully agree with what was stated by Ms June Cheung sitting as a magistrate in her decision in SFC v CL Management Services & Anor dated (11 June 2014) where at paragraph 80 of her statement of findings, she quoted from the Hong Kong Bilingual Legal Dictionary where it was said that the term to “hold out” means “to represent or pretend”. It is an offence for an unqualified, unlicensed or unregistered person to hold out, advertise or represent that he or she is qualified or licensed to provide professional or regulated services.” There was an appeal from her decision which was heard before M. Poon J who handed down her reasons on 2 June 2016. It does not appear from those reasons that there was any disagreement on the meaning of that term.

22.Insofar as the term “carrying on business” means for present purposes, I would respectfully adopt the interpretation adopted by Bokhary and Chan PJJ, albeit taken from a different context (one to do with tax law) in Lee Yee Shing v Commissioner of Inland Revenue [2008] 11 HKCFAR 6, at paragraph 38 where their Lordships held that:

“The question whether something amounts to carrying on of a trade or business is a question of fact and agreed to be answered by the fact finding body upon a consideration of all the circumstances.”

23.In this context, I accept the SFC’s submission that the expression “transaction” is widely defined and that in SFC v Young Bik Fung [2016] 1 HKLRD 1249, Anthony Chan J had hold as follows:

“Transaction is widely defined in section 300(3) to include ‘an offer and an invitation (however expressed)’. It is therefore quite clear that the securities transaction needs not be a completed transaction. (166) Apart from the expansion of the word by section 300(3) ‘transaction’ is not defined in the SFO. I had been referred by Mr Westbrook to the New Oxford Dictionary of English which defines ‘transaction’ as ‘an instance of buying or selling something; a business deal.’ I agree that there is no warrant or principle of construction to limit the meaning to the first definition of buying or selling something when the word also includes as a second meaning of a business deal, which obviously has multiple features to it. (167) In my view, fraudulent or deceptive conduct employed in making an offer to buy securities would be caught under section 300...”

24.This is an important distinction in the present context, whereas in all boiler room cases, no trades have in fact been effected.

25.As to the expression “a transaction involving securities”, I note that in Lee Kwok Wa v SFC [2018] 21 HKCFAR 537, at page 545, Ribeiro PJ considered that:

“It will be evident that the lynchpin of the appellant’s argument is the proposition that section 300 requires the defendant to be a party to the ‘transaction involving securities’ in question. In my view, it is an unwarranted construction of the section. To produce a result desired by the appellants, section 300 would have to say something along the lines of ‘a person, being a party to a transaction involving securities, shall not directly or indirectly’ employ a fraudulent or deceptive scheme, etc. That is obviously not what section 300 says. The words ‘in a transaction involving securities’ are most naturally read to mean ‘in connection with’ or ‘in relation to’ a transaction involving securities. There is no requirement that the defendants be parties, as long as their fraudulent or deceptive scheme or course of business is employed in connection with or in relation to the transaction.”

26.I note that the term “in connection with, or in relation to” is a term which is often used in other contexts, including in arbitration clauses, and in those contexts it has been held that they are liable to catch a large number of matters which arise out of the same background and circumstances.

27.Insofar as the term “with intent to defraud” is concerned, the authorities suggest that such concepts are not confined to the actual and intended effects that certain acts had on another person and there is therefore no warrant to confine the words “intend to defraud” to an intent to deprive a person by deceit by way of getting an economic advantage or to inflict upon him an economic loss. (see decision of Anthony Chan J in Young Bik Fung supra at paragraphs 194 to 200.)

28.I note also that very fairly, the Commission drew my attention to paragraphs 161 and 167 of the same judgment where his Lordship held that section 300 did not have extraterritorial effect and therefore only targets the employment of fraudulent or deceptive conduct in Hong Kong.

Contravention of section 109(1) of the SFO by the 1st Defendants

29.The contents and wordings used in the three websites have been set out in detail in the statements of claim. I do not repeat the same here. Suffice to say, I accept the SFC’s case that from the websites it would clearly appear that the services offered by the 1st Defendants as represented constituted type 4, type 5, type 6 and/or type 9 regulated activities, notwithstanding that the 1st Defendants were not licensed or registered to carry on such activities in Hong Kong.

30.Further, those representations contained in those websites constituted a means of issuing, in effect, electronic “advertisements” as it was a form of public media aimed at promoting the securities and future contract advisory services that they purported to provide and, in any event, those webpages as contained or hosted on those websites were electronically produced “documents” containing the aforesaid advertisements. I note the obvious similarity between what was being held out by the Defendants on the websites and what was done by the defendants in Cardell.

31.That case also involved boiler room ‘fraudsters’ who purported to operate as licensed securities brokers and had solicited via their website and also emails and other cold calls a number of victims to invest in securities or futures, when in fact there was no bona fide intention to execute any trades on behalf of those victims who then later remitted funds into bank accounts in Hong Kong.

32.In Cardell, Ng J had no difficulty in agreeing with the SFC that upon a detailed examination of the contents of that website (which bear similarities to the ones in the present case) those defendants had indeed, breached section 109(1) of the SFO.

33.In the premises I agree with the SFC’s submission that the 1st Defendants have clearly held themselves out as being prepared to carry on regulated activities and that the irresistible inference to be drawn from the facts of this case is that the 1st Defendants were the issuers of the advertisements as contained in or hosted by the website and must have had the necessary knowledge for the purpose of section 109(1) of the SFO. Accordingly, the 1st Defendants have contravened section 109(1) of the SFO.

34.For the reasons explained above, and the logic of which also applies to the paragraphs below, the Court of course appreciates that whilst Ng J made his decision after trial, I am dealing with a default judgment. Courts are generally speaking, very cautious when making any form of declaratory relief in a default judgment context. Nevertheless, in an appropriate case the court can and, indeed, should grant declaratory relief as Coleman J rightly noted in Cheung Sai Lon v Cheung Sai Ha & Ors (supra).

D1’s contravention of section 114(1)(b) of the SFO

35.The SFC further argues that the 1st Defendants have either by themselves, their directors, servants, employees, agents or otherwise contravened section 114(1)(b) of the SFO by operating their websites which contained various representations offering services in relation to securities and/or futures contracts to the public, as well as making cold calls and sending emails to victims.

36.The SFC argues that the 1st Defendants held themselves out as carrying on activities of “dealing in securities” and “dealing in futures contracts” which are regulated activities in respect of which they were neither licensed, registered, nor authorised by the SFC to do under the SFO. I agree. Based on the facts as pleaded in the statements of claim, I find that the 1st Defendants in each of the High Court Actions has contravened section 114(1)(b) of the SFO.

The 1st Defendants’ contravention of section 300(1) of the SFO

37.The SFC submits that the 1st Defendants have contravened section 300(1) of the SFO for a number of reasons. The 1st Defendants have employed a “device” or scheme or artifice with an intention to defraud or deceive and/or engage in the act or practice or course of business which is fraudulent and in any event deceptive.

38.This can be evidenced by the following:

(a)  the 1st Defendants would allow calls to be made to potential investors purporting to be bona fide investment advisors and/or dealers while operating and holding themselves out as operating from fictitious business addresses;

(b)  potential investors were persuaded to, in fact, invest in various securities and/or futures contracts carrying with it the implicit or implied representation (which was untrue) that such securities or futures contracts would be executed honestly and in accordance with trade custom;

(c)  potential investors were induced to make payments into bank accounts held under the name of the Corporate Defendants to purportedly fund the purchase of securities when there was no such intention to execute them.

39.All in all, the 1st Defendants’ acts were committed in transactions involving securities and futures contracts in a way which was deceptive and fraudulent and fall within the wide definition of the term “transaction” set out in section 300(3) of the SFO which I have dealt with above.

40.Given the place where the relevant transactions were conducted, namely in Hong Kong, there is no issue which arises because there are no matters which are extraterritorial and therefore section 300 would cover the relevant acts.

Corporate Defendants

41.I now deal with the SFC’s contentions insofar as the Corporate Defendants are concerned. The SFC submits that the Corporate Defendants have aided, abetted or assisted, counselled or procured or conspired with the 1st Defendants in their contraventions, as well as, directly or indirectly, having been knowingly involved in the 1st Defendants’ contraventions of sections 109(1), 114(1)(b) of the SFO.

42.Reliance is placed on R v Lau Chi Kin [1988] 1 HKLR 282, where Silke VP held at page 286, F-G:

“To ‘procure’ an offence implies a causal link between the acts of the person concerned and the commission of the offence. That cannot apply here. It is not, and not all these words should be given their ordinary meaning, suggested that the appellant ‘counsel’ the commission of the offence. In order to ‘aid’ it is necessary for the appellant to have been present during the commission of the crime. It is not necessary for an aider to be an ear or eyewitness to the commission of the crime, provided that he is present in the sense of being near enough and having the intention to assist, and to be capable of affording that assistance, should the occasion arise at the time the crime is committed...”

43.The Corporate Defendants have opened and maintained bank accounts which have allowed the 1st Defendants to receive funds paid by and/or remitted by the victims and therefore, in that sense it is said that they have aided or abetted or conspired with the 1st Defendants in the said contraventions of the sections set out above. The SFC therefore invites me to draw an inference that there must have existed some sort of organised scheme or arrangement among the various Defendants whereby the victims were induced into remitting monies into the bank accounts maintained by the Corporate Defendants to settle fictitious investments or trades purportedly entered into through the 1st Defendants when there was never any intention to execute or otherwise deliver.

44.In this regard, it is pointed out that a similar inference was drawn by Ng J in Cardell (supra, see paragraphs 24 to 26) in finding that the parties who played a role similar to the Corporate Defendants in these present proceedings had opened a bank account and allowed them to receive and pay out funds from the victims, thereby contravening sections 109 and 114(1)(b) of the SFO.

45.Notwithstanding that these are default judgment summonses and that these are very serious allegations, I consider that on the facts of the present case such an inference can be drawn because it is both clear and compelling that there can be no other innocent explanation.

46.The Corporate Defendants have also contravened section 300(1) of the Securities and Futures Ordinance by being directly or indirectly and in a way which knowingly involved a party in contravention of the said section. My analysis above applies with full force here notwithstanding the Corporate Defendants were not in a technical sense parties to the relevant transaction involving securities and futures contracts. The fact that they permitted and facilitated the 1st Defendants’ conduct by permitting their accounts to be used in such fraudulent and deceptive schemes make them equally liable under section 300 of the SFO because those acts have been employed “in connection with and/or in relation to” the relevant transaction. (see dicta of Ribeiro PJ in Lee Kwok Wa supra.)

47.For the reasons set out above, I consider the SFC has proved its case and I now deal with the question of reliefs to be granted. The rationale behind the remedies which are available under section 213 of the SFO had been comprehensively considered by Godfrey Lam J in Securities and Futures Commission v Qunxing Paper Holdings Co Ltd (No 2) [2018] 1 HKLRD 1060, in the following paragraphs which are particularly relevant.

“Should the order be made?

56. Not only is s 213(2) striking in its width, it is also remarkable in that the cause of action it creates appears to be discretionary. S 213(1) confers a discretion on the court by providing that it “may”, on the application of the Commission, make one or more of the orders specified in subsection (2). The jurisdiction arises once the court finds that the matters set out in s 213(1)(a) have occurred. The only express fetter on this discretion is subsection (4), which requires the court to satisfy itself on two matters, “so far as it can reasonably do so”, before making an order, namely, (i) that it is desirable that the order be made, and (ii) that the order will not unfairly prejudice any person.

57. Desirability and fairness are highly general concepts which do not lend themselves to definition or precise exposition. A fairly broadbrush approach has to adopted where necessary. In the present case an order along the lines proposed by the Commission should in my view be made having regard to the following.

60. But in the real world these facts are either not all ascertainable or are so only at the end of a vastly complex, lengthy and costly process. To insist on investigating the circumstances of every individual investor and investment might completely destroy the efficacy of the statutory scheme and defeat the legislative purpose. It is not surprising therefore that there has been no attempt in this case to establish reliance and inducement on an individual basis in the case of each investor. Despite that proceedings under s 213 are “the public law analogue of actions for damages by individuals under s 305”[6], it is in my view not necessary to bring into s 213(2)(b) all the requirements of a private law cause of action of deceit in the case of each investor, especially where to do so would render the statutory remedy ineffective. In any event, the expert evidence received by this court was that the false financial information about Qunxing publish between the IPO in 2007 and suspension of trading in 2011 (which included the annual results up to 2009) was on a general level, likely to influence investors to purchase Qunxing shares or at least not to sell them, and to affect the share price accordingly. Even if an investor did not himself read the IPO prospectus, annual reports and results announcement, the relevant information would have found its way into market commentaries and would have been reflected in market sentiments about Qunxing’s shares and ultimately in the prevailing share price.

62. The primary purpose of the kind of order sought must be protection of the investing public. Such protection, where investors have been induced by false or misleading information disseminated in contravention of the provisions referred to above (ss 277, 298 and 384 of the SFO and s 342F of Cap 32) to subscribe for or purchase shares or warrants, should take the form of rescission of the transaction or payment of compensation.

63. To the extent that the proposed scheme extends to an investor, it does seek to restore him to the position in which he was before he acquired the shares in question (following the latter part of s 213(2)(b)), provided that he is also required in principle to make counter-restitution such as by delivering up the share certificate or signing an appropriate document or transfer form for that purpose or giving credit for the residual value, if any, of the shares in his possession (see Pantell, pp 280E, 281B-D, 283E, 286B-C; Scandex, p 724F-H). Such counter-restitution is probably merely of theoretical interest in this case because the shares in Qunxing are likely to be valuless after the payments ordered are made. The fact that the scheme does not seek to affect the position of the sellers of Qunxing shares on the market to these investors does not remove the proposed order out of the scope of s 213(2)(b).

64. Qunxing obtained a very large amount of funds through the IPO, the open offer and the issue of warrants to Victory Asset. Best Known had also received from Qunxing a substantial part (HK$429.8m) of the proceeds of subscription for shares (though HK$382.36m was transferred back to Qunxing). Through their company Boom Instant, the 3^rd and 4^th respondents had received dividends of approximately RMB 329m from Qunxing between 2008 and 2013. Moreover, they were involved in knowingly disseminating materially false and misleading financial information which they must have known would induce investors to acquire shares in Qunxing or retain shares already acquired. There is a high degree of culpability in the contravention: see Financial Services Authority v Shepherd [2009] EWHC 1167 (Ch), §36. Requring them to compensate investors for the false and misleading information published by Qunxing is in my view not unfair to them. Nor has any defendant appeared in these proceedings to contend that the proposed orders would unfairly prejudice him.

65. Although s 213(2)(b) does not enforce private law rights, I note that at common law, in a case of fraudulent misrepresentation, the defendant is generally taken to be responsible for all losses suffered as a direct consequence of the tort without any need to prove foreseeability of the loss. Moreover, the loss is not necessarily measured by reference to the true value of the shares as at the date of acquisition (as opposed to an even lower value at a later date) where the purchaser became locked into the transaction by reason of the fraud perpetrated on him: Smith New Court Securities Ltd v Scrimgeour Vickers [1997] AC 254, 266-267, 285.”

48.In summary, the purpose of the jurisdiction is to provide a statutory regime whereby the SFC, as regulator, can take action to obtain civil remedies for the benefit of investors who may otherwise be deterred by costs and other considerations from instituting legal proceedings individually to obtain redress for their losses (which may otherwise not justify their institution on costs and other practical considerations). Section 213(2) in particular is striking, both in its width and the cause of action it creates. These are discretionary. Section 213(1) confers a discretion on the court by providing that it “may” on the application of the SFC make one or more of the orders specified in subsection (2). That jurisdiction arises once the court finds that the matters set out in section 213(1)(a) have been satisfied.

49.The only statutory fetter on that discretion is set out in subsection (4) which requires the court to be satisfied that “insofar as it can reasonably do so before making an order, (1) it is desirable that the order be made, and (2) the order will not unfairly prejudice any person”.

50.It is recognised that a fairly broad-brush approach has to be adopted in appropriate circumstances and that the primary purpose of the jurisdiction is for the benefit of the protection of the investing public. In the ultimate analysis where one is concerned with a large number of transactions and limited resources for compensation, a robust and practical approach had to be called for.

Declarations

51.As already explained above and is very fairly accepted by the SFC, the normal practice of the Court is not to grant declaratory relief in the absence of trial. However, this is only a rule of practice and not a rule of law.

52.Two authorities have been cited by the SFC and drawn to my attention. The first is that of Terence John Stott v Larks Trading Limited & Ors [2019] HKCFI 1317 per DHCJ Allan Leung and Spruce Australia Property v New Senjia Trade Limited [2019] HKCFI 101 per DHCJ Keith Yeung, SC, as Keith Yeung J then was.

53.The declarations in the present instance are very similar to those which were sought and indeed obtained by the SFC in Cardell. The only difference of course, it might be said, is that whereas I am dealing with a default judgment application, his Lordship was trying the issue.

54.It seems to me that the appropriate comparator to adopt is for the court to ask itself this question: if the matter were now tried instead of being dealt with by way of default judgment applications, what difference would it make? Essentially, the Defendants neither having filed a defence nor having called witnesses would mean that the court would be looking at exactly the same documents. The SFC, presumably, would call one of its officers who would then produce those documents. The officer in question is unlikely to have first-hand knowledge beyond the matters which has come to his or her attention by virtue of documentary evidence or other documents available in the public domain.

55.There is unlikely to be more documentary evidence by reason of discovery for the same reasons I mentioned above. So the practical reality is that there would be, in effect, no real difference, or rather, a difference without a distinction, between dealing with this as I am now as opposed to dealing with this at a trial where none of the Defendants appear and no further discovery is produced.

56.Bearing in mind the customary caution above, but looking at the practical realities, I am satisfied that the declarations which are sought by the SFC in the present instance are both appropriate and justified, notwithstanding that I am dealing with this on a default judgment basis.

57.As is obvious from the Orders which I have made and are appended below, I am also satisfied that the prohibitory injunction and Mareva injunctions are justified in the present case. As Ng J had done in Cardell, it is clearly desirable that the Defendants are restrained from contravening and continuing to contravene provisions of the SFO so as to prevent unfair prejudice to any other person and members of the investing public.

Restitutionary order

58.Insofar as the restitutionary order is concerned, Le Pichon JA had held in SFC v C [2009] 4 HKLRD 315 at paragraph 36:

“Section 213(2)(b) enables an order to be made that would restore all the parties to the transaction to their respective former positions. In other words, it is restitutionary in nature and in conjunction with an order under section 213(2)(c) would provide compensation to those who have sustained losses through the wrongdoing in question.”

59.Godfrey Lam J in SFC v Tsoi Bun [2014] 2 HKLRD 1, (at paragraphs 11 to 13), further explained that that jurisdiction was not confined in making restitution in specie. Rather, the section permitted an order to be made requiring restoration of the parties to their relevant financial position prior to the impugned transaction.

60.Again by reference to Cardell, the SFC invites me to grant a restitutionary order similar to that which had been sought and obtained by the SFC in that case where Ng J at paragraph 32 had observed that the most appropriate form of restitution would often be to distribute the amounts frozen in bank accounts to the victims and/or complainants on a pro rata basis, ie by dividing up the amount left in each of those bank accounts among the various complaints/victims by reference to the amounts that they had respectively remitted, and that although in individual cases that proposed restitution may not fully restore those complainants/victims to their position ex ante, it is, nevertheless, desirable because it would be the most practicable and efficient form of compensation.

61.I agree, and in the present case it is also obvious that this order would not unfairly prejudice any other person. I note that in two of the proceedings before me the SFC suggests a further tweaking of that order to meet the justice of the individual case. The amounts concerned are not very significant and I agree with the SFC that it would be appropriate to tweak the standard order in the way which is now reflected in the orders for the reasons which they submit and for which it is unnecessary for me to explain in greater detail.

Administrators

62.I finally deal with the matter of the appointment of administrators. This is a fairly conventional order made in cases such as the present where there is a need for a third party to go through the logistics and calculations to ensure and give effect to the restitutionary order.

63.Having regard to the relatively modest amounts concerned, I was concerned that the costs of dealing with this restitutionary exercise as a result of the appointment of the administrators and their function would perhaps “eat into” whatever compensation those complainants/victims may eventually receive, Mr Westbrook explained that those proposed appointees had agreed not to charge more than HK$180,000 for their work for all of the three proceedings and therefore, to some extent, this would allay this concern of the court.

64.I agree that in the circumstances such as the present it is desirable that the costs be as best controlled. I also note Mr Westbrook’s submission that insofar as the costs of the SFC in these proceedings are concerned, whilst, of course, these are sought as against the Defendants, these would not be paid out of whatever monies that now remain and would otherwise be available to the victims/complainants.

Costs

65.I will grant certificate for two counsel and costs of the proceedings to be taxed, if not agreed to be to the SFC.

	(José Maurellet SC)
	Deputy High Court Judge

Mr Simon Westbrook SC, and Mr Norman Nip, instructed by the Securities and Futures Commission, for the plaintiff

The defendants were not represented and did not appear

HCA 2511/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2511 of 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry
on a securities and/or futures trading business known as
BROADSPAN SECURITIES
and using the website www.broadspansecurities.com 1^st Defendant
TIMEPRIME LIMITED 2^nd Defendant
LYNWIN LIMITED 3^rd Defendant
RESMART LIMITED 4^th Defendant

________________________
STATEMENT OF CLAIM
________________________

1.  At all material times:

1.1.  The Plaintiff is a statutory body whose regulatory objectives in section 4 of the Securities and Futures Ordinance Cap 571 (the “SFO”) include “(d) to minimize crime and misconduct in the securities and futures industry” and “(c) to provide protection for members of the public investing in or holding financial products”. The functions and powers of the Plaintiff in section 5(1) of the SFO include “(a) to take such steps as it considers appropriate to maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry”, “(g) to maintain and promote confidence in the securities and futures industry in such manner it considers appropriate…”, “(l) to secure an appropriate degree of protection for members of the public investing in or holding financial products…” and “(n) to suppress illegal, dishonourable and improper practices in the securities and futures industry”. In performing its functions, section 6(1) of the SFO imposes a duty on the Plaintiff to act in a way which is compatible with its regulatory objectives and which it considers most appropriate for the purpose of meeting those objectives.

1.2.  The 1^st Defendant is a person or persons purporting to carry on a securities and/or futures trading business known as BROADSPAN SECURITIES and using the website www.broadspansecurities.com (“Website”). The 1^st Defendant is not a company registered with the Hong Kong Companies Registry and does not hold any Business Registration certificate to carry on any business in Hong Kong, nor has it been registered or granted any license by the Plaintiff to carry on any activity regulated by the Plaintiff under and in accordance with the SFO.

1.3.  The 2^nd Defendant was and is a company incorporated in Hong Kong on 16 October 2013, which has claimed to engage in trading goods. Its sole director and majority shareholder is a Mr. Chong Kok Seong, holder of a Malaysian passport. The 2^nd Defendant was and is the holder of the following accounts (“Timeprime Accounts”) at Industrial and Commercial Bank of China (Asia) Limited (“ICBC Bank”):-

1.3.1.  HKD current account number 864-502-01453-6;

1.3.2.  USD current account number 864-506-00340-4; and

1.3.3.  Multi-currency statement savings account number 864-530-01077-7.

1.4.  The 3^rd Defendant was and is a company incorporated in Hong Kong on 11 December 2012, which has claimed to engage in the business of the trading of electronic products, home appliances, TVs, DVDs, VCDs, washing machine (finished products). Its sole director and shareholder is a Mr. Chua Kean Wooi, holder of a Malaysian passport. The 3^rd Defendant was and is the holder of an integrated account number 817-635584-838 (“the Lynwin Accounts”) at Hongkong and Shanghai Banking Corporation Limited (“HSBC”) with sub-accounts as follows:

1.4.1.  HKD saving account no. 817-635584-838;

1.4.2.  HKD current account no. 817-635584-001;

1.4.3.  HKD time deposit account no. 817-635584-000;

1.4.4.  HKD securities trading account no. 817-635584-380;

1.4.5.  USD saving account no. 817-635584-201;

1.4.6.  GBP saving account no. 817-635584-202; and

1.4.7.  EUR saving account no. 817-635584-220.

1.5.  The 4^th Defendant was and is a company incorporated in Hong Kong on 15 November 2013, which has claimed to engage in wholesale and trading of textiles clothing and footwear. Its sole director and majority shareholder is a Mr. Kanikkaraj Kalaikumar, holder of an Indian passport. The 4^th Defendant was and is the holder of an integrated account number 817-734981-838 (“the Resmart Accounts”) at HSBC with sub-accounts as follows:

1.5.1.  HKD saving account no. 817-734981-838;

1.5.2.  HKD current account no. 817-734981-001;

1.5.3.  USD saving account no. 817-734981-201; and

1.5.4.  GBP saving account no. 817-734981-202.

THE 1^ST DEFENDANT

2.  The 1^st Defendant operated the Website. The Website included the following contents:

2.1.  Under the page titled “About Broadspan Securities” in the Website, it stated:

“Our firm offers not only a wide-ranging emporium of futures and commodities alongside with our far-reaching and focused trading specialists but as well as dedicated client friendly brokers who are ready to assist our traders in their trading objectives and interests.

...

At Broadspan Securities, we mean excellent services in all aspect of the futures industry. We smartly provide a wide array of services to individual traders whatever their trading needs and objectives are; advisory firms and business establishments concerned in the world expanding marketplace. In addition, we can facilitate and support the entire futures related objectives of the individual speculator as well as the requirements of multinational corporations, Commodity pool Operators, Commodity Trading Advisors, Introducing Brokers and other Futures Commission Merchants.”

2.2.  Under the page titled “Frequently Asked Questions” of the Website, it stated:

“Who is Broadspan Securities?

Basically, Broadspan Securities is an independent and guaranteed Introducing advisory firm that has been servicing both local and international clients since 2010. The firm offers specialized services on commodity futures and options with primary vision of providing futures traders and investors with state of the art order entry functionalities, competitive yet affordable commission rates and professional services that current traders’ mandate.

…

Can we expect trading assistance from you?

Broadspan Securities has remarkable trading tools that are tailored to all types of investing clients. We offer live and free markets news; daily, weekly and monthly futures and options research; per day opening market calls; recommended trading reports; trade recommendations with our experienced brokers and education center aims to provide helpful knowledge to prospective clients.”

2.3.  Under the page titled “Open New Account” of the Website, it included a link to download a 2-page form titled Account Application. The second page of the form includes the following terms and conditions:

“2.  Purchases and Sales. We undertake on a “best efforts” basis, to sell or purchase on behalf of You, as per your instructions...”

2.4.  Under the page “Customer Support” of the Website, it is stated that:

“Get in touch with us.

45/F International Finance Center

8 Finance Street, Central Hongkong

Email: [email protected]

Telephone: +852 5808 4967”

3.  On various dates in 2014, the 1^st Defendant has, whether by himself / herself / themselves, or his / her / their servants, employees, or agents, invited and solicited a number of persons including, inter alia, Mr. ██ (“████”), Mr. ██ (“████”) and Mr. ██ (“███”), all of whom were New Zealand residents, to invest in securities and/or futures contracts by transferring funds for that purpose to the Timeprime Accounts, the Lynwin Accounts, and the Resmart Accounts:

███

3.1.  In February 2014, ██ received an unsolicited telephone call from someone who claimed to work for the 1^st Defendant promoting investments.

3.2.  There was then e-mail correspondence between various representatives of the 1^st Defendant and ██ regarding the opening of an account with the 1^st Defendant. On 18 February 2014, ██ sent his signed account opening application form of even date to the 1^st Defendant by e-mail.

3.3.  On 20 February 2014, ██ was also asked by staff of the 1^st Defendant to transfer funds into the Lynwin Accounts to trade. On 21 February 2014, ██ deposited US$5,000 into the Lynwin Accounts. On that day, the 1^st Defendant sent ██ an e-mail confirming the execution of an options trade: buy 5 CALL GCM14 @ $1,000. “CALL GCM14” stands for Gold Futures Call Options Contract listed for the contract month of June 2014 and appears to be listed on the Commodity Exchange Inc (“COMEX”). The value of the purported trade was US$5,000.

3.4.  An account summary on ██’s online account with the 1^st Defendant as at 13 August 2014 shows that ████ had purportedly traded in a number of options contracts listed on the New York Mercantile Exchange (“NYMEX”) and the Chicago Mercantile Exchange (“CME”). ██’s balance as at 13 August 2014 was a debit balance of US$42,078.75. All of these transactions were placed by staff of the 1^st Defendant with ██’s consent (except for the first contract). He has never received any account statements or other documents to confirm the trades placed on his behalf were in fact executed.

3.5.  On 7 March 2014, ███ received an e-mail from the 1^st Defendant requesting for the transfer of funds to the Timeprime Accounts. On even date, ██ deposited US$40,700 into the Timeprime Accounts.

3.6.  On 10 March 2014, staff of the 1^st Defendant called ██ informing him that he would need to arrange for his bank to stop the transfer of US$40,700 as his funds could not be placed in the Timeprime Accounts. ██ made a request to his remitting bank to stop the transfer, but the sum had already left New Zealand and he was advised that the only avenue of getting his money back was from the 2^nd Defendant. When ██ asked staff of the 1^st Defendant about it, he was told that the error was the 1^st Defendant’s fault so the 1^st Defendant would keep investing on his behalf. No money was ever returned to ██.

███

3.7.  In January 2014, ███ received an unsolicited telephone call from someone who claimed to work for the 1^st Defendant. That person claimed to be the same Robert Spencer with whom ███ had previously made investments through a firm called Advantage Asset Management.

3.8.  There was then e-mail correspondence between various representatives of the 1^st Defendant and ███ regarding the opening of an account with the 1^st Defendant. On 13 February 2014, ███ sent his signed account opening application form of 12 February 2014 to the 1^st Defendant by e-mail.

3.9.  On 14 February 2014, ███ was also asked by staff of the 1^st Defendant to transfer funds into the Lynwin Accounts to trade. On 5-6 March 2014, ███ deposited US$2,894.50 and US$2,480 into the Lynwin Accounts. On 6 March 2014, the 1^st Defendant sent ███ an e-mail confirming the purchase of 5 CALL GCM14 (i.e. Gold Futures Call Options Contract listed for the contract month of June 2014). The value of the purported trade was US$5,000.

3.10.  Subsequently, ████ transferred the following further sums of monies at the requests of the 1^st Defendant for trading:

3.10.1. On 20 and 27 March 2014, ███ remitted US$4,194.25 and US$3,462.37 into the Resmart Accounts.

3.10.2. On 28 April 2014, ███ remitted US$4,681.25 into the Resmart Accounts.

3.10.3. On 10 June 2014, ███ remitted US$2,800 into the United Overseas Bank Limited in Singapore held by Collins House.

3.11.  An account summary of ██’s online account with the 1^st Defendant as at 13 August 2014 shows that ████ had purportedly traded a number of options contracts with expiry dates ranging from 27 May 2014 to 28 July 2014.

██

3.12.  On 31 March 2014, ████ received an email from the 1^st Defendant with an account application form of the 1^st Defendant.

3.13.  On 3 April 2014, ████ sent a completed and signed account opening document to the 1^st Defendant.

3.14.  On 4 April 2014, ███ received an email from the 1^st Defendant with details of his login name and passwords to his online trading account at the 1^st Defendant.

3.15.  On 10 April 2014, ████ received an email from the 1^st Defendant with a document headed “Transfer Instructions” containing details of the Lynwin Accounts. ███ remitted USD 5,000 to the Lynwin Accounts on 11 April 2014 purportedly to purchase fuel options for the June / July driving seasons in the USA.

4.  Neither the 1^st Defendant, nor any of the persons purportedly working for the 1^st Defendant above were at all material times licensed by the Plaintiff to carry on any regulated activity as defined in the SFO.

5.  Personnel of the Plaintiff tried to locate and contact the 1^st Defendant from September to December 2014, by visiting 45/F, Two International Finance Centre located at 8 Finance Street, writing to the management office of Two International Finance Centre and calling the telephone number as given in paragraph 2.4 above. However there was no sign of any business called Broadspan Securities on 45/F, Two International Finance Centre and the telephone calls were not answered.

6.  The Plaintiff has been unable to find any physical trace of the 1^st Defendant or its employees within Hong Kong.

7.  In the premises:

7.1.  The 1^st Defendant has contravened section 109(1) of the SFO by issuing an advertisement in which to its knowledge the 1^st Defendant held itself out as being prepared to carry on the activities of advising on securities and/or advising on futures contracts and/or advising on corporate finance and/or asset management, which are regulated activities under the SFO, when the 1^st Defendant is not licensed or registered for such regulated activities as required by the SFO.

7.2.  The 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business, inter alia, of dealing in securities and/or futures contracts, which are regulated activities under the SFO, when the 1^st Defendant is not licensed, registered or authorized for such regulated activities.

7.3.  Further or in the alternative, the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts by:-

(a)  employing a device, scheme or artifice with intent to defraud or deceive; and/or

(b)  engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

Particulars of fraudulent or deceptive device, scheme, artifice,

act, practice or course of business

(1)  Cold calling potential investors, purporting to be bona fide investment advisors and dealers while operating from a fictitious address to conduct securities and/or futures trading business.

(2)  Persuading potential investors to invest in various securities and/or futures contracts with the implied representation, which was untrue, that the securities and/or futures contracts would be executed honestly and in accordance with trade custom, failing which their money would be returned.

(3)  Inducing potential investors to make payments into the Timeprime Accounts, the Lynwin Accounts and the Resmart Accounts to fund the purported purchases of securities and/or futures contracts which there was no intention to execute or deliver.

7.4.  The 1^st Defendant is consequently a person within section 213(1)(a)(i)(A) and section 213(2)(b) of the SFO and the court thereby has jurisdiction to make an order requiring it to take such steps as the court may direct, including steps to restore investors to any transaction entered into as a result of the 1^st Defendant’s conduct to the position in which they were before the transaction was entered into. Alternatively, the Plaintiff is entitled to seek payment of damages by the 1^st Defendant pursuant to section 213(8) of the SFO.

7.5.  The Plaintiff is entitled to and seeks an order under section 213(1)(a) or alternatively section 213(1)(b) of the SFO, namely an injunction under section 213(2)(a) to restrain or prohibit the 1^st Defendant from:

(a)  holding itself out as carrying on a business in its name in Hong Kong in relation to the said regulated activities under the SFO, whilst unlicensed and unauthorized;

(b)  issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the Website, in which the 1st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered;

(c)  continuing to operate any internet websites within its power or control promoting or advertising the carrying out of the prohibited activities under the SFO, including, but not limited to, the Website; and

(d)  in transactions involving securities and/or futures contracts, employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

THE 2^ND DEFENDANT

8.  The Timeprime Accounts were opened in November 2013 purportedly for the purposes of the 2^nd Defendant’s business which it claimed to ICBC Bank to be trading goods. When the Timeprime Accounts were frozen by the interim freezing order granted by the Court on 19 December 2014, there was a total of HK$3,840 and US$56,757.23 in the Timeprime Accounts. From 27 February to 7 March 2014, there were 7 inward remittances during this period into the 2^nd Defendant’s USD account no. 864-506-00340-4 which included the US$40,700 from ████. Three of the remitters subsequently requested ICBC Bank to cancel the remittances citing “fraud” as the reason.

8.1.  According to the 6 remitters (including ██) who responded to enquiries of the Plaintiff:

8.1.1.  The remitters stated that they were induced to deposit funds into the Timeprime Accounts for the purpose of investing in various types of securities and/or futures contracts by persons, who claimed to be staff representing the following entities whose businesses were said to involve advising upon and executing securities transactions and/or advising upon and conducting futures trading for its clients: the 1^st Defendant, Smith and Stanley Corporate Consultants (“SSCC”) and York Capital Advisors (“York”).

8.1.2.  SSCC purported to carry on a business from 54 Avenue of the Americas, New York, NY, U.S.A. providing investment advisory service.

8.1.3.  York purported to carry on a business from 777 Fifth Avenue, 28^th Floor, New York, NY 10153, U.S.A. providing investment advisory service.

8.1.4.  None of the remitters received any of the securities and/or futures contracts they had agreed to buy nor any monetary returns from their purported investments or otherwise.

8.1.5.  No trace of any physical presence of the above entities or their staff could be found at the addresses from which they claimed to be carrying on business nor do any of them appear to have been registered or licensed to conduct securities and/or futures trading on behalf of clients in the jurisdictions from which they claimed to operate.

8.2.  According to the Plaintiff’s investigation:-

8.2.1  SSCC, which purported to carry on business in the USA, is not licensed or registered with the USA Financial Industry Regulatory Authority, Inc. (“FINRA”) which regulates trading in equities, corporate bonds, securities futures, and options in the USA;

8.2.2  SSCC was placed on the warning list of the UK Financial Conduct Authority (“FCA”), the conduct regulator for financial services firms and financial markets, on 11 September 2014 and on the investor alerts portal of the International Organization of Securities Commissions (“IOSCO”) on 12 September 2014, which alerted investors that SSCC is not authorised to provide investments services in the UK; and

8.2.3  York which purported to carry on business in the USA is not licensed or registered with FINRA.

8.3.  Details of the remittances made by the 6 persons who responded to the Plaintiff’s enquiries are attached to this Statement of Claim as Annexure 1.

THE 3^RD DEFENDANT

9.  The Lynwin Accounts were opened on 8 January 2013 purportedly for the purposes of the 3^rd Defendant’s business which it claimed to HSBC to be trading of electronic products, home appliances, TVs, DVDs, VCDs, washing machine (finished products). The sales location was stated to be from China to Malaysia and Brazil. The reason given for setting up the Lynwin Accounts was to pay suppliers in China and to settle payments in Hong Kong and the source of funds was stated to be Malaysia. The 3^rd Defendant claimed that the main source of the funds of the Lynwin Accounts would be 100% from Malaysia, and the main application of the funds would be 50% to Malaysia and 50% to China.

10.  When the Lynwin Accounts were frozen by the interim freezing order granted by the Court on 19 December 2014, there were a total of HK$68,034.99, US$6,482.90, GBP6,394.94 and EUR1,968.95 in the Lynwin Accounts. From 1 September 2013 to 31 July 2014, there were 58 inward remittances (including those from ███, ███ and ██) during this period into the Lynwin Accounts from various places including New Zealand, Belgium, Greece and Hong Kong.

10.1.  According to the 16 remitters (including ██, ███, and ████) who responded to enquiries of the Plaintiff:

10.1.1.  The remitters stated that they were induced to deposit funds into the Lynwin Accounts for the purpose of investing in various types of securities and/or futures contracts by persons, who claimed to be staff representing the following entities whose businesses were said to involve advising upon and executing securities transactions and/or advising upon and conducting futures trading for its clients: the 1^st Defendant, Bear Creek Securities (“Bear Creek”), Capital Hill Group Limited (“CHG”) and York.

10.1.2.  Bear Creek purported to carry on a business providing investment advisory services. It represented that its phone number was +852-5808-4587.

10.1.3.  CHG purported to carry on a business providing investment advisory services. It represented that its phone number was +852-5808-4554.

10.1.4.  None of the remitters received any of the securities and/or futures contracts they had agreed to buy nor any monetary returns from their purported investments or otherwise.

10.1.5.  All of the remittances related to purported securities and/or futures contracts transactions and none of the remittances related to trading of electronic products, home appliances, TVs, DVDs, VCDs, washing machine (finished products).

10.1.6.  None of the remitters stated that they resided in Malaysia. This is inconsistent with the 3^rd Defendant’s claim that the funds of the Lynwin Accounts all came from Malaysia.

10.1.7.  No trace of any physical presence of the above entities or their staff could be found at the addresses and phone numbers from which they claimed to be carrying on business nor do any of them appear to have been registered or licensed to conduct securities and/or futures trading on behalf of clients in the jurisdictions from which they claimed to operate.

10.2.  According to the Plaintiff’s investigation;-

10.2.1  Bear Creek which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

10.2.2  CHG which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong; and

10.2.3  CHG was placed on the investor alerts portal of IOSCO on 22 April 2014, which alerted investors that the said firm is not authorised to provide investments services in Belgium.

11.  Details of the remittances made by the 16 persons who responded to the Plaintiff’s enquiries are attached to this Statement of Claim as Annexure 2.

THE 4^TH DEFENDANT

12.  The Resmart Accounts were opened on 24 February 2014 purportedly for the purposes of the 4^th Defendant’s business which it claimed to HSBC to be wholesale and trading of textiles clothing and footwear. The sales location was stated to be from China and Hong Kong to India, and from India to Singapore. The purpose of opening the Resmart Accounts was for intercompany settlement and the expected source of funds is from sale proceeds and from India.

13.  When the Resmart Accounts were closed on 11 August 2014 due to “administrative reasons”, the sums of US$989.14, HK$371.92 and GBP0.01 in the Resmart Accounts were transferred to account numbers 638-903815-102, 638-903815-001 and 638-903815-101 at HSBC respectively pending the account holder’s disposal instructions (“Segregated Accounts”).

14.  From 20 March 2014 to 8 May 2014, there were a total of 18 deposits/inward remittances and 21 withdrawals from the Resmart Accounts. Many of the withdrawals were transferred to different companies in China, India, Malaysia, South Korea etc.

14.1.  According to the 3 remitters (including ██) who responded to enquiries of the Plaintiff:

14.1.1. The remitters stated that they were induced to deposit funds into the Resmart Accounts for the purpose of investing in various types of securities and/or futures contracts by persons, who claimed to be staff representing the following entities whose businesses were said to involve advising upon and executing securities transactions and/or advising upon and conducting futures trading for its clients: 1^st Defendant, SSCC and York.

14.1.2. None of the remitters received any of the securities and/or futures contracts they had agreed to buy nor any monetary returns from their purported investments or otherwise.

14.1.3. All of the remittances related to purported securities and/or futures contracts transactions and none of the remittances related to wholesale and trading of textiles clothing and footwear.

14.1.4. None of the remitters stated that they resided in Hong Kong, India, China, or Singapore. This is inconsistent with the 4^th Defendant’s claim that the expected source of funds is from sale proceeds and from India.

14.1.5. No trace of any physical presence of the above entities or their staff could be found at the addresses from which they claimed to be carrying on business nor do any of them appear to have been registered or licensed to conduct securities and/or futures trading on behalf of clients in the jurisdictions from which they claimed to operate.

15.  Paragraph 8.2 is repeated here.

16.  Details of the remittances made by the 3 persons who responded to the Plaintiff’s enquiries are attached to this Statement of Claim as Annexure 3.

17.  The 2^nd – 4^th Defendants by, inter alia, receiving the funds obtained by the 1^st Defendant in contravention of the SFO, have aided, abetted, or otherwise assisted, counselled, or procured or conspired with the 1^st Defendant in its said contraventions, or alternatively directly or indirectly have been in any way knowingly involved in the 1^st Defendant’s contraventions of sections 109(1) and 114(1)(b) of the SFO.

18.  Further or in the alternative, by reason of the facts pleaded above, the 2^nd – 4^th Defendants have contravened section 300(1) of the SFO by aiding and abetting or conspiring with the 1st Defendant and/or persons unknown purporting to operate the securities and/or futures trading businesses known as SSCC, York, Bear Creek, and CHG during 2013 and 2014, in transactions involving securities and/or futures contracts to:

18.1. employ a device, scheme or artifice with intent to defraud or deceive; and/or;

18.2. engage in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

Particulars of fraudulent or deceptive device, scheme, artifice,

act, practice or course of business

(1)  Cold calling potential investors, purporting to be bona fide investment advisors and dealers while operating from fictitious addresses and via unlicensed entities to conduct securities and/or futures trading businesses in the claimed jurisdictions.

(2)  Persuading potential investors to invest in various securities and/or futures contracts transactions with the implied representation, which was untrue, that the securities and/or futures contracts transactions would be executed honestly and in accordance with trade custom, failing which their money would be returned.

(3)  Inducing potential investors to make payments into the Timeprime Accounts, the Lynwin Accounts and the Resmart Accounts to fund the purported purchase and/or sale of securities and/or futures contracts which there was no intention to execute or deliver.

(4)  The 2^nd – 4^th Defendants aided and abetted or conspired with the said fictitious investment agents to operate the above mentioned device, scheme, artifice, act, practice or course of business by actively permitting their bank accounts to accept funds from the potential investors with no intention that their securities and/or futures contracts transactions would ever be executed and disbursing funds shortly after receipt, thereby converting the said funds for their own use and causing the potential investors to suffer a total loss of their monies so remitted.

19.  In the premises:

19.1.  The 2^nd – 4^th Defendants are persons within section 213(1)(a)(ii) or (iv) or (v) of the SFO, by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/or by directly or indirectly having been in any way knowingly involved in, or a party to the aforementioned contraventions by the 1^st Defendant, and section 213(2)(b) of the SFO.

19.2.  Further or in the alternative, the 2^nd – 4^th Defendants are persons within section 213(1)(a)(i)(A) or section 213(1)(a)(ii) or (iv) or (v) of the SFO, by contravening section 300(1) of the SFO by reason of the matters pleaded hereinabove and/or by directly or indirectly having been in any way knowingly involved in, or a party to the contraventions of section 300(1) of the SFO, and section 213(2)(b) of the SFO.

19.3.  The court thereby has jurisdiction to make orders requiring the 2^nd – 4^th Defendants to take such steps as the court may direct, including steps to restore investors to any transaction entered into as a result of the conduct of the Defendants to the position in which they were before the transaction was entered into. Alternatively, the Plaintiff is entitled to seek payment of damages by the 2^nd – 4^th Defendants pursuant to section 213(8) of the SFO.

AND THE PLAINTIFF CLAIMS:

(1)  A declaration that the 1^st Defendant is a person within section 213(1)(a)(i)(A) of the SFO, in that the 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business in regulated activities, whilst unlicensed and unauthorised.

(2)  A declaration that the 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 109(1) of the SFO by knowingly issuing an advertisement in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities, whilst unlicensed and unregistered.

(3)  Further or in the alternative to paragraphs 1 and 2 above, a declaration that the 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts, in employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

(4)  A declaration that the 2^nd – 4^th Defendants are persons within section 213(1)(a)(ii) or (iv) or (v) of the SFO by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/ or by directly or indirectly having been in any way knowingly involved in, or a party to, the aforementioned contraventions by the 1^st Defendant.

(5)  Further or in the alternative to paragraph 4 above, a declaration that the 2^nd – 4^th Defendants are persons within section 213(1)(a)(i)(A) or section 213(1)(a)(ii) or (iv) or (v) of the SFO, in that the 2^nd – 4^th Defendants have contravened section 300(1) of the SFO and/or have directly or indirectly been in any way knowingly involved in, or a party to the contraventions of section 300(1) of the SFO.

(6)  Further or in the alternative, declarations that the Defendants are persons within section 213(2)(b) of the SFO in that they have been, or it appears that they have been, knowingly, involved in the contraventions of sections 213(1)(a) aforesaid.

(7)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever from holding itself out as carrying on a business under the name of Broadspan Securities in Hong Kong in relation to the regulated activities under the SFO, whilst unlicensed and unauthorised, contrary to section 114(1)(b) of the SFO.

(8)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever from issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the website www.broadspansecurities.com, in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered, contrary to section 109(1) of the SFO.

(9)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever in transactions involving securities and/or futures contracts, by employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

(10)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an order as the Court considers appropriate under section 213(2)(f) or section 213(2)(g) of the SFO directing the 1^st Defendant to suspend all internet websites within its power or control promoting or advertising the carrying out of the regulated activities under the SFO, including, but not limited to, the website with the address www.broadspansecurites.com.

(11)  An order pursuant to section 213(2)(b) of the SFO, requiring the Defendants to take such steps as the Court may direct, including steps to restore investors to any transaction entered into as a result of the conduct of the Defendants to the position in which they were before the transactions were entered into, to the extent possible.

(12)  An order pursuant to section 213(2)(d) of the SFO, that a proper person be appointed to recover, receive and administer the 1^st Defendant’s assets in Hong Kong and/or to recover, receive and administer the money frozen by the injunctions in the Timeprime Accounts, the Lynwin Accounts, and the Segregated Accounts, or such other sum as appears to the Court to be just, and interest thereon and for that purpose all necessary and proper directions may be given, including orders to return the remittances (or a proportion thereof) received from all such persons as may have been induced to purportedly participate in the 1^st Defendant’s unlawful securities and/or futures trading business and/or the fraudulent or deceptive conduct by the Defendants.

(13)  Further, or in the alternative to claim (12) above, an order pursuant to section 213(8) of the SFO requiring the Defendants to pay damages (which may include interest whether pursuant to section 48 of the High Court Ordinance (Cap. 4) or otherwise) to investors who had paid money into the Timeprime Accounts, the Lynwin Accounts and the Resmart Accounts as a result of the Defendants’ conduct referred to above.

(14)  Further and other directions or orders as this Honourable Court thinks fit.

(15)  Costs.

Dated the 9^th day of August 2019

Securities and Futures Commission

The Plaintiff

HCA 2511/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2511 of 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry
on a securities and/or futures
trading business known as
BROADSPAN SECURITIES and using the website www.broadspansecurities.com 1^st Defendant
TIMEPRIME LIMITED 2^nd Defendant
LYNWIN LIMITED 3^rd Defendant
RESMART LIMITED 4^th Defendant

________________________
STATEMENT OF CLAIM
________________________

Dated this 9^th day of August 2019

Filed this 27^th day of August 2019

Securities and Futures Commission
The Plaintiff
35^th Floor, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Tel: 2231 1222   Fax: 2521 7884
Ref: 122/LG/1000/0045

HCA 2512/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2512 of 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry
on a securities and/or futures trading business known as
SHEPHERDS HILL PARTNERS, HONG KONG
and using the website www.shepherdshillhk.com 1^st Defendant
FIELDMARK CORPORATION LIMITED 2^nd Defendant
DH CORPORATION LIMITED 3^rd Defendant

________________________
STATEMENT OF CLAIM
________________________

1.  At all material times:

1.1.  The Plaintiff is a statutory body whose regulatory objectives in section 4 of the Securities and Futures Ordinance Cap 571 (the “SFO”) include “(d) to minimize crime and misconduct in the securities and futures industry” and “(c) to provide protection for members of the public investing in or holding financial products”. The functions and powers of the Plaintiff in section 5(1) of the SFO include “(a) to take such steps as it considers appropriate to maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry”, “(g) to maintain and promote confidence in the securities and futures industry in such manner it considers appropriate…”, “(l) to secure an appropriate degree of protection for members of the public investing in or holding financial products…” and “(n) to suppress illegal, dishonourable and improper practices in the securities and futures industry”. In performing its functions, section 6(1) of the SFO imposes a duty on the Plaintiff to act in a way which is compatible with its regulatory objectives and which it considers most appropriate for the purpose of meeting those objectives.

1.2.  The 1^st Defendant is a person or persons purporting to carry on a securities and/or futures trading business known as SHEPHERDS HILL PARTNERS, HONG KONG and using the website www.shepherdshillhk.com (“Website”). The 1^st Defendant is not a company registered with the Hong Kong Companies Registry and does not hold any Business Registration certificate to carry on any business in Hong Kong, nor has it been registered or granted any license by the Plaintiff to carry on any activity regulated by the Plaintiff under and in accordance with the SFO.

1.3.  The 2^nd Defendant was and is a company incorporated in Hong Kong on 11 December 2013. Its sole director and shareholder is a Mr. David Hunt (“Hunt”), holder of a UK passport. The UK address of Hunt given in the filings with the Companies Registry does not appear to be his residential address, because the stated address is occupied by a pub. The 2^nd Defendant was and is the holder of the bank account number 10698198 (“Fieldmark Account”) at China Construction Bank (Asia) Corporation Limited (“CCB Bank”).

1.4.  The 3^rd Defendant was and is a company incorporated in Hong Kong on 23 September 2013. Its sole director and founder is Hunt. The 3^rd Defendant was and is the holder of bank account number 848-528121-838 (“DH Account”) at the Hongkong and Shanghai Banking Corporation Limited (“HSBC”).

THE 1^ST DEFENDANT

2.  The 1^st Defendant operated the Website. The Website included the following contents:

2.1.  On the homepage of the Website, the following passages appeared:

“Welcome to Shepherds Hill Partners, Hong Kong

Shepherds Hill Partners is involved with a large group of Worldwide Institutional Investor Companies located in Japan and around the World. These companies are Institutional Commercial Companies and most ARE NOT involved in Retail Brokering to the public and therefore do NOT have websites.

Please be advised that our website is NOT designed to be a Retail Broker site. We are not in competition with any Broker Dealer. Our site is designed to give basic market knowledge only. Special detailed information about the market and the trades we offer will be given on an individual basis.

This year we have initiated a “Special Project”, starting a “Retail” Division by Invitation ONLY!

This “special project” will have only 10 Brokers, each having a maximum of 10 new clients or a total of 100 clients. Our brokers will work one on one with each new client to “jump start” their financial portfolios utilizing our institutional “clout”.

Our marketing arm has researched and is sending out invitations to certain qualified individuals for the opportunity to join with us in a special “insider” retail program. We have appointed one of our Directors Mr. M. Anderson to oversee and coordinate the project with a team of qualified Advisers.

We understand that for our new retail clients, the thought of sending hard earned cash overseas might be concerning especially if it is for the first time, however our advisers are trained in fully educating clients in all the risks verses rewards.

Shepherds Hill Partners offers a guarantee to all first time retail clients. If for some reason in an initial options trade the market moves against us the company will “roll” the option period over or switch the commodity if need be. Thus, decreasing the risk by extending of (doubling) the option period and increasing the profit potential significantly.”

2.2.  Under the “Services” tab of the Website, it stated that the services provided by the 1^st defendant were offshore services, options, stocks and equities, equity markets, private placements and a private placement program.

2.3.  Under the page titled “Offshore Services” of the Website, it stated that:

“As an international company, Shepherd Hill Partners, Ltd has many clients across the globes who take advantage of the various opportunities offered by investing “offshore”.”

2.4.  Under the page titled “Equity Markets” of the Website, it stated that:

“Our group is dedicated to excellence in the equity related securities markets. We create exceptional value in support of our clients’ business goals, evidenced in the execution of our training and distribution strategies and by our delivery of a wide range of equity related products.

We draw on the considerable resources of Shepherds Hill Partners in Capital Markets, Block Trading, Options/ Derivatives and Convertible Bonds. Our substantial institutional block trading practice provides timely and efficient execution. Relationship management teams ensure that our clients have access to both our domestic and international product lines.”

2.5.  The words “Financial One Platform Executive office, Central, Hong Kong” are found below the name of the 1^st Defendant at the top of each page of the Website.

3.  On various dates in 2014, the 1^st Defendant has, whether by himself / herself / themselves, or his / her / their servants, employees, or agents, invited and solicited a number of persons including, inter alia, Mr. ███ (“███”), a New Zealand resident, and Mr. ███ (“██”), an Australian resident, to invest in securities and/or futures contracts by transferring funds for that purpose to the Fieldmark Account and the DH Account:

██

3.1.  ██ received an unsolicited telephone call from someone who claimed to work for the 1^st Defendant promoting investment opportunities, core trades and market histories etc. ██ was told that the phone number of the 1^st Defendant was +852 3051 8264.

3.2.  On 15 April 2014, [   invested in 3 June Call Unleaded Gasoline Options through the 1^st Defendant and apparently sold them on 1 May 2014 for US$11,000. He was then further asked to invest in 50 July Call Crude Oil Options to be sold by 12 May 2014 with US$10,000 to be paid by 7 May 2014. ██ claimed that the total cost of his investment was US$3,150. ██ remitted these funds to the DH Account.

██

3.3.  ██ received a telephone call from someone at the 1^st Defendant during which ██ was invited to invest in gasoline options.

3.4.  On 16 May 2014, ██ invested in US$15,000 CLN14 Crude Oil Call Options through the 1^st Defendant and was told that the total cost of his investment was US$20,000. ██ remitted these funds to the Fieldmark Account.

4.  Neither the 1^st Defendant, nor any of the persons purportedly working for the 1^st Defendant above were at all material times licensed by the Plaintiff to carry on any regulated activity as defined in the SFO.

5.  The purported address of the 1^st Defendant as stated in the Website, namely, Financial One Platform Executive office, Central, Hong Kong, is fictitious. Personnel of the Plaintiff tried to contact the 1^st Defendant in May 2014 by calling the phone number of +852 3051 8264 as pleaded at paragraph 3.1 above. However, nobody answered the call.

6.  The Plaintiff has been unable to find any physical trace of the 1^st Defendant or its employees within Hong Kong.

7.  In the premises:

7.1.  The 1^st Defendant has contravened section 109(1) of the SFO by issuing an advertisement in which to its knowledge the 1^st Defendant held itself out as being prepared to carry on the activities of advising on securities and/or advising on futures contracts and/or advising on corporate finance and/or asset management, which are regulated activities under the SFO, when the 1^st Defendant is not licensed or registered for such regulated activities as required by the SFO.

7.2.  The 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business, inter alia, of dealing in securities and/or futures contracts, which are regulated activities under the SFO, when the 1^st Defendant is not licensed, registered or authorized for such regulated activities.

7.3.  Further or in the alternative, the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts by:-

(a)  employing a device, scheme or artifice with intent to defraud or deceive; and/or

(b)  engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

Particulars of fraudulent or deceptive device, scheme, artifice,

act, practice or course of business

(1)  Cold calling potential investors, purporting to be bona fide investment advisors and dealers while operating from a fictitious address to conduct securities and/or futures trading business.

(2)  Persuading potential investors to invest in various securities and/or futures contracts with the implied representation, which was untrue, that the securities and/or futures contracts would be executed honestly and in accordance with trade custom, failing which their money would be returned.

(3)  Inducing potential investors to make payments into the Fieldmark Account and/or the DH Account to fund the purported purchases of securities and/or futures contracts which there was no intention to execute or deliver.

7.4.  The 1^st Defendant is consequently a person within section 213(1)(a)(i)(A) and section 213(2)(b) of the SFO and the court thereby has jurisdiction to make an order requiring it to take such steps as the court may direct, including steps to restore investors to any transaction entered into as a result of the 1^st Defendant’s conduct to the position in which they were before the transaction was entered into. Alternatively, the Plaintiff is entitled to seek payment of damages by the 1^st Defendant pursuant to section 213(8) of the SFO.

7.5.  The Plaintiff is entitled to and seeks an order under section 213(1)(a) or alternatively section 213(1)(b) of the SFO, namely an injunction under section 213(2)(a) to restrain or prohibit the 1^st Defendant from:

(a)  holding itself out as carrying on a business in its name in Hong Kong in relation to the said regulated activities under the SFO, whilst unlicensed and unauthorised;

(b)  issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the Website, in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered;

(c)  continuing to operate any internet websites within its power or control promoting or advertising the carrying out of the prohibited activities under the SFO, including, but not limited to, the Website; and

(d)  in transactions involving securities and/or futures contracts, employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

THE 2^ND DEFENDANT

8.  The Fieldmark Account was opened on 7 February 2014 purportedly for the purposes of the 2^nd Defendant’s business which it claimed to the CCB Bank to be “reproduction (figurine)”. When the Fieldmark Account was frozen by the interim freezing order granted by the Court on 19 December 2014, there was a total of HK$22,501.39, GBP0.23, US$279,721.05 and EUR65,402.11 in the Fieldmark Account. Further, from February to November 2014:

8.1.  There were a total of 138 remittances to the Fieldmark Account by 91 remitters.

8.2.  On the same day or within a few days of the inward remittances, amounts equalling the inward remittances or slightly less, were transferred out of the account by way of interbank fund transfers.

8.3.  According to the 41 remitters (including ██) who responded to enquiries of the Plaintiff:

8.3.1.  The remitters stated that they were induced to deposit funds into the Fieldmark Account for the purpose of investing in various types of securities and/or futures contracts by persons, who claimed to be staff representing the following entities whose businesses were said to involve advising upon and executing securities transactions and/or advising upon and conducting futures trading for its clients: the 1^st Defendant, A.C.A. Group Limited (“ACA”), Advantage Asset Management (“Advantage Asset”), Asian Direct Capital Management (“Asian Direct”), Beijing Global Group (“Beijing Global”), Capital Action Ltd (“Capital Action”), China Development Finance Corporation (“China Development Finance”), China International Capital Holdings (“China International Capital”), Crosswall Capital (“Crosswall”), DFA Management Limited (“DFA”), Global Brokers Asia (“Global Brokers”), KoSin Corporation Limited (“KoSin”), Phoenix Creek Capital (“Phoenix Creek”), Renminbi Yuan Holdings China (“Renminbi Yuan”), Select Securities Limited (“Select”), LSE Acquisitions (“LSE”), Queensway Capital (“Queensway”), Sonora Partners Limited (“Sonora”) and The First Financial Group (“The First Financial”).

8.3.2.  ACA purported to carry on business from 71 Des Voeux Road Central, Hong Kong providing inter alia, investment and IPO trading services.

8.3.3.  Advantage Asset purported to carry on business from Two Exchange Square, 8 Connaught Place, Central, Hong Kong providing, inter alia, futures trading services.

8.3.4.  Asian Direct purported to carry on business from Bank of China Tower, 1 Garden Road, 48^th Floor, Central, K300000 providing investment management and corporate advisory services.

8.3.5.  Beijing Global purported to carry on business from 4 Jianguomenwai, China World Tower 3, Lower Penthouse, Upper Annex, Beijing, 10004, PRC providing inter alia, strategic investment planning.

8.3.6.  Capital Action purported to carry on business from One Island East, 18 Westland Road, Hong Kong providing, inter alia, investment products including commodities futures and options, listed equities on global markets and access to IPOs.

8.3.7.  China Development Finance purported to carry on business from 1 Jianguomenwai, Tower 3, LP, Beijing and claimed to be a broad based financial management consultancy providing financial counselling service.

8.3.8.  China International Capital purported to carry on business from One Corporate Avenue, No. 222 Hubin Road, Shanghai, PRC, 200021 and claimed to be a broad based financial management consultancy providing financial counselling service.

8.3.9.  Crosswall purported to carry on business from The Old Jewry London EC2R 8DD United Kingdom providing wealth management services and trading in commodity futures contracts and options.

8.3.10.  DFA purported to carry on business from 8 Wyndham Street, Central, Hong Kong as a capital management firm providing equity, IPO or corporate trading and asset management services.

8.3.11.  Global Brokers purported to carry on business from Winland International Finance Center Unit F620-22 No. 9 Financial Street Xicheng District Beijing, China and claimed to be a leading global financial services company that has steadily grown to become one of the most respected Asian firms in the field of investment services.

8.3.12.  KoSin purported to carry on business from Two International Finance Centre, 8 Finance Street, Hong Kong providing investment and securities services.

8.3.13.  Phoenix Creek purported to carry on business from Fenchurch Street, London EC4, United Kingdom as an international company providing top quality equity, fixed earnings and balanced investment management services.

8.3.14.  Renminbi Yuan purported to carry on business from 118 Jianguo Road, LP, Chaoyang District, Beijing, PRC, 100022 with an administrative office in Hong Kong and claimed to be a broad based financial management consultancy providing financial counselling service.

8.3.15.  Select purported to carry on business from One International Finance Centre, 21/F - 22/F, 1 Harbour View Street, Central, Hong Kong and claimed to be Hong Kong’s leading investment holding and advisory broker.

8.3.16.  LSE purported to carry on business from Swiss Re Building, 30 St Mary Axe, London EC3A 8BF with a Hong Kong office at Two International Finance Centre, 8 Finance Street, Central, Hong Kong providing investment advisory and share trading services.

8.3.17.  Queensway purported to carry on business from Bayswater, London, W2 3RL, United Kingdom providing commodities trading services.

8.3.18.  Sonora purported to carry on business from Yotsuya Business Garden, 8-37 Sanelyco, Shinjuku-Ku, Tokyo, Japan, 160-0008 focusing on short term limited risk options trading in energies, precious metals, and other commodities.

8.3.19.  The First Financial purported to carry on business from 19 Newgate Street, London EC1A 7HD.

8.3.20.  None of the remitters received any of the securities and/or futures contracts they had agreed to buy nor any monetary returns from their purported investments or otherwise.

8.3.21.  All of the remittances related to purported securities and/or futures contracts transactions and none of the remittances related to reproduction (figurine).

8.3.22.  No trace of any physical presence of the above entities or their staff could be found at the addresses from which they claimed to be carrying on business, nor do any of them appear to have been registered, licensed or authorized to conduct securities and/or futures trading on behalf of clients in the jurisdictions from which they claimed to operate.

8.4.  According to the Plaintiff’s investigation:

8.4.1.  ACA which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.2.  ACA was placed on the investor alerts portal of the International Organization of Securities Commissions (“IOSCO”) on 11 December 2014, which alerted investors that ACA is not authorised to provide investments services in Ireland;

8.4.3.  Advantage Asset which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.4.  Advantage Asset was placed on the investor alerts portal of IOSCO on 16 April 2014, which alerted investors that Advantage Asset is not authorised to provide investments services in Hong Kong;

8.4.5.  Asian Direct which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.6.  Asian Direct was placed on the warning list of the UK Financial Conduct Authority (“FCA”), the conduct regulator for financial services firms and financial markets and on the investor alerts portal of IOSCO on 27 October 2014, which alerted investors that Asian Direct is not authorised to provide investments services in the UK;

8.4.7.  Beijing Global which purported to carry on business in the PRC is not a member of the Securities Association of China (“SAC”), which conducts self-regulation over the securities industry under the supervision of the China Securities Regulatory Commission;

8.4.8.  Capital Action which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.9.  Capital Action was placed on the investor alerts portal of IOSCO on 25 February 2014, which alerted investors that Capital Action is not authorised to provide investments services in Hong Kong;

8.4.10.  China Development Finance which purported to carry on business in the PRC is not a member of SAC;

8.4.11.  China International Capital which purported to carry on business in the PRC is not a member of SAC and has been placed on the unlicensed companies list of the Australian Securities and Investments Commission (“ASIC”) (last updated on 18 June 2018), which alerted investors that China International Capital is not authorized to provide investment services in Australia;

8.4.12.  Crosswall which purported to carry on business in the UK is not authorised by the FCA to offer financial services in the UK;

8.4.13.  DFA which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.14.  DFA has been placed on the unlicensed companies list of ASIC (last updated on 7 September 2017) and the investor alerts portal of IOSCO on 6 May 2015, which alerted investors that DFA is not authorized to provide investment services in Australia;

8.4.15.  Global Brokers which purported to carry on business in the PRC and also purported to have a Hong Kong presence, is not a member of SAC and is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.16.  Global Brokers was placed on the investor alerts portal of IOSCO on 14 January 2014 and 27 February 2014, which alerted investors that Global Brokers is not authorised to provide investments services in Hong Kong and the Netherlands respectively;

8.4.17.  KoSin which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.18.  KoSin was placed on the investor alerts portal of IOSCO on 21 March 2014, which alerted investors that KoSin is not authorised to provide investments services in Hong Kong;

8.4.19.  Phoenix Creek which purported to carry on business in the UK is not authorised by the FCA to offer financial services in the UK;

8.4.20.  Phoenix Creek was placed on the unlicensed companies list of ASIC (last updated on 7 September 2017), which alerted investors that Phoenix Creek is not authorized to provide investment services in Australia;

8.4.21.  Renminbi Yuan which purported to carry on business in the PRC is not a member of SAC and was placed on the investor alerts portal of IOSCO on 31 March 2016, which alerted investors that Renminbi Yuan is not authorised to provide investments services in Hong Kong;

8.4.22.  Select which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.23.  LSE which purported to carry on business in the UK and also purported to have a Hong Kong presence, is not authorised by the FCA to offer financial services in the UK and is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.24.  LSE was placed on the warning list of the FCA on 11 April 2014 and on the investor alerts portal of IOSCO on 20 March 2014, which alerted investors that LSE is not authorised to provide investments services in the UK and Hong Kong respectively;

8.4.25.  Queensway which purported to carry on business in the UK is not authorised by the FCA to offer financial services in the UK;

8.4.26.  Sonora which purported to carry on business in Japan is not registered with the Japanese Financial Services Agency, the financial regulator responsible for overseeing banking, securities and exchange, and insurance sectors in Japan; and

8.4.27.  The First Financial which purported to carry on business in the UK is not authorised by the FCA to offer financial services in the UK.

8.5.  Details of the remittances made by the 41 persons who responded to the Plaintiff’s enquiries are attached to this Statement of Claim as Annexure 1.

THE 3^RD DEFENDANT

9.  The DH Account was opened on 7 October 2013 purportedly for the purposes of the 3^rd Defendant’s business which it claimed to HSBC to be “trading”. The 3^rd Defendant claimed that their sales business was “From China, Vietnam to UK and USA.” The reason for setting up an account in Hong Kong was stated to be “billing account in HK”. The purpose for opening the DH Account was given as business operations and intercompany settlement. The country of source of funds was stated to be United Kingdom, from sale proceeds and from the business owner. The anticipated level of activity was stated to be US$300,000.

10.  When the DH Account was frozen by the interim freezing order granted by the Court on 19 December 2014, there was a total of HK$30,863.95, US$6,235.35, GBP0.98 and EUR0.50 in the DH Account. Further from November 2013 to December 2014:

10.1.  There were a total of 12 remittances to the DH Account by 7 remitters purportedly for investments made through the 1^st Defendant.

10.2.  On or around 30 August 2014, HSBC withdrew funds from the DH Account and transferred the funds to the following accounts (“Segregated Accounts”):

Account Number  Amount

638-903815-001  HK$25,413.00

638-903815-001  HK$5,450.95

638-903815-102  US$6,235.35

638-903815-101  GBP0.98

638-903815-178   EUR0.50.

10.3.  According to the 7 remitters (including ██ and ██) who responded to enquiries from the Plaintiff:

10.3.1.  The remitters stated that they were induced to deposit funds into the DH Account for the purpose of investing in various types of securities and/or futures contracts by persons, who claimed to be staff representing the 1^st Defendant.

10.3.2.  None of the remitters received any of the securities and/or futures contracts they had agreed to buy nor any monetary returns from their purported investments or otherwise.

10.3.3.  Most of the remitters stated that they did not reside in China, Vietnam, UK, and the USA. This is inconsistent with the 3^rd Defendant’s claim that its sales locations were China, Vietnam, UK, and the USA.

10.4.  Paragraphs 4 to 6 are repeated here.

11.  Details of the remittances made by the 7 persons who responded to the Plaintiff’s enquiries are attached to this Statement of Claim as Annexure 2.

12.  The 2^nd and 3^rd Defendants by, inter alia, receiving the funds obtained by the 1^st Defendant in contravention of the SFO, have aided, abetted, or otherwise assisted, counselled, or procured or conspired with the 1^st Defendant in its said contraventions, or alternatively directly or indirectly have been in any way knowingly involved in the 1^st Defendant’s contraventions of sections 109(1) and 114(1)(b) of the SFO.

13.  Further or in the alternative, by reason of the facts pleaded above, the 2^nd and 3^rd Defendants have contravened section 300(1) of the SFO by aiding and abetting or conspiring with the 1^st Defendant and/or persons unknown purporting to operate the securities and/or futures trading businesses known as ACA, Advantage Asset, Asian Direct, Beijing Global, Capital Action, China Development Finance, China International Capital, Crosswall, DFA, Global Brokers, KoSin, Phoenix Creek, Renminbi Yuan, Select, LSE, Queensway, Sonora, The First Financial during 2014, in transactions involving securities and/or futures contracts to:

(a)  employ a device, scheme or artifice with intent to defraud or deceive; and/or

(b)  engage in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

Particulars of fraudulent or deceptive device, scheme, artifice,

act, practice or course of business

(1)  Cold calling potential investors, purporting to be bona fide investment advisors and dealers while operating from fictitious addresses and via unlicensed entities to conduct securities and/or futures trading businesses in the claimed jurisdictions.

(2)  Persuading potential investors to invest in various securities and/or futures contracts transactions with the implied representation, which was untrue, that the securities and/or futures contracts transactions would be executed honestly and in accordance with trade custom, failing which their money would be returned.

(3)  Inducing potential investors to make payments into the Fieldmark Account and the DH Account to fund the purported purchase of securities and/or futures contracts which there was no intention to execute or deliver.

(4)  The 2^nd and 3^rd Defendants aided and abetted or conspired with the said fictitious investment agents to operate the above mentioned device, scheme, artifice, act, practice or course of business by actively permitting their bank accounts to accept funds from the potential investors with no intention that their securities and/or futures contracts transactions would ever be executed and disbursing funds shortly after receipt, thereby converting the said funds for their own use and causing the potential investors to suffer a total loss of their monies so remitted.

14.  In the premises:

14.1.  The 2^nd and 3^rd Defendants are persons within section 213(1)(a)(ii) or (iv) or (v) of the SFO, by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/or by directly or indirectly having been in any way knowingly involved in, or a party to the aforementioned contraventions by the 1^st Defendant, and section 213(2)(b) of the SFO.

14.2.  Further or in the alternative, the 2^nd and 3^rd Defendants are persons within section 213(1)(a)(i)(A) or section 213(1)(a)(ii) or (iv) or (v) of the SFO, by contravening section 300(1) of the SFO by reason of the matters pleaded hereinabove and/or by directly or indirectly having been in any way knowingly involved in, or a party to the contraventions of section 300(1) of the SFO, and section 213(2)(b) of the SFO.

14.3.  The court thereby has jurisdiction to make orders requiring the 2^nd and 3^rd Defendants to take such steps as the court may direct, including steps to restore investors to any transaction entered into as a result of the conduct of the Defendants to the position in which they were before the transaction was entered into. Alternatively, the Plaintiff is entitled to seek payment of damages by the 2^nd and 3^rd Defendants pursuant to section 213(8) of the SFO.

AND THE PLAINTIFF CLAIMS:

(1)  A declaration that the 1^st Defendant is a person within section 213(1)(a)(i)(A) of the SFO, in that the 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business in regulated activities, whilst unlicensed and unauthorised.

(2)  A declaration that the 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 109(1) of the SFO by knowingly issuing an advertisement in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities, whilst unlicensed and unregistered.

(3)  Further or in the alternative to paragraphs 1 and 2 above, a declaration that the 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts, by employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

(4)  A declaration that the 2^nd and 3^rd Defendants are persons within section 213(1)(a)(ii) or (iv) or (v) of the SFO by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/ or by directly or indirectly having been in any way knowingly involved in, or a party to, the aforementioned contraventions by the 1^st Defendant.

(5)  Further or in the alternative to paragraph 4 above, a declaration that the 2^nd and 3^rd Defendants are persons within section 213(1)(a)(i)(A) or section 213(1)(a)(ii) or (iv) or (v) of the SFO, in that the 2^nd and 3^rd Defendants have contravened section 300(1) of the SFO and/or have directly or indirectly been in any way knowingly involved in, or a party to the contraventions of section 300(1) of the SFO.

(6)  Further or in the alternative, declarations that the Defendants are persons within section 213(2)(b) of the SFO in that they have been, or it appears that they have been, knowingly involved in the contraventions of sections 213(1)(a) aforesaid.

(7)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever from holding itself out as carrying on a business under the name of Shepherds Hill in Hong Kong in relation to the regulated activities under the SFO, whilst unlicensed and unauthorised, contrary to section 114(1)(b) of the SFO.

(8)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever from issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the website www.shepherdshillhk.com, in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered, contrary to section 109(1) of the SFO.

(9)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever in transactions involving securities and/or futures contracts, employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

(10)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an order as the Court considers appropriate under section 213(2)(f) or section 213(2)(g) of the SFO directing the 1^st Defendant to suspend all internet websites within its power or control promoting or advertising the carrying out of the regulated activities under the SFO, including, but not limited to, the website with the address www.shepherdshillhk.com.

(11)  An order pursuant to section 213(2)(b) of the SFO, requiring the Defendants to take such steps as the Court may direct, including steps to restore investors to any transaction entered into as a result of the conduct of the Defendants to the position in which they were before the transactions were entered into, to the extent possible.

(12)  An order pursuant to section 213(2)(d) of the SFO, that a proper person be appointed to recover, receive and administer the 1^st Defendant’s assets in Hong Kong and/or to recover, receive and administer the money frozen by the injunctions in the Fieldmark Account, the DH Account, and the Segregated Accounts, or such other sum as appears to the Court to be just, and interest thereon and for that purpose all necessary and proper directions may be given, including orders to return the remittances (or a proportion thereof) received from all such persons as may have been induced to purportedly participate in the 1^st Defendant’s unlawful securities and/or futures trading business and/or the fraudulent or deceptive conduct by the Defendants.

(13)  Further, or in the alternative to claim (12) above, an order pursuant to section 213(8) of the SFO requiring the Defendants to pay damages (which may include interest whether pursuant to section 48 of the High Court Ordinance (Cap. 4) or otherwise) to investors who had paid money into the Fieldmark Account and the DH Account, as a result of the Defendants’ conduct referred to above.

(14)  Further and other directions or orders as this Honourable Court thinks fit.

(15)  Costs.

Dated the 9^th day of August 2019

Securities and Futures Commission

The Plaintiff

HCA 2512/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2512 of 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry
on a securities and/or futures
trading business known as
SHEPHERDS HILL PARTNERS, HONG KONG
and using the website
www.shepherdshillhk.com 1^st Defendant
FIELDMARK CORPORATION LIMITED 2^nd Defendant
DH CORPORATION LIMITED 3^rd Defendant

________________________
STATEMENT OF CLAIM
________________________

Dated this 9^th day of August 2019

Filed this 27^th day of August 2019

Securities and Futures Commission
The Plaintiff
35^th Floor, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Tel: 2231 1222   Fax: 2521 7884
Ref: 122/LG/1000/0045

HCA 2513/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2513 of 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry
on a securities and/or futures trading business known as
RICH FUTURES (HK) LIMITED
and using the website www.richfutureshk.com 1^st Defendant
SMD PARTNERSHIP LIMITED 2^nd Defendant

________________________
STATEMENT OF CLAIM
________________________

1.  At all material times:

1.1.  The Plaintiff is a statutory body whose regulatory objectives in section 4 of the Securities and Futures Ordinance Cap 571 (the “SFO”) include “(d) to minimize crime and misconduct in the securities and futures industry” and “(c) to provide protection for members of the public investing in or holding financial products”. The functions and powers of the Plaintiff in section 5(1) of the SFO include “(a) to take such steps as it considers appropriate to maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry”, “(g) to maintain and promote confidence in the securities and futures industry in such manner it considers appropriate…”, “(l) to secure an appropriate degree of protection for members of the public investing in or holding financial products…” and “(n) to suppress illegal, dishonourable and improper practices in the securities and futures industry”. In performing its functions, section 6(1) of the SFO imposes a duty on the Plaintiff to act in a way which is compatible with its regulatory objectives and which it considers most appropriate for the purpose of meeting those objectives.

1.2.  The 1^st Defendant is a person or persons purporting to carry on a securities and/or futures trading business known as RICH FUTURES (HK) LIMITED and using the website www.richfutureshk.com (“Website”). The 1^st Defendant is not a company registered with the Hong Kong Companies Registry and does not hold any Business Registration certificate to carry on any business in Hong Kong, nor has it been registered or granted any license by the Plaintiff to carry on any activity regulated by the Plaintiff under and in accordance with the SFO.

1.3.  The 2^nd Defendant was and is a company incorporated in Hong Kong on 8 April 2014, which has claimed to engage in furniture trading and decorative furnishings with its principal place of business in Hong Kong. Its sole director and shareholder is a Mr. Steven Drake, holder of a UK passport. The address of Mr. Drake given in the filings with the Companies Registry appears to be fictitious, because the stated address does not comprise residential premises and does not match the given UK postcode. The 2^nd Defendant was and is the holder of the following accounts (“SPL Accounts”) at Industrial and Commercial Bank of China (Asia) Limited (“ICBC Bank”):-

1.3.1.  HKD current account number 701-502-03345-0;

1.3.2.  MCY (multi-currency) statement savings account number 701-530-02666-2 (“the MCY Account”); and

1.3.3.  CNY current account number 701-560-00414-6.

THE 1^ST DEFENDANT

2.  The 1^st Defendant operated the Website. The Website included the following contents:

2.1.  On the homepage of the Website, the following passages appeared:

“Welcome to Rich Futures HK, we offer a wide variety of services enabling our clients to make the most out of potential profit making opportunities…”

“Rich Futures HK is dedicated to making the client profitable. We have a variety of services that suit all types of clients, ranging from low-risk and large outcome to hedge funds. We strive to give you what you want.”

2.2.  Under the page titled “Managed Futures” of the Website, it stated:

“Managed futures is an industry made up of specialized money managers known as commodity trading advisors (CTAs). These CTAs direct client assets using global futures markets as an investment medium. Trading advisors take positions based on expected profit potential. For over twenty years investment management professionals have been using managed futures...

… A Rich Futures Managed Futures Specialist can help you decide what is best for you taking into consideration your investment goals and financial future.

We hope we have given you a better understanding of managed futures and everything they have to offer. To find out about our exemplary CTAs, please fill out our application form and one of our specialists will call you and discuss a proper strategy based on your portfolio. Be confident that our CTAs have been chosen based on their esteemed reputation, money management and trading methods. We are excited to start working with you.”

2.3.  Under the page titled “Investment Criteria” of the Website, it stated:

“Our principals have a long history of investment in sectors including business services, financial services, consumer / retails, food / restaurants, healthcare, manufacturing and media. We have a particular focus and expertise in investments in companies that are well positioned to capitalize on the fast growing markets in the world”

2.4.  Under the page titled “Open an Account” of the Website, it included a link to download a form, where people are invited to fill in, inter alia, the following information in a two-page document:

Page 2

“7.  What type of account are you opening? (Must check one)

□  Speculative account  □  Hedge account

8a.  Do you intend to trade security futures products (“SFP”)?

□  Yes  □  No

  If yes, what are you investment objective / risk tolerance?

…

12.  Do you intend to trade commodity futures products?

□  Yes  □   No

…

15.  What type of account are you interested in ?

□  Execution only  □  Advisory  □  Fully Managed.

16.  What best describes your investment style?

□  Conservative  □  Cautious

□  Aggressive  □  Unpredictable

17.  How much do you intend on funding your account for?”

2.5.  Under the page titled “Account Options” of the Website, it stated:

“Rich Futures offers a diverse amount of trading accounts at discounted and competitive rates. Clients may choose from a series of different account types, or our online system can adapt to meet your needs for a personalized account.

…

2.6.  At the bottom of each page of the Website, a fictitious address, namely International Financial Centre #8, Financial Street Central Hong Kong was given; a telephone number +852 819-90519 with Hong Kong area code was also given. The phrase “Rich (HK) Limited 富有(香港)有限公司 CR No.: 1875506” appeared at the bottom of each page.

3.  On various dates in 2014, the 1^st Defendant has, whether by himself / herself / themselves, or his / her / their servants, employees, or agents, invited and solicited a number of persons including, inter alia, Mr ████ (“███”) to invest in securities and/or futures contracts by transferring funds for that purpose to the SPL Accounts:

3.1.  In June/July 2014, ███ received an unsolicited telephone call from someone who claimed to work for the 1^st Defendant promoting investments. He was led to believe that the 2^nd Defendant was a clearing house (i.e. an agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades and collecting and maintaining margin monies etc.).

3.2.  There was then e-mail correspondence between various representatives of the 1^st Defendant and ███ regarding the opening of an account with the 1^st Defendant. On 3 July 2014, ██ sent his signed account opening application form dated 2 July 2014 to the 1^st Defendant by e-mail.

3.3.  On 3 July 2014, ███ was also asked by the 1^st Defendant’s staff to transfer US$10,000 into the MCY Account. On that day, he was sent an invoice for the purchase of a Buy 10 Call Options “CLG14-August” at US$1,000 each and US$10,000 in total. The expiry date was 29 July 2014 and the relevant commodities product was stated to be Crude Oil WTI.

3.4.  On 4 July 2014, ███ attempted to transfer US$10,000 from Australia to the MCY Account. However, the swift code provided by the 1^st Defendant was wrong and the funds did not in fact reach the MCY Account that day but rather on 11 July 2014 after the correct swift code had been used. ███ was informed by the 1^st Defendant’s staff by e-mail on 11 July 2014 that he was allocated an extra 1 option at no charge to compensate him for the mix up and that he was now holding an 11 option position.

3.5.  Subsequently, the 1^st Defendant’s staff suggested to ████ that since the price of oil was dipping, he should move to another option where he could profit in a big way. On 21 July 2014, the 1^st Defendant’s staff sent an e-mail to ███ stating that the 1^st Defendant had already entered into 30 options of palladium (without his knowledge, consent or authorization) and that his payment was required.

3.6.  ███’s suspicions of the legitimacy of the 1^st Defendant’s operations were thereby aroused. Despite constant pressing from the 1^st Defendant, he deposited no further funds into the SPL Accounts.

4.  Neither the 1^st Defendant, nor any of the persons purportedly working for the 1^st Defendant above were at all material times licensed by the Plaintiff to carry on any regulated activity as defined in the SFO.

5.  Personnel of the Plaintiff tried to contact the 1^st Defendant in September and November 2014, by visiting the International Finance Centre located at 8 Finance Street (there is no Financial Street in Hong Kong) and calling the telephone number as given in paragraph 2.6 above. However there was no sign of any business called Rich Futures, Rich Futures Limited, Rich Futures (HK) Limited or Rich (HK) Limited at the International Finance Centre and the telephone calls were not answered. Subsequent enquiries by the Plaintiff revealed that:

5.1.  A company by the name of Rich (HK) Limited was incorporated in Hong Kong on 15 March 2013 and that its registration number is 1875506. Enquiries with the directors of Rich (HK) Limited indicated that the 1^st Defendant has no connection with Rich (HK) Limited.

5.2.  The Hong Kong telephone number in the Website was reserved and directed to an untraceable Skype service.

6.  The Plaintiff has been unable to find any physical trace of the 1^st Defendant or its employees within Hong Kong.

7.  In the premises:

7.1.  The 1^st Defendant has contravened section 109(1) of the SFO by issuing an advertisement in which to its knowledge the 1^st Defendant held itself out as being prepared to carry on the activities of advising on securities and/or advising on futures contracts and/or advising on corporate finance and/or asset management, which are regulated activities under the SFO, when the 1^st Defendant is not licensed or registered for such regulated activities as required by the SFO.

7.2.  The 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business, inter alia, of dealing in securities and/or futures contracts, which are regulated activities under the SFO, when the 1^st Defendant is not licensed, registered or authorized for such regulated activities.

7.3.  Further or in the alternative, the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts by:-

(a)  employing a device, scheme or artifice with intent to defraud or deceive; and/or

(b)  engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

Particulars of fraudulent or deceptive device, scheme, artifice,

act, practice or course of business

(1)  Cold calling potential investors, purporting to be bona fide investment advisors and dealers while operating from a fictitious address to conduct securities and/or futures trading business.

(2)  Persuading potential investors to invest in various securities and/or futures contracts with the implied representation, which was untrue, that the securities and/or futures contracts would be executed honestly and in accordance with trade custom, failing which their money would be returned.

(3)  Inducing potential investors to make payments into the SPL Accounts to fund the purported purchase of securities and/or futures contracts which there was no intention to execute or deliver.

7.4.  The 1^st Defendant is consequently a person within section 213(1)(a)(i)(A) and section 213(2)(b) of the SFO and the court thereby has jurisdiction to make an order requiring it to take such steps as the court may direct, including steps to restore investors to any transaction entered into as a result of the 1^st Defendant’s conduct to the position in which they were before the transaction was entered into. Alternatively, the Plaintiff is entitled to seek payment of damages by the 1^st Defendant pursuant to section 213(8) of the SFO.

7.5.  The Plaintiff is therefore entitled to and seeks an order under section 213(1)(a) or alternatively section 213(1)(b) of the SFO, namely an injunction under section 213(2)(a) to restrain or prohibit the 1^st Defendant from:

(a) holding itself out as carrying on a business in its name in Hong Kong in relation to the said regulated activities under the SFO, whilst unlicensed and unauthorized;

(b) issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the Website, in which the 1st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered;

(c) continuing to operate any internet websites within its power or control promoting or advertising the carrying out of the prohibited activities under the SFO, including, but not limited to, the Website; and

(d) in transactions involving securities and/or futures contracts, employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

THE 2^ND DEFENDANT

8.  The SPL Accounts were opened on 30 April 2014 purportedly for the purposes of the 2^nd Defendant’s business which it claimed to the ICBC Bank to be furniture trading and decorative furnishings. When the SPL Accounts were frozen by the interim freezing order granted by the Court on 19 December 2014, there were a total of HK$22,427.71 and US$103,047.68 in the SPL Accounts. The only transaction in the SPL Accounts before July 2014 was a cash deposit of HK$5,000 on 26 June 2014. In July and August 2014:

8.1.  A total of US$979,127.52 (subject to deduction of bank charges) was remitted into the MCY Account in 43 remittances by 25 remitters.

8.2.  A large portion of the monies deposited into the SPL Accounts was transferred away from the SPL Accounts within one or two working days.

8.3.  According to the 10 remitters (including ███) who responded to enquiries of the Plaintiff:

8.3.1.  The remitters stated that they were induced to deposit funds into the SPL Accounts for the purpose of investing in various types of securities and/or futures contracts by persons, who claimed to be staff representing the following entities whose businesses were said to involve advising upon and executing securities transactions and/or advising upon and conducting futures trading for its clients - the 1^st Defendant, Carter Jones Capital (“Carter Jones”), DFA Management Limited (“DFA”), Phoenix Creek Capital (“Phoenix Creek”) and Queensway Capital (“Queensway”).

8.3.2.  Carter Jones purported to carry on a business from 1140 Avenue of the Americas, New York 10036, U.S.A. of providing short term limited risk options trading in energies, precious metals and other commodities.

8.3.3.  DFA purported to carry on business from 8 Wyndham Street, Central, Hong Kong as a capital management firm providing equity, IPO or corporate trading and asset management services.

8.3.4.  Phoenix Creek purported to carry on business from Fenchurch Street, London EC4, United Kingdom as an international company providing top quality equity, fixed earnings and balanced investment management services.

8.3.5.  Queensway purported to carry on business from Bayswater, London, W23RL, United Kingdom offering share trading services and providing short term limited risk options trading in energies, precious metals and other commodities.

8.3.6.  None of the remitters received any of the securities and/or futures contracts they had agreed to buy nor any monetary returns from their purported investments or otherwise.

8.3.7.  All of the remittances related to purported securities and/or futures contracts transactions and none of the remittances related to furniture trading or decorative furnishings.

8.3.8.  None of the remitters stated that they resided in Hong Kong. This is inconsistent with the 2^nd Defendant’s claim that its principal place of business was in Hong Kong.

8.3.9.  No trace of any physical presence of the above entities or their staff could be found at the addresses from which they claimed to be carrying on business nor do any of them appear to have been registered, licensed or authorized to conduct securities and/or futures trading on behalf of clients in the jurisdictions from which they claimed to operate.

8.4.  According to the Plaintiff’s investigation:

8.4.1.  Carter Jones which purported to carry on business in the USA is not licensed or registered with the USA Financial Regulatory Industry Authority, Inc. (“FINRA”), which regulates trading in equities, corporate bonds, securities futures, and options in the USA;

8.4.2.  Carter Jones has been placed on the unlicensed companies list of the Australian Securities and Investments Commission (“ASIC”) (last updated on 11 October 2017) and the investor alerts portal of the International Organization of Securities Commissions (“IOSCO”) on 16 December 2014, which alerted investors that Carter Jones is not authorized to provide investment services in Australia;

8.4.3.  DFA which purported to carry on business in Hong Kong is not licensed or registered with the Plaintiff to carry on business in regulated activities in Hong Kong;

8.4.4.  DFA has been placed on the unlicensed companies list of ASIC (last updated on 7 September 2017) and the investor alerts portal of IOSCO on 6 May 2015, which alerted investors that DFA is not authorized to provide investment services in Australia;

8.4.5.  Phoenix Creek which purported to carry on business in the UK is not authorised by the UK Financial Conduct Authority (“FCA”), the conduct regulator for financial services firms and financial markets, to offer financial services in the UK;

8.4.6.  Phoenix Creek has been placed on the unlicensed companies list of ASIC (last updated on 7 September 2017), which alerted investors that Phoenix Creek is not authorized to provide investment services in Australia; and

8.4.7.  Queensway which purported to carry on business in the UK is not authorised by the FCA to offer financial services in the UK.

8.5.  Details of the remittances made by the 10 persons who responded to the Plaintiff’s enquiries are attached to this Statement of Claim as Annexure 1.

9.  The 2^nd Defendant by, inter alia, receiving the funds obtained by the 1^st Defendant in contravention of the SFO, has aided, abetted, or otherwise assisted, counselled, or procured or conspired with the 1^st Defendant in its said contraventions, or alternatively directly or indirectly has been in any way knowingly involved in the 1^st Defendant’s contraventions of sections 109(1) and 114(1)(b) of the SFO.

10.  Further or in the alternative, by reason of the facts pleaded above, the 2^nd Defendant has contravened section 300(1) of the SFO by aiding and abetting or conspiring with the 1^st Defendant and/or persons unknown purporting to operate the securities and/or futures trading businesses known as Carter Jones, DFA, Phoenix Creek and/or Queensway during 2014, in transactions involving securities and/or futures contracts to:

10.1.  employ a device, scheme or artifice with intent to defraud or deceive; and/or;

10.2.  engage in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

Particulars of fraudulent or deceptive device, scheme, artifice,

act, practice or course of business

(1)  Cold calling potential investors, purporting to be bona fide investment advisors and dealers while operating from fictitious addresses and via unlicensed entities to conduct securities and/or futures trading businesses in the claimed jurisdictions.

(2)  Persuading potential investors to invest in various securities and/or futures contracts transactions with the implied representation, which was untrue, that the securities and/or futures contracts transactions would be executed honestly and in accordance with trade custom, failing which their money would be returned.

(3)  Inducing potential investors to make payments into the SPL Accounts to fund the purported purchase of securities and/or futures contracts which there was no intention to execute or deliver.

(4)  The 2^nd Defendant aided and abetted or conspired with the said fictitious investment agents to operate the above mentioned device, scheme, artifice, act, practice or course of business by actively permitting its bank accounts to accept funds from the potential investors with no intention that their securities and/or futures contracts transactions would ever be executed and disbursing funds shortly after receipt, thereby converting the said funds for its own use and causing the potential investors to suffer a total loss of their monies so remitted.

11.  In the premises:

11.1.  The 2^nd Defendant is a person within section 213(1)(a)(ii) or (iv) or (v) of the SFO, by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/or by directly or indirectly having been in any way knowingly involved in, or a party to the aforementioned contraventions by the 1^st Defendant, and section 213(2)(b) of the SFO.

11.2.  Further or in the alternative, the 2^nd Defendant is a person within section 213(1)(a)(i)(A) or section 213(1)(a)(ii) or (iv) or (v) of the SFO, by contravening section 300(1) of the SFO by reason of the matters pleaded hereinabove and/or by directly or indirectly having been in any way knowingly involved in, or a party to the contraventions of section 300(1) of the SFO, and section 213(2)(b) of the SFO.

11.3.  The court thereby has jurisdiction to make orders requiring the 2^nd Defendant to take such steps as the court may direct, including steps to restore investors to any transaction entered into as a result of the conduct of the Defendants to the position in which they were before the transaction was entered into. Alternatively, the Plaintiff is entitled to seek payment of damages by the 2^nd Defendant pursuant to section 213(8) of the SFO.

AND THE PLAINTIFF CLAIMS:

(1)  A declaration that the 1^st Defendant is a person within section 213(1)(a)(i)(A) of the SFO, in that the 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business in regulated activities, whilst unlicensed and unauthorised.

(2)  A declaration that the 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 109(1) of the SFO by knowingly issuing an advertisement in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities, whilst unlicensed and unregistered.

(3)  Further or in the alternative to paragraphs 1 and 2 above, a declaration that the 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts, by employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

(4)  A declaration that the 2^nd Defendant is a person within section 213(1)(a)(ii) or (iv) or (v) of the SFO by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/ or by directly or indirectly having been in any way knowingly involved in, or a party to, the aforementioned contraventions by the 1^st Defendant.

(5)  Further or in the alternative to paragraph 4 above, a declaration that the 2^nd Defendant is a person within section 213(1)(a)(i)(A) or section 213(1)(a)(ii) or (iv) or (v) of the SFO, in that the 2^nd Defendant has contravened section 300(1) of the SFO and/or has directly or indirectly been in any way knowingly involved in, or a party to the contraventions of section 300(1) of the SFO.

(6)  Further or in the alternative, declarations that the 1^st and 2^nd Defendants are persons within section 213(2)(b) of the SFO in that they have been, or it appears that they have been, knowingly, involved in the contraventions of sections 213(1)(a) aforesaid.

(7)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever from holding itself out as carrying on a business under the name of Rich Futures in Hong Kong in relation to the regulated activities under the SFO, whilst unlicensed and unauthorised, contrary to section 114(1)(b) of the SFO.

(8)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever from issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the website www.richfutureshk.com, in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered, contrary to section 109(1) of the SFO.

(9)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an injunction as the Court considers appropriate under section 213(2)(a) of the SFO, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever in transactions involving securities and/or futures contracts, by employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

(10)  Pursuant to section 213(1)(a), and/or section 213(1)(b) of the SFO, an order as the Court considers appropriate under section 213(2)(f) or section 213(2)(g) of the SFO directing the 1^st Defendant to suspend all internet websites within its power or control promoting or advertising the carrying out of the regulated activities under the SFO, including, but not limited to, the website with the address www.richfutureshk.com.

(11)  An order pursuant to section 213(2)(b) of the SFO, requiring the 1^st and/or 2^nd Defendants to take such steps as the Court may direct, including steps to restore investors to any transaction entered into as a result of the conduct of the Defendants to the position in which they were before the transactions were entered into, to the extent possible.

(12)  An order pursuant to section 213(2)(d) of the SFO, that a proper person be appointed to recover, receive and administer the 1^st Defendant’s assets in Hong Kong and/or to recover, receive and administer the money frozen by the injunctions in the SPL Accounts, or such other sum as appears to the Court to be just, and interest thereon and for that purpose all necessary and proper directions may be given, including orders to return the remittances (or a proportion thereof) received from all such persons as may have been induced to purportedly participate in the 1^st Defendant’s unlawful securities and/or futures trading business and/or the fraudulent or deceptive conduct by the 1^st and 2^nd Defendants.

(13)  Further, or in the alternative to claim (12) above, an order pursuant to section 213(8) of the SFO requiring the 1^st and/or 2^nd Defendants to pay damages (which may include interest whether pursuant to section 48 of the High Court Ordinance (Cap. 4) or otherwise) to investors who had paid money into the SPL Accounts, as a result of the Defendants’ conduct referred to above.

(14)  Further and other directions or orders as this Honourable Court thinks fit.

(15)  Costs.

Dated the 9^th day of August 2019

Securities and Futures Commission

The Plaintiff

HCA 2513/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2513 of 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry
on a securities and/or futures
trading business known as
RICH FUTURES (HK) LIMITED
and using the website
www.richfutureshk.com 1^st Defendant
SMD PARTNERSHIP LIMITED 2^nd Defendant

________________________
STATEMENT OF CLAIM
________________________

Dated this 9^th day of August 2019

Filed this 27^th day of August 2019

Securities and Futures Commission
The Plaintiff
35^th Floor, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
Tel: 2231 1222   Fax: 2521 7884
Ref: 122/LG/1000/0045

HCA 2511/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2511 OF 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry on
a securities and/or futures trading business known as
BROADSPAN SECURITIES and using the website
www.broadspansecurities.com 1^st Defendant
TIMEPRIME LIMITED 2^nd Defendant
LYNWIN LIMITED 3^rd Defendant
RESMART LIMITED 4^th Defendant

________________________

BEFORE DEPUTY HIGH COURT JUDGE MAURELLET, SC IN CHAMBERS

JUDGMENT

________________________

Dated and entered the 12^th day of May 2021

No notice of intention to defend having been given and no defence having been served by the 1^st, 2^nd, 3^rd and 4^th Defendants herein

AND the said Deputy High Court Judge Maurellet, SC having on 12^th May 2021 ordered that Judgment as hereinafter provided be entered for the Plaintiff

IT IS DECLARED THAT:-

1.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the Securities and Futures Ordinance, Cap. 571 (“SFO”), in that the 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business in regulated activities, whilst unlicensed and unauthorised and without reasonable excuse.

2.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 109(1) of the SFO by knowingly issuing an advertisement in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities, whilst unlicensed and unregistered.

3.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts, in employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

4.  The 2^nd, 3^rd and 4^th Defendants are persons within section 213(1)(a)(ii) or section 213(1)(a)(iv) or section 213(1)(a)(v) of the SFO by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/or by directly or indirectly having been in any way knowingly involved in, or a party to, the aforementioned contraventions by the 1^st Defendant.

5.  The 1^st, 2^nd, 3^rd and 4^th Defendants are persons within section 213(2)(b) of the SFO in that they have been involved in the contraventions of section 213(1)(a) as aforesaid, whether knowingly or otherwise.

IT IS HEREBY ORDERED THAT:-

6.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant, whether by itself, its directors, servants, employees, agents or otherwise howsoever from holding itself out as carrying on a business under the name of Broadspan Securities in Hong Kong in relation to the regulated activities under the SFO, whilst unlicensed and unauthorised, contrary to section 114(1)(b) of the SFO.

7.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant, whether by itself, its directors, servants, employees, agents or otherwise howsoever from issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the website www.broadspansecurities.com, in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered, contrary to section 109(1) of the SFO.

8.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever in transactions involving securities and/or futures contracts, in employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception, contrary to section 300(1) of the SFO.

9.  Pursuant to section 213(1)(a), an injunction under section 213(f) or section 213(2)(g) of the SFO is hereby granted against the 1^st Defendant to suspend all internet websites within its power or control promoting or advertising the carrying out of the regulated activities under the SFO, including, but not limited to, the website with the address www.broadspansecurites.com.

10.  Pursuant to section 213(1)(a), an injunction under section 213(2)(c) of the SFO is hereby granted, prohibiting the 2^nd Defendant (save for the purpose of complying with paragraph 13 below), whether by itself, its directors, servants, agents or otherwise howsoever from removing from Hong Kong or in any way disposing of or dealing with or diminishing the value of any money in the following accounts held in the name of the 2^nd Defendant at the Industrial and Commercial Bank of China (Asia) Limited (“ICBC Bank”) of Shop B, Ground Floor, Railway Plaza, 39 Chatham Road South, Tsim Sha Tsui, Kowloon, Hong Kong (“Timeprime Account”):

(a)  HKD current account no. 864-502-01453-6;

(b)  USD current account no. 864-506-00340-4; and

(c)  Multi-currency statement savings account no. 864-530-01077-7.

11.  Pursuant to section 213(1)(a), an injunction under section 213(2)(c) of the SFO is hereby granted, prohibiting the 3^rd Defendant (save for the purpose of complying with paragraph 13), whether by itself, its directors, servants, agents or otherwise howsoever from removing from Hong Kong or in any way disposing of or dealing with or diminishing the value of any money in account number 817-635584-838 including its sub-accounts, held in the name of the 3^rd Defendant at the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) of Ground Floor, 82-84 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong (“Lynwin Account”).

12.  Pursuant to section 213(1)(a), an injunction under section 213(2)(c) of the SFO is hereby granted, prohibiting the 4^th Defendant (save for the purpose of complying with paragraph 13), whether by itself, its directions, servants, agents or otherwise howsoever from removing from Hong Kong or in any way disposing of or dealing with or diminishing the value of any money in account number 817-734981-838 held in the name of the 4^th Defendant at HSBC of Ground Floor, 82-84 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong, including any other HSBC account into which the proceeds thereof have been transferred by HSBC (“Resmart Account”).

13.  Pursuant to section 213(2)(b) of the SFO, with a view to restoring the persons mentioned in the Appendix to this Order (“Victims”), to the extent possible, to the positions in which they were before they made payments to the Timeprime Account, the Lynwin Account and/or the Resmart Account on the 1^st Defendant’s instructions, the 2^nd, 3^rd and 4^th Defendants do pay the Victims the amounts set out in the Appendix to this Order, after giving credit to the actual amounts recovered from the monetary assets in the Timeprime Account, the Lynwin Account and the Resmart Account (“Frozen Monies”) which are returned to the Victims on a pro-rata basis.

14.  Pursuant to section 213(2)(d) of the SFO, Cliff Tsui and Leonard Chan of Ernst & Young Transactions Limited be appointed as administrators (“Administrators”) from the date hereof until further order of the Court for the following purposes:-

(a)  to receive and administer the Frozen Monies;

(b)  to implement and administer the distribution of the Frozen Monies pro rata to the Victims in accordance with paragraph 13 above; and

(c)  to perform all incidental and necessary duties as may be directed by the Court.

15.  Pursuant to section 213(2)(f) and section 213(2)(g) of the SFO, for the purposes of paragraphs 13 and 14 above, ICBC Bank and HSBC shall transfer and pay out all monies respectively held in the Timeprime Account, the Lynwin Account and the Resmart Account forthwith to a designated client account of Ernst & Young Transactions Limited managed by the Administrators referred to in paragraph 14 above.

16.  Pursuant to section 213(2)(f) and section 213(2)(g) of the SFO, the Administrators shall have, inter alia, the powers and duties to take all necessary steps as follows:-

(a)  to receive, hold and administer the Frozen Monies in the designated client account of Ernst & Young Transactions Limited referred to in paragraph 15 above for the purposes identified in paragraphs 14(b) and (c) above, including to exercise, in relation to the Frozen Monies or any part thereof, all such powers, authorities and things as the Administrators would be capable of exercising if they were the absolute beneficial owners of the same and to use the names of the 2^nd, 3^rd and 4^th Defendants as necessary;

(b)  subject to paragraph 18 below, to settle the remuneration, costs and expenses incurred by the Administrators themselves for the purposes of the administration, out of the Frozen Monies;

(c)  to calculate, transmit and make pro rata payments to the Victims in accordance with paragraphs 13 and 14(b) above out of the balance of the Frozen Monies after settling the payments in sub-paragraph (b) above, at such time(s) and in such manner as may be determined by the Administrators as they deem appropriate;

(d)  to correspond with any persons and advertise and make announcements as the Administrators deem fit for the purposes of the administration;

(e)  to do all acts, take all measures and/or execute any documentation in relation to the Frozen Monies as the Administrators see fit;

(f)  to carry out their functions and duties expeditiously and use all reasonable efforts to pay the Victims in accordance with paragraphs 13, 14 and sub-paragraph (c) above within 9 months from the date of this Order and in any event as soon as reasonably practicable;

(g)  to keep proper accounts of all payments received and made pursuant to this Order, report and provide supporting documents to the Plaintiff on the progress of the distribution from time to time and report to the Court and the Plaintiff upon conclusion of payment and distribution of the Frozen Monies pursuant to sub-paragraphs (b) and (c) above;

(h)  with the leave of the Court, to appoint agents to do any business(es) which the Administrators are unable to do themselves in the discharge and exercise of their powers;

(i)  with the leave of the Court, to appoint solicitors (whose fees will be subject to taxation by the Court) to advise on any points of law arising in the course of the administration, subject always to the right of the Plaintiff to be heard by the Administrators in respect of such point of law. Unless the Plaintiff and the Administrators are in agreement on any such legal advice by the Administrators, the Administrators shall refer any dispute as to any point of law to the Court for resolution; and

(j)  to do all other things incidental to the exercise of the foregoing powers.

17.  The balance of the Frozen Monies (if any) remaining in the hands of the Administrators after making payments to the Victims in accordance with paragraphs 13, 14, 16(b) and 16(c) above, including the balance of the Frozen Monies that remain unclaimed after the expiry of 9 months from the date of this Order, shall unless otherwise directed by the Court, forthwith be paid by the Administrators into Court to the credit of these proceedings, subject to further order.

18.  The remuneration of the Administrators for acting as the administrators in this Action, HCA2512/2014 and HCA2513/2014 is not to exceed in aggregate HK$180,000 (inclusive of all out-of-pocket costs and expenses properly incurred by the Administrators in receiving, holding and administering the Frozen Monies) but which does not include the agents and solicitors fees, if appointed, referred to in paragraphs 16(h) and 16(i) above.

19.  The Plaintiff shall provide all reasonable assistance to the Administrators in the performance of the exercise of their powers and duties.

20.  The Plaintiff and the Administrators shall be at liberty to apply for the purpose of carrying out the terms of this Order.

21.  Costs of this action be paid by the Defendants jointly and severally to the Plaintiff, to be taxed if not agreed, with certificate for two counsel.

Registrar

HCA 2511/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2511 OF 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting
to carry on a securities and/or futures
trading business known as BROADSPAN
SECURITIES and using the website
www.broadspansecurities.com 1^st Defendant
TIMEPRIME LIMITED 2^nd Defendant
LYNWIN LIMITED 3^rd Defendant
RESMART LIMITED 4^th Defendant

________________________

J U D G M E N T

________________________

Dated the 12^th day of May 2021

Filed the 18^th day of May 2021

Securities and Futures Commission
54/F, One Island East
18 Westlands Road
Quarry Bay
Hong Kong
Tel: 2231 1123
Fax: 2521 7884
Ref: 122/LG/0500/0045

HCA 2512/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2512 OF 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry on
a securities and/or futures trading business known as
SHEPHERDS HILL PARTNERS, HONG KONG
and using the website www.shepherdshillhk.com 1^st Defendant
FIELDMARK CORPORATION LIMITED
(Company No. 2010793) 2^nd Defendant
DH CORPORATION LIMITED 3^rd Defendant

________________________

BEFORE DEPUTY HIGH COURT JUDGE MAURELLET, SC IN CHAMBERS

JUDGMENT

________________________

Dated and entered the 12^th day of May 2021

No notice of intention to defend having been given and no defence having been served by the 1^st, 2^nd and 3^rd Defendants herein

AND the said Deputy High Court Judge Maurellet, SC having on 12^th May 2021 ordered that Judgment as hereinafter provided be entered for the Plaintiff

IT IS DECLARED THAT:-

1.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the Securities and Futures Ordinance, Cap. 571 (“SFO”), in that the 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business in regulated activities, whilst unlicensed and unauthorised and without reasonable excuse.

2.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 109(1) of the SFO by knowingly issuing an advertisement in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities, whilst unlicensed and unregistered.

3.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts, by employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

4.  The 2^nd and 3^rd Defendants are persons within section 213(1)(a)(ii) or section 213(1)(a)(iv) or section 213(1)(a)(v) of the SFO by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/or by directly or indirectly having been in any way knowingly involved in, or a party to, the aforementioned contraventions by the 1^st Defendant.

5.  The 1^st, 2^nd and 3^rd Defendants are persons within section 213(2)(b) of the SFO in that they have been involved in the contraventions of section 213(1)(a) as aforesaid, whether knowingly or otherwise.

IT IS HEREBY ORDERED THAT:-

6.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant, whether by itself, its directors, servants, employees, agents or otherwise howsoever from holding itself out as carrying on a business under the name of Shepherds Hill in Hong Kong in relation to the regulated activities under the SFO, whilst unlicensed and unauthorised, contrary to section 114(1)(b) of the SFO.

7.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant, whether by itself, its directors, servants, employees, agents or otherwise howsoever from issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the website www.shepherdshillhk.com, in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered, contrary to section 109(1) of the SFO.

8.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever in transactions involving securities and/or futures contracts, in employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception, contrary to section 300(1) of the SFO.

9.  Pursuant to section 213(1)(a), an injunction under section 213(f) or section 213(2)(g) of the SFO is hereby granted against the 1^st Defendant to suspend all internet websites within its power or control promoting or advertising the carrying out of the regulated activities under the SFO, including, but not limited to, the website with the address www.shepherdshillhk.com.

10.  Pursuant to section 213(1)(a), an injunction under section 213(2)(c) of the SFO is hereby granted, prohibiting the 2^nd Defendant (save for the purpose of complying with paragraph 12 below), whether by itself, its directors, servants, agents or otherwise howsoever from removing from Hong Kong or in any way disposing of or dealing with or diminishing the value of any money in account number 10698198, including its sub-accounts, held in the name of the 2^nd Defendant at the Commercial office of the China Construction Bank (Asia) Corporation Limited (“CCB”) at 26/F, CCB Center, 18 Wang Chiu Road, Kowloon Bay, Hong Kong (“Fieldmark Account”).

11.  Pursuant to section 213(1)(a), an injunction under section 213(2)(c) of the SFO is hereby granted, prohibiting the 3^rd Defendant (save for the purpose of complying with paragraph 12), whether by itself, its directions, servants, agents or otherwise howsoever from removing from Hong Kong or in any way disposing of or dealing with or diminishing the value of any money in account number 848-528121-838 held in the name of the 3^rd Defendant at the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) of Hong Kong Office Commercial Service Centre, BL1, 1 Queen’s Road, Central, Hong Kong, including any other HSBC account into which the proceeds thereof have been transferred by HSBC (“DH Account”).

12.  Pursuant to section 213(2)(b) of the SFO, with a view to restoring the persons mentioned in the Appendix to this Order (“Victims”), to the extent possible, to the positions in which they were before they made payments to the Fieldmark Account and the DH Account on the 1^st Defendant’s instructions, the 2^nd and 3^rd Defendants do pay the Victims the amounts set out in the Appendix to this Order, after giving credit to the actual amounts recovered from the monetary assets in the Fieldmark Account and the DH Account (“Frozen Monies”) which are returned to the Victims on a pro-rata basis.

13.  Pursuant to section 213(2)(d) of the SFO, Cliff Tsui and Leonard Chan of Ernst & Young Transactions Limited be appointed as administrators (“Administrators”) from the date hereof until further order of the Court for the following purposes:-

(a)  to receive and administer the Frozen Monies;

(b)  to implement and administer the distribution of the Frozen Monies pro rata to the Victims in accordance with paragraph 12 above; and

(c)  to perform all incidental and necessary duties as may be directed by the Court.

14.  Pursuant to section 213(2)(f) and section 213(2)(g) of the SFO, for the purposes of paragraphs 12 and 14 above, CCB and HSBC shall transfer and pay out all monies respectively held in the Fieldmark Account and the DH Account forthwith to a designated client account of Ernst & Young Transactions Limited managed by the Administrators referred to in paragraph 14 above.

15.  Pursuant to section 213(2)(f) and section 213(2)(g) of the SFO, the Administrators shall have, inter alia, the powers and duties to take all necessary steps as follows:-

(a)  to receive, hold and administer the Frozen Monies in the designated client account of Ernst & Young Transactions Limited referred to in paragraph 14 above for the purposes identified in paragraphs 14(b) and (c) above, including to exercise, in relation to the Frozen Monies or any part thereof, all such powers, authorities and things as the Administrators would be capable of exercising if they were the absolute beneficial owners of the same and to use the names of the 2^nd and 3^rd Defendants as necessary;

(b)  subject to paragraph 17 below, to settle the remuneration, costs and expenses incurred by the Administrators themselves for the purposes of the administration, out of the Frozen Monies;

(c)  to calculate, transmit and make pro rata payments to the Victims in accordance with paragraphs 12 and 14(b) above out of the balance of the Frozen Monies after settling the payments in sub-paragraph (b) above, at such time(s) and in such manner as may be determined by the Administrators as they deem appropriate;

(d)  to correspond with any persons and advertise and make announcements as the Administrators deem fit for the purposes of the administration;

(e)  to do all acts, take all measures and/or execute any documentation in relation to the Frozen Monies as the Administrators see fit;

(f)  to carry out their functions and duties expeditiously and use all reasonable efforts to pay the Victims in accordance with paragraphs 12, 14 and sub-paragraph (c) above within 9 months from the date of this Order and in any event as soon as reasonably practicable;

(g)  to keep proper accounts of all payments received and made pursuant to this Order, report and provide supporting documents to the Plaintiff on the progress of the distribution from time to time and report to the Court and the Plaintiff upon conclusion of payment and distribution of the Frozen Monies pursuant to sub-paragraphs (b) and (c) above;

(h)  with the leave of the Court, to appoint agents to do any business(es) which the Administrators are unable to do themselves in the discharge and exercise of their powers;

(i)  with the leave of the Court, to appoint solicitors (whose fees will be subject to taxation by the Court) to advise on any points of law arising in the course of the administration, subject always to the right of the Plaintiff to be heard by the Administrators in respect of such point of law. Unless the Plaintiff and the Administrators are in agreement on any such legal advice by the Administrators, the Administrators shall refer any dispute as to any point of law to the Court for resolution; and

(j)  to do all other things incidental to the exercise of the foregoing powers.

16.  The balance of the Frozen Monies (if any) remaining in the hands of the Administrators after making payments to the Victims in accordance with paragraphs 12, 14, 16(b) and 16(c) above, including the balance of the Frozen Monies that remain unclaimed after the expiry of 9 months from the date of this Order, shall unless otherwise directed by the Court, forthwith be paid by the Administrators into Court to the credit of these proceedings, subject to further order.

17.  The remuneration of the Administrators for acting as the administrators in this Action, HCA2511/2014 and HCA2513/2014 is not to exceed in aggregate HK$180,000 (inclusive of all out-of-pocket costs and expenses properly incurred by the Administrators in receiving, holding and administering the Frozen Monies) but which does not include the agents and solicitors fees, if appointed, referred to in paragraphs 16(h) and 16(i) above.

18.  The Plaintiff shall provide all reasonable assistance to the Administrators in the performance of the exercise of their powers and duties.

19.  The Plaintiff and the Administrators shall be at liberty to apply for the purpose of carrying out the terms of this Order.

20.  Costs of this action be paid by the Defendants jointly and severally to the Plaintiff, to be taxed if not agreed, with certificate for two counsel.

Registrar

HCA 2512/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2512 OF 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting
to carry on a securities and/or futures
trading business known as SHEPHERDS
HILL PARTNERS, HONG KONG and
using the Website www.shepherdshillhk.com 1^st Defendant
FIELDMARK CORPORATION LIMITED
(Company No. 2010793) 2^nd Defendant
DH CORPORATION LIMITED 3^rd Defendant

________________________

JUDGMENT

________________________

Dated the 12^th day of May 2021

Filed the 18^th day of May 2021

Securities and Futures Commission
54/F, One Island East
18 Westlands Road
Quarry Bay
Hong Kong
Tel: 2231 1123
Fax: 2521 7884
Ref: 122/LG/0500/0045

HCA 2513/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2513 OF 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting to carry
on a futures trading business known as
RICH FUTURES (HK) LIMITED and using the
website www.richfutureshk.com 1^st Defendant
SMD PARTNERSHIP LIMITED 2^nd Defendant

________________________

BEFORE DEPUTY HIGH COURT JUDGE MAURELLET, SC IN CHAMBERS

JUDGMENT

________________________

Dated and entered the 12^th day of May 2021

No notice of intention to defend having been given and no defence having been served by the 1^st and 2^nd Defendants herein

AND the said Deputy High Court Judge Maurellet, SC having on 12^th May 2021 ordered that Judgment as hereinafter provided be entered for the Plaintiff

IT IS DECLARED THAT:-

1.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the Securities and Futures Ordinance, Cap. 571 (“SFO”), in that the 1^st Defendant has contravened section 114(1)(b) of the SFO by holding itself out as carrying on a business in regulated activities, whilst unlicensed and unauthorised and without reasonable excuse.

2.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 109(1) of the SFO by knowingly issuing an advertisement in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities, whilst unlicensed and unregistered.

3.  The 1^st Defendant is a person within the meaning of section 213(1)(a)(i)(A) of the SFO in that the 1^st Defendant has contravened section 300(1) of the SFO in transactions involving securities and/or futures contracts, by employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception.

4.  The 2^nd Defendant is a person within section 213(1)(a)(ii) or section 213(1)(a)(iv) or section 213(1)(a)(v) of the SFO by having aided, abetted or otherwise assisted, counselled or procured or conspired in the aforementioned contraventions by the 1^st Defendant and/or by directly or indirectly having been in any way knowingly involved in, or a party to, the aforementioned contraventions by the 1^st Defendant.

5.  The 1^st and 2^nd Defendants are persons within section 213(2)(b) of the SFO in that they have been involved in the contraventions of section 213(1)(a) as aforesaid, whether knowingly or otherwise.

IT IS HEREBY ORDERED THAT:-

6.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant, whether by itself, its directors, servants, employees, agents or otherwise howsoever from holding itself out as carrying on a business under the name of Rich Futures in Hong Kong in relation to the regulated activities under the SFO, whilst unlicensed and unauthorised, contrary to section 114(1)(b) of the SFO.

7.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant, whether by itself, its directors, servants, employees, agents or otherwise howsoever from issuing, publishing, circulating, distributing or otherwise disseminating an advertisement, including via the website www.richfutureshk.com, in which the 1^st Defendant holds itself out as being prepared to carry on the specified regulated activities under the SFO, whilst unlicensed and unregistered, contrary to section 109(1) of the SFO.

8.  Pursuant to section 213(1)(a), an injunction under section 213(2)(a) of the SFO is hereby granted, restraining or prohibiting the 1^st Defendant whether by itself, its directors, servants, employees, agents or otherwise howsoever in transactions involving securities and/or futures contracts, in employing a device, scheme or artifice with intent to defraud or deceive and/or engaging in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception, contrary to section 300(1) of the SFO.

9.  Pursuant to section 213(1)(a), an injunction under section 213(f) or section 213(2)(g) of the SFO is hereby granted against the 1^st Defendant to suspend all internet websites within its power or control promoting or advertising the carrying out of the regulated activities under the SFO, including, but not limited to, the website with the address www.richfutureshk.com.

10.  Pursuant to section 213(1)(a), an injunction under section 213(2)(c) of the SFO is hereby granted, prohibiting the 2^nd Defendant (save for the purpose of complying with paragraph 12 below), whether by itself, its directors, servants, agents or otherwise howsoever from removing from Hong Kong or in any way disposing of or dealing with or diminishing the value of any money in the following accounts held in the name of the 2^nd Defendant at the Industrial and Commercial Bank of China (Asia) Limited (“ICBC”) of 1^st Floor, 9 Queen’s Road Central, Hong Kong (“SMD Account”):-

(a)  HKD current account no. 701-502-03345-0;

(b)  MCY (multi-currency) statement savings account no. 701-530-02666-2;

(c)  CNY current account no. 701-560-00414-6.

11.  Pursuant to section 213(2)(b) of the SFO, with a view to restoring the persons mentioned in the Appendix to this Order (“Victims”), to the extent possible, to the positions in which they were before they made payments to the SMD Account on the 1^st Defendant’s instructions, the 2^nd Defendant do pay the Victims the amounts set out in the Appendix to this Order, after giving credit to the actual amounts recovered from the monetary assets in the SMD Account (“Frozen Monies”) which are returned to the Victims on a pro-rata basis.

12.  Pursuant to section 213(2)(d) of the SFO, Cliff Tsui and Leonard Chan of Ernst & Young Transactions Limited be appointed as administrators (“Administrators”) from the date hereof until further order of the Court for the following purposes:-

(a)  to receive and administer the Frozen Monies;

(b)  to implement and administer the distribution of the Frozen Monies pro rata to the Victims in accordance with paragraph 12 above; and

(c)  to perform all incidental and necessary duties as may be directed by the Court.

13.  Pursuant to section 213(2)(f) and section 213(2)(g) of the SFO, for the purposes of paragraphs 12 and 14 above, ICBC shall transfer and pay out all monies respectively held in the SMD Account forthwith to a designated client account of Ernst & Young Transactions Limited managed by the Administrators referred to in paragraph 14 above.

14.  Pursuant to section 213(2)(f) and section 213(2)(g) of the SFO, the Administrators shall have, inter alia, the powers and duties to take all necessary steps as follows:-

(a)  to receive, hold and administer the Frozen Monies in the designated client account of Ernst & Young Transactions Limited referred to in paragraph 13 above for the purposes identified in paragraphs 14(b) and (c) above, including to exercise, in relation to the Frozen Monies or any part thereof, all such powers, authorities and things as the Administrators would be capable of exercising if they were the absolute beneficial owners of the same and to use the name of the 2^nd Defendant as necessary;

(b)  subject to paragraph 17 below, to settle the remuneration, costs and expenses incurred by the Administrators themselves for the purposes of the administration, out of the Frozen Monies;

(c)  to calculate, transmit and make pro rata payments to the Victims in accordance with paragraphs 12 and 14(b) above out of the balance of the Frozen Monies after settling the payments in sub-paragraph (b) above, at such time(s) and in such manner as may be determined by the Administrators as they deem appropriate;

(d)  to correspond with any persons and advertise and make announcements as the Administrators deem fit for the purposes of the administration;

(e)  to do all acts, take all measures and/or execute any documentation in relation to the Frozen Monies as the Administrators see fit;

(f)  to carry out their functions and duties expeditiously and use all reasonable efforts to pay the Victims in accordance with paragraphs 12, 14 and sub-paragraph (c) above within 9 months from the date of this Order and in any event as soon as reasonably practicable;

(g)  to keep proper accounts of all payments received and made pursuant to this Order, report and provide supporting documents to the Plaintiff on the progress of the distribution from time to time and report to the Court and the Plaintiff upon conclusion of payment and distribution of the Frozen Monies pursuant to sub-paragraphs (b) and (c) above;

(h)  with the leave of the Court, to appoint agents to do any business(es) which the Administrators are unable to do themselves in the discharge and exercise of their powers;

(i)  with the leave of the Court, to appoint solicitors (whose fees will be subject to taxation by the Court) to advise on any points of law arising in the course of the administration, subject always to the right of the Plaintiff to be heard by the Administrators in respect of such point of law. Unless the Plaintiff and the Administrators are in agreement on any such legal advice by the Administrators, the Administrators shall refer any dispute as to any point of law to the Court for resolution; and

(j)  to do all other things incidental to the exercise of the foregoing powers.

15.  The balance of the Frozen Monies (if any) remaining in the hands of the Administrators after making payments to the Victims in accordance with paragraphs 12, 14, 16(b) and 16(c) above, including the balance of the Frozen Monies that remain unclaimed after the expiry of 9 months from the date of this Order, shall unless otherwise directed by the Court, forthwith be paid by the Administrators into Court to the credit of these proceedings, subject to further order.

16.  The remuneration of the Administrators for acting as the administrators in this Action, HCA2511/2014 and HCA2512/2014 is not to exceed in aggregate HK$180,000 (inclusive of all out-of-pocket costs and expenses properly incurred by the Administrators in receiving, holding and administering the Frozen Monies) but which does not include the agents and solicitors fees, if appointed, referred to in paragraphs 16(h) and 16(i) above.

17.  The Plaintiff shall provide all reasonable assistance to the Administrators in the performance of the exercise of their powers and duties.

18.  The Plaintiff and the Administrators shall be at liberty to apply for the purpose of carrying out the terms of this Order.

19.  Costs of this action be paid by the Defendants jointly and severally to the Plaintiff, to be taxed if not agreed, with certificate for two counsel.

Registrar

HCA 2513/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2513 OF 2014

________________________

BETWEEN

SECURITIES AND FUTURES COMMISSION Plaintiff

and

An unknown person or persons purporting
to carry on a futures trading business
known as RICH FUTURES (HK)
LIMITED and using the Website
www.richfutureshk.com 1^st Defendant
SMD PARTNERSHIP LIMITED 2^nd Defendant

________________________

JUDGMENT

________________________

Dated the 12^th day of May 2021

Filed the 18^th day of May 2021

Securities and Futures Commission
54/F, One Island East
18 Westlands Road
Quarry Bay
Hong Kong
Tel: 2231 1123
Fax: 2521 7884
Ref: 122/LG/0500/0045